Elon Musk has intensified his battle against the US Securities and Exchange Commission (SEC), placing emphasis on the unusual appetite for legal bickering the billionaire CEO because he is not like to go down on his Twitter.
In recent legal filings, Musk has accused the SEC. The charges speak of violation of rules on the use of information privileged. Musk accused the SEC of harassment after the agency opened an investigation. The investigation has framed whether recent stock sales by him and his brother, Kimbal Musk, on the said violation.
The appeal is that federal judge struck down the 2018 settlement with the SEC when the Tesla Inc. boss Musk did not like to down his Twitter and reached legal. The deal stems from a ‘Musk posted tweet’ in the same year in which he claimed that he had to get funding to take Tesla public. The agreement necessitates that a lawyer of pre-approves some of the billionaire’s public statements. An attorney for the businessman stated rapper Eminem as reiterating his request. The argument is that it violates the right of Musk to speak liberally.
The Chief Executive of Telsa is also seeking to vacate parts of a November subpoena from the SEC. The SEC is seeking information on whether he had previously endorsed ‘a poll’ or not. They asked his Twitter users if he should put up 10% of his Tesla stake for sale.
The Legal Strategy of Musk is another example of his remarkable track record. Many executives avoid antagonizing regulators. However, Musk has not done so. He usually faces a host of critics and has shown his willingness to take legal disputes to court rather than settle.
Musk tweeted in February while referring to his disagreement with the SEC, that he didn’t start the fight, but he will finish it. Afterward, he stated in a legal filing that he had considered pressured to resolve the SEC civil suit in 2018.
There was no answer from Tesla. Musk characterized the legal strategy of the company in a tweet the previous year. The policy of Telsa is to never give in to fake claims, even if they lose, and never fight true claims, even if they win.
A Georgetown University law professor, Urska Velikonja, described the stance of Musk toward the SEC as highly abnormal for the CEO of a public company. She stated that he seemed to like to fight.
The SEC, which refused to make, has called the harassment claim of the billionaire as baseless. Further, it has opposed his requests to leave parts of a subpoena the agency issued and to fragment its ‘2018 settlement’ with him.
The SEC may rightfully probe into the matters related to Tesla’s disclosure controls and procedures. The agency wrote in a ‘legal filing’ in the previous week that as long as Musk and Tesla would use Twitter accounts of Musk to reveal information to investors. The SEC maintained that the businessman renounced any potential first ‘Amendment’ objections when he had agreed to the 2018 settlement.
Musk has opted not to pursue legal settlements at various times in up-to-date years. The CEO of Telsa was the only member of the company’s board of directors to go to trial last year in a shareholder lawsuit over the acquisition of domestic solar company Solar City in 2016. Others who were directors of Tesla at the time of the operation settled in 2020 for $60 million. They denied any wrongdoing.
Many of the directors of Telsa were in conflict. Further, the electric vehicle company overpaid for Solar City. Shareholders alleged that Musk had controlled the acquisition while having a financial interest in both companies. Last summer, during the bench trial in Delaware Chancery Court, Musk took the stand has said that he had not dictated the settlement process or the price. During post-trial arguments, an attorney for the plaintiffs suggested that the judge ordered Musk to pay more than $13 billion in damages. The judge has not delivered a verdict yet.
The appetite Musk for legal risk has, at times, paid off in 2019. To illustrate the same, he took the stand in a libel suit brought by British caver Vernon Unsworth, whom Musk had spoken of on Twitter as pedo guy. One of the Los Angeles juries made a favorable ruling on Musk. As per the decision, he suggested that Unsworth was a pedophile, which did not amount to libel. L. Lin Wood, an attorney who represented to Unsworth, called it as ‘unfair verdict.’ Wood suggested that the jury award $190 million in damages at trial.
At that juncture, it is also risky to take cases to trial. Federal Jury in San Francisco awarded $137 million in damages to a previous black contract work during the previous year. They found that Tesla was putting him in a racially ‘hostile workplace.’ The award included $6.9 million in damages for the worker Owen Diaz and $130 million account of disciplinary damages, money intended to penalize the defendant.
David Oppenheimer, a clinical law professor at the University of California, Berkeley, said that punitive damages were rare in workplace harassment and discrimination cases. He added that the most egregious cases tend to settle because the exposure to the employer is so substantial.
Larry Organ, one of its attorneys of Diaz, said that Tesla had a chance in 2020 to settle the case for $8 million. Tesla has said that it had not believed the justification of the verdict by the jury and had called for a new trial or reduced damages. In the intervening time, an attorney representing Tesla in the case had not commented at all.
James Park, a law professor at the California University, Los Angeles, said that as for the SEC, the decision of Musk to go on the offensive is a gamble. He noted that the agency could end up feeling like it can’t back down.
However, he added that it seemed to him that the SEC also cared about public sensitivity. Further, he did not think and considered it is harassing business people needlessly.