Tesla CEO Elon Musk scored a legal win on Nov. 6, as a federal appeals court upheld a jury’s decision clearing him of securities fraud over his 2018 posts on Twitter, now X, about taking the electric vehicle company private.
In the ruling, the three-judge panel concluded that there were no errors in jury instructions that would justify a new trial. The court also found that the instructions did not unfairly raise the burden of proof for the investors and that the instructions were in line with the law.
“Even if there had been an instructional error, it was ’more probably than not harmless,'” the three-judge panel wrote, adding that, during their two-hour deliberations, the jurors asked no clarifying questions.
The appellate court noted that much of Musk’s trial focused on whether his posts were important enough to affect investor decisions. The court found that the jury could have reasonably decided they weren’t, weakening the investors’ claims for billions in damages.
“A jury considering the evidence—which included testimony about a ‘handshake deal’ to take Tesla private and about a rise in Tesla’s stock price after Musk’s August 13th blogpost—could reasonably have found that the essential element of materiality was not established,” the judges wrote.
The case stems from a lawsuit brought by Tesla investors, who argued that Musk’s 2018 posts on Twitter caused significant volatility in the company’s stock price. The investors claimed that the tweets were materially misleading and led them to suffer as much as $12 billion in financial losses.
During a three-week trial, Musk’s defense argued that he believed his statements were truthful, citing discussions with Saudi Arabia’s Public Investment Fund (PIF) as evidence of potential funding. Musk, who spent hours on the witness stand, testified that he met with PIF representatives who expressed strong interest in taking Tesla private, leading him to post that funding was secured.
“I had no ill motive,” Musk testified. “My intent was to do the right thing for all shareholders.”
The jury ultimately sided with Musk, delivering a unanimous verdict in February 2023 that he and Tesla were not liable for misleading investors with the Twitter posts.
In the appeal to the Ninth Circuit, the Tesla investors claimed that U.S. District Judge Edward Chen gave the jury confusing instructions, making it harder for them to win by requiring proof that Musk knew that his posts were false. However, the appellate court disagreed, finding that Chen had correctly instructed the jury to consider whether Musk acted “recklessly”—a lower standard than knowingly making false statements.
Nicholas Porritt, a lawyer for the plaintiffs, did not respond by publication time to a request for comment on the Nov. 6 ruling.
Musk’s lawyer Ellyde Thompson welcomed the appellate court’s Nov. 6 decision.
