Azealia Banks, Grimes, the New York Times, Gizmodo, and Business Insider are set to be pulled into the case that investors filed against Tesla, after a “false and misleading” tweet from founder Elon Musk impacted stock prices and garnered Securities and Exchange Commission scrutiny. Despite pushback from Musk’s counsel and from Banks, herself, who lashed out at the 47-year old South African billionaire on social media recently over the case, a federal court in Northern California has approved the investor plaintiffs’ motion to preserve evidence held by the two musicians and three publications.
According to a motion filed early this year, the plaintiffs, a group of Tesla investors, are seeking to get information from Musk’s ex-girlfriend, Claire Elise Boucher, who goes by the stage name, Grimes, and fellow musician Azealia Banks, the latter of whom alleged in an array of social media posts that Musk was using drugs at the time of the tweet that boosted stock prices for the NASDAQ-traded Tesla, in order to help build their case against Musk and Tesla.
Beyond Banks and Boucher, the plaintiffs are also seeking to preserve information held by the New York Times, Gizmodo, and Business Insider, all of which interviewed Banks and/or Musk this summer and likely “have information bearing on the veracity of Musk’s tweet.”
Because neither the two musicians nor the publications are named as defendants in the case, the plaintiffs must secure authorization from the court before demanding information from them (i.e., before sending them subpoenas).
Counsel for Musk, Dean Kristy of Fenwick & West, attempted to shut down the proposed subpoenas, arguing in a filing that adding the famous figures into the mix clearly represents an effort to “sensationalize these proceedings” – potentially in an effort to force a high sum settlement out of Musk and Tesla (I think) – rather than to serve a legitimate fact-finding purpose.
Judge Edward M. Chen of the U.S. District Couth for the North District of California was not persuaded, though, deciding this week that the investor plaintiffs have “adequately established that the document preservation subpoenas constitute ‘particularized discovery . . . necessary to preserve the evidence or to prevent undue prejudice.’” He further held that “although the plaintiffs failed to show that the loss of evidence was imminent, a company [or individual]’s status as a non-party [in the case] significantly increases the risk that evidence may be lost.”
In short: the subpoenas will merely require that Banks, Boucher, and the three publications immediately refrain from destroying documents and other potential evidence central to the case. The plaintiffs also wanted them to turn over specific documents but Judge Chen denied that request.
The judge also noted that the plaintiffs’ “claim that [Tesla and Musk] have a practice of trying to silence critics is not well supported,” pointing only to an “incident with Ms. Banks and a second incident involving an author who worked for [financial publication] Seeking Alpha.” Finally, in response to the plaintiff’s claim that Banks was intentionally, recklessly, or negligently withholding, hiding, altering, fabricating, or destroying evidence relevant to the case, including social media posts, which are "highly susceptible to deletion,” the judge stated that such an evidence “spoliation [claim] vis-à-vis Ms. Banks is largely speculative.”
The suit follows from Musk’s August 2018 tweet that he was “considering taking [publicly-listed] Tesla private at $420. Funding secured,” which the U.S. Securities and Exchange Commission has subsequently held contained “false and misleading statements,” and that he “knew or was reckless in not knowing [were] false and/or misleading.”
*The case is Kalman Isaacs, individually and on behalf of all others similarly situated, vs. Elon Musk and Tesla, Inc., 3:18-cv-04865 (N.D. Cal).