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SCOTUS on Election Deadlines & Musk Misled Investors · Bloomberg Law

0:02
Speaker 1: This is Bloomberg Law with June Grossel from Bloomberg Radio.
0:08
Speaker 2: The Supreme Court signaled a divide over Republican calls to
0:13
Speaker 2: require mail in ballots to arrive by election day. The
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Speaker 2: justices are reviewing a Mississippi law that allows mail in
0:20
Speaker 2: ballots to be counted as long as they arrive within
0:24
Speaker 2: five business days of election day. Federal law sets the
0:28
Speaker 2: Tuesday after the first Monday in November as the quote
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Speaker 2: day for the election, and the issue is whether that
0:35
Speaker 2: phrase means that ballots need to be both cast by
0:38
Speaker 2: voters and received by state officials by that date, or
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Speaker 2: whether voters must drop them in the mail by then.
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Speaker 2: Several conservative justices, like Samuel Alito voice some of President
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Speaker 2: Trump's familiar complaints.
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Speaker 3: Confidence in election outcomes can be seriously undermined if the
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Speaker 3: apparent outcome come of the election on the day after
1:04
Speaker 3: the polls close is radically flipped by the acceptance later
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Speaker 3: of a big stash of ballots that flipped the election.
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Speaker 4: Or Yeah, I think you've got.
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Speaker 3: Ballots that are delivered by somebody, by a neighbor, and
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Speaker 3: they received a month after the election, and they don't
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Speaker 3: have postmarks.
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Speaker 2: In defending Mississippi's law. The state solicitor general pointed out
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Speaker 2: that the Trump administration and its allies in the case
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Speaker 2: have not submitted a single case of fraud due to
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Speaker 2: late arriving male ballots, and the liberal justice is like
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Speaker 2: Sonya Soto Mayor, indicated they would uphold state laws with
1:49
Speaker 2: post election day deadlines.
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Speaker 5: History is informative of what's been permitted by Congress, because
1:55
Speaker 5: what we're looking for is what understanding Congress had with
1:59
Speaker 5: respect to elections.
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Speaker 4: Correct, that's right, You're all right.
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Speaker 5: And it doesn't talk about the receipt of absentee ballots
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Speaker 5: after elections at all. So we look to the history
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Speaker 5: of whether Congress has accepted it.
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Speaker 2: Chief Justice John Roberts and Justice Amy Cony Barrett emerged
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Speaker 2: as pivotal votes among the court's conservative super majority. Roberts
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Speaker 2: suggested he wasn't convinced by the Trump administration's contentions that
2:30
Speaker 2: late arriving ballots could be outlawed without also undermining early voting.
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Speaker 6: If day means includes a period after a particular day
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Speaker 6: of the election, does it include a particular day before
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Speaker 6: the day of the election, or does your logic require
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Speaker 6: a different.
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Speaker 4: Consideration.
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Speaker 2: A ruling likely to come by late June that bars
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Speaker 2: counting ballots arriving after election day would send officials scrambling
3:03
Speaker 2: in fourteen states and DC that have grace periods for
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Speaker 2: ballots cast by mail, giving them just a few months
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Speaker 2: before the twenty twenty six mid term congressional elections to
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Speaker 2: change their ballot rules. Joining me is elections law expert
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Speaker 2: Richard Brefalt, a professor at Columbia Law School. So, Rich,
3:22
Speaker 2: this isn't about mail in balloting in general, but about
3:26
Speaker 2: the grace periods that some states have.
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Speaker 7: So this case has a challenge to a Mississippi law,
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Speaker 7: and about another dozen or so states have similar laws
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Speaker 7: concerning mail in ballots, which say that we will counter
3:38
Speaker 7: ballot so long as it's mailed by election day, will
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Speaker 7: counter ballot up to a certain number of days after
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Speaker 7: election day. I think in Mississippi it's five days. Some
3:49
Speaker 7: states are shorter, some states are longer. The idea for
3:53
Speaker 7: the state laws is that you're voted by election day
3:55
Speaker 7: if you vote on election day and mail it. But
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Speaker 7: if you do vote on election day mail or ballot,
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Speaker 7: it is almost certainly not going to get to the
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Speaker 7: Board of Elections on election day, maybe more than almost certainly.
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Speaker 7: It's certainly not. So these states give a grace period.
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Speaker 7: It basically say you can vote as late as election day,
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Speaker 7: provided that it's postmarked and election day or mailed on
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Speaker 7: election day. We will count it provided it gets to
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Speaker 7: us by a certain number of days after election day.
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Speaker 7: In Mississippi's case, it's five days. In their view, that's
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Speaker 7: consistent with a federal law that says there shall be
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Speaker 7: a single national election day for federal elections. So long
4:30
Speaker 7: as you voted on election day, that's all you need
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Speaker 7: to do. We'll count it if it comes in within
4:35
Speaker 7: a certain number of days after election day. The challengers
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Speaker 7: are saying, no, that's not good enough. When the federal
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Speaker 7: law says there's a single national election day, that means
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Speaker 7: the votes have to be cast and received by election day.
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Speaker 7: So that the Mississippi law which permits late received absentee ballots,
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Speaker 7: and any other state has a similar law, they have
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Speaker 7: violated the federal law.
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Speaker 2: The Fifth Circuits decision, which this is an appeal from.
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Speaker 7: Oh, so when this case was found now, as I say,
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Speaker 7: I think something like fourteen states have this provision or
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Speaker 7: its challengers first brought the district court threw it out
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Speaker 7: basically saying the election day means the day you vote,
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Speaker 7: not necessarily the day that the ballots are received and counted.
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Speaker 7: The Fifth Circuit disagreed and said, no, an election includes
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Speaker 7: not just the casting of the ballot, but its receipt
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Speaker 7: by the government elections agency. And so therefore the challengers
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Speaker 7: are right, and that's why the Supreme Court then agreed
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Speaker 7: to take the case.
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Speaker 2: Did it appear as if several of the conservative justices
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Speaker 2: have a problem with the Mississippi law.
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Speaker 7: Yeah, it looks to me that there's at the very
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Speaker 7: least three and possibly four, based on the oral argument,
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Speaker 7: who are willing to go along with the challengers and
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Speaker 7: say election means casting your ballot and have it received.
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Speaker 7: That's one process, and that election day means election day,
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Speaker 7: including receipt of the ballot based on their comments, and
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Speaker 7: it's always a little bit treacherous to rely on the
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Speaker 7: comments in oral argument. But Tom ms Alito and Gorstage
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Speaker 7: seemed very sympathetic or more than sympathetic to agree with
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Speaker 7: the position, and some of Justice Kavanaugh's questions seemed to
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Speaker 7: me to lean in that direction too, though he was
6:16
Speaker 7: less clear cut. The liberal justices were clearly a hostile
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Speaker 7: to this and felt that Congress did not address this,
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Speaker 7: that this law, which is a nineteenth century law, was
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Speaker 7: adopted at a time we never even thought about it
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Speaker 7: in mail in belots in the way we have them now,
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Speaker 7: and that they would leave it to the states, and
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Speaker 7: if Congress doesn't like it, Congress can write a new law.
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Speaker 7: Justice Barrett asked a lot of questions. She was a
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Speaker 7: little hard to read. She seemed a little more skeptical
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Speaker 7: of the challengers than the other Republican and other Conservative justices,
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Speaker 7: and I think the Chief Justice said hardly anything, so
6:51
Speaker 7: he was hard to read as well. So right now,
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Speaker 7: I don't know. It's hard to sum them up in
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Speaker 7: clearly three votes to strike this down, three votes to
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Speaker 7: sustain it, and three votes that are it's not so sure.
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Speaker 2: What is the real objection from the conservative justices to this.
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Speaker 7: Well, there's the formal technical objection that choose means choes
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Speaker 7: our vote means by their election doesn't means election, and
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Speaker 7: that's what it means. And there is I think a
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Speaker 7: latent objection that I think the challengers have emphasized very heavily,
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Speaker 7: which is that this does permit fraud, both fraud and
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Speaker 7: the appearance of fraud. This has been I think a
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Speaker 7: Republican criticism of mail in ballots less couple election cycles
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Speaker 7: is that the sense that Democrats use it more the
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Speaker 7: person seems to be head on election night, suddenly the
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Speaker 7: person who's behind comes ahead once the late received mail
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Speaker 7: in ballots are counted. Of course, it's kind of silly
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Speaker 7: because in most states count all the mail in ballots
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Speaker 7: afterwards and not just the ones that come in late.
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Speaker 7: But there's a sense that it's fraud, that there's a
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Speaker 7: problem of fraud, there's a problem of the appearance of fraud.
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Speaker 7: The post Office doesn't postmark everything, so maybe there will
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Speaker 7: be some late ballots. That there's no inherent endpoint, you know,
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Speaker 7: there was the usual sort of a parade of horribles.
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Speaker 7: Mississippi chooses five days, but there's nothing to prevent them
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Speaker 7: from choosing five weeks. No state does that, but that
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Speaker 7: there's no endpoint once you cross election day. So I
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Speaker 7: think it's the challenges it's largely text, plus I think
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Speaker 7: a concern that this is a rule that's better for
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Speaker 7: preventing fraud and for public confidence.
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Speaker 2: I mean, it sounds like they're buying into some of
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Speaker 2: the concerns about ballot harvesting and all that. Are those
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Speaker 2: concerns real.
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Speaker 7: Every study that's ever been a ballot fraud shows that
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Speaker 7: there is almost none I won't say none, but almost
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Speaker 7: not very very very little, and certainly a tiny amount
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Speaker 7: relative to the millions of people who mail in their ballots,
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Speaker 7: and maybe the millions are certainly the high hundreds of
8:55
Speaker 7: thousands who mail them on election day. I mean, there's
8:57
Speaker 7: some argument actually using election day because at that point
9:00
Speaker 7: you have as much information as you're ever going to get.
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Speaker 7: There are sometimes late developments afore an election day, so
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Speaker 7: I mean this is a great period. If courts strikes
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Speaker 7: down the Mississippi law, people who vote by mail would
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Speaker 7: be very well advised to vote at least a week ahead,
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Speaker 7: if not more. It could be very chaotic in the
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Speaker 7: upcoming election because it only applies to federal elections, and
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Speaker 7: there's no federal law that requires state elections to be
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Speaker 7: held on any particular day or that would affect how
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Speaker 7: the states use ballot So obviously there's a big federal
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Speaker 7: election coming up in this coming November. Many states will
9:39
Speaker 7: have elections the same day, and you're either going to
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Speaker 7: have some ballots that come in in fourteen states that
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Speaker 7: come in after election day, they'll be counted for one
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Speaker 7: vote but not the other. Or the states are going
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Speaker 7: to have to scramble to revise their laws. Guessing this
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Speaker 7: won't come down before jun It's already late March, and
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Speaker 7: no matter who wins, there's going to be descents identity,
10:01
Speaker 7: and that usually means it takes a little bit more
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Speaker 7: time to write. So it's now, what is in March
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Speaker 7: twenty third? You know it's not going to be before June.
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Speaker 7: I think so. I think if the law is struck down,
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Speaker 7: I mean it's conceivable, I think unlikely that would say
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Speaker 7: it's not good for this election. There is this idea
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Speaker 7: that you don't change the laws too close to an election,
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Speaker 7: but I don't know that anyone argued for that.
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Speaker 2: So I knew, is it going to give the states
10:27
Speaker 2: time enough? If it comes down in June. Let's say
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Speaker 2: the end of.
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Speaker 7: June, there's technically time enough the states can rewrite there.
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Speaker 7: If you could, in most states, the legislative session is
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Speaker 7: long over, so they'd have to come back into session
10:39
Speaker 7: and rewrite it or do something now. Again, I think
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Speaker 7: it's fourteen states that have this a few more states
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Speaker 7: had it and eliminate it because I think of the
10:48
Speaker 7: Republican pressure on mail and voting. I think several states
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Speaker 7: have already repealed it, but that was a state's choice.
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Speaker 7: This would be a national Supreme Court mandate to the
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Speaker 7: fourteen states that have chosen to give voters this option
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Speaker 7: to take it away.
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Speaker 2: I always hear that Democrats use mail in voting more
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Speaker 2: than Republicans. Is that changing.
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Speaker 7: I'm actually going to check a challenge you a little
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Speaker 7: bit on that. Traditionally it was Republicans tended to be
11:15
Speaker 7: the stereotype. Is it was the Republican businessman who was
11:18
Speaker 7: away from home kind of thing. But traditionally, I mean
11:21
Speaker 7: further back in time, let's say in the twentieth century,
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Speaker 7: it was primarily Republicans. Didn't become more common for Democrats
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Speaker 7: until I think into the twenty first century when many
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Speaker 7: states began to liberalize their voting rules and to allow it.
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Speaker 7: And I think it's become more so lately, especially now
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Speaker 7: given Trump's attack on mail in ballots, and so I
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Speaker 7: think it's become more of an article of faith for
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Speaker 7: Republicans to oppose it.
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Speaker 4: It's a little unclear.
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Speaker 7: I think the better term many people would use is
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Speaker 7: that it may very well be less committed voters, because
11:54
Speaker 7: in some ways it's kind of easier to get a
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Speaker 7: ballot and mail it rather than show up and wigh
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Speaker 7: online in election. I think the assumption is that the
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Speaker 7: partisan cut would be that it would hurt Democrats, but
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Speaker 7: I think the proof is actually pretty unclear, and it's
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Speaker 7: certainly no evidence that it's the late voting mail in
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Speaker 7: voters that they are any more democratic than the early
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Speaker 7: voting mail in voters. I mean, this would not end
12:18
Speaker 7: mail in voting. It would just say if you want
12:20
Speaker 7: to vote by mail, you've got to vote early.
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Speaker 2: And tell us what else President Trump is pushing before
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Speaker 2: the midterms.
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Speaker 7: Well, President Trump would certainly try and stop all mail
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Speaker 7: in voting, except for I think he says service overseas,
12:38
Speaker 7: people who are ill and people traveling, so he would
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Speaker 7: go much further. And then, of course the so called
12:43
Speaker 7: Save Act I think, would also require people to bring
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Speaker 7: proof of citizenship when they vote, proof of citizenship when
12:52
Speaker 7: they register, I think, to attach proof of citizenship when
12:55
Speaker 7: they send in a mail ballot, even for those who
12:57
Speaker 7: are allowed to do it, and as I say, to
13:00
Speaker 7: proof of citizenship when they go to vote. So if
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Speaker 7: the Supreme Court strikes down the Mississippi law, it will
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Speaker 7: make it more inconvenient for people to vote by mail
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Speaker 7: in fourteen states. Now should point out thirty six states
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Speaker 7: don't have this rule, so in those states, if you
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Speaker 7: want to vote by mail, you do have to vote early.
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Speaker 7: This would be I think a setback for people in
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Speaker 7: the other states, but it would not be as remotely
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Speaker 7: significant in terms of making it harder to vote as
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Speaker 7: the kinds of things that are going to.
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Speaker 2: Say that, as you said, we'll find out the Supreme
13:31
Speaker 2: Court's decision by June. As you said, we'll find out
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Speaker 2: the Supreme Court's decision by the end of June. Thanks
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Speaker 2: so much, rich As always, that's Professor Richard Rfault of
13:41
Speaker 2: Columbia Law School. Remember the tumultuous months in twenty twenty
13:46
Speaker 2: two leading up to Elon Musk's acquisition of Twitter for
13:50
Speaker 2: forty four billion dollars, with the billionaire flip flopping over
13:54
Speaker 2: whether he'd buy the platform, resulting in hard font litigation
13:59
Speaker 2: with Twitter's board of directors to force him to follow through. Well,
14:04
Speaker 2: a San Francisco jury has found that Musk intentionally misled
14:08
Speaker 2: Twitter shareholders when he tweeted that the social network had
14:13
Speaker 2: too many fake accounts and tried to back out of
14:16
Speaker 2: the deal. The amount of damages Musk must pay to
14:19
Speaker 2: individual investors will be determined at a later date when
14:23
Speaker 2: shareholders submit claims, although estimates are that it could reach
14:28
Speaker 2: as high a S two point six billion dollars. My
14:31
Speaker 2: guest is business law professor Eric Talley of Columbia Law School. Eric,
14:36
Speaker 2: take us back to that period in twenty twenty two
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Speaker 2: when it seems all we were hearing about was Elon
14:42
Speaker 2: Musk and Twitter.
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Speaker 1: Well, yeah, this is something that is fused into many
14:46
Speaker 1: people's memories, including my own. Back in the spring of
14:50
Speaker 1: twenty twenty two, Elon Musk went hard at a purchase
14:54
Speaker 1: of Twitter. They weren't even asking for his entreaties, and
14:57
Speaker 1: he basically appeared on their doorsteps.
15:00
Speaker 4: I want to buy this company.
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Speaker 1: And after initially resisting, finally it looked like he was
15:05
Speaker 1: offering a good enough price that it would just seem like,
15:09
Speaker 1: you know, that the Twitter board would have been sort
15:12
Speaker 1: of crazy not to consider it seriously. Moreover, he said,
15:15
Speaker 1: not only am I offering this great price that I
15:18
Speaker 1: want to sign up a deal that doesn't have any
15:20
Speaker 1: financing contingencies, doesn't have any of the booby traps that
15:24
Speaker 1: you often see in M and A transactions that can sometimes.
15:27
Speaker 4: Allow a buyer to walk away.
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Speaker 1: And so at the end of the day, the Twitter board,
15:31
Speaker 1: you know, basically leapt at this this offer of forty
15:35
Speaker 1: two dollars a share, which was you know, once again
15:37
Speaker 1: a sort of a takeoff on his recurrent four to
15:39
Speaker 1: twenty meme that we've seen many other times and has
15:42
Speaker 1: also gotten into hot water, even though you know, the
15:45
Speaker 1: Twitter stock price was far below that at the time.
15:49
Speaker 1: So he signed it up, and it became pretty clear
15:51
Speaker 1: that shortly after he you know, he signed this deal
15:55
Speaker 1: that had to you know, go through a shareholder approval process.
15:58
Speaker 1: So there were some months that had that he began
16:01
Speaker 1: to feel some regret that he might have overpaid. And
16:05
Speaker 1: that's when mister Musk started to drop several hints, all
16:10
Speaker 1: on Twitter, of course, that he thought this deal wasn't
16:13
Speaker 1: going to go through, and so on a couple of
16:15
Speaker 1: different occasions, mister Musk tweeted, first the deal is on hold.
16:20
Speaker 1: We're not exactly sure why the deal was on hold,
16:23
Speaker 1: and then relatedly tweeted that he had a concern about
16:28
Speaker 1: so many of the spam bots that were evident account
16:31
Speaker 1: holders on Twitter, and that they hadn't disclosed their existence
16:36
Speaker 1: to him.
16:36
Speaker 4: Or the magnitude of them to him.
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Speaker 1: I don't think anyone at the time viewed either of
16:42
Speaker 1: these things as as sort of credible claims. Most people,
16:44
Speaker 1: i think thought that they were his claims to try
16:47
Speaker 1: to walk the price down a little bit so that
16:49
Speaker 1: he could try to negotiate either a better deal or
16:51
Speaker 1: walk away from the transaction completely. And it worked on
16:55
Speaker 1: some level. The fact that you know, he had offered
16:58
Speaker 1: forty two dollars per share should in principle mean that
17:01
Speaker 1: if people think the deal is going to close, the
17:04
Speaker 1: stock price should pretty quickly converge to something close to
17:07
Speaker 1: forty two dollars a share. And by the summer of
17:10
Speaker 1: twenty twenty two, it was sitting in the mid thirties,
17:14
Speaker 1: evidently because a lot of people thought that mister Musk
17:17
Speaker 1: somehow had some secret that was going to allow him
17:19
Speaker 1: to walk away from the deal.
17:21
Speaker 2: I mean, tell us what the jury found, because it
17:22
Speaker 2: was sort of a split decision.
17:24
Speaker 4: Yeah, it was a bit of a split verdict from
17:26
Speaker 4: the jury.
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Speaker 1: The plaintiffs had brought forward a variety of claims, all
17:30
Speaker 1: various forms of securities fraud. Probably the most simple sort
17:34
Speaker 1: of claim that proved successful was the claim that these
17:37
Speaker 1: tweets that mister Musk put out during the pendency of
17:40
Speaker 1: the Twitter acquisition constituted misleading statements that were made recklessly
17:46
Speaker 1: or possibly deliberately in contravention of rules against securities fraud
17:50
Speaker 1: that would entitle them to damages. They also made another
17:54
Speaker 1: claim that these tweets were actually part of a much
17:58
Speaker 1: larger scheme to fraud the entire market. These were just
18:02
Speaker 1: points on the map, but the map was a grander
18:04
Speaker 1: map of putting together a significant scheme to defraud the
18:08
Speaker 1: market over a many month long period. When the jury
18:12
Speaker 1: came back, they basically accepted the idea that these individual
18:16
Speaker 1: tweets were episodic moments of carelessness and recklessness by mister
18:21
Speaker 1: Musk that would expose him to securities fraud liability. But
18:24
Speaker 1: it wasn't part of a month's long scheme. This was
18:27
Speaker 1: more of a kind of a you know, shooting from
18:29
Speaker 1: the hip set of examples in which he made statements
18:32
Speaker 1: that clearly moved the market. He should not have made them.
18:35
Speaker 1: He knew better than to make them. And therefore they
18:37
Speaker 1: constituted securities for auduct Now, you know, either way, the
18:41
Speaker 1: jury got to a verdict of securities fraud. But it
18:44
Speaker 1: does turn out that a scheme liability approach would probably
18:48
Speaker 1: be in some ways more potent because the way that
18:51
Speaker 1: you add up damages would allow plaintiffs as part of
18:55
Speaker 1: this large class action to come forward and pick out
18:58
Speaker 1: any period of time during this month long period to
19:01
Speaker 1: point to to say I was defrauded during this period
19:03
Speaker 1: of time. Now it's going to be those plaintiffs that
19:06
Speaker 1: you know, basically, you know, bought before the correction or
19:11
Speaker 1: sold after the correction, right right around the point where
19:14
Speaker 1: he was making these statements. That will limit the award
19:17
Speaker 1: a little bit. But people are still expecting that this
19:20
Speaker 1: would be somewhere in the low billions of dollars, say
19:23
Speaker 1: around two to two point five billion dollars, So it's
19:25
Speaker 1: real exposure. The other reason why it's pretty important that
19:29
Speaker 1: the jury found that the type of secures for liability
19:33
Speaker 1: was these specific statements actually makes it a little bit
19:36
Speaker 1: more challenging to appeal because these are more sort of
19:40
Speaker 1: facts specific conclusions of a jury as opposed to statements
19:44
Speaker 1: of law that a court could get wrong, and so
19:47
Speaker 1: you know this type of securities fraud, the court pretty
19:50
Speaker 1: much puts it in the hands of the jury. It's
19:52
Speaker 1: up to the jury to figure out facts, and a
19:54
Speaker 1: court on appeal is very reluctant to overturn a factual
19:57
Speaker 1: finding that a jury has delivered up.
20:00
Speaker 2: I'll continue this conversation with Columbia Law School professor Eric Tally.
20:04
Speaker 2: Musk was on the stand for more than a day,
20:07
Speaker 2: but unlike other cases where he testified, the jury returned
20:11
Speaker 2: a verdict against him. After about four hours of deliberations.
20:19
Speaker 2: A jury found Elon Musk libel for defrauding investors by
20:23
Speaker 2: deliberately driving down Twitter's stock price in the tumultuous months
20:28
Speaker 2: leading up to his twenty twenty two acquisition of the
20:32
Speaker 2: social media company for forty four billion dollars. I've been
20:36
Speaker 2: talking to Columbia Law School professor Eric Tally.
20:39
Speaker 4: I think that a jury has delivered Eric.
20:41
Speaker 2: He's often been called teflon Elon for winning high stakes
20:46
Speaker 2: legal battles that many expected him to lose and in
20:51
Speaker 2: which he testified. Here he was on the stand for
20:54
Speaker 2: more than a day. So how can I put this?
20:57
Speaker 2: Do you think the thrill is sort of gone.
21:00
Speaker 1: Yeah, I think maybe the thrills worn off a little bit.
21:02
Speaker 1: And it's also important to realize that, you know, his
21:04
Speaker 1: Teflon status is as much myth as it is reality.
21:08
Speaker 4: In some level.
21:09
Speaker 1: It's true that he ultimately won on his compensation case
21:12
Speaker 1: at the Delawarre Supreme Court, but that's after having lost
21:15
Speaker 1: the first time around. He has gotten into hot water
21:18
Speaker 1: earlier with tweets that he made about a supposed you know,
21:22
Speaker 1: buyout of Tesla for four hundred and twenty dollars a
21:25
Speaker 1: share go figure that wasn't going to happen, and even
21:28
Speaker 1: the Twitter acquisition it ended up closing at forty two
21:32
Speaker 1: dollars a share, not because he won, largely because he
21:35
Speaker 1: basically just gave up an abandoned ship, right and so
21:38
Speaker 1: on some level, the Teflon Elon thing I think.
21:41
Speaker 4: Has always been a little bit overblown here.
21:43
Speaker 1: However, I do sort of feel like there has been
21:46
Speaker 1: a sense in which, you know, not only after Twitter acquisition,
21:49
Speaker 1: but after you know, Musk's kind of arrival as a
21:53
Speaker 1: semi government regulator in Doge and his kind of about
21:57
Speaker 1: face that turned off a lot of Tesla consumers and
22:00
Speaker 1: maybe members of the public. He probably just doesn't have
22:03
Speaker 1: the same type of you know, charm and appeal that
22:06
Speaker 1: he might have three or four years ago. And you know,
22:08
Speaker 1: certainly that could have played a role, though. I got
22:11
Speaker 1: to tell you, you know, as someone who is following
22:13
Speaker 1: the Twitter acquisition incredibly closely, June, I couldn't understand.
22:17
Speaker 4: These statements that he was making. They made no sense whatsoever.
22:22
Speaker 1: And in fact, I now teach a class at Columbia
22:25
Speaker 1: that is based largely on this episode right about why
22:30
Speaker 1: is it the case that so many traders out there
22:33
Speaker 1: just assumed that mister Musk was right and ignored the
22:36
Speaker 1: fact that he had a very very difficult to break
22:40
Speaker 1: acquisition agreement that he had willingly signed up, and the
22:43
Speaker 1: legal record on these things was incredibly clear, and I
22:46
Speaker 1: think ultimately that's one of the reasons why he just
22:49
Speaker 1: decided to drop that challenge and close the deal on
22:53
Speaker 1: the very same terms that he signed it up.
22:55
Speaker 2: At one point, Musk acknowledged under questioning from lawyer for
23:00
Speaker 2: Investors that the temporarily on hold post was a mistake.
23:05
Speaker 2: Quote it may not be my wisest tweet. I don't
23:09
Speaker 2: know if I would call it my stupidest, but if
23:12
Speaker 2: it led to this trial, it probably qualifies as such.
23:16
Speaker 1: It certainly looks like it could prove to be an
23:19
Speaker 1: expensive set of tweets, right that even for someone with
23:23
Speaker 1: wealth and the magnitude of the lawn Musk's stratosphere, a
23:26
Speaker 1: two billion dollar award.
23:28
Speaker 4: Is real money.
23:29
Speaker 1: And so, you know, the one thing that's important to
23:32
Speaker 1: note June is that the jury did not deliver any
23:34
Speaker 1: judgment on the damages, and so the various members of
23:37
Speaker 1: the plaintiff's class might have to come forward and say,
23:41
Speaker 1: you know, listen, I was you know, I was one
23:43
Speaker 1: of the people that I got fooled or got swindled
23:45
Speaker 1: by this, and I lost.
23:47
Speaker 4: Money because of it.
23:48
Speaker 1: So that tabulation process is going to be ongoing, and
23:51
Speaker 1: the plaintiffs attorneys have said this could be in the
23:54
Speaker 1: mid two billions. I suspect some of those damages theories
23:57
Speaker 1: are not going to pan out.
23:59
Speaker 4: But you know, anything that.
24:00
Speaker 1: Starts with a bee is something that anyone, including Kelon Musk,
24:03
Speaker 1: probably is going to want to pay a little attention to.
24:05
Speaker 2: Will it be the trial judge who decides how much
24:08
Speaker 2: money each investor will get or someone else?
24:11
Speaker 4: It will not be the jury.
24:12
Speaker 1: It'll probably be the trial judge who is working in
24:15
Speaker 1: collaboration with There's a whole private series of claims administrators
24:19
Speaker 1: out there that try to tabulate up the various types
24:21
Speaker 1: of claims.
24:21
Speaker 4: But it will have to be superintended by the judge.
24:25
Speaker 4: And this has not been a settlement right.
24:27
Speaker 1: A lot of times when there's a securities front case,
24:29
Speaker 1: most of them settle and then there's a pot of
24:31
Speaker 1: money that's put in and then the claims administrator pretty
24:34
Speaker 1: much works out outside of the supervision of the judge.
24:37
Speaker 4: But now the judge is.
24:38
Speaker 1: Going to have to be a little bit more involved
24:39
Speaker 1: try to figure out, okay, who's getting what, And there
24:42
Speaker 1: probably is going to be a little bit more legal
24:43
Speaker 1: wrangling with various types of members of the class saying, hey,
24:47
Speaker 1: I'm you know, I'm claiming that i'd lost, you know,
24:49
Speaker 1: a couple hundred thousand dollars in this.
24:51
Speaker 4: Does it add up?
24:52
Speaker 1: Did your loss sort of somehow bookend these important statements
24:56
Speaker 1: or not?
24:57
Speaker 4: And so that's going to take some time to fare
24:59
Speaker 4: it out.
25:00
Speaker 1: But I can't imagine given the fact that people were
25:03
Speaker 1: trading heavily in Twitter during this period of time, there
25:06
Speaker 1: was a lot of interest in this transaction.
25:08
Speaker 4: So there was a lot of volume of trading going on.
25:10
Speaker 1: And when there's a lot of volume of trading going on,
25:12
Speaker 1: that means there are a lot of potential securities fraud
25:15
Speaker 1: claimants out there. So I would not be surprised for
25:18
Speaker 1: the final bar tap on this set of tweets to
25:22
Speaker 1: exceed a billion dollars, and it could well run north
25:25
Speaker 1: of two.
25:26
Speaker 2: So Musk's lawyers say they're going to appeal. We view
25:29
Speaker 2: today's verdict where the jury found both for and against
25:32
Speaker 2: the plaintiffs and found no fraud scheme as a bump
25:36
Speaker 2: in the road. Now you were talking before about the
25:39
Speaker 2: difficulties on appeal.
25:41
Speaker 1: Yeah, So the one thing that's kind of interesting is
25:43
Speaker 1: that while scheme liability, which the jury rejected, that this
25:47
Speaker 1: was part of a long standing scheme and these are
25:49
Speaker 1: just two two dots on the radar screen, but it
25:52
Speaker 1: was a much bigger thing that was rejected by the jury,
25:54
Speaker 1: and in principle that could have delivered a much higher
25:58
Speaker 1: monetary damages award. So on some level, mister Musk dodged
26:02
Speaker 1: a bullet because if everyone who traded at any time
26:06
Speaker 1: during this scheme could bring a lawsuit or could make
26:09
Speaker 1: a claim for damages, you could have something that may
26:11
Speaker 1: be over ten billion dollars.
26:13
Speaker 4: So now it's just going to be.
26:14
Speaker 1: Those people that traded in and around these tweets and
26:17
Speaker 1: can kind of trace it to market changes that took
26:20
Speaker 1: place because of the tweet, and so that's going to
26:23
Speaker 1: cabin the potential losses. But by the same token, it
26:26
Speaker 1: makes a challenge on appeal somewhat more difficult to bring forward.
26:32
Speaker 1: A lot of times, scheme liability has to involve up
26:35
Speaker 1: some pronouncements by the judge and often pronouncements about what
26:39
Speaker 1: the law says. The law is often pretty unclear in
26:42
Speaker 1: this area because so many cases settled rather than litigate,
26:45
Speaker 1: and so you can stand a chance about getting the
26:48
Speaker 1: trial court judges ruling overturned on appeal when you're appealing
26:52
Speaker 1: one of these scheme liability.
26:54
Speaker 4: Cases for a misstatement case, and that's what this one is.
26:57
Speaker 1: It's another type of security scrum case that is trickier
27:01
Speaker 1: because so much more of the determination is basically given
27:05
Speaker 1: to a deputized jury to find out. They just have
27:08
Speaker 1: to figure out whether the facts around this were misleading
27:11
Speaker 1: and reckless and so forth, and they found that they
27:14
Speaker 1: were in these instances, and that is going to be
27:17
Speaker 1: a much harder thing for an appellate level court that's
27:20
Speaker 1: not seeing any witnesses, that's not looking at any you know,
27:24
Speaker 1: documents at lengthen the evidentiary record other than you know,
27:27
Speaker 1: some of the major ones to say, yeah, we just
27:29
Speaker 1: think the jury got it wrong on this, that no
27:31
Speaker 1: reasonable jury could have made that conclusion, when there are
27:35
Speaker 1: so many people out there, including myself quite frankly, who
27:38
Speaker 1: were kind of mystified at the time, and we're you know,
27:42
Speaker 1: sort of saying that publicly about you know, why is
27:44
Speaker 1: it the case that mister Musk was you know, thinking
27:47
Speaker 1: that he could get out of the steal.
27:48
Speaker 4: It just didn't seem like he could.
27:49
Speaker 2: Does this jury verdict stand for anything beyond this case?
27:54
Speaker 4: Well, I think in some ways it may.
27:56
Speaker 1: I think the thing that you know has been maybe
27:59
Speaker 1: lost in the shuffle in the last couple of years June,
28:02
Speaker 1: as we've gotten you know, so excited about you know,
28:05
Speaker 1: NFTs and crypto and very you know, meme stocks and
28:09
Speaker 1: so forth, is that securities markets, when they're well regulated
28:12
Speaker 1: and when they are not sort of pumped full of
28:15
Speaker 1: exaggerations or careless statements, are a very very good mechanism
28:20
Speaker 1: both to transmit information and to distribute risk across the
28:24
Speaker 1: entire economy. And so there's a really, you know, kind
28:27
Speaker 1: of major goal, policy goal that we all have in
28:31
Speaker 1: trying to make sure that the way that security markets
28:33
Speaker 1: are regulated and litigated, I guess is to make sure
28:38
Speaker 1: that people, you know, feel like they are operating with integrity,
28:41
Speaker 1: that when someone says something and that person is in
28:44
Speaker 1: a position of authority in a company, that they're not
28:46
Speaker 1: basically just making stuff up. And so there there is
28:49
Speaker 1: on some level, you know, a sense that maybe this
28:52
Speaker 1: does vindicate the idea that you know, people are who
28:56
Speaker 1: are in possession of information, who are trying to make
28:58
Speaker 1: statements that they know we're going to have an effect
29:00
Speaker 1: on the price, they need to be.
29:01
Speaker 4: Careful when they do it.
29:03
Speaker 1: And ultimately, while that may be inconvenient for them at
29:07
Speaker 1: the time, it will redound to all of our long
29:10
Speaker 1: term benefit simply because that means that, you know, when
29:13
Speaker 1: they really do have news, we can trust that they're
29:16
Speaker 1: delivering that news in a bona fide fashion. And so,
29:19
Speaker 1: you know, my sense is that this probably is on
29:22
Speaker 1: some level of victory for you know, continued faith in
29:25
Speaker 1: the help of securities markets. I'm not necessarily too worried
29:30
Speaker 1: about the fact that there wasn't a scheme liability verdict
29:33
Speaker 1: in this case, because I don't really think there was
29:35
Speaker 1: much of a scheme.
29:36
Speaker 4: You know.
29:36
Speaker 1: My sense is that, you know, mister Musk, this wasn't
29:39
Speaker 1: part of some you know, four dimensional chess type of
29:41
Speaker 1: thing that he was trying to play. You know, he
29:43
Speaker 1: thought he might want to buy Twitter, and then he
29:45
Speaker 1: changed his mind. He was trying to come up with
29:46
Speaker 1: reasons why he could walk away, and he was trying
29:48
Speaker 1: it out by crowdsourcing it, but that also turned out
29:51
Speaker 1: to be securities.
29:52
Speaker 4: Fra up.
29:53
Speaker 2: Eric, It's always a pleasure, Thanks so much. That's Professor
29:56
Speaker 2: Eric Tally of Columbia Law School. And that's it. It's
29:59
Speaker 2: a of the Bloomberg Law Show. Remember you can always
30:02
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30:05
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