SAN FRANCISCO - Tesla and its owner, billionaire Elon Musk, appear to have curbed, for now, a shareholder class action accusing Musk and his electric car company of allegedly misleading investors and the public about the true capabilities of the so-called full self-driving capabilities of Tesla vehicles.
On Sept. 30, U.S. District Judge Araceli Martinez-Olguin sided with Tesla and Musk in the dispute, dismissing the lawsuit, which alleged Musk and his company committed fraud and other alleged violations of federal securities laws, allegedly deceiving people into investing in the company on allegedly false pretenses.
In her ruling, Martinez-Olguin said the investors failed to show how a long series of marketing statements issued by Musk and Tesla about the abilities of their cars were genuinely false and misleading, or amounted to more than "corporate puffery" or other forward-looking statements not forbidden by law.
She specifically repeatedly rejected the plaintiffs' assertions that the court should make Musk and Tesla pay under what is known as "scienter," a legal term used when a plaintiff accuses a defendant of willfully making false or fraudulent statements.
"... Plaintiffs have not adequately alleged any false or misleading statements or scienter, and thus may not proceed under that theory," the judge wrote. "Under scheme liability, which Plaintiffs seem to be pursuing, Plaintiffs argue that they are focusing on Defendants' 'course of business' in which they persuaded investors that Tesla was close to releasing fully autonomous cars based on the collective totality of the false and misleading statements.
"However, Plaintiffs fail to allege sufficient facts showing that Defendants engaged in such a fraudulent scheme to mislead investors."
The judge ordered the lawsuit dismissed, but did so without prejudice, meaning the judge will allow the plaintiffs an opportunity to try again by filing an amended complaint that attempts to address the shortcomings identified by the judge in her ruling.
The ruling comes as the latest step in one of the many lawsuits pending against Musk in several state and federal courts.
Musk and other observers have noted that the legal assaults on him and his companies may be politically driven, as Musk has come under attack from the left, particularly after he bought the social media platform X, which was formerly known as Twitter, and lifted restrictions on so-called "misinformation" and "hate speech," which conservatives said were used to stifle speech opposing policies, programs and politicians supported by Democrats.
The opposition to Musk has only intensified as he has continued to defy Democratic' elected officials desires to reinstate censorship policies on his platform, and has endorsed Donald Trump for president over both President Joe Biden and Democratic nominee Vice President Kamala Harris.
Musk has described the efforts by the Biden administration against other business ventures, including SpaceX and Starlink, combined with the raft of lawsuits from predominantly Democratic trial lawyers and clients as "lawfare" against him in a bid to financially harm him in retribution.
Neither the complaint nor the decision in the lawsuit over Musk's and Tesla's FSD claims referenced Musk's politics or his purchase and management of X.
The lawsuit was filed in 2023 by attorneys with the firm of Pomerantz LLP, of Los Angeles.
The lawsuit was filed on behalf of named plaintiffs Thomas Lamontagne, the Oakland County Voluntary Employees' Beneficiary Association and Oakland County Employees' Retirement System, which manage pension funds for Oakland County public workers and retirees.
The lawsuit centers on 29 allegedly false or misleading statements made by Musk and Tesla concerning the development of Tesla autonomous cars and their capabilities.
Notably, the statements include assertions by Tesla that it would soon "run a network of 'robotaxis,'" or vehicles that would allow people to use a smartphone app similar to that used by rideshare services like Uber and Lyft, to summon a Tesla vehicle and drive them to a destination. The lawsuit notes that Tesla allegedly falsely led Tesla investors and vehicle owners to believe this would allow Tesla owners to earn "passive income while they were not personally using their car."
The lawsuit also took aim at statements Tesla and Musk made touting Tesla's alleged safety advantages over other vehicles fully driven by humans, and lacking Tesla's FSD semi-autonomous driving technology.
While the judge agreed those statements do not reflect the current abilities of Tesla automobiles, she said they amounted to legal forward-looking statements or marketing "puffery," in which companies selling products may engage to promote themselves.
Any statements that did not fit the "puffery" profile, the judge said, could not be considered false or misleading.
In a statement posted to X following the ruling, Musk said: "Justice prevails."
Judge Martinez-Olguin was appointed to the federal bench in the Northern District of California by President Joe Biden.
Musk has been represented in the case by attorneys Michael T. Lifrak and Alex Spiro, of the Quinn Emanuel firm, of Los Angeles and New York.