Elon Musk asks federal appeals court to end 'Twitter Sitter' Deal

By Bob Van Voris and Chris Dolmetsch

A lawyer for Elon Musk asked a federal appeals court in New York to throw out his 2018 agreement with US regulators requiring a Tesla Inc. lawyer to screen all his company-related Twitter posts, calling it an illegal limitation on his free-speech rights.
 

Musk, Tesla’s chief executive officer and now the owner of Twitter Inc., has claimed that the agreement with the US Securities and Exchange Commission violates the First Amendment to the Constitution and that the SEC is harassing him. 

The requirement “chills Mr. Musk’s speech,” limiting his ability to make statements about Tesla that don’t violate any securities laws, Ellyde R. Thompson, an attorney representing the Tesla CEO, told the panel.

Last year, US District Judge Lewis Liman refused to release Musk from the deal and end his “Twitter Sitter” requirement, saying the CEO was “simply bemoaning that he felt like he had to agree to it at the time” and now “wishes that he had not.” Liman also denied Musk’s effort to block an SEC subpoena seeking information on his tweets.

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Thompson on Thursday asked a three-judge panel of the federal appeals court in Manhattan to reverse the ruling and throw out the deal, or at least modify it.

“The pre-approval provision is a classic prior restraint that the Constitution forbids: a government-imposed muzzle on Mr. Musk’s speech before it is made,” Musk’s legal team said in court papers. 

Musk has been battling with the SEC over his social media posts since he tweeted in 2018 that he had “funding secured” to take Tesla private, sending shares of the electric-car maker surging. The regulator sued, claiming Musk and Tesla had misled shareholders. Musk and Tesla settled with the SEC, with each paying $20 million and agreeing that Musk’s Tesla-related tweets would be reviewed before he posts them.

In his decision, Liman ruled that Musk willingly waived his First Amendment right to tweet without restraint, a finding Musk denied in his appeal brief.

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“Mr. Musk could not possibly have known the circumstances and consequences of the pre-approval provision because the provision applies to future speech about circumstances no one could anticipate in advance,” his lawyers wrote. But even if he did waive his rights, such a waiver is invalid and unenforceable, they said.

Jeffrey Berger, arguing for the SEC, told the judges there have been no significant changes since Musk agreed to screen his Tesla tweets and that the CEO had failed to show the deal has become “onerous or unworkable.”

“Those are the terms to which he agreed,” Berger said. 

“Musk may no longer wish to comply with the preapproval process, and he may find it inconvenient at times, but he agreed to its terms and has not demonstrated any change in circumstances that makes it substantially more onerous or unworkable,” the SEC said in its appeal brief.

The regulator called Musk’s harassment claim “a significant exaggeration.”

“There is no government censor here,” Berger told the panel. “There is an agreement that Tesla will review its CEO’s communications before they become public. The agreement here does not preclude him from speaking about any topic.”

The case is US Securities and Exchange Commission v. Musk, 22-1291, Second US Circuit Court of Appeals (Manhattan).