Tesla Wins Lawsuit Over Alleged Autopilot Fraud
Tesla has emerged victorious in a lawsuit that accused the company and its senior executives of deceiving the public and shareholders about the status of its autopilot systems.
The plaintiffs in the case were unable to demonstrate that Tesla CEO Elon Musk and other top officials committed fraud with statements like the autopilot being generally safer than ordinary drivers, according to a ruling made on September 30 by U.S. District Judge Araceli Martínez-Olguín.
During an investor event in 2019, Musk stated that "we publish accidents per mile every quarter, and what we see right now is that autopilot is about twice as safe as a normal driver on average." In the same year, he posted on Twitter (now X) that "buying a car in 2019 that can’t upgrade to full self-driving is like buying a horse instead of a car in 1919."
The lawsuit, filed by investor Thomas Lamontagne, claimed that these and other statements were false and misleading because they exaggerated the effectiveness of autopilot and left out crucial information. The Securities Exchange Act forbids the making of business-related statements that are manipulative or deceptive.
Tesla's lawyers defended the statements, arguing that they were protected because they were forward-looking and accompanied by cautionary language.
Judge Sides with Tesla
Judge Olguín agreed with Tesla, ruling that some of the statements "are plainly forward-looking statements of Tesla’s plans and objectives" and thus meet a safe harbor provision in federal law.
She stated, "Plaintiffs have failed to allege that these challenged statements contain such ‘concrete’ assertions of ‘current or past fact.’"
Tesla and its officials also used cautionary language, such as informing investors that actual results could vary from projections.
While a number of the statements were not forward-looking, the plaintiffs did not demonstrate that Musk knew the statements were false, meaning they’re protected by another safe harbor provision, according to the ruling.
A third group of statements, including Musk’s assertion that the system was "not going to be perfect, but what matters is that it is very clearly safer than not deploying it," are not actionable because they constitute corporate optimism, the judge ruled.
She also agreed with Tesla on other statements concerning the safety of autopilot, such as Musk telling investors that autopilot was safer than regular drivers.
The plaintiffs have not provided contemporaneous reports or data showing the statements were false or misleading when made, the judge stated.
"Even if this data existed at the time the statements were made, the fact that there were safety issues with the technology does not suggest that it was false or misleading to assert that the technology was safer than regular human driving," she wrote.
Judge Olguín dismissed the claims, but gave the plaintiffs the chance to file a new complaint providing evidence the statements were false or misleading.
"Justice prevails," Musk posted on his social media platform X.
A lawyer for the plaintiffs did not respond to a request for comment.
Bottom Line
In this case, Tesla has successfully defended itself against allegations of misleading the public and investors about the safety and effectiveness of its autopilot systems. The court's decision highlights the importance of understanding the context and intent behind corporate statements, particularly those that are forward-looking. What are your thoughts on this outcome? Do you believe Tesla's statements about its autopilot system were misleading, or do you agree with the court's ruling? Share this article with your friends and let us know your thoughts. Don't forget to sign up for the Daily Briefing, which is delivered every day at 6pm.
