Tesla Resists Summary Judgment, Says Plaintiffs Must Try Securities Fraud Contentions

On Tuesday, Tesla Inc., its chief executive Elon Musk, and several directors fired back at shareholder allegations that they are entitled to partial summary judgment in the class action concerning Musk’s infamous 2018 tweet about selling the company. The opposition says that the plaintiffs cannot meet the summary judgment standard and that the court should reject their “transparent attempt to avoid a trial on the merits.”

In the course of the three year litigation, the Northern District of California court overseeing the consolidated matter denied Tesla’s motion to dismiss, certified a shareholder class, and approved the plaintiffs’ notice plan. Last month, the shareholders moved for summary judgment on the elements of falsity, scienter, and reliance, arguing that nothing in the record creates a genuine dispute of material fact. 

In this week’s filing, the defendants assert that the plaintiffs cannot escape the truth: “Elon Musk’s August 7, 2018 tweet informing the public that he was considering taking Tesla private was entirely truthful and cannot support the claims that Plaintiff brings—much less a motion for summary judgment.”

The redacted filing reiterates the veracity of the statements at issue, stating that Musk was considering taking Tesla private at $420 a share, funding was secured, and there was investor support. Contemporaneous evidence that the plaintiffs have chosen to ignore supports these arguments, defeating their bid for early judicial determination on the merits.

As to scienter, the ultimate question is whether Musk acted with the requisite intent when tweeting about the prospective sale, and specifically whether he intended to deceive the public, or his behavior was reckless. Tesla argues that that is a question for the jury.

The defendants contend that that evidence demonstrates, “beyond a shadow of a doubt that Mr. Musk reasonably believed funding was secured, reasonably believed his public disclosures were accurate, and that Mr. Musk had the genuine desire to take Tesla private.” If the plaintiffs disagree with this analysis, it only underscores the need for these issues to be resolved by a trier of fact, the opposition says.

Levi & Korsinsky LLP is class counsel and Tesla is represented by Quinn Emanuel Urquhart & Sullivan LLP.