Elon Musk celebrates winning lawsuit over Tesla self-driving claims with embarrassing defense

Elon Musk is celebrating winning a lawsuit over his misleading claims regarding Teslaโ€™s self-driving program.

However, before celebrating, he should take a closer look at the defense his lawyers took: puffery.

By definition, โ€œpufferyโ€ย refers to exaggerated or false praise. Itโ€™s also a legal defense used by defendants in cases of false advertising or misleading statements.

The defendants argue that the statements canโ€™t be taken seriously because they were โ€œmere puff.โ€

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Thatโ€™s precisely the defense that Tesla and Elon Muskโ€™s lawyers have taken to defend against a shareholderโ€™s lawsuit over Muskโ€™s alleged misleading statements regarding Teslaโ€™s self-driving effort.

Musk said that โ€œjustice prevailsโ€ when commenting on one of his biggest fans, Sawyer Merritt, celebrating the dismissal of the lawsuit yesterday:

However, when reporting on the dismissal, Musk and his fans didnโ€™t examine the argument his lawyers used to defend him.

Letโ€™s be clear on what Musk is celebrating here: he is celebrating a judge siding with his lawyers, who argued that his misleading statements regarding Teslaโ€™s self-driving effort were simple โ€œcorporate pufferyโ€ and not โ€œactionable material misrepresentations.โ€

Thatโ€™s it.

The lawsuit is full of โ€œcorporate pufferyโ€ arguments by Teslaโ€™s lawyers:

Defendants argue that the Timeline Statements that FSDC technology โ€œappear[ed] to be on track,โ€ would be available โ€œaspirationally by the end of the year,โ€ and Tesla was โ€œaiming to release [it] this year,โ€ [..] were nonactionable statements of corporate puffery and optimism. [โ€ฆ] Plaintiffs contend that the statements provided a โ€œconcrete descriptionโ€ of the state of Teslaโ€™s technology in a way that misled investors. [โ€ฆ]. These statements about Teslaโ€™s aims and aspirations to develop Teslaโ€™s technology by the end of the year and Muskโ€™s confidence in the development timeline are too vague for an investor to rely on them. [โ€ฆ] Thus, in addition to being protected under the PSLRA safe harbor, Statements (10, 11, and 18) are nonactionable puffery.

In a mind-numbing statement, Muskโ€™s lawyers argue that his claims about Tesla Autopilot safety were โ€œvague statements of corporate optimism are not objectively verifiableโ€:

Defendants also assert that several Safety Statements are corporate puffery. For example, statements that safety is โ€œparamountโ€ (FAC ยถ 325), Tesla cars are โ€œabsurdly safeโ€ (id.), autopilot is โ€œsuperhumanโ€ (FAC ยถ 337), and โ€œwe want to get to as close to perfection as possibleโ€ (FACยถ363). Mot. at 19. Plaintiffs respond that โ€œsuperโ€ in โ€œsuperhumanโ€ is not puffery because it represents that ADT is safer than human and โ€œabsurdly safeโ€ conveys greater-than-human safety. Opp. at 12. However, these vague statements of corporate optimism are not objectively verifiable.

The lawyers even argued, successfully, that โ€œno reasonable investor would relyโ€ on many of the alleged misleading statements because they are โ€œmere puffingโ€:

Defendants next argue that several Timeline and Safety Statements, (Statements 7, 9-11, 13, 16, 18, and 26 FAC 325, 329, 331, 333, 337, 343, 347, 363), are nonactionable statements of corporate puffery and optimism. Mot. at 15, 19. In the Ninth Circuit, โ€œvague, generalized assertions of corporate optimism or statements of โ€˜mere puffingโ€™ are not actionable material misrepresentations under federal securities lawsโ€ because no reasonable investor would rely on such statements.

Therefore, yes, Tesla won a dismissal, but at the cost of a judge agreeing with Muskโ€™s lawyers that his statement about Teslaโ€™s Full Self-Driving effort was โ€œmere puffing.โ€

Electrekโ€™s Take

Look. They are not wrong. I donโ€™t think many reasonable investors are taking Elonโ€™s words seriously. โ€˜Reasonableโ€™ is the keyword here.

There are plenty of unreasonable ones who do, though.

I am not well-versed enough in the law to have a strong opinion on this, but you donโ€™t need to be well-versed in the law to read the arguments of Tesla and Elonโ€™s lawyers, who clearly state that Elonโ€™s self-driving claims are just corporate puffing.

Itโ€™s funny that Elon is celebrating this victory. He is basically saying, โ€ Hey, look, I won this court case because the judge agrees that reasonable investors wouldnt believe what I say.โ€

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