Tesla Investors Fail in Effort to Secure Fresh US Trial Over Musk’s 2018 Tweets

The 9th U.S. Circuit Court of Appeals, based in San Francisco, dismissed claims from Tesla investors’ attorneys that the jury instructions provided by the presiding judge were incorrect, leading to a skewed verdict in February 2023. These legal representatives insisted that a new trial was necessary due to these alleged errors.

The attorneys representing Tesla shareholders contended that the jury directions were not only perplexing but also unfairly increased their burden of proof. The jurors were asked to prove that Musk had knowledge of the falsehood in his Twitter messages, a platform which has been rebranded as X after Musk’s acquisition for $44 billion in 2022.

Before the trial, U.S. District Judge Edward Chen had determined that Musk’s tweets were not accurate and that he had acted recklessly. Despite this, the problematic instruction required shareholders in the class action lawsuit to demonstrate that Musk had acted with actual knowledge of the misinformation.

However, the appellate panel of three judges held a different view on Wednesday. They acknowledged that while Musk’s actions were at least reckless, determining whether he had knowingly misled was still crucial. This would affect how damages should be distributed among the defendants, which included Tesla’s directors.

Ellyde Thompson, representing Musk and Tesla, expressed approval of the court’s decision. However, the lawyer for the plaintiffs did not provide any comments when approached.

The lawsuit, initiated in 2018, was linked to Twitter posts that had previously resulted in a $40 million securities fraud settlement that same year between Musk, Tesla, and the U.S. Securities and Exchange Commission.

The legal and public scrutiny began after Musk tweeted on August 7, 2018, about considering taking Tesla private at $420 per share, which was a 23% premium over the stock’s closing price the previous day, claiming he had “funding secured.” Shortly after, he confirmed, “Investor support is confirmed.”

Following these tweets, Tesla’s stock price initially surged, only to plummet after August 17, 2018, as it became evident that the privatization would not proceed. The legal team for the shareholders argued that Tesla and Musk had deceived investors, causing them to lose billions of dollars.