Elon Musk Disappointed To Learn His Own Legal Agreements Still Apply To Him

(Photo by Dimitrios Kambouris/Getty Images for The Met Museum/Vogue)

Somewhere within the bowels of Tesla, a lawyer still performs the unenviable task of reviewing Elon Musk's tweets to make sure the mogul's openly antisemitic musings don't veer into market manipulation. There are so many career paths for a juris doctor!

The screener is a condition of a consent decree that Musk voluntarily entered with the Securities and Exchange Commission in 2018 after blasting to his sycophantic followers that he'd secured funding to take Tesla private at $420/share -- because he's so hilarious -- creating a run on Tesla stock. As it happens, Musk did not have funding to take the company private and had just falsely told the market that he did while inflating the value of his stock holdings... which the SEC frowns upon. By agreeing to employ the screener and pay some fines, Musk escaped the full wrath of the market regulator.

Since then, Musk asked his followers if he should sell 10 percent of his Tesla shares, creating more market havoc. Last year, a federal court ruled that Musk had snuck this message past his Twitter nanny in violation of the agreement. Musk and his attorney Alex Spiro and the rest of the Quinn Emanuel team argued that the consent decree -- that Musk entered voluntarily -- amounts to prior restraint. Then, bizarrely, tossed in an unconstitutional taking claim wrapped up in the fact that Musk successfully beat back a shareholder case on the Animal House defense of "you fucked up, you trusted [M]us[k]."

It will shock you not at all to learn that the Second Circuit did not embrace this theory.

Musk's argument that the consent decree is effectively a "prior restraint" on his speech does not change this conclusion. Parties entering into consent decrees may voluntarily waive their First Amendment and other rights. See SEC v. Romeril, 15 F.4th 166, 172 (2d Cir. 2021). Indeed, every consent decree by definition involves waiver of the right to trial, which saves the parties "the time, expense, and inevitable risk of litigation." United States v. Armour & Co., 402 U.S. 673, 681 (1971). Had Musk wished to preserve his right to tweet without even limited internal oversight concerning certain Tesla-related topics, he had "the right to litigate and defend against the [SEC's] charges" or to negotiate a different agreement--but he chose not to do so. Romeril, 15 F.4th at 172. Having made that choice, he may not use Rule 60 to collaterally re- open a final judgment merely because he has now changed his mind.3 We express no view as to the substance of his underlying First Amendment claims.

Because without honoring a party's ability to waive a right, there would be no such thing as a settlement agreement. The whole endeavor rests on the idea that someone can give up something in exchange for the government's leniency.

Per AP:

Alex Spiro, an attorney for Musk, said in a statement: "We will seek further review and continue to bring attention to the important issue of the government constraint on speech."

Musk can appeal to the full 2nd Circuit or to the U.S. Supreme Court.

The government constraint... that Musk voluntarily entered. How is this not getting through? Maybe an analogy is in order! See, there's a Tesla attorney who's forcibly subjected to the inane drivel and racist rhetoric Musk puts on Twitter that the rest of us mercifully get to skip over. But that doesn't mean they have a case against the company for infliction of emotional distress... because they're getting paid to be there. It's like they're agreeing to perform an unpleasant task in return for something that benefits them... much like avoiding a massive SEC enforcement action.

Still, it must suck when billionaires find out that those legally binding agreements you enter turn out to be legally binding. But then again, Musk has to be getting used to this by now.

The full order is on the next page.

Elon Musk must still have his tweets approved by Tesla lawyer, federal appeals court rules [AP]

Earlier: Elon Musk Settlement Agreement As Unconstitutional Taking Is... A Theory
Twitter Complaint Demonstrates That Every Lawyer, Everywhere, Always Is Smarter Than Elon Musk

Joe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter if you're interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.