Solomon: What Does Elon Musk's Victory in Court Ultimately Mean?
It took the jury in the Elon Musk class action around two hours to decide that he was not legally responsible for what happened to investors who relied on his 2018 tweets in which he claimed that funding was secured to take Tesla private.
The jury foreman called the case against Musk “disorganized,” explaining to the plaintiff’s lawyers that he didn’t know what they were driving at and that the case seemed to rely entirely on the tweets.
That’s because the case could and should have been won entirely on the tweets. As I explained on NBC News, this jury simply got it wrong.
The opening statements in the trial (seems like they were a year ago, but actually only three weeks) depicted Musk as a liar intent on manipulating investors and Tesla’s share price.
In 2018, when Musk tweeted his now-famous claims about Tesla having funding in place to go private at $420 per share, Tesla was having serious production problems and its stock price was stagnant.
Counsel for the plaintiffs argued that members of this class action detrimentally relied on Musk’s “funding secured” claim and were financially damaged as a result.
Back in April 2020, Judge Edward Chen granted summary judgment to the class on a critically important issue: “These statements by Musk were false and misleading and … Musk made these false statements recklessly and with full awareness of the facts that he misrepresented in his tweets.”
As attorney Rich DiTomaso observed, “For any defendant in a class action to rally from the kind of summary judgment Elon Musk did is a huge win and the result of excellent legal work by his defense team.”
It was excellent legal work, but as the jury foreman pointed out, it was also an egregious failure to get the ball from first-and-goal from the one-yard line into the end zone.
From the same Chen order: “As the Court held, the evidentiary record demonstrated that no reasonable jury could find Musk’s tweets on August 7, 2018 accurate or not misleading.”
So either this was an unreasonable jury, or counsel for plaintiffs failed to causally link Musk’s false and misleading statements to the damage plaintiffs suffered by relying on what Musk tweeted.
On Musk’s second day on the stand, he clearly admitted that the point of the “funding secured” tweet was for Tesla shareholders to rely on it, even though he was well aware at the time he tweeted that nothing was finalized — he only believed he could get all of the funding lined up.
As a result, the jury’s decision is a powerful one that should impact anyone who invests as well as anyone who spends any time on social media. While many of the post-verdict analyses are painting Musk as a Teflon man, the real non-stick surface here is social media.
Following the jury’s logic, any public figure can use powerful social media platforms such as Twitter, make false and misleading statements that people detrimentally rely on, and walk away with no liability.
The Musk case was about investors relying on these statements, but is it going to begin and end there? If any of us becomes a highly influential person and takes to social or traditional media to make false statements that others rely on, where will the line be drawn?
Part of what Musk successfully argued is that Twitter’s 280-character limit causes confusion — that irony shouldn’t be lost on us given that Musk now owns Twitter.
But it wasn’t Twitter’s format that ultimately fooled investors; it was Musk himself. This jury verdict will send the message that any of us, no matter how influential, may also be able to slide if our statements can’t stick.
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