Investors File New Class Action Lawsuit Against Tesla

By B.N. Frank

Complaints about Tesla CEO Elon Musk and Tesla vehicles aren’t new or isolated to the U.S (see 1, 2).  However, in the U.S., Tesla accidents, fires, investigations, lawsuits, recalls, and other safety warnings (including about harmful electromagnetic radiation emissions) are being reported so frequently that it’s hard to keep up with all of them.  In fact, another lawsuit was filed earlier this week.

From Ars Technica:

Tesla shareholder suit says Musk and co. lied about Full Self-Driving safety

Investor lawsuit cites recall of Tesla cars that act dangerously in intersections.

Jon Brodkin

A class-action complaint alleges that Tesla and CEO Elon Musk repeatedly made false statements about the capabilities and safety of the electric carmaker’s Autopilot and Full Self-Driving (FSD) technology.

The complaint, filed Monday in US District Court for the Northern District of California, comes less than two weeks after a recall of 362,758 cars based on a US government finding that Tesla’s “FSD Beta system may allow the vehicle to act unsafe around intersections, such as traveling straight through an intersection while in a turn-only lane, entering a stop sign-controlled intersection without coming to a complete stop, or proceeding into an intersection during a steady yellow traffic signal without due caution.” The problem is slated to be fixed by an over-the-air software update.

The lawsuit was filed by investor Thomas Lamontagne and seeks to represent a proposed class of potentially thousands of people who 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 had significantly overstated the efficacy, viability, and safety of the Company’s Autopilot and FSD technologies; (ii) contrary to Defendants’ representations, Tesla’s Autopilot and FSD technologies created a serious risk of accident and injury associated with the operation of Tesla vehicles; (iii) all the foregoing subjected Tesla to an increased risk of regulatory and governmental scrutiny and enforcement action, as well as reputational harm.

Stock sold for “artificially inflated prices”

The lawsuit says Lamontagne “acquired Tesla securities at artificially inflated prices during the Class Period and was damaged upon the revelation of the alleged corrective disclosures.” The complaint cites several stock-price drops triggered by news about Tesla safety deficiencies and related investigations.

There were significant stock-price drops in April 2021, August 2021, June 2022, and January 2023 triggered by National Highway Traffic Safety Administration (NHTSA) and Securities and Exchange Commission (SEC) investigations, the lawsuit said. After each price decline, Tesla “stock continued to trade at artificially inflated prices throughout the remainder of the Class Period because of Defendants’ continued misstatements and omissions regarding Tesla’s Autopilot and FSD technologies,” the lawsuit said.

The complaint says the “truth fully emerge[d]” earlier this month on 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 have suffered significant losses and damages,” the complaint said.

Tesla’s stock price hit a peak of $409.97 in November 2021 but fell to $108.10 by January 3, 2023. The stock price has risen substantially in the eight weeks since then—despite a 5.7 percent drop right after this month’s recall news—and ended today’s trading at $205.71.

We emailed Tesla’s media relations contact about the shareholder lawsuit today, but our message wasn’t delivered because the “recipient’s mailbox is full and can’t accept messages now.”

Musk: “Side mirrors won’t be needed”

The lawsuit’s proposed class period is from February 19, 2019, to February 17, 2023, with the starting date chosen because that’s when Tesla filed an annual report with the SEC containing “representations regarding the purported safety-enhancing features and capabilities of Tesla’s Autopilot technology.”

“We have expertise in developing self-driving systems, and currently offer in our vehicles an advanced driver assist system that we refer to as Autopilot, including auto-steering, traffic aware cruise control, automated lane changing, automated parking, Summon and driver warning systems… Our Autopilot systems relieve our drivers of the most tedious and potentially dangerous aspects of road travel,” the Tesla 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 won’t be needed in a self-driving future,’ thereby once again endorsing the viability of the Autopilot system’s technology and FSD Beta software and suggesting that the Company’s ADAS [advanced driver-assistance system] technologies obviated the need for basic, common-sense safety practices (e.g., checking a vehicle’s mirrors),” the lawsuit said.

The lawsuit mentions several crashes, including an April 2021 accident that killed two passengers near Houston. “A Harris County Precinct constable told local news station KPRC 2 that the investigation showed ‘no one was driving’ the 2019 Tesla vehicle when the accident occurred,” the lawsuit said.

Musk videos hyped Tesla self-driving

The lawsuit quotes a January 2023 Bloomberg article about an SEC probe that said Musk “personally directed the creation of a 2016 video that may have exaggerated the technology’s capabilities. The video’s promises of eventual fully autonomous, hands-free driving functionality have yet to materialize.”

The lawsuit also describes a series of April 2019 statements in which Tesla and Musk promised that existing cars would receive software updates bringing 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 autonomous driving software and hardware, including our FSD computer, which is currently in production and which will enable full-self driving via future over-the-air software updates.”

On April 14, 2019, hyping the viability of Tesla’s Autopilot technology, Defendant Musk tweeted that “[b]uying a car in 2019 that can’t upgrade to full self-driving is like buying a horse instead of a car in 1919.”

Likewise, on April 22, 2019, Defendant Musk posted a nearly four-hour video under the caption “Tesla Full Self-Driving,” which depicted footage of Tesla cars purportedly driving autonomously, as well as Musk and other Tesla executives discussing at length the various features of the Autopilot system, at a “Tesla Autonomy Day” event.

Though Tesla’s SEC filings warned that the carmaker could face product liability claims, the lawsuit accuses Tesla of “simultaneously downplaying such risks and touting the purported safety of the Company’s vehicles.”

The lawsuit seeks a trial by jury and financial damages. A few weeks ago, a jury in the same federal court cleared Musk of charges in a lawsuit that alleged he harmed investors with false statements about having secured funding to take Tesla private. Even though a judge ruled that Musk’s taking-Tesla-private tweets were false and reckless, the jury foreperson said the plaintiffs’ case “didn’t land” and seemed to be “relying on just the tweets.”

Of course, it’s important to mention that significant safety issues have also been identified in most if not all autonomous aka self-driving software applications (see 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11) – not just Tesla’s (see 1, 2, 3, 4, 5, 6).  Nevertheless, driverless vehicles continue to be approved for operation on U.S. roads.

Activist Post reports regularly about Tesla and unsafe technologies.  For more information, visit our archives.

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