A class-action lawsuit alleges Tesla and CEO Elon Musk repeatedly made false claims about the capabilities and safety of the electric carmaker’s Autopilot and Full Self-Driving (FSD) technology.
The lawsuit, filed Monday in the U.S. District Court for the Northern District of California, comes less than two weeks after 362,758 cars were recalled based on a U.S. government finding that Tesla’s “FSD Beta system may enable the vehicle to act in an unsafe manner around intersections, such as traveling straight through an intersection while in a turning lane only, entering an intersection controlled by a stop sign without coming to a complete stop, or entering in an intersection during a steady yellow traffic light without due caution.The issue should be fixed by an over-the-air software update.
The lawsuit was filed by investor Thomas Lamontagne and is intended to represent a proposed class of potentially thousands of people who have acquired Tesla stock. Tesla, Elon Musk and other Tesla executives “made materially false and misleading statements regarding the company’s business, operations and prospects,” the lawsuit said, continuing:
Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) Defendants materially overestimated the effectiveness, viability and safety of the Company’s Autopilot and FSD technologies ; (ii) contrary to the statements of the Defendants, Tesla’s Autopilot and FSD technologies have created a serious risk of accident and injury associated with the use of Tesla vehicles; (iii) all of the foregoing has subjected Tesla to increased risk of regulatory and governmental scrutiny and enforcement action, as well as damage to its reputation.
Stock sold at “artificially inflated prices”
The lawsuit states that Lamontagne “acquired Tesla securities at artificially inflated prices during the class action period and was damaged upon the disclosure of the alleged corrective disclosures.” The complaint cites several stock price declines triggered by reports of Tesla’s security lapses and related investigations.
There were significant declines in stock prices in April 2021, August 2021, June 2022 and January 2023 triggered by investigations by the National Highway Traffic Safety Administration (NHTSA) and the Securities and Exchange Commission (SEC), according to the trial. After each price drop, Tesla shares “continued to trade at artificially inflated prices for the remainder of the class period due to defendants’ continued inaccuracies and omissions regarding Tesla’s Autopilot and FSD technologies.” , says the lawsuit.
The complaint says the “truth fully emerged(d)” earlier this month at news of the 362,758 vehicle recall. “As a result of defendants’ wrongful acts and omissions and the precipitous decline in the market value of the company’s common stock, plaintiff and other class members suffered substantial losses and damages,” the lawsuit states.
Tesla’s stock price peaked at $409.97 in November 2021, but fell to $108.10 on January 3, 2023. The stock price has risen significantly in the eight weeks since followed, despite falling 5.7% just after this month’s recall announcement, and ended trading today. at $205.71.
We emailed Tesla’s media relations contact about the shareholder lawsuit today, but our message was not delivered because “the recipient’s mailbox is full and cannot accept messages now”.
Musk: ‘Side mirrors won’t be necessary’
The proposed class period for the lawsuit runs from February 19, 2019 through February 17, 2023, the start date being chosen because that’s when Tesla filed an annual report with the SEC containing ” statements regarding alleged safety-enhancing features and capabilities of Tesla’s Autopilot technology.
“We have expertise in developing autonomous driving systems and currently offer in our vehicles an advanced driver assistance system that we call Autopilot, including automatic steering, traffic-aware cruise control, automated lane changing, automated parking, driver summoning and warning systems… Our Autopilot systems relieve our drivers of the most tedious and potentially dangerous aspects of road travel,” Tesla’s filing said.
The lawsuit goes on to cite additional statements about self-driving capability made by Tesla and Musk. “For example, on August 18, 2022, Defendant Musk tweeted, in relevant part, that ‘side mirrors will not be needed in an autonomous future’, thus once again endorsing the viability of the security system technology. autopilot and FSD Beta software, and suggesting that the company’s Advanced Driver Assistance System (ADAS) technologies have obviated the need for basic, common-sense safety practices (e.g., checking car mirrors). a vehicle),” the lawsuit said.
The lawsuit mentions several crashes, including an April 2021 crash that killed two passengers near Houston. “A Harris County officer told local news station KPRC 2 that investigation showed ‘no one was driving’ the 2019 Tesla vehicle when the crash occurred,” the lawsuit states.
Musk’s videos promoted Tesla self-driving
The lawsuit cites a January 2023 Bloomberg article on an SEC investigation that said Musk “personally directed the creation of a 2016 video that may have exaggerated the capabilities of the technology. The video promises of a possible fully autonomous hands-free driving feature have yet to materialize.”
The lawsuit also describes a series of statements from April 2019 in which Tesla and Musk promised that existing cars would receive software updates providing full self-driving capabilities:
On April 3, 2019, Tesla issued a press release stating that “Tesla is making significant progress in the development of its self-driving software and hardware, including our FSD computer, which is currently in production and will enable self-driving fully self-contained via future over-the-air software updates.”
On April 14, 2019, extolling the viability of Tesla’s Autopilot technology, defendant Musk tweeted that “(b) buying a car in 2019 that can’t upgrade to full self-driving is like buying a horse instead of a car in 1919”.
Similarly, on April 22, 2019, defendant Musk posted a nearly four-hour-long video under the caption “Tesla Full Self-Driving”, which showed footage of Tesla cars supposedly being self-driving, along with Musk and other Tesla executives discussing the various features of the Autopilot system at length, at a “Tesla Autonomy Day” event.
Although Tesla’s SEC filings warned that the automaker could face product liability lawsuits, the lawsuit accuses Tesla of “simultaneously downplaying those risks and touting the alleged safety of the company’s vehicles.” “.
The lawsuit seeks a jury trial and damages. A few weeks ago, a jury in the same federal court cleared Musk of charges in a lawsuit alleging he harmed investors with false statements about obtaining funding to take Tesla private. Although a judge ruled that Musk’s private tweets taking on Tesla were false and reckless, the foreman of the jury said the plaintiffs’ case “did not succeed” and appeared “to rely solely on the tweets.”