Tesla defeats investor lawsuit over Musk’s autopilot marketing

Tesla Inc. won the dismissal of a shareholder lawsuit alleging that misleading statements about self-driving capabilities propped up its stock price, although the company still faces numerous other complaints and regulatory investigations into its marketing.

Tesla Chief Executive Elon Musk said in April that Tesla is “going to the wall for autonomy” as it engages the automaker to adopt a next-generation autonomous vehicle concept called the robotaxi. The billionaire entrepreneur has promoted autonomy for over a decade and convinced customers to pay thousands of dollars for the Full Self-Driving, or FSD, feature.

The name is a misnomer — FSD requires constant oversight and doesn’t make autonomous vehicles — but Musk has repeatedly predicted it’s on the verge of measuring up to the brand. The company is embroiled in numerous lawsuits over the feature, including from Tesla investors who claim they were misled.

In her ruling on Monday, US District Judge Araceli Martínez-Olguín rejected allegations from shareholders that Musk had overhyped Tesla’s self-driving technology, with assurances that drivers could “fall asleep” in their cars by 2020, among other promises . She found that some of the alleged exaggerations referred to future plans, while others were not necessarily false.

“Plaintiffs fail to connect Musk’s hands-on management with any information he purportedly knew, making his statements false or misleading,” the judge wrote. However, she gave the investors until October 30 to file an updated version of their complaint.

Investors claimed they were harmed when the truth about Tesla’s shortcomings came out and its stock price plummeted, according to the complaint, which claimed Musk had sold $39 billion in stock before then.

Tesla consumers are moving forward with a separate class action proposal over the company’s autonomous marketing, while Tesla earlier this year settled a high-profile lawsuit involving a fatal crash while Autopilot was engaged.

Meanwhile, the company faces federal investigations into whether Autopilot flaws contributed to fatal crashes, as well as investigations by federal prosecutors and the Securities and Exchange Commission into whether Tesla made misleading claims about the feature to the public. Similar claims by the California Department of Motor Vehicles were allowed to move forward earlier this year.

The case is Lamontagne v. Tesla Inc., 23-cv-00869, U.S. District Court, Northern District of California (San Francisco).

Top photo: Elon Musk, chief executive of Tesla Inc., raises a clenched fist at the Atreju convention in Rome, Italy, Saturday, Dec. 16, 2023. The annual event, organized by Giorgia Meloni’s Brothers of Italy party, began in 1998 as convention for right-wing youth and evolved into a political kermesse, including ministers and members of the opposition.

Copyright 2024 Bloomberg.