Judge Dismisses Shareholder Lawsuit Against Tesla, Musk Over Self-Driving Promises

Tesla and its CEO Elon Musk on Monday won the dismissal of a lawsuit accusing them of defrauding shareholders by overstating the effectiveness and safety of the automaker’s self-driving technology in order to boost its stock price.

U.S. District Judge Araceli Martinez-Olguin in San Francisco said shareholders failed to show Tesla and Musk should be liable for falsely promising they were close to delivering technology that would drive safer than humans, but that was actually “plagued with safety issues” and encouraged inattentiveness.

Tesla vehicles have included “Autopilot” software designed to enhance self-driving capabilities, and the company has sold “Full Self Driving” software upgrades.

Martinez-Olguin said some of Tesla’s and Musk’s were not necessarily false, while others could be excused because they addressed future expectations for the technology.

She said Musk’s “hands-on” management did not mean he knew more than he let on, while his nearly $34 billion profit from selling Tesla shares in the February 2019 to February 2023 class period did not show he was cashing out at other shareholders’ expense.

Shareholders said Musk, the world’s richest person, received about $39.4 billion of proceeds from those stock sales, approximately the same as Vermont’s gross domestic product.

Lawyers for the shareholders did not immediately respond to requests for comment. Tesla did not immediately respond to similar requests. The judge dismissed the lawsuit without prejudice, meaning that shareholders can amend it.

Tesla still faces by the U.S. Department of Justice and U.S. Securities and Exchange Commission, as well as a by the California Department of Motor Vehicles, into its self-driving claims.

The case is Lamontagne v Tesla Inc et al, U.S. District Court, Northern District of California, No. 23-00869.

(Reporting by Jonathan Stempel in New York; Editing by Jamie Freed)