Musk takes SEC 'Twitter sitter' consent decree appeal to US Supreme Court

Elon Musk's lawyers are again trying to get the world's richest man out of his "Twitter sitter" consent decree with the US Securities and Exchange Commission via an appeal to the US Supreme Court.

Filed yesterday [PDF], Musk's legal team repeats the same general argument it has made since Musk and the SEC signed an agreement in 2019 that required a lawyer to vet tweets from the Tesla supremo that could have an material effect on the company or its investors. 

Namely, that the consent decree amounts to prior restraint on Musk's First Amendment free speech rights and is a violation of the unconstitutional conditions doctrine, which "forbids burdening the Constitution's enumerated rights by coercively withholding benefits from those who exercise them," or so Musk's lawyers say in their petition, citing a prior Supreme Court decision. 

Referring to Musk's multiple attempts to get out of the consent decree, his lawyers note in their petition for a writ of certiorari that previous denials of the request have largely come down to the fact that Musk signed the consent decree of his own accord. Thus, or so multiple courts and the SEC itself have said, there is no infringement on Musk's free speech rights.

The most recent decision to that end came from the US Court of Appeals for the Second Circuit, which in August denied [PDF] Musk's request for an appeal of a lower court's determination that the consent decree was legitimate. It's that August decision which is currently being appealed to the Supreme Court. 

"We see no evidence to support Musk's contention that the SEC has used the consent decree to conduct bad faith, harassing investigations of his protected speech," a panel of judges from the 2nd Circuit Appeals Court said earlier this year.

"Musk's argument that the consent decree is effectively a 'prior restraint' on his speech does not change this conclusion," the judges added, as "parties entering into consent decrees may voluntarily waive their First Amendment and other rights." 

Musk's lawyers have also argued that, because he was found not guilty of securities fraud by a California jury over the tweet that kicked off this entire debacle - "Am considering taking Tesla private at $420. Funding secured." - that he shouldn't be beholden to the SEC anymore. 

The SEC declined to comment on Musk's appeal. 

Stop! In the name of Musk

Whether the Supreme Court will decide differently than multiple courts before it is unknown - as is whether they'll even take the case to begin with. 

According to the US court system, writs of certiorari, which when granted demand that a lower court send records up to the Supremes for review, are rarely heard - less than 150 of the 7,000 writ requests the Supreme Court gets each year pass muster. 

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"The Court usually is not under any obligation to hear these cases, and it usually only does so if the case could have national significance, might harmonize conflicting decisions in the federal Circuit courts, and/or could have precedential value," the US courts system website states. 

Naturally, Musk's lawyers argue that there is a matter of exceptional importance to their case: "whether the government can insulate its demands that settling defendants waive constitutional rights from judicial scrutiny."

Speaking to CNBC, which first reported Musk's Supreme Court appeal, Columbia Law School professor Eric Talley said the appeal was a "swing for the fences" that, with the resources at his disposal, makes "spinning the judicial roulette wheel" feasible. Whether it's likely to succeed is another matter altogether. 

The unconstitutional conditions doctrine, Talley said, is a slippery one. "This case is more like the government agreeing to forebear from pursuing charges against someone in exchange for their agreement to cooperate with the terms of the settlement," Talley told CNBC. "That's not general doling out of benefits," he added.

In order for the writ to be granted and the Supreme Court to hear the case, four of the nine justices must agree to accept the petition. It's unclear when a vote on the matter may be held. ®