Musk essentially doubled down after suffering a first setback last year, when a judge in San Francisco federal court ruled his tweet was “false” and “reckless”. As a result, the jury will have to determine only whether the statements had an impact on Tesla’s stock price, whether Musk acted knowingly, and the amount of damages, if any.
“Everything is lined up for a plaintiff victory here,” said Minor Myers, who teaches corporate law at the University of Connecticut. Judge Edward Chen’s ruling in May means shareholders are “starting with runners on base”, he said.
An attorney for Musk, as well as Tesla and several directors who are also defendants, declined to comment. They denied that Musk’s statements violated the law. They will argue at trial that the stock price rose because Musk revealed he was considering taking Tesla private at the time. His conversations with Saudi investors led him to believe that the financing for the operation had been unhooked.
Eduard Korsinsky, a lawyer who represents the group of investors who have alleged billions of dollars in losses, called the case “exceptionally strong”.
The trial is a chance for Musk to take the stand to vindicate himself by convincing a jury he was being truthful when he tweeted on Aug. 7, 2018, “I’m considering taking Tesla $420 private. Funding landed.” In another tweet on the same day, he wrote: “Investor support confirmed.”
The company’s shares soared, then fell again after Aug. 17, 2018, when The New York Times reported that financing for the takeover bid was “nowhere near off the hook.”
Tesla and Musk reached a settlement with the Securities and Exchange Commission in 2018, denying any wrongdoing. Musk resigned as Tesla chairman and agreed to let a company attorney vet some of his tweets. In a separate case, he asked a New York appeals court to end Tesla’s surveillance of his online speech.
A RARE BET
Most business leaders shy away from the risks of testifying under oath, but Musk has taken several cases to court and submitted himself to cross-examination, though none have been brought under federal immigration law. securities.
In 2019, he won a defamation lawsuit in front of a California jury for defaming a cave explorer whom he called a “pedophile” in a tweet. Last year, he won a lawsuit in the Delaware Court of Chancery over allegations by Tesla shareholders that he coerced Tesla’s board of directors to buy SolarCity, a maker of rooftop solar panels. Tesla shareholders had sought billions of dollars in damages and they appealed.
Also last year, he spent months fighting a losing battle to get out of his deal to buy Twitter and defended his $56 billion compensation for Tesla in a non-jury trial. Both trials took place in the same Delaware court and a decision is expected later this year on his compensation.
Next week’s trial should last about three weeks. The parties could, however, settle their differences at any time, even in the middle of the trial or on the steps of the courthouse.
It would be unusual for the case to go to a verdict. Hundreds of U.S. securities class action lawsuits have been filed each year since current laws governing such cases took effect in 1996, but only 15 of them have resulted in a verdict, according to the law firm. Wolf Popper lawyers.
About half are dismissed for failing to comply with securities law and most of the rest are settled.
“Those kinds of cases rarely go to trial. Partly because you put all the determination of the outcome in the hands of a group of strangers,” said Kevin LaCroix, a seasoned casualty insurance attorney. Directors and Officers who blogs about executive liability.
If the shareholders end up winning their case and getting damages, it will probably be years before they see them because of the appeals process.
For example, shareholders of Household International, a creditor now owned by HSBC, won the lawsuit in 2009, but appeals dragged on until it was settled in 2016 for $1.575 billion, one of the largest. big wins for shareholders in a securities deal.
“Even if the plaintiffs win, they face appeals that could take a very long time,” and potentially go to the U.S. Supreme Court, said Tulane law professor Ann Lipton.