While not adopting
all plaintiffs’ arguments, the court certifies a limited class to challenge Tesla’s
full self-driving claims. I’m going to omit a lot, but the claims are the usual California statutory claims
plus fraud, negligent misrepresentation, and negligence.
Of note, because Tesla
doesn’t pay for traditional marketing/advertising, “it reaches consumers
directly through its website, as reinforced by its own YouTube, Instagram,
press conferences, sales events, marketing newsletters, and CEO Elon Musk’s
personal Twitter account.” There’s a bizarre redaction of historical fact about
the prices offered to the public: “Tesla has historically offered customers the
ability to purchase or subscribe to optional technology packages—ranging from
[redacted] to [redacted] in price—designed to enable autonomous vehicle
operation.”
Plaintiff allegedly
relied on two misrepresentations to pay an extra $8000: (1) that Tesla vehicles
are equipped with the hardware necessary for full self-driving capability, and
(2) that a Tesla vehicle would be able to drive itself across the country
within the following year. Musk touted the hardware for “full self-driving for
driver-less capability” in 2016, claiming it was “in every car we make.” These
statements also appeared on Tesla’s website, including on the Autopilot, Model
S, and Model X subpages, and other places.
Hardware updates
followed, and “Musk later stated on a 2024 earnings call that a hardware
upgrade may be necessary for customers who purchased FSD with prior hardware
configurations.”
In 2016, Musk also
claimed that “we will be able to demonstrate a [demonstration] drive of our
full autonomy all the way from LA to New York.” He tweeted words to this effect
three times. Embarrassing: “While Musk’s Twitter account has over 200 million
followers, the 2019 Tweet generated around 2,000 engagements, and the 2017
Tweet generated around 300 engagements.” Also in 2016, “Tesla began displaying
a video that showed a Tesla driving autonomously, which remains on the Tesla
site today” and was also on YouTube.
It’s undisputed
that Tesla has not yet provided cross-country capability, and Tesla has not even
applied for regulatory approval to deploy a Society of Automotive Engineers Level 3 or higher vehicle in California, which
is a necessary step for approval of a full self-driving vehicle. Before this
ruling, the court compelled arbitration as to one group of plaintiffs and dismissed
all warranty claims but permitted fraud-based, negligence-based, and related
statutory claims based on the statements above.
The court thus
certified a class of California purchasers/lessees who opted out of the arbitration
agreement or who paid before the arbitration agreement came in and who bought
or leased while the key statements were being made.
The number of
people estimated to be in the class was redacted (again, why?) but numerosity
was satisfied. Commonality and
predominance were also satisfied because the case turned on whether Tesla’s
statements were deceptive to a reasonable consumer. Tesla argued that there was
no showing of class-wide exposure where there was neither a product label nor a
traditional mass advertising campaign.
Plaintiff met his
burden of showing class-wide exposure on the hardware statement, but not the
cross-country statement. The hardware statement was (1) on the “Autopilot”
subpage of Tesla’s website from October 2016 until August 2024; (2) on various
other subpages of Tesla’s website, including the “Model X” and “Model S” pages,
at points throughout that period; (3) disseminated by Musk at a high-profile
conference in 2016; (4) stated in a Tesla blog post published in October 2016;
(5) stated in a Tesla quarterly earnings call in May 2017; and (6) sent via
newsletter to prospective and current Tesla vehicle owners in 2016. “While
these channels alone may not ordinarily be enough to establish class-wide
exposure for a traditional car manufacturer, Tesla’s distinctive advertising
strategy warrants a departure from the typical approach.”
Given Tesla’s
direct-to-consumer sales and lack of independent dealers, consumers are “highly
likely to visit the website when considering the purchase of an expensive
package such as EAP or FSD.” The undisputed evidence “indicates that the
Autopilot page is the principal source of detailed marketing information from
Tesla, and typically the only written source of such information, describing
the supported features and how they work. Additionally, consumers can order
those packages directly through the site.” Thus, “it is reasonable to infer
that almost all consumers spending thousands of dollars on the packages would
review Tesla’s description to make that decision.”
Further, “because
Tesla itself serves as the primary source of product information, it is
reasonable to infer that the few alternative sources available to
consumers—i.e., YouTube videos demonstrating self-driving capability,
word-of-mouth, news articles—reinforce Tesla’s core message that full-self
driving capability is on the horizon, even if they do not specifically contain
the Hardware Statement.” Plaintiff’s expert also supported this finding. However,
without the hardware statement on the Tesla site, “the remaining channels of
communication are insufficient to support an inference of class-wide exposure,”
which led the court to limit the class period to the time the statement was on
the site.
As with product labels,
“though some consumers may not read the packaging when opening an item, courts
have inferred class-wide exposure based on the ‘inherently high likelihood’
that consumers would have relied upon those representations when encountering
them in the course of purchasing the product.” Monthly Tesla website traffic
data did not show otherwise; Tesla contended that only a few thousand people
visited tesla.com/autopilot the related blog post:
But
this information has little bearing on the key issue of the proportion of FSD
purchasers who viewed those pages, as it is reasonable to assume that many
people visit the Tesla website for reasons other than to purchase FSD.
Moreover, the table does not include the number of monthly visits to the Model
X and Model S subpages, which also contained the Hardware Statement at certain
points throughout the relevant time period, and is missing large portions of
data (i.e., from January to November 2017 for tesla.com/autopilot). Indeed, the
view counts are consistent with a finding of class-wide exposure, as it appears
thousands of people on average—which does not include those using ad
blockers—viewed the Autopilot page and blog post each month throughout the
class period. Tesla has therefore failed to rebut Plaintiff’s showing of
class-wide exposure as to the Hardware Statement.
But the
cross-country statement was less well-disseminated (Musk only said it four
times and didn’t get much engagement when he did), so class-wide exposure was
not established.
Materiality is an
objective standard, and plaintiff showed it with testimony from a marketing
expert who explained that these statements were material “due to the objective
credibility of the speakers (i.e. Tesla itself and Musk, Tesla’s CEO and an
industry leader), existence of multiple channels conveying a consistent
message, centrality of statement to the product’s core qualities, and clear
nature of the promise.”
Tesla argued that its
disclosure on the Tesla website that FSD functionality was subject to
“validation and regulatory approval,” as well as other “manuals, contracts and
[ ] documents [that] made it crystal clear that the technology was for ‘driver
assistance’ and NOT to replace the driver” disproved materiality. But “a
consumer can simultaneously believe that his car has the hardware necessary to
enable full self-driving and that such functionality would only be released to
him after regulatory approval.” The “manuals, contracts and [ ] documents,” likewise
referred to a Tesla vehicle’s current capabilities, not the full self-driving
capability touted by Tesla and Musk as being possible using the existing
hardware. Nor did the testimony of a “handful” of customers perceiving the
Hardware Statement to be “mere puffery” undermine the common evidence
demonstrating materiality, because the standard is objective. However, this
conclusion only applied to the FSD package, not a lesser package.
Tesla also argued
that falsity wasn’t subject to common proof because it kept tweaking the
hardware. But Plaintiff’s expert reviewed the sensor and compute configurations
for Tesla vehicles throughout the class period and testified that, for example,
“[t]he [in]ability for the sensors to perform in bad weather” is a limitation
that would be common across the different hardware versions. “Moreover, that
Tesla has been unable to demonstrate a long-distance autonomous drive with any
of its vehicles or obtain the required certifications to do driverless testing
in California further supports the lack of full self-driving capability across
the class.”
Damages were also
subject to common proof because plaintiff’s theory was that the appropriate
measure of damages would simply require refunding class members the amounts
paid for their purchases or subscriptions to FSD.
Nor would statute
of limitations issues preclude class treatment; individual application of a
limitation period to a class member rarely does. Also, the delayed discovery
rule and equitable estoppel theories of tolling “turn primarily on the
objective inquiry of whether Tesla’s misrepresentations to the class stopped a
consumer from discovering the cause of action or pursuing a lawsuit.”
The court also
certified an injunctive class of members of the classes above “who have stated
that they would like to purchase or subscribe to FSD in the future but cannot
rely on the product’s future advertising or labelling.” Tesla argued that this
was subjective, but ascertainability is not a requirement for certifying a Rule
23(b)(2) class. And the requested
injunctive relief was clear enough: “Plaintiff seeks to stop Tesla from
continuing to state that its vehicles have the hardware capable of full
self-driving until the vehicles are actually able to do so.”
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