Judge Rules on Tesla Lawsuit Allegations that “Self-Driving” Claims Were Misleading

By B.N. Frank

A growing number of American emergency responders, lawmakers, and residents are becoming very concerned about dangers posed by robotaxis and other autonomous vehicles (AVs) (see 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11). Additionally, Tesla’s increasingly controversial “self-driving” claims motivated owners to take legal action against the company.

From Ars Technica:

Judge upholds Tesla arbitration agreement that drivers called “unconscionable”

Lawsuit said Tesla and Elon Musk falsely marketed cars as self-driving.

Jon Brodkin

Four Tesla drivers who sued the company over its allegedly deceptive “self-driving” claims will have to go to arbitration instead of pursuing a class action, a judge ruled.

The complaint sought class-action status on behalf of “consumers who purchased or leased a new Tesla vehicle with Tesla’s ADAS [Advanced Driver Assistance Systems] technology but never received the self-driving car that Tesla promised them.” Self-driving claims made by Tesla and CEO Elon Musk “have proven false time and time again,” the lawsuit said.

While the plaintiffs agreed to terms including an arbitration clause when they purchased cars, they argued that “Tesla’s arbitration agreement is unconscionable, and thus [un]enforceable.” They said the arbitration agreement “is not referenced on the Order page” and “is buried in small font in the middle of an Order Agreement, which is only accessible through an inconspicuous hyperlink.”

Judge Haywood Gilliam Jr. of US District Court for the Northern District of California did not agree. Gilliam issued an order on Friday granting Tesla’s motion to compel arbitration and denied the plaintiffs’ motion for a preliminary injunction.

Judge: Tesla “provided conspicuous notice”

Gilliam said the Tesla website offers “a type of hybrid browsewrap agreement where the terms of the agreement are hyperlinked above the ‘Place Order’ button.” Contrary to plaintiffs’ claims, Gilliam did not think that Tesla’s references to the arbitration agreement were too inconspicuous:

As explained above, the text reads: “By placing this order, I agree to the Model [3 or Y] Order Agreement,” and the agreement is hyperlinked. Despite Plaintiffs’ urging, the text of this sentence was the same size as the “Place Order” button text below it, and was the same size as other text on the webpage. The hyperlinked agreement was highlighted in blue, which courts have routinely found indicates to a user that there is a hyperlink. And this blue text is some of the only colored text on the screen. There are no other distracting details on the webpage, and the relevant language about the order agreement is therefore conspicuous. It also clearly indicates that clicking the “Place Order” button will manifest the customer’s consent to the agreement.

Gilliam decided that Tesla’s “order payment screens provided conspicuous notice of the order agreements.”

Plaintiffs also argued that the agreement’s 30-day opt-out clause is “illusory” because it “typically takes much more than 30 days for Tesla to configure and deliver a car, which deprives customers of any opportunity to inspect before the 30 days expire.” The agreement also “compels consumers to waive their right to participate in class arbitration,” a factor that “weighs in favor of substantive unconscionability,” they said.

But Gilliam didn’t find the 30-day opt-out clause or other parts of the agreement to be unconscionable. He noted that “the order agreements themselves are just a few pages long, and the arbitration provisions within them are offset from the rest of the agreement with a large text box.” The text included the provision that customers “may opt out of arbitration within 30 days after signing this Agreement by sending a letter” to Tesla.

Gilliam also rejected plaintiffs’ claims that the arbitration agreement violates California’s McGill rule, a precedent in which arbitration provisions are unenforceable if they waive a plaintiff’s right to seek public injunctive relief.

“Plaintiffs do not explain how the [Tesla] arbitration agreement at issue here waives their right to pursue public injunctive relief through arbitration and the Court sees no indication that it does. The Court therefore finds that the arbitration agreements are enforceable,” he wrote.

Claims from fifth plaintiff dismissed

The plaintiffs are four California residents and one Florida resident. One of the five plaintiffs, Thomas LoSavio of California, did opt out of the arbitration agreement. However, the judge granted Tesla’s motion to dismiss claims from LoSavio because of the statute of limitations.

LoSavio bought his Tesla in January 2017 and opted out of the arbitration agreement. But he sued over five years later, after the expiration of the relevant statutes of limitations, which range from two to four years. LoSavio argued that the continuing violation doctrine allows him to bring the case, but the judge wasn’t convinced.

“Here, Plaintiff’s injury appears to have occurred and was apparent in January 2017 when he first purchased the car, paying $8,000 above the base price for the ‘Full Self-Driving ADAS package’ that did not work as he thought… But critically, Plaintiff does not explain in his opposition brief—let alone allege in the complaint—how such misrepresentations continued to injure him. Plaintiff does not suggest that he made any ongoing or new purchases from Tesla based on their subsequent representations about their technology. He does not allege that he even saw, let alone relied on, these subsequent statements,” Gilliam wrote.

LoSavio has the option to amend the complaint within 21 days. The ruling also wouldn’t preclude other Tesla owners from suing if they opted out of arbitration and are within the statute of limitations.

A Reuters article noted that Gilliam’s ruling “came in the midst of the first US trial over allegations that Tesla’s Autopilot feature led to a death because it was based on untested experimental technology that should not have been sold to the public.” The trial is being held in a California state court and involves a 2019 crash leading to a driver’s death. Tesla previously defeated a different lawsuit in which a plaintiff suffered severe injuries in a crash and blamed Autopilot.

Tesla is also facing a class-action lawsuit filed by customers who say they were misled by the company’s exaggerated range claims. Tesla has an October 13 deadline to file a response to the class-action complaint.

Jon has been a reporter for Ars Technica since 2011 and covers a wide array of telecom and tech policy topics. Jon graduated from Boston University with a degree in journalism and has been a full-time journalist for over 20 years. Before Ars, he spent six years as a newspaper reporter and five years writing about technology for IDG’s Network World. To send Jon encrypted email, his public key is here; he can also be reached securely on Keybase.