Case 3:23-mc-80253-LB Document 37 Filed 02/10/24 Page 1 of 10

8 UNITED STATES DISTRICT COURT

9 NORTHERN DISTRICT OF CALIFORNIA

10 San Francisco Division

11 SECURITIES AND EXCHANGE Case No. 23-mc-80253-LB

COMMISSION,
12 ORDER COMPELLING
Northern District of California

Applicant, COMPLIANCE WITH

United States District Court

13 ADMINISTRATIVE SUBPOENA
v.
14 Re: ECF No. 1
ELON MUSK,
15
Respondent
16

17 INTRODUCTION

18 The SEC has applied for an order to compel compliance with its investigative subpoena for

19 respondent Elon Musk to appear and testify at the SEC’s San Francisco office about possible

20 violations of federal securities laws in connection with his 2022 purchase of Twitter and his

21 statements about that purchase. 1 The parties, at least initially, agreed to a date but ultimately the

22 respondent did not appear and resists the subpoena on the grounds that the SEC’s investigation is

23 baseless and harassing and seeks irrelevant information. Also, he contends that the subpoena —

24 issued by an SEC staff member appointed by the SEC’s Director of Enforcement — exceeds the

25

26

27
1
Appl. – ECF No. 1. Citations refer to material in the Electronic Case File (ECF); pinpoint citations
28 are to the ECF-generated page numbers at the top of documents.

ORDER – No. 23-mc-80253-LB

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1 SEC’s authority because it was not issued by an officer appointed by the President, a court, or the

2 head of a department, as required by the Appointments Clause of the U.S. Constitution.2

3 The court enforces the subpoena: the evidence is relevant and material to the SEC’s

4 investigation, and the testimony is not unduly burdensome. As to the argument that the subpoena

5 exceeds the SEC’s authority, the Exchange Act authorizes the subpoena, and the staff attorneys

6 who issue subpoenas are not inferior officers subject to the Appointments Clause.

7 The parties must confer within one week and settle on a date and location for the testimony.

9 STATEMENT

10 The SEC issued a formal order initiating its investigation on April 14, 2022, and it issued a

11 corrected order on July 15, 2023. The orders authorized SEC staff to investigate — including

12 through subpoenas for documents and testimony — whether persons may have violated the federal
Northern District of California
United States District Court

13 securities laws in connection with the respondent’s purchase of Twitter in 2022 and his 2022

14 statements and SEC filings relating to Twitter. 3 The SEC served the respondent with a subpoena

15 for his testimony, and he testified by videoconference in two half-day sessions on July 12 and 27,

16 2022. 4 Since then, the SEC has received “thousands of new documents” from various parties,

17 including hundreds of documents from the respondent. Nearly half of the respondent’s production

18 to the SEC occurred after his last half-day session, including documents that he authored. 5 The

19 SEC thus wants to ask the respondent about the new information. In April 2023, SEC staff

20 informed the respondent’s counsel that it would subpoena the respondent for in-person testimony

21 in San Francisco. The respondent’s counsel provided scheduling conflicts, and ultimately, on May

22 23, 2023, the respondent’s counsel agreed that the respondent would appear for investigative

23 testimony in San Francisco on September 14, 2023. He did not object to either to the testimony or

24 to an in-person appearance. Later that day, the SEC served the respondent with the subpoena

25
2
26 Opp’n – ECF No. 24 at 8–9.
3
Andrews Decl. – ECF No. 2 at 2–3 (¶¶ 2–3, 5).
27 4
Id. at 3 (¶ 6).
28 5
Id. (¶ 7).

ORDER – No. 23-mc-80253-LB 2

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1 requiring his attendance for testimony on September 14 at the SEC’s San Francisco office. 6 The

2 respondent did not object to the subpoena. 7

3 On August 28, 2023, the respondent’s counsel asked to move the testimony date from

4 September 14 to September 15, 2023, to accommodate the respondent’s travel schedule. The SEC

5 agreed to the accommodation and issued a second subpoena for the respondent’s appearance on

6 September 15. 8 On September 13, the respondent’s counsel informed the SEC that the respondent

7 would not appear on September 15 for several reasons: (1) it was not clear why the SEC needed to

8 question the respondent further, given the earlier testimony; (2) the in-person testimony in San

9 Francisco suggested bad faith because the respondent lives elsewhere; (3) a six-hundred-page

10 biography was published on September 12, and counsel needed to review it (and expected that the

11 SEC would want to review it too); and (4) these matters needed to be resolved before the

12 respondent provided further testimony. 9 The SEC responded the next day, explained that it needed
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United States District Court

13 another day of testimony to review new documents, summarized the parties’ discussions and

14 agreements for the respondent to provide testimony in September 2023, cited its statutory

15 authority to compel attendance at any place in the U.S., 15 U.S.C. § 78u(b), and offered two new

16 dates (September 19 and September 20) in San Francisco, citing media reports that the respondent

17 would be in the San Francisco area then. 10 The respondent did not appear on September 15. 11

18 Based on its understanding that the respondent lives in Austin, Texas, on September 19, the

19 SEC sent an email to the respondent’s counsel offering to conduct the testimony at the SEC’s

20 office in Fort Worth, Texas, on various dates in October. 12 On September 21, the SEC sent a

21 follow-up letter offering additional dates in November. 13 On September 24, 2023, the respondent’s

22
6
23 Id. at 3–4 (¶¶ 8–9); Subpoena, Ex. 2 to id. – ECF No. 2-2.
7
Andrews Decl. – ECF No. 2 at 4 (¶ 10).
24 8
Id. (¶ 11).
25 9
Id. (¶ 13); Letter, Ex. 4 to id. – ECF No. 2-4.
10
26 Letter, Ex. 5 to id. – ECF No. 2-5.
11
Andrews Decl. – ECF No. 2 at 4 (¶ 14).
27 12
Email, Ex. 6 to id. – ECF No. 2-6.
28 13
Letter, Ex. 7 to id. – ECF No. 2-7.

ORDER – No. 23-mc-80253-LB 3

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1 counsel sent a letter saying that that the respondent would not appear for several reasons: the SEC

2 had leaked information to the mainstream media, the investigation was frivolous (shown in part by

3 the SEC’s opening it the day after it closed an earlier investigation), and the litany of document

4 requests and demand for a third testimony — in the face of a multi-year investigation “arising

5 from the accidental tardiness of a clerical filing” — was troubling government action. 14 The SEC

6 responded on September 25, characterizing the objections as baseless and asking the respondent to

7 reconsider his refusal to provide testimony. 15 The respondent did not reply to the letter. 16

8 To support his contention of harassment, the respondent points to the SEC’s “unrelenting

9 investigation” of the respondent, including its two September 2018 actions against him in the

10 S.D.N.Y. for his statements on Twitter. 17 He characterizes the settlement of those cases as a forced

11 consent decree with First Amendment implications in the form of the requirement for a Tesla

12 lawyer’s preapproval of public communications “on a range of subject matters.” 18 He identifies

Northern District of California
United States District Court

13 the SEC’s loss of its contempt motion against the respondent for a tweet and the jury’s finding of

14 no liability in a private securities action. 19 Since 2018, the SEC has issued “dozens upon dozens”

15 of burdensome and costly subpoenas to the respondent and to his related entities without bringing

16 formal charges. 20 On November 18, 2019, the SEC closed its investigation into the 2018 tweet but

17 opened a new investigation into SpaceX. 21

18 The respondent characterizes the SEC’s actions as “dirty tactics:” For example, in connection

19 with the contempt action (discussed in the last paragraph), an SEC staff member leaked

20

21
14
22 Letter, Ex. 8 to id. – ECF No. 2-8.
15
Letter, Ex. 9 to id. – ECF No. 2-9.
23 16
Andrews Decl. – ECF No. 2 at 5 (¶ 18).
24 17
Opp’n – ECF No. 24 at 9 (citing SEC v. Musk, 1:18-cv-8865 (S.D.N.Y.), ECF No. 1; SEC v. Tesla,
1:18-cv-8947 (S.D.N.Y.)).
25 18
Id.
26 19
Id. at 9–10 (citing SEC v. Musk, 1:18-cv-8865, ECF Nos. 18, 39, 48, and In re Tesla Inc. Sec. Litig.,
No. 18-CV-04865-EMC, ECF No. 671 (N.D. Cal. Feb. 3, 2023)).
27 20
Spiro Decl. – ECF No. 25 at 3 (¶ 11).
28 21
Id. at 3 (¶ 12).

ORDER – No. 23-mc-80253-LB 4

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1 information to the press. 22 He also references the SEC’s hijacking of an investigation into the

2 respondent’s SEC Rule 13d-1 disclosures. 17 C.F.R. § 240.13d. On the same day that the

3 respondent disclosed his acquisition of Twitter stock on Schedule 13G (the form for passive

4 investors who acquire more than five percent of a publicly traded stock), the SEC’s Division of

5 Corporation Finance asked about the filing. 23 The next day the respondent filed a Schedule 13D

6 (the form for investors who are not passive investors). 24 Shortly thereafter, the Enforcement

7 Division intervened “so that the same individuals investigating Mr. Musk’s compliance with the

8 consent decree could also manage the present investigation.” 25 The SEC usually resolves untimely

9 filings with fines. 26 But here, it has issued thirty-two administrative subpoenas in the investigation,

10 including five document subpoenas — including for all of the respondent’s emails through August

11 2022 related to the Twitter merger — and three testimony subpoenas to the respondent. 27 It has

12 taken the respondent’s testimony twice for a total of eight hours, 28 the testimony of the
Northern District of California
United States District Court

13 respondent’s wealth manager three times for a total of twelve hours, 29 and testimony from at least

14 two other individuals. 30

15 The court held a hearing on December 14, 2023.

16

17

18

19

20 22
Opp’n – ECF No. 24 at 10 (citing SEC v. Musk, 1:18-cv-8865, ECF No. 71); Spiro Decl. – ECF No.
25 at 3 (¶ 13) (SEC has never denied that it was responsible for the leak).
21 23
Spiro Decl. – ECF No. 25 at 3 (¶ 14); Schedule 13G, Ex. 1 to id. – ECF No. 25-1.
22 24
Schedule 13D, Ex. 2 to id. – ECF No. 25-2.
25
23 Spiro Decl. – ECF No. 25 at 3 (¶ 14).
26
Opp’n – ECF No. 24 at 11–12 (citing specific cases, including one involving a $100,000 fine for a
24 hedge fund that failed to timely file a Schedule 13D for approximately 45 days after it previously filed a
Schedule 13G, and three other cases imposing fines of $100,000, $120,000, and $150,000 for — at least
25 for two cases — longer delays).
27
26 Spiro Decl. – ECF No. 25 at 3 (¶ 15).
28
Id. at 3–4 (¶¶ 17–18)
27 29
Id. (¶¶ 16, 19, 21).
28 30
Id. at 3 (¶ 15).

ORDER – No. 23-mc-80253-LB 5

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1 ANALYSIS

2 The respondent challenges the SEC subpoena as irrelevant and burdensome, and he also

3 contends that it exceeds the SEC’s authority because it was not issued by an officer appointed by

4 the President, a court, or the head of a department. 31 The court grants the SEC’s motion to enforce

5 the subpoena: it seeks relevant information, and it is otherwise valid.

7 1. The Subpoena Seeks Relevant Information

8 The court’s inquiry is narrow: the issues are (1) whether Congress has granted the authority to

9 investigate, (2) whether the procedural requirements have been followed, and (3) whether the

10 evidence is relevant and material to the investigation. SEC v. Obioha, No. 12-cv-80109-WHA,

11 2012 WL 4889286, at *1 (N.D. Cal. Oct. 12, 2012) (quoting EEOC v. Fed. Exp. Corp., 558 F.3d

12 842, 848 (9th Cir. 2009); see also United States v. Powell, 379 U.S. 48, 57–58 (1964)
Northern District of California
United States District Court

13 (administrative agency’s investigative subpoena (there, an IRS subpoena) must be enforced if its

14 investigation has a legitimate purpose, the information may be relevant to that purpose, the agency

15 does not already possess the information, and all administrative steps have been followed). “An

16 affidavit from a government official is sufficient to establish a sprima facie showing that these

17 requirements have been met.” FDIC v. Garner, 126 F.3d 1138, 1143 (9th Cir. 1997).

18 First, the SEC has broad authority to issue subpoenas. SEC v. Jerry T. O’Brien, Inc., 467 U.S.

19 735, 741 743 (1984) (“The provisions vesting the SEC with power to issue and seek enforcement

20 of subpoenas are expansive.”) Its authority includes the power to “subpoena witnesses, compel

21 their attendance, take evidence, and require the production of any books, papers, correspondence,

22 memoranda, or other records which the Commission deems relevant or material to the inquiry.” 15

23 U.S.C. § 78u(b); see also id. § 77t(a). The investigation here — about possible violations of the

24 federal securities laws in connection with the respondent’s 2022 purchases of Twitter stock and

25

26

27

28 31
Opp’n – ECF No. 24 at 8–9.

ORDER – No. 23-mc-80253-LB 6

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1 his 2022 statements and SEC filings relating to Twitter — were authorized by the SEC’s Formal

2 Orders. 32

3 Second, the information that the SEC seeks is relevant to that investigation. “For purposes of

4 subpoena enforcement, relevance of the evidence is established when the information sought is not

5 ‘plainly incompetent or irrelevant for any lawful purpose.’” Obioha, 2012 WL 4880286, at *1

6 (quoting Endicott Johnson Corp. v. Perkins, 317 U.S. 501, 408 (1943)). The respondent is the

7 person who made the securities purchases, statements, and SEC filings, and the SEC may question

8 him on those topics. This is an investigative subpoena. Minimal relevance is required to enforce it. 33

9 Third, the SEC does not have the information. It wants to question the respondent about new

10 information it received after his prior testimony. 34

11 Fourth, the SEC has satisfied all administrate prerequisites. The SEC can compel the attendance

12 of witnesses that it deems relevant or material to its investigation. 15 U.S.C. §§ 77s(c), 77u(b). It
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United States District Court

13 issued subpoenas for the testimony. The respondent did not comply with the subpoenas. 35

14 Because the SEC issued its subpoena lawfully, the burden shifts to the respondent to prove that

15 the subpoena was issued in bad faith or for an improper purpose, such as harassment or to pressure

16 that person to settle a collateral dispute, Powell, 379 U.S. at 58, or is “overbroad or unduly

17 burdensome,” EEOC v. Children’s Hosp. Med. Center, 719 F.3d 1426, 1428 (9th Cir. 1983). The

18 respondent has not met this burden. He did not object to the subpoenas initially and asked only for

19 an accommodation for his schedule. 36 Only later did he object to the testimony as irrelevant and

20 harassing, in part because he testified twice previously. 37 The SEC’s view is that the timing

21

22

23

24 32
See supra Statement.
25 33
Appl. – ECF No. 1 at 12–13 (collecting cases on this point).
34
26 See supra Statement.
35
See id.
27 36
See id.
28 37
See id.

ORDER – No. 23-mc-80253-LB 7

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1 suggests gamesmanship. 38 But in any event, the contemplated testimony is about productions that

2 post-dated his testimony.

3 The respondent also suggests that the SEC’s investigation is overkill, pointing to its hijacking

4 of the investigation into the respondent’s SEC Rule 13d-1 disclosures and contrasting its ordinary

5 practice of fines for Rule 13d violations with the extensive investigation here. 39 But the

6 investigation is about more than a late filing: there are eleven Section 13 filings from April to July

7 2022. Also, the SEC is investigating potential fraud in connection with securities transactions, in

8 violation of § 10(b) of the Exchange Act and Rule 10b-5, including the respondent’s public

9 statements about Twitter. 40

10 The other investigations are not demonstrably harassment: they are legitimate government

11 investigations. Cf. SEC v. Musk, No. 22-1291, 2023 WL 3451402, at *2 (2nd Cir. May 15, 2023)

12 (affirming district court’s denial of the respondent’s motion to terminate the 2018 SEC consent
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United States District Court

13 degree and rejecting claim of harassment).

14 Finally, whatever time the respondent’s counsel needed to review the biography was provided

15 by the SEC’s offer of new dates (and generally by the time that has passed), and any challenge to

16 the location of the deposition was addressed by the SEC’s offer to host the testimony in Texas. 41

17 In sum, the respondent’s claims of harassment generally are challenges to the relevancy of the

18 SEC’s continued investigation. But the SEC’s subpoena is within its authority, definite, and seeks

19 relevant information. The court grants the SEC’s application to enforce the subpoena.

20

21 2. The Subpoena Does Not Exceed the SEC’s Authority

22 The respondent contends that the subpoena — issued by an SEC staff member appointed by

23 the SEC’s Director of Enforcement — exceeds the SEC’s authority because it was not issued by

24

25
38
26 Reply – ECF No. 28 at 12.
39
See supra Statement.
27 40
Second Andrews Decl. – ECF No. 29 at 3–4 (¶¶ 6–9) (referencing the Formal Orders).
28 41
See supra Statement.

ORDER – No. 23-mc-80253-LB 8

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1 an officer appointed by the President, a court, or the head of a department, as required by the

2 Appointments Clause of the U.S. Constitution.42 U.S. Const. Art. II, § 2, Cl. 2.

3 The Exchange Act authorizes the SEC to investigate potential securities violations and allows

4 “any member of the Commission or any officer designated by it” to administer oaths, subpoena

5 witnesses and compel their attendance, take evidence, and require the production of any

6 documents or records that “the Commission deems relevant or material to the inquiry.” 15 U.S.C.

7 § 78u(b). The Commission has delegated the authority to “order the making” of investigations to

8 the Director of the Division of Enforcement. 17 C.F.R. § 200.30-4(a)(13); see also 15 U.S.C. §§

9 78d-1, 78d-2.

10 The respondent contends that the SEC Enforcement Staff who issue administrative subpoenas

11 in aid of enforcement investigations are inferior officers subject to the Appointments Clause

12 because they are exercising significant government authority that can be performed only by
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United States District Court

13 officers appointed pursuant to the Appointments Clause. 43 And because they were not appointed

14 by the President, the Courts of Law, or the Heads of Departments, as required by U.S. Const. Art.

15 II, § 2, Cl. 2, and instead were appointed by the Director of the SEC Division of Enforcement, the

16 subpoenas are improper. 44

17 But as the SEC counters, the staff attorneys who sign subpoenas are non-officer employees not

18 subject to the Appointments Clause: they lack the “extensive powers . . . comparable to [] a federal

19 district judge conducting a bench trial.” 45 Lucia v. SEC, 138 S. Ct. 2044, 2049, 2053–3055 (2018)

20 (cleaned up) (holding that ALJs and special trial judges of the U.S. Tax Court are constitutional

21 officers). Instead, the attorneys are performing investigative functions pursuant to the SEC’s formal

22 orders. Moreover, as this case shows, the SEC cannot compel compliance with its subpoenas: it

23 needs a court order. They are not like the ALJs in Lucia. Cf. id. at 2051 (constitutional officers

24 “exercise significant authority pursuant to the laws of the United States”).

25
42
26 Opp’n – ECF No. 24 at 8–9, 23–29.
43
Id. at 24–25.
27 44
Id. at 26–27.
28 45
Reply – ECF No. 28 at 14.

ORDER – No. 23-mc-80253-LB 9

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1 Based on this conclusion, the court denies the respondent’s request to stay the case pending the

2 Supreme Court’s decision in Jarkesky v. SEC, 34 F.4th 446 (5th Cir. 2022), cert. granted, 143 S.

3 Ct. 2688 (2023). 46 It is unlikely to affect the outcome here.

5 CONCLUSION

6 The court grants the SEC’s application to enforce the subpoena. The parties must confer within

7 one week and settle on a date and location for the testimony. If they cannot agree, then they may

8 submit a joint letter brief with their respective positions, see Standing Order (attached) (discovery-

9 dispute procedures), and the court will decide the dispute for them.

10 This resolves ECF No. 1.

11 IT IS SO ORDERED.

12 Dated: February 10, 2024

Northern District of California
United States District Court

13 ______________________________________
LAUREL BEELER
14 United States Magistrate Judge
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28 46
Opp’n – ECF No. 24 at 29–30; Reply – ECF No. 28 at 18.

ORDER – No. 23-mc-80253-LB 10