By Mark Pratzel on May 10, 2017

car GPSTesla is facing its first U.S. product liability litigation challenging its Autopilot autonomous vehicle (AV) technology in a putative class action filed in Federal Court in San Jose, California.[1] The three named plaintiffs are owners of Tesla Model S cars in Colorado, Florida, and New Jersey, who paid between $81,200 and $113,200 for their vehicles, including a $5,000 premium for Tesla’s “Enhanced Autopilot” 2.0 AV software. Each plaintiff claims that both the Autopilot “Standard Safety Features” and Enhanced Autopilot features were non-functional at delivery and remained so when suit was filed.  The plaintiffs claim that Tesla sold 47,000 vehicles with “dangerously defective” software, at least half of which were supposed to have Enhanced Autopilot. They refer to it derisively as “vaporware,” which they define as “computer software that is advertised but still nonexistent.”

The 44-page complaint contains 203 numbered paragraphs of allegations. In substance, the plaintiffs contend that Tesla promised full functionality of these features by December 2016, but that the cars are either non-functioning or unsafe to drive. The plaintiffs contend that Tesla deceived customers by assuring them that standard safety features and its premium enhanced autopilot software would be incorporated into a December 2016 software update, but missed that deadline or delivered software that is unstable.

According to the complaint, the Tesla cars sometimes veer out of lanes, “lurching, slamming on the brakes for no reason, and failing to slow or stop when approaching other vehicles” when Autopilot is activated.  Furthermore, although consumers paid an extra $5,000 to buy models with enhanced autopilot software, the company missed a December rollout of such software. The plaintiffs allege that when the software was revealed, consumers found that it “causes vehicles to behave erratically” and is “essentially unusable and demonstrably dangerous.”

The named plaintiffs seek certification of Colorado, Florida and New Jersey classes of Tesla purchasers and lessors, and subclasses of those who purchased or leased Teslas equipped with the hardware necessary for Enhanced Autopilot. They plead violation of the Colorado Consumer Protection Act, the Florida Unfair and Deceptive Trade Practices Act and the New Jersey Consumer Fraud Act, as well as common law fraudulent concealment and unjust enrichment claims, and seek injunctive relief, including a recall order, as well as compensatory and punitive damages.

Not surprisingly, Tesla has attacked the suit, calling it “a disingenuous attempt to secure attorney’s fees posing as a legitimate legal action, which is evidenced by the fact that the suit misrepresents many facts.” The company further asserts that, “Many of the features this suit claims are ‘unavailable’ are in fact available, with more updates coming every month.”  It proclaims, “We have always been transparent about the fact that Enhanced Autopilot software is a product that would roll out incrementally over time, and that features would continue to be introduced as validation is completed, subject to regulatory approval.”

This putative class action could be significant for future litigation involving AV technology. Promises are often made with respect to forthcoming software that has not been rolled out at the time it is offered for sale.  The case provides an opportunity for the court to address the effect of such promises and whether they can rise to the level of actionable fraud, and to issue a nationwide recall of Tesla cars and injunctive relief.

It is also significant that the suit was filed at Tesla’s corporate home, in the heart of Silicon Valley, considered to be plaintiff-friendly and a magnet for consumer class actions. While the plaintiffs’ allegations and the requested relief could make settlement difficult, they could also motivate Tesla to try to settle as quickly as possible.  The AV industry will surely follow this case closely, for its outcome could have significance for the marketing of AV cars and technology.

[1] Dean Sheikh, et al. v. Tesla, Inc., United States District Court, Northern District of California, San Jose Division, Case no. 5:17-cv-02193, filed 4/19/2017.