Recently, the U.S. 9th Circuit Court of Appeals signalled its reluctance to overturn a jury’s verdict clearing Tesla CEO Elon Musk and Tesla Inc. of liability for alleged investor misrepresentation in relation to Musk’s 2018 tweets claiming he had “funding secured” to take Tesla private. Investors alleged Musk’s statements were misleading and resulted in financial losses, a claim a jury dismissed in February 2023.
At oral arguments, counsel for the investors, Nicholas Porritt, argued that a new warranted due to flawed jury instructions that may have misled jurors. Porritt contended that U.S. District Judge Edward Chen’s instructions wrongly suggested that the plaintiffs needed to demonstrate that Musk knowingly made false statements. He noted that Judge Chen had already determined Musk’s tweets were inaccurate and recklessly made, which should negated the need to prove intentional deceit.
However, the three-judge appellate panel seemed unconvinced. U.S. Circuit Judge Gabriel Sanchez observed that the jury instruction largely aligned with the plaintiff’s proposal, casting doubt on the claim that the instructions misled jurors. Senior U.S. Circuit Judge Richard Clifton added that jurors had been instructed to assume Musk acted recklessly and that the primary issue for them to decide was the materiality of Musk’s statements to investors. Clifton questioned whether the general verdict indicated any prejudice against the plaintiffs, as it was simply a determination of whether they had substantiated their case against Musk.
Ellyde Thompson, representing Musk and Tesla, maintained that the evidence showed no liability on materiality grounds alone, making any error in jury instructions harmless. The lawsuit, filed in 2018, arose from Musk’s tweets about considering a buyout of Tesla at $420 per share and having “funding secured”. The tweets led to a brief surge in Tesla’s stock price, followed by a drop when it became clear the buyout would not proceed, prompting shareholder claims of misleading conduct.
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