Class Action Claims Tesla, Musk Misled Investors on Viability of Self-Driving Tech [UPDATE]
Last Updated on October 5, 2023
Lamontagne v. Tesla, Inc. et al.
Filed: February 27, 2023 ◆§ 5:23-cv-00869-BLF
A class action lawsuit alleges Tesla, CEO Elon Musk, CFO Zachary J. Kirkhorn, and former CFO Deepak Ahuja misled investors by overstating the viability and safety of the electric vehicle company’s self-driving technology.
California
October 5, 2023 – Some Claims in Tesla Self-Driving Cars Lawsuit Sent to Arbitration, Remaining Claim Dismissed
Four of the five plaintiffs in the proposed class actions detailed on this page—which were consolidated with similar lawsuits in October 2022—have been ordered by a federal judge to handle their claims individually before an arbitrator.
The judge dismissed the remaining plaintiff’s claims after finding that they were time-barred by a statute of limitations.
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United States District Judge Haywood S. Gilliam, Jr. granted Tesla’s motion to compel arbitration for four plaintiffs in a 20-page order issued on September 30, 2023, finding that the individuals had entered into valid arbitration agreement when they purchased their vehicles on Tesla’s website.
The plaintiffs argued that they were not bound by the arbitration agreement because the provision was “inconspicuous” on the payment screen, “buried in small font” in the order agreement and failed to provide them with the applicable arbitration rules before they consented.
However, Judge Gilliam refuted these arguments after finding that Tesla’s checkout page clearly presents its hyperlinked order agreement in font the same size as other text on the webpage and highlighted in blue.
The judge also found that the order agreement contains arbitration provisions that are “offset from the rest of the agreement with a large text box,” explain that unresolved disputes will be resolved through arbitration and even provide a definition of arbitration.
Although Judge Gilliam rejected the fifth plaintiff’s arguments that the applicable statute of limitations was “tolled” – or stopped – by several different exceptions, the judge has allowed the plaintiff to amend his complaint to “address these deficiencies.”
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A proposed class action lawsuit alleges Tesla, CEO Elon Musk, CFO Zachary J. Kirkhorn, and former CFO Deepak Ahuja misled investors by overstating the viability and safety of the electric vehicle company’s self-driving technology.
Want to stay in the loop on class actions that matter to you? Sign up for ClassAction.org’s free weekly newsletter here.
The 32-page lawsuit alleges the defendants showed a “reckless disregard for the truth” in public statements that promoted the Tesla Autopilot system and “Full Self-Driving” (FSD) software since they were rolled out in 2014. Contrary to the automaker’s rosy representations, the technology put the public at significant risk of accident and injury—something the Tesla executives “knowingly” concealed from investors, the suit charges.
The case contends that the defendants’ “scheme” was intended to artificially inflate the market value of the company’s common stock and push investors to buy in at higher prices.
In Tesla’s 2018 Form 10-K—an annual report filed with the U.S. Securities and Exchange Commission (SEC)—the company boasted of the “high-performance” and “safety and convenience features” of its Autopilot system, which has been built into all Tesla cars since 2014 and whose software features purportedly include automatic lane-centering, traffic-sensitive cruise control, self-parking and more, the complaint relays.
Tesla touted in an April 2019 press release its progress in enhancing its self-driving technology, and a few weeks later, Musk posted a lengthy video showing footage of Tesla vehicles driving autonomously, the filing says. Two subsequent 10-Ks, in 2019 and 2020, similarly promoted the efficacy and safety of the software and downplayed liability risks, the lawsuit shares.
However, in August 2021, the National Highway Traffic Safety Administration (NHTSA) began an investigation into the Tesla Autopilot system in the wake of numerous reports of collisions with parked vehicles and a fatal accident in April of that year that involved a self-driving car, the suit says.
Media reports of the accidents and subsequent investigation were bad news for Tesla investors, who saw stock prices first fall by 3.4 percent in April 2021 and again by 4.32 percent in August, the case shares.
Stock prices fell again, this time by 9.22 percent, in June 2022 after the NHTSA issued a formal inquiry concerning unexpected braking in certain Tesla models, and in January of this year, the SEC announced it was investigating what it thought may have been “inappropriate, forward-looking” statements by the defendants regarding the Autopilot system, the complaint explains.
Tesla stocks sank another 6.32 percent after this news broke, the filing says.
What’s more, in February, the NHTSA ordered a recall of almost 363,000 Tesla vehicles built with the FSD “beta” software, alleging that the technology may cause the cars to act in an “unpredictable manner,” the lawsuit says. According to the suit, another fatal accident occurred that same month involving a Tesla self-driving car, and news outlets pointed to prior reports of collisions as a result of “poorly performing” FSD software.
After the events of February 2023, Tesla’s stock price first fell by 5.69 percent, and then again by 5.25 percent, the case states.
In spite of the plummeting stock prices, however, the defendants filed two more 10-Ks with the SEC in 2021 and 2022 which maintained the misrepresentations of the company’s Autopilot and FSD technologies, the lawsuit claims.
As a result of the defendants’ false statements and the subsequent nosedive of Tesla’s stock value, investors like the plaintiff—who allegedly bought Tesla securities at artificially inflated prices—have suffered substantial losses, the complaint contends.
The lawsuit looks to represent anyone who purchased or acquired Tesla common stock between February 19, 2019, and February 17, 2023 and who was damaged financially upon the revelation of the alleged corrective disclosures.
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