Appeals Court Blocks Class Actions Over Tesla Self-Driving Claims

Tesla has won an important appellate ruling after a US federal appeals court overturned class certification for thousands of California customers pursuing claims over allegedly misleading statements about the company's self-driving technology.

A three-judge panel of the 9th US Circuit Court of Appeals vacated orders certifying three classes and sent the case back to the district court for further proceedings.

The decision is a significant procedural victory for Tesla, but it does not determine whether the electric vehicle manufacturer made false or misleading claims about the capabilities of its vehicles.

The underlying lawsuit remains pending.

The plaintiffs accuse Tesla of violating California consumer protection laws and common law by misrepresenting whether its vehicles contained the hardware necessary to achieve full self-driving capability.

They allege customers paid additional money for Full Self-Driving packages based on representations about the vehicles' hardware and future autonomous-driving capabilities.

Tesla has denied the claims.

US District Judge Rita Lin had certified two damages classes under Federal Rule of Civil Procedure 23(b)(3) and a third class seeking injunctive relief under Rule 23(b)(2).

At the centre of the appeal was whether Tesla customers could be treated collectively when determining their exposure to an allegedly misleading statement about the company's Full Self-Driving hardware.

The statement appeared on Tesla's Autopilot webpage and said vehicles being produced had the hardware needed for full self-driving capability.

The district court had concluded that prospective purchasers were highly likely to visit Tesla's website when considering an expensive Full Self-Driving package.

The appeals court found that reasoning insufficient.

Circuit Judges Ronald Gould, Jay Bybee and Daniel Bress concluded that the district court had wrongly inferred that members of the proposed classes had all been exposed to the disputed hardware statement.

The panel noted that purchasers were not required to visit the Autopilot webpage to complete their transactions.

That meant determining exposure would require individual consideration of whether particular customers had visited the page and seen the statement before making their purchases.

The court found that those individual questions prevented the plaintiffs from satisfying the predominance requirement necessary for the two damages classes to proceed under Rule 23(b)(3).

The exposure issue also affected Tesla's statute-of-limitations defences because determining whether particular statements delayed a customer's discovery of a potential claim could depend on what that individual had seen.

The appeals court therefore vacated certification of both damages classes.

It also vacated the separate injunctive-relief class because that group had been defined as a subset of the two damages classes and could not stand independently once their certification was overturned.

The ruling means thousands of California purchasers grouped together by the lower court cannot, for now, pursue their claims collectively under those certified classes.

It does not resolve the underlying allegations against Tesla.

The Ninth Circuit expressly confined its decision to the class certification issues and did not decide whether Tesla's statements about Full Self-Driving hardware were false or misleading.

The panel also did not address whether the plaintiffs' proposed damages model was appropriate because the classwide exposure issue was sufficient to decide the appeal.

Lawyers representing the plaintiffs criticised the ruling, arguing that the panel had not fully recognised the circumstances surrounding Tesla's marketing campaign or the importance of the hardware statement.

The US Chamber of Commerce supported Tesla in the appeal, arguing that the lower court's approach risked increasing the cost of overly broad class proceedings.

The case highlights a recurring issue in consumer class action litigation: whether alleged misrepresentations were disseminated widely enough to justify treating thousands of purchasers as a single class.

That distinction can have substantial consequences.

Combining large numbers of comparatively small consumer claims can make litigation economically viable and substantially increase a defendant's potential exposure. Decertification can make those claims considerably more difficult to pursue collectively.

For Tesla, the decision removes the class structure previously approved by the district court, but it does not dispose of the litigation itself.

The case will now return to the US District Court for the Northern District of California for further proceedings.

The plaintiffs' allegations that Tesla misrepresented the hardware capabilities associated with its Full Self-Driving packages therefore remain unresolved.