A federal judge in California ruled over the weekend that a group of Tesla owners could not sue Tesla in court for falsely promoting its self-driving capabilities, a victory for the company that would have had to face the costs of individual arbitration.
U.S. District Judge Haywood Gilliam’s ruling was not a victory for Tesla’s Advanced Driver Assistance Systems, Autopilot and Fully Self-Driving (FSD) defenses, but simply a victory for Tesla’s terms and conditions. According to the judge, the plaintiffs who filed the class-action lawsuit in September 2022 did contextually agree to arbitrate any legal claims against the company when they signed the agreement. They had 30 days to opt out, but none chose to do so.
Mandatory arbitration has been a loyal partner to the tech industry. Tesla's success in escaping a class-action lawsuit may encourage other automakers to rely more heavily on this strategy.
Ryan Koppelman, a partner at law firm Alston & Bird, said: "In some ways, this may create challenges for these types of claims."
Pursuing arbitration is a common legal strategy used by companies to avoid individual claims and similar class actions. In this particular case, a fifth plaintiff opted out of arbitration, but Judge Jillian ruled to dismiss their claim because they had waited too long to sue, according to court documents.
"The statute of limitations issue is interesting because the claims at issue here relate to the future performance of Tesla's products and the purported performance at the time of sale," Koppelman said.
Plaintiffs in the cases all claim to have spent thousands of dollars on unreliable and dangerous technology that caused accidents and, in some cases, deaths. Tesla denies wrongdoing and has requested that the claim be submitted to arbitration, citing the plaintiff's acceptance of the arbitration agreement.
Judge Gilliam also denied the plaintiff's motion for a preliminary injunction "to prohibit the defendants from continuing to engage in their allegedly illegal and deceptive conduct." In fact, the plaintiffs are asking the court to force Tesla to stop promoting its ADAS technology as providing "full self-driving capabilities"; to stop selling and deactivating FSD beta software; and to remind all customers that Tesla's use of terms such as "full self-driving capabilities," "self-driving" and "autonomous" to describe ADAS technology is inaccurate.
The original complaint, filed in September 2022, alleged that Tesla and CEO Elon Musk had been deceptively promoting its Autopilot features since 2016, claiming that the features were fully functional or close to being "solved," despite knowing that the capabilities of Autopilot and FSD did not live up to the hype.
The plaintiffs claim that Tesla’s ADAS caused the vehicles to run red lights, miss turns, and deviate from the flow of traffic, while costing Tesla owners thousands of dollars. Briggs Matsko, a plaintiff in the lawsuit, said he paid $5,000 for his 2018 Tesla Model X to get the enhanced self-driving feature. Tesla's FSD costs an additional $12,000.
The failed class-action lawsuit isn't the only time Tesla's so-called self-driving technology has come under scrutiny. Earlier this year, Musk was found to have overseen a 2016 video that exaggerated the capabilities of self-driving cars.
The revelation comes from a senior engineer's testimony that was used as evidence in Tesla's lawsuit over a fatal 2018 crash involving former Apple engineer Walter Huang. The lawsuit alleges that Autopilot's errors and Huang's misplaced trust in the system's capabilities contributed to the crash.
Tesla's ADAS system is also under investigation by multiple state government agencies. The California Department of Motor Vehicles also accused Tesla of making false claims about its Autopilot and FSD systems in July 2022. The National Highway Traffic Safety Administration (NHTSA) is actively investigating 830,000 Tesla vehicles that contain Autopilot systems. The U.S. Department of Justice has asked Tesla to provide information about its Autopilot and FSD technologies.