Elon Musk's attorney claims in a court brief that US securities authorities are illegally stifling his speech by relentlessly enforcing a 2018 securities fraud settlement, infringing on his rights to free expression.
The paper was written to support Musk's appeal of a lower court's April decision to uphold the settlement with the Securities and Exchange Commission and was submitted late Tuesday to the federal appeals court in Manhattan.According to the brief, a clause in the settlement that requires Musk to seek permission before tweeting about the electric vehicle manufacturer is an unconstitutional "government-imposed muzzle on Mr. Musk's speech before it is made."
As part of the settlement, his tweets had to be vetted by a Tesla attorney before being public. The SEC is looking into whether Musk broke the terms of the agreement when he asked his Twitter followers in November whether he should sell 10% of his Tesla stock.
Alex Spiro, Musk's attorney, argued in the filing that the SEC is still looking into Musk for matters not covered by the deal. It requested that the prior permission clause be removed or modified by the Second Circuit Court of Appeals.
According to Spiro, the consent decree's pre-approval clause qualifies as a prior restraint on communication that violates the First Amendment. It prohibits future permissible speaking on a variety of issues without permission.The brief added that Musk's speech has also been restrained by the fear of SEC investigations and prosecution for contempt of court.
The agreement Musk struck with the SEC in October 2018 is the source of the entire controversy. In response to Musk's tweets about having the "financing secured" to take Tesla private at $420 per share, he and Tesla each agreed to pay $20 million in civil penalties.
The electric vehicle firm is still open to the public, and the finance was far from secured, but Tesla's stock price increased. The deal included improvements to governance, such as removing Musk from his position as board chairman and pre-approving his tweets.
US District Judge Lewis Liman in New York denied Elon Musk's request to have the deal he reached with the SEC voided in April. Additionally, Judge rejected a request to strike down a subpoena sent to Musk for testimony regarding potential settlement violations.Musk sent the tweets without seeking prior approval, according to Limon's ruling, although the judge later stated that he did not want to make a judgment call on that matter.SEC officials declined to comment on Wednesday.
Spiro said in the court brief that Musk did not voluntarily surrender his First Amendment rights in the settlement since he had no way of knowing how extensive it was. He wrote, "The provision applies to future speech about events no one could foresee in advance."
According to him, Musk is constantly worried that the SEC will disagree with his understanding of what he is permitted to say. Musk also approved the acquisition when Tesla was a smaller business and the SEC's move might have put its financing in jeopardy.
"The SEC has continued to investigate Mr. Musk's speech and has used ambiguous interpretations of the consent decree that appear to be intended to limit and chill his future speech, all with regard to speech that has nothing to do with the 2018 tweet for which the SEC is being investigated.The SEC took this action. Spiro penned.
Musk is the richest man in the world, and Tesla is currently the most valuable automobile manufacturer.
Musk's assertion that he signed the settlement under financial duress is "wholly unpersuasive," according to Liman.
Even if Musk had concerns that legal action against the SEC would cause Tesla to go bankrupt, Liman argued that this did not provide grounds for Musk to withdraw his voluntary signature on the decision.
The judge further stated that Musk's claim that the SEC had harassed him and opened investigations using the settlement order was "meritless."
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