SAN FRANCISCO (CN) — Tesla shareholders argued Friday before the Ninth Circuit that jurors who heard their case against Tesla CEO Elon Musk earlier this year were improperly instructed. Investors specifically objected to the wording of the jury instructions, which they believe could have changed the outcome of the case.
“In its instructions, the court misstated the law and imposed a higher burden on plaintiff than what is required,” said attorney Nicholas Porritt of Levi & Korsinsky, who represents the investors. He added that the way the court issued its instructions was confusing and bound to mislead jurors.
Musk previously faced trial in the lawsuit filed by the investors who said they were misled by a tweet on August 7, 2018, in which he said he secured financing for a Tesla buyout. That buyout never came to fruition, however, and stockholders cried foul.
“Am considering taking Tesla private at $420. Funding secured,” the South African-born multibillionaire tweeted at the time. Tesla stock jumped in value and then sank when it became clear nothing of the sort was going to happen. The tweet also cost Musk $40 million when the U.S. Securities and Exchange Commission fined him following an investigation.
After three weeks of testimony in the Tesla securities trial, jurors in February found Musk and Tesla itself not liable on all claims of fraud and attempts to deceive investors in their efforts to take the electric vehicle company private.
Oral arguments took place before a three-judge panel in the James R. Browning U.S. Courthouse in San Francisco.
The plaintiffs wasted no time launching into their primary argument that this wording misled jurors into believing that the plaintiff had the burden of proof in demonstrating Musk acted with the intent to deceive.
“The jury instructions, both at the end of trial and the curative instruction during trial, said explicitly the plaintiff has the burden of proof to prove that Elon Musk acted knowingly when he made those tweets. That is a false statement of the law,” declared Porritt.
When pressed by U.S. Circuit Judge Richard Randall Clifton on where that wording was in the instructions, the lawyer quoted the passage back to the George W. Bush appointee.
“Plaintiff must prove by a preponderance of the evidence that Elon Musk and/or Tesla acted with the necessary state of mind,” he read.
The plaintiffs’ attorney further argued that the instructions unnecessarily confused jurors with its phrasing. For example, the instructions asked them to assume that Musk acted with deliberate recklessness, but then in the next sentence reminded them they still had to consider whether he acted knowingly.
“That, in itself, is at a minimum confusing, or I would say a misstatement of the law,” Porritt argued.
The jury instructions in the trial went through several revisions, including some the day before they were issued to jurors. This fact left some of the judges confused about which instructions plaintiffs were referring to at times, prompting them to ask for clarification at multiple points.
Meanwhile, defense attorney Ellyde Thompson of Quinn Emanuel, who represented Musk, said that the jury instructions were quite clear and claimed the plaintiffs did not file their objections by the court’s deadline, but were instead 20 days late — the day before the jury instructions were issued. Therefore, she concluded the objection should not be in the record and the error was not preserved.
Preservation of error refers to raising objections, issues, and arguments during a trial and including them in the written or oral record for later review by an appellate court. Failure to preserve almost always results in a waiver or loss of one’s legal arguments on appeal.
“Well, don’t our cases say that an objection can still be timely, even if made before the instructions get to the jury?” asked U.S Circuit Judge Gabriel Patrick Sanchez. “Why isn’t this timely under our case law?”
“Actually, standing here today, we don’t even know if the court even read that filing before the instructions were given the following day,” she told the Biden appointee, acknowledging the significant back and forth involved with the case’s jury instructions.
Ultimately, she concluded, there was no legal error in the case. “And even if there was it was absolutely harmless,” she added.
The judges did not indicate when they would rule on the matter before they concluded.