Emoji and the Law

POMERANTZ MONITOR | SEPTEMBER OCTOBER 2023

By Brett Lazer, an Editor of The Pomerantz Monitor

Pomerantz’s recent victory overcoming the defendants’ Motion to Dismiss in In re Bed Bath and Beyond Securities Litigation (discussed by Omar Jafri in this issue) constitutes a win not only for shareholders, but also for one of the most ubiquitous forms of modern communication: the emoji. A key point in the case turns on a tweet sent by the defendant, Ryan Cohen, in which Cohen allegedly used the “smiling moon” emoji to encourage his legions of followers to buy Bed Bath and Beyond stock before he sold his investment. In denying Cohen’s motion to dismiss, Washington DC district judge Trevor McFadden became the second federal judge to hold that an emoji could be considered an actionable misrepresentation. Emoji are a relatively new subject for the courts, and this ruling highlights the issues at play in bringing novel forms of digital communication in line with the U.S. legal system.

In the meme stock subculture, in which Cohen, a billionaire investor, is a well-known influencer, the “smiling moon” emoji is common shorthand for “to the moon,” an indication that a stock’s price will rise. Cohen’s followers got the message of his tweet, buying Bed Bath and Beyond stock and driving up its share price. Four days later, Cohen sold his shares in Bed Bath and Beyond for a $68 million profit. When the market learned of the sale, Bed Bath and Beyond stock lost more than half its value, leaving investors with staggering losses.

This is the classic mechanism of a pump-and-dump scheme: drive up the stock price and then sell your shares before everyone else finds out. The question is whether Cohen’s tweet, and specifically the use of the “smiling moon,” could legally be considered part of the “pump.” In his motion to dismiss, Cohen claimed that the emoji could have any number of meanings, asserting that, “there is no way to establish objectively the truth or falsity of a tiny lunar cartoon.” However, the court rejected this line of reasoning, declaring that, just like spoken or written language, symbols constitute a mode of communication that can have clear meanings given context clues.

In so ruling, the court cited several precedents on the use of language and symbols. The first is West Virginia State Board of Education v. Barnette (1943), in which the U.S. Supreme Court held that the Free Speech Clause of the First Amendment protects students from having to salute the American flag in public schools. Discussing the power of the flag as a symbol, Justice Robert Jackson, writing for the majority, states that, “[s]ymbolism is a primitive but effective form of communicating ideas.” Even if his description of symbolism as “primitive” has not held up well, Jackson cites numerous examples of the efficacy of symbolic communication: “The State announces rank, function, and authority through crowns and maces, uniforms and black robes; the church speaks through the Cross, the Crucifix, the altar and shrine, and clerical raiment.” The emoji in Cohen’s tweet was not just a visual flourish, but a key part of the message.

The second case cited in the Bed Bath and Beyond ruling is Spence v. Washington (1974). If the Barnette ruling affirmed the power of symbols to communicate, Spence holds that context can resolve symbolic communication into a clear meaning. Spence v. Washington concerned a student who, in May of 1970, displayed an upside-down American flag with a peace sign affixed to it in his dorm room window. Coming on the heels of the U.S. invasion of Cambodia and the killings at Kent State, the student claimed his act was meant to convey that “America stood for peace.” In upholding the student’s flag display as a form of protected expression, the Court’s per curiam decision stated that, “the context in which a symbol is used for purposes of expression is important.” The decision continues, “In this case, appellant’s activity was roughly simultaneous with and concededly triggered by the Cambodian incursion and the Kent State tragedy, [both] issues of great public moment. Cf. Scheuer v. Rhodes, 416 U. S. 232 (1974). A flag bearing a peace symbol and displayed upside down by a student [in 1974] might be interpreted as nothing more than bizarre behavior, but it would have been difficult for the great majority of citizens to miss the drift of appellant's point at the time that he made it.”

Taken together, the Barnette and Spence decisions reflect the Court’s acceptance that symbols have the power to communicate ideas, and that context can render a symbol’s meaning clear for most viewers. Therefore, it is not surprising that the Court in In re Bed Bath and Beyond Sec. Lit. rejected Cohen’s argument that the meaning of the emoji was ambiguous. As Judge McFadden stated in his ruling, “meme stock investors conceivably understood Cohen’s tweet to mean that Cohen was confident in Bed Bath and that he was encouraging them to act.”

In summing up its position, the Court declared: “A fraudster may not escape liability simply because he used an emoji.” However, this pronouncement opens a glaring question, which is: Why would Cohen have thought any differently? It is here that the peculiarities of communication in the digital age come into play. First, emoji are often viewed as an unserious form of communication. They are brightly colored, stylized, and often whimsical. It is a lexicon that features smiling ghosts, snorkeling gear, and a rainbow lollipop. Cohen’s description of the moon emoji as a “tiny . . . cartoon” underscores this perspective, rhetorically diminishing emoji and relegating them to the realm of children’s entertainment.  

Second, there is a tongue-in-cheek quality to the discourse surrounding the meme stock subculture. Investopedia notes that r/wallstreetbets, the main internet hub of meme stock activity, is “known for its unconventional and often irreverent tone.” Interest in the first successful meme stock, GameStop, was sparked by a YouTube persona using the moniker Roaring Kitty, and people in the meme stock world are known to refer to stocks using the ironic misspelling “stonks.” Even the term “meme stock,” which brings to mind humorous viral internet images, suggests frivolity.

For these reasons, it can be tempting to write off any activity in the meme stock world as no more than an ironic prank perpetrated by anonymous internet denizens with unorthodox usernames who communicate in acronyms and smiley faces. The Bed Bath and Beyond ruling demonstrates that underneath this veneer of flippancy lies a well-defined system of symbolic communication with a relevant discourse that informs its meaning.  These are elements governed by a robust body of caselaw, which is capable of piercing any attempts to rhetorically diminish them. It has been estimated that 10 billion emoji are sent every day. They are more than just “tiny cartoons,” they are a powerful form of contemporary communication, and deploying them offers their user no special protection from the full force of the law.