Wednesday, December 3, 2025
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Ninth Circuit:
Investor Action Over Tesla Self-Driving Claims Properly Axed
Opinion Says Putative Class Action Complaint Asserting That Elon Musk Helped Company Commit Securities Fraud By Hyping Autonomous Capabilities of Company’s Vehicles Failed to Point to Any False, Misleading Statements
By Kimber Cooley, associate editor
The Ninth U.S. Circuit Court of Appeals held yesterday that a District Court judge properly kicked a putative class action alleging that Elon Musk and other Tesla Inc. officers misled investors and caused an artificial inflation of stock values, based on purportedly false assurances in 2019 that the company was on the verge of releasing vehicles with safe, fully-autonomous driving capabilities when, in fact, the cars have continued to require human intervention.
In a memorandum opinion, the court said that the statements highlighted in the pleading—including ones allegedly indicating that the technology was “capable of zero intervention drives,” was safer than human operation, and that the company’s robotaxis would be road-ready by the end of 2020—did not amount to assurances that the cars were or would soon be ready for fully autonomous driving.
Breaking the 29 declarations listed in the operative complaint into three categories—claims about safety, capability, and timing—the panel, consisting of Circuit Judges Daniel Aaron Bress and Salvador Mendoza Jr. and Senior Circuit Judge Salvador Mendoza Jr.—said that the plaintiffs had “failed to allege falsity” or a fraudulent intent.
Securities Fraud Claims
On Feb. 27, 2023, plaintiff Thomas Lamontagne, a purported investor in Tesla stock, filed the putative class action complaint against Tesla, its chief executive officer, Musk, and other officers of the company, asserting securities fraud claims under §§10(b) and 20(a) of the Securities and Exchange Act of 1934.
A few months later, Oakland County Voluntary Employees’ Beneficiary Association and Oakland County Employees’ Retirement System were appointed lead plaintiffs in the action.
In the operative complaint, the plaintiffs alleged that the defendants, between February 2019 and February 2023, “touted the value of investing in Tesla with incessant assurances that it already had technology that enabled cars to safely drive themselves and that it was on the cusp of releasing ‘full self-driving,’ which…Musk claimed would generate billions in software and car sales, and revenue from a fleet of autonomous ‘robotaxis.’ ”
They added:
“These were unequivocal lies: Tesla cars cannot safely drive themselves, and Tesla was never close to releasing true autonomous driving systems. While Tesla’s stock price was artificially inflated and artificially maintained by this fraud, Defendant Musk sold over $39 billion in stock. As the truth came to light, including through an eventual recall of every single car equipped with Tesla’s ‘full self-driving’ software, investors suffered massive losses.”
Musk Statements
The plaintiffs’ cited statements by Musk, purportedly made during an April 22, 2019 “Autonomy Investor Day” event, crediting him with saying, “next year, for sure, we’ll have over one million robotaxis on the road,” “[b]y the middle of next year, we’ll have over 1 million Tesla cars on the road with full Self-Driving hardware, feature complete at a reliability level [such] that no one needs to pay attention,” and “autopilot is about twice as safe as a normal driver.”
In fact, the company did not launch its pilot robotaxi program until June of this year, and, although the automaker continues to release upgraded self-driving technologies in the vehicles offered to consumers, the cars still require human oversight.
After the defendants moved to dismiss the operative complaint, District Court Judge Araceli Martínez-Olguín of the Northern District of California granted the request, with leave to amend, on Sept. 30 of last year. The plaintiffs opted not to file an amended pleading, and judgment was entered that November.
Thomas, Bress, and Mendoza noted that the plaintiffs’ claims required them to plead falsity, or that the defendant’s statements directly contradicted what the party knew to be true at the time or contained omissions of material information. Applying this standard, the jurists opined:
“Musk did not state that Tesla’s [autonomous driving technology] could self-drive safer than humans. Rather, Tesla represented that its ADT technology requires ‘a fully attentive driver.’ Thus, fairly considered, Musk represented that a driver with the technology is safer than a driver without it. Plaintiffs’ allegations, including the claimed technological deficiencies and driver intervention rates, also do not show that these statements were false when made. Musk’s later statements about the…safety capabilities likewise cannot establish falsity.”
Turning to the statements about self-driving capabilities, they said:
“Musk’s statement that the [autonomous driving technology] was ‘capable of zero intervention drives’ did not suggest that the [program] had already reached full autonomy––that is, autonomous driving without human intervention. To the contrary, Musk noted that he still has to intervene while the technology is engaged.”
Timing of Launch
As to the statements about the timing of the launch of the autonomous vehicles, the jurists said that the plaintiffs “failed to allege that Musk did not honestly believe reaching full autonomy was possible on his suggested timeline” and remarked:
“Even if [some of the] statements are not strictly opinions, Plaintiffs still have not adequately alleged falsity….Tesla did not represent to California regulators that it was impossible to achieve the projected timeline and confirmed that Musk was ‘extrapolating on the rates of improvement.’ ”
They also found that the plaintiffs failed to plead scienter, as required under the Private Securities Litigation Reform Act, saying:
“[A] complaint must ‘state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind.’…Scienter requires fraudulent intent or ‘deliberate recklessness,’ which is an ‘an extreme departure from the standards of ordinary care.’ ”
They concluded that any alleged “financial motive” on Musk’s part was “insufficient to show scienter” and added:
“Plaintiffs’ allegations fail to give rise to a strong inference that Tesla and Musk were deliberately reckless in making their statements.
“Tesla repeatedly warned investors that the [autonomous driving technology] may not proceed as quickly as planned because it involved ‘highly complex state-of-the art technology that was evolving and being developed on a daily basis.’ These risk disclosures undermine any inference of scienter.”
The case is Oakland County Voluntary Employees’ Beneficiary Association v. Tesla Inc., 25-55.
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