Tesla and Musk Overcome Shareholder Lawsuit Regarding Self-Driving Promises By Reuters

By Jonathan Stempel

Tesla and its CEO Elon Musk have successfully dismissed a lawsuit alleging they defrauded shareholders by exaggerating the effectiveness and safety of the company’s self-driving technology to inflate stock prices.

U.S. District Judge Araceli Martinez-Olguin, presiding in San Francisco, ruled that shareholders did not adequately demonstrate that Tesla and Musk were liable for making false claims about the technology’s ability to drive more safely than humans. The judge noted that the technology was "plagued with safety issues" that could promote inattentiveness among drivers.

Tesla’s vehicles feature "Autopilot" software aimed at improving self-driving capabilities, and the company has marketed "Full Self Driving" software upgrades. Judge Martinez-Olguin pointed out that not all of Tesla’s and Musk’s statements were necessarily false, while others could be justified as addressing future expectations for the technology.

The judge further stated that Musk’s active management style did not imply he possessed more knowledge than he publicly acknowledged, and his substantial profit from selling Tesla shares during the specified period did not indicate he was profiting at the expense of other shareholders. The shareholders claimed that Musk earned approximately $39.4 billion from those stock sales, roughly equivalent to Vermont’s gross domestic product.

Attorneys representing the shareholders did not provide immediate comments, nor did Tesla respond to similar requests. The judge’s dismissal of the lawsuit was without prejudice, allowing shareholders the option to amend their claims.

Moreover, Tesla remains under investigation by the U.S. Department of Justice and the U.S. Securities and Exchange Commission, along with a case by the California Department of Motor Vehicles regarding its self-driving technology assertions.

This case has been filed as Lamontagne v Tesla Inc et al in the U.S. District Court for the Northern District of California.