A federal judge ruled on Wednesday that Elon Musk would not be subjected to a “gag order” prohibiting him from discussing a lawsuit alleging that he deceived Tesla Inc (TSLA.O) shareholders by tweeting in 2018 about taking his electric car business private.
The proposed temporary restraining order appeared overbroad to U.S. District Judge Edward Chen in San Francisco, who agreed with Musk and Tesla that it banned Musk from communicating to “anyone” about the lawsuit.
There was also no evidence that allowing Musk, the world’s richest man, to speak publicly posed a “clear and present danger” or “severe and imminent harm” to a trial, according to Chen.
However, the judge stated that he intends to inform jurors at Musk’s next trial in January 2023 that he has already determined that Musk’s tweets were fraudulent and made with sufficient awareness that they were false.
Shareholders sued Tesla for losses caused by stock volatility after Musk tweeted on Aug. 7, 2018, that he had “financing secured” to potentially take Tesla, private, at $420 per share and that “investor support has been confirmed.”
In an email, shareholder lawyer Nicholas Porritt expressed his delight that jurors will be told that the tweets “were untrue and made fraudulently by Elon Musk.” The amount of damages owing, he claimed, is the key sticking point.
Musk’s and Tesla’s lawyers did not reply to demands for comment right away.
Musk requested a gag order on April 15, one day after telling the TED conference in Vancouver that he had secured funds to privatize Tesla, but the US Securities and Exchange Commission sued him for fraud over his tweeting regardless.
The proposed gag order, according to Musk and Tesla, “evokes a level of censorship” that cannot be reconciled with the US Constitution’s guarantee of free expression.
They also claimed that an injunction could prevent Musk from communicating with Tesla shareholders, discussing his proposed acquisition of Twitter Inc (TWTR.N), and attempting to end his consent decree with the Securities and Exchange Commission, which requires Tesla lawyers to vet some of his tweets.