Judge Smacks Down Elon Musk’s Attempt to Transfer SEC Case to Friendlier State
AP Photo/Evan Vucci
A federal judge emphatically rejected Elon Musk’s attempt to move a case filed by the Securities and Exchange Commission against him from the District of Columbia to Texas or New York, scoffing at arguments from the billionaire that travel to D.C. would impose “substantial burdens” on him.
The case arose from Musk’s purchase of Twitter, Inc. common stock in 2022, which, according to the SEC, required Musk to file a disclosure report with the agency detailing his Twitter holdings. The SEC sued Musk in the U.S. District Court for the District of Columbia on Jan. 14 of this year for filing the required report late. The remedies sought in the SEC’s complaint include a civil penalty and disgorgement.
Musk filed a motion in August to transfer the case to the Western District of Texas, or in the alternative, the Southern District of New York. The SpaceX and Tesla CEO has a long history of not only using litigation as a tactic against his critics, but making every effort to get the cases heard in specific states and courts he believes to be more favorable to him, a practice known as forum shopping.
The legal standard in federal court to transfer a case is found in a federal statute, 28 U.S.C. § 1404(a), and if all parties don’t consent, past cases have established a standard that first has the court determine if the case could have been brought in the district the moving party seeks to transfer the case. Once that threshold has been met, the court then “must balance case-specific factors which include the private interests of the parties as well as public interests such as efficiency and fairness,” wrote Judge Sparkle L. Sooknanan, a Biden appointee, quoting past case law in a 16-page opinion denying Musk’s motion.
The burden to prove that a transfer is proper was on Musk, as the moving party, and the court was tasked with evaluating the following factors (citations omitted):
The private-interest factors include: “(1) the plaintiff’s choice of forum; (2) the defendant’s choice of forum; (3) whether the claim arose elsewhere; (4) the convenience of the parties; (5) the convenience of the witnesses; and (6) the ease of access to sources of proof.”
The public-interest factors include: “(1) the transferee’s familiarity with the governing laws; (2) the relative
congestion of the calendar of the transferor and transferee courts; and (3) the local interest in having local controversies decided at home.”
Acknowledging that the case could have been brought in the Texas or New York courts Musk preferred, the judge found his arguments lacking on several of the other factors.
Musk merely residing in the Western District of Texas was not enough to justify giving that forum “unusual weight” in the analysis, Sooknanan wrote.
Musk had argued that having to litigate the case in D.C. “would impose ‘substantial burdens’ on him because he is ‘an incredibly busy individual’ and ‘it is unlikely [he] could attend an entire trial in Washington, D.C.,'” Sooknanan wrote, but flatly rejected his arguments that this would be unfairly inconvenient for him or that location of some business records in Austin, Texas was enough to justify a transfer.
“The Court takes Mr. Musk’s convenience seriously, but it also notes that Mr. Musk has considerable means and spends at least forty percent of his time outside his chosen forum,” the judge wrote, and referenced Musk’s controversial and well-publicized activities with DOGE earlier this year as proof he could in fact travel to D.C. if he wished. “Indeed, although Mr. Musk may have ‘rarely’ traveled to this District in recent months, Mr. Musk’s brief itself indicates that he has spent substantial time here this year.”
The judge’s analysis of a possible transfer of the case to New York ended finding Musk’s arguments similarly lacking, and without the element of the location of the defendant’s residence and records, also ruled against a transfer.
