Federal judge allows class certification for Tesla suit

A Tesla vehicle’s ability to (potentially) go coast-to-coast by itself without stopping to recharge was–and as of the time of publication, still is–yet to be tested. In 2019, Musk was asked a direct question about the expected journey; he responded that, though it could have happened the year before, “everyone with Tesla Full Self-Driving [would] be able to do it” when the company put the rubber to the road later that year. However, even at the time this decision was issued, that trip had still not occurred. Marketing materials claimed the FSD technology was being held up by regulatory measures, but evidence produced by the plaintiff showed no application had been submitted for an SAE Level 3 vehicle, much less a Level 4 or 5 vehicle.

Customer Dissatisfaction

LoSavio, it turned out, was not the only Tesla owner frustrated with the company’s unfulfilled promises. Five individuals, including LoSavio, filed lawsuits against the auto maker in the same month, alleging violations of both federal and state consumer protection laws, breach of warranties, negligence, and negligent misrepresentation. The claims were ultimately consolidated by the court; one group of plaintiffs was compelled to arbitrate the matter, but some opted out of that resolution. After a few years of legal back-and-forth, the plaintiffs sought class certification in their consolidated suit against Tesla.

The Case for a Class

Under the Federal Rules of Civil Procedure Rule 23 (Rule 23), LoSavio and the other plaintiffs seeking class certification had to prove that a large number of people have sufficiently similar claims against the same person or entity, and the named plaintiff’s case is reasonably standard among all of the claims, so that litigating the named plaintiff’s case “will fairly and adequately protect the interests” of the entire group, and that it is more efficient and practicable to litigate the claims as a whole than on an individual basis. Tesla did not debate either the size of the proposed class, or that litigating a single claim as opposed to individual claims would be the most efficient method of resolving the matter, so the court’s analysis focused on what the claims had in common and how those claims took precedence over any individual claim.

Something There

Tesla argued LoSavio had not presented sufficient evidence that all of the proposed class members even read either the Hardware or Cross-Country statement; therefore, there was no element of commonality among the proposed class of plaintiffs.

The court pointed out that, in certain situations, exposure to an allegedly misleading statement can be inferred based on the particular advertising campaign. Tesla’s advertising strategy is unique among automakers, as the vehicles are only sold directly through Tesla itself. Consumers must either visit a Tesla-specific vehicle lot owned and operated by Tesla, or visit the company’s website. Tesla’s distinct advertising and sales practices afford few opportunities for potential and existing Tesla drivers to gather information about the vehicles from sources that are not directly connected to the company.

The plaintiffs submitted evidence showing that, among other outlets, the Hardware statement had stayed on the Tesla webpage specific to “Autopilot for almost eight years, from October 2016 to August 2024. It had also appeared in both a Tesla blog post and a consumer-based Tesla newsletter sometime in 2016. Musk himself had made the Hardware statement during a 2016 press conference.

This evidence was sufficient to satisfy the “commonality” requirement for class certification regarding the Hardware statement. The Cross-Country statement, however, had been made far less frequently and across a narrower scope. And while Tesla’s unique marketing strategies and methods “reinforce Tesla's core message that full-self driving capability is on the horizon,” albeit in different terms than the Hardware statement, there was no similar marketing campaign for Tesla’s alleged ability to go across the country without a driver or a pit stop. Class certification regarding the Cross-Country statement was denied.

Claim Predominance

Now it was necessary for LoSavio to show that the Hardware statement would have been “material” to someone who purchased Tesla’s full-self driving package, according to the “reasonable consumer” standard. In this context, a “material statement” would be one where “a reasonable man would attach importance to its existence or nonexistence in determining his choice of action” regarding the issue at hand.

Tesla asserted that some potential class members had received “explicit signs or explicit verbal advice that would negate” class certification, including some cautions that the FSD they had purchased was still in the process of regulatory approval. The company also offered evidence that its online disclosure and other written material from Tesla clearly and unequivocally warned drivers that the technology in their vehicles “was for ‘driver assistance’ and NOT to replace the driver” (all caps original).

The judge disagreed. First, a marketing expert for the plaintiffs with almost fifty years of experience stated that drivers “would not have spent thousands of dollars to purchase Tesla's FSD packages had they known that their vehicle was not capable of full self-driving, but instead ‘require[d] repeated intervention from a Tesla engineer…in the back seat in order to prevent accidents.’” Furthermore, it was neither improbable nor unreasonable for a consumer to think his car was capable of maneuvers that “would only be released to him after regulatory approval.”

Tesla also argued that the individual members of the proposed class had purchased different hardware packages for their vehicles of differing capabilities. Since some of the claims in the class action concerned fraud and negligent misrepresentation, it would be necessary to prove the falsity of Tesla’s claims about the vehicle hardware on an individual basis; therefore, class certification was not appropriate.

Differing hardware packages notwithstanding, the court pointed to some generalized issues that, according to an expert witness, “would be common across the different hardware versions,” such as lackluster performance during inclement weather. And, even though the Cross-Country statement was excluded from class certification, the fact that such a trip had not been attempted, much less actually occurred, at the time the hearing was held demonstrated that there were still questions surrounding the purported capabilities of Tesla’s FSD technology.

Conclusion

The court granted LoSavio’s motion for class certification, creating three separate classes of plaintiffs based on when the Tesla was purchased and whether the plaintiffs would consider purchasing another one in the future. However, the grant was specifically limited to the Hardware statement Tesla and Musk had made.

Editor’s Note: If Tesla seeks coverage for this lawsuit–regardless of the type of coverage sough–the insurer’s duty of defense will depend on whether the complaint makes allegations that could, not will, require coverage.

At this juncture, it is crucial to draw the lines between what the court did and did not say. The court did say that class certification was appropriate, meaning LoSavio and the other plaintiffs showed that, as was stated above, (1) a large number of people (2) have sufficiently similar claims against the same person or entity, and (3) the named plaintiff’s case is reasonably standard among all of the claims, so that (4) litigating the named plaintiff’s case “will fairly and adequately protect the interests” of the entire group. The court did not say whether there had or had not been a material misrepresentation - that will be determined at trial.

This article was originally published on FC&S Expert Coverage Interpretation and may not be reprinted.

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