Elon Musk Defeats Tesla Investors’ Bid for New Fraud Trial

Tesla Inc. investors who sued Elon Musk over his 2018 tweets about taking the electric vehicle company private won’t get a new trial, a California federal court ruled.

Class representative Glen Littleton moved for a new trial, arguing Musk’s tweets were material and that the jury received confusing instructions. But the motion was “flawed,” and the jury’s February verdict was supported by substantial evidence with respect to materiality, the US District Court for the Northern District of California said Wednesday.

The court went to “great lengths to illustrate the difference” between falsity and materiality, Judge Edward M. Chen said. Furthermore, the judge said a second objection to another jury instruction was “nonsensical” because whether Musk acted knowingly was highly relevant to make a decision.

Also, Littleton’s request for a judgment as a matter of law didn’t seek judgment on each element that was a requirement for his claim, namely loss causation, Chen said. The court was limited in its analysis of the claim and therefore couldn’t enter a judgment, he said.

The investors sued after Musk published tweets saying he was considering taking Tesla private at $420, with “funding secured” and “investor support is confirmed.” The jury decided in his favor in February.

“The jury could have found that there was insufficient evidence of loss causation due to Plaintiff’s failure to isolate the impact of the false ‘funding secured’ statement from the true statement that Mr. Musk was considering taking Tesla private at $420,” Chen said.

The court said no reasonable juror could have found Musk’s tweets to be material. Since materiality is an element of the fraud-on-the-market presumption, that requirement of Littleton’s claim also failed, the judge said.

Due to the substantial public importance of the case and the highly disputed issues of fact, the court concluded that each party should bear their own costs, Chen said.

Levi & Korsinsky LLP represented Littleton and the class. Quinn Emanuel Urquhart & Sullivan LLP represented the defendants.

The case is In re Tesla Inc. Sec. Litig., N.D. Cal., No. 18-cv-04865, 6/14/23.