Fight over misleading Elon Musk tweets not over: Parties lock horns over next steps

U.S. District Judge Charles Breyer, the federal judge who presided over the trial, asked the parties to submit their suggestions for the process to be followed after the jury verdict.

The rules that govern litigation in federal courts generally set forth the processes to be followed after the jury has done its work, but in large cases it is common for the court to seek input from the parties on how to move forward fairly and efficiently.

In this case, it is clear that a court-approved schedule will need to be established because Musk has the right to ask Breyer to set aside or override parts of the jury's verdict. Moreover, even though the jury indicated that damages should be awarded to class members, the amount to be paid to individual plaintiffs still needs to be determined.

On Monday, lawyers for Musk and the plaintiffs separately advised Breyer of how the main post-verdict procedural matters should be scheduled.

Not surprisingly, lawyers for the class of stockholder plaintiffs wanted to get started with the process by which individual class members would submit claims and have them approved for payment. The lawyers also wanted to gather and submit evidence of the costs of the litigation and the amount of their attorneys' fees, all of which the court will need to consider.

Musk's lawyers' proposed path forward was also not surprising. His lawyers want the court to determine if the jury's verdict will withstand scrutiny, and hold anything relating to claims or litigation costs until that is first determined.

In a letter submitted to the court, Musk's lawyers said that Musk intends to challenge the jury's decision and would do so in filings they will submit to Breyer on or before April 24.

While they did not specify the grounds they will raise, the lawyers have not been shy about their opinion that the trial was fatally flawed and that Breyer should have declared a mistrial when they asked him to do so on March 7.

In seeking a mistrial, Musk's lawyers presented a laundry list of complaints, including the allegation that the plaintiffs' lawyers violated the court's instructions and raised topics previously determined to be inappropriate for presenting to the jury.

They also argued that at times during the trial, Breyer was antagonistic to Musk and his lawyers, saying that Breyer's "repeated, one-sided interruptions and admonitions in front of the jury throughout defense counsel's examination prejudiced Defendant and warrant a mistrial."

Musk's lawyers also said that if they are unsuccessful in convincing Breyer to throw out the verdict, they expect to appeal to the U.S. Court of Appeals for the 9th Circuit, something they would like to do "without delay."

They also suggested that the claims process be put on hold until Breyer has ruled on their challenges to the jury verdict.

While the positions are typical in cases with a lot at stake, Musk's lawyers also telegraphed that they plan to take an aggressive approach in the claims process.

The claims process will require — at minimum — the collection of information about individual shareholder claims.

The class is made up of former Twitter shareholders who sold their shares after Musk's misleading statements caused their value to fall. The jury gave guidance about how the amount of loss relating to a sale on a given day would be determined, but calculating the loss incurred by any particular shareholder will require information about the date and time on which the shares were sold and the terms of the sale.

While that type of process can take time, it can be a fairly mechanical and straightforward affair.

However, Musk's lawyers said that Musk "intends to challenge individual reliance and damages — and will avail himself of all related discovery and adjudicatory processes authorized by law — for all claimants seeking damages."

If Musk carries through on that approach, he will seek to litigate the claims on a claimant-by-claimant basis, challenging not only how the specific damages were calculated but also whether the individual relied on the statements the jury found to be untrue.

The lawyers also said that to find the relevant information, they may take "discovery" of individual claimants — for example by making them produce their records and/or taking their depositions under oath.

If Musk follows that approach, it could greatly extend the time of ultimate resolution.

According to court records, Breyer has not responded to the suggestions of counsel but is likely to address them in the near term.