Supreme Court declines to take up Elon Musk challenge to SEC-imposed restrictions on Tesla-related speech

 April 30, 2024

The Supreme Court on Monday rejected a request from tech billionaire Elon Musk to review a provision of a 2018 settlement agreement with a federal agency that he claimed was unconstitutional, the Associated Press reported.

Musk argued that his First Amendment rights were constrained by a settlement agreement with the U.S. Securities and Exchange Commission that required him to obtain pre-approval from a company attorney before making any public comments, including on social media, about his electric vehicle company Tesla.

The decision by the Supreme Court not to take up Musk's petition for review effectively leaves in place a district court ruling and circuit court affirmation that the provision in question did not violate his free speech rights.

The SEC settlement agreement

Reuters reported that the challenged settlement agreement between Musk, Tesla, and the SEC stemmed from a 2018 social media post in which Musk asserted that he had the "funding secured" to transition Tesla, a publicly traded company, into a private entity.

That alleged deal never happened, though, and the SEC pursued enforcement actions for what they claimed were "false and misleading" assertions from Musk that significantly impacted Tesla's stock price.

A settlement was eventually negotiated in which the SEC dropped a lawsuit against Musk and Tesla in exchange for a $20 million fine paid by both the company and its owner as well as for Musk to step down as chairman of Tesla's board.

The agreement also included the now-challenged provision that required Musk to obtain pre-approval from a Tesla attorney before posting anything to social media about the company.

Petition denied

However, according to NBC News, Musk had a change of heart about the SEC settlement and its restrictive "Twitter sitter" provision that constrained his free speech after the jury in a separate but related civil trial ruled that he had not misled investors.

That led Musk to file a lawsuit of his own against the settlement provision, only for that challenge to be denied by a district court, with that dismissal being later upheld by a 2nd Circuit appeals court panel, which resulted in the petition for review with the Supreme Court.

In that petition, Musk's attorneys argued that the provision constituted an unconstitutional "sweeping prior restraint on his speech" that was an "egregious agency overreach" within the SEC's broader "ongoing campaign against Mr. Musk and his companies."

They further asserted that the pre-approval provision "restricts Mr. Musk’s speech even when truthful and accurate. It extends to speech not covered by the securities laws and with no relation to the conduct underlying the SEC’s civil action against Mr. Musk. And it chills Mr. Musk’s speech through the never-ending threat of contempt, fines, or even imprisonment for otherwise protected speech if not pre-approved to the SEC’s or a court’s satisfaction."

That petition noted -- and the government's response filing confirmed by way of reiteration -- that the lower courts had ruled that Musk was forever bound by the terms of the SEC settlement agreement since he had ostensibly waived his constitutional rights when he "voluntarily" entered into the agreement.

The federal government has specifically targeted Musk

Musk's claim of an "ongoing campaign" against him by the SEC is not entirely inaccurate, as a report earlier this year documented some of the several major federal investigations, as well as unofficial non-investigative scrutiny, of multiple aspects of his ownership and management of Tesla and SpaceX and his acquisition of Twitter, now renamed as X.

It seems clear to some that the federal government has specifically targeted Musk, though it is also now apparent that the Supreme Court has no desire to intervene, at least in this case, to halt any alleged violations of his constitutional rights.

" A free people [claim] their rights, as derived from the laws of nature."
Thomas Jefferson
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