Tesla Model 3 on display during LA Auto Show at the Los Angeles Convention Center on Nov. 30, 2017. (Photo: Betto Rodrigues/Shutterstock.com)Tesla Gets Early Win in 'Non-Twitter' Securities Suit
U.S. District Judge Charles Breyer specified early in his order granting the electric car company's motion to dismiss that the claims centered on missed production goals for Tesla's "Model 3" rather than Elon Musk's recent tweets.
August 28, 2018 at 02:47 PM
3 minute read
The original version of this story was published on The Recorder
With plaintiffs lawyers hawk-eyeing Tesla Inc. over founder and CEO Elon Musk's recent Twitter activity—not to mention the SEC's reported interest in the tweets implying Musk had “go-private” financing lined up—the electric car maker got some welcome news Monday on the securities litigation front.
A federal judge in San Francisco granted a motion to dismiss filed by Tesla's lawyers at Fenwick & West related to claims the company misled investors about its ability to meet goals of producing 5,000 of its mass-market “Model 3″ per week by the end of 2017.
U.S. District Judge Charles Breyer of the Northern District of California, who specified early in Monday's order that his ruling applied to a “non-Twitter-related securities action,” wrote that “a firm's failure to meet projections is only actionable if the firm did not accompany those projections with meaningful qualifications.”
“Because plaintiffs fail to allege that defendants made any projections that were not so qualified, their claims fail,” Breyer wrote.
In their amended class action complaint, the lead plaintiffs lawyers—Laurence Rosen of The Rosen Law Firm in Los Angeles and Jacob Goldberg and Gonen Haklay in the firm's Jonestown, Pennsylvania, office—cited confidential former Tesla employees who claimed that Musk and other executives knew that the 5,000-vehicle-per-week goal was unrealistic long before the company reported in a October 2017 press release that it had fallen short because of “production bottlenecks.”
But Breyer agreed with Tesla's lawyers at Fenwick, who argued the company and officials had always accompanied the forward-looking goal with appropriate cautionary statements regarding the company's supply chain and the unprecedented ramp-up they were asking of their parts makers.
“That Tesla employees and suppliers may have disagreed with Tesla's own estimates of what was a realistic timeline does not make Tesla's estimates false, given that the market had access to the same factual information as those employees and suppliers,” Breyer wrote.
Breyer's order dismissed the case but offered the plaintiffs an opportunity to amend their complaint. Neither Rosen nor Goldberg responded to email messages asking if the plaintiffs intend to amend their claims.
Read the ruling:
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