A California judge has rejected Tesla’s request to dismiss a lawsuit brought against it by the state alleging the company overstated its claims of self-driving capabilities.
The state’s Department of Motor Vehicles (DMV) claims in its lawsuit the company made several statements that were “untrue or misleading” when advertising that its vehicles were “equipped” or “partially equipped” with autopilot and driver-assistance features, according to court filings.
The state also claims Tesla continues to lead people to believe the features allow the vehicle to operate autonomously.
The alleged false marketing violates state law, according to the lawsuit. As a result, the DMV is asking the judge to suspend Tesla’s license to make and sell vehicles in the state and for payment to Tesla owners for any financial loss.
Administrative Law Judge Juliet Cox sided with Deputy Attorney General Greg Call, representing the DMV, and will allow the state’s lawsuit against the company to move forward, saying it was too soon to dismiss the case before a formal hearing that’s scheduled for Sept. 9.
“The administrative law judge cannot terminate this proceeding prematurely by granting [Tesla’s] motion before [the state] has had the opportunity to develop evidence and present it at the hearing,” Ms. Cox said in her order denying the motion to dismiss.
The DMV launched an investigation in May 2021 and filed a court complaint in July 2022. Attorneys with the California Attorney General’s Office spent the next year investigating the automaker.
Tesla did not respond to requests for comment about the ruling.
The DMV argued in court filings that Tesla identified its vehicles’ “partial driving automation features using language that implies or would otherwise lead a reasonable person to believe that the features allow the vehicle to function as an autonomous vehicle.”
The state also argued California law prohibits companies from advertising using misleading terms to attract customers, even if the truth is later disclosed before purchase.
State vehicle code also prohibits vehicle makers or dealers from advertising untrue or misleading statements including even an unintentional misrepresentation, the DMV claimed in its court filing.
Tesla’s attorneys argued the DMV is attacking the company’s free speech rights under the First Amendment of the U.S. Constitution and the California Constitution.
“Instead, the DMV tries to dodge the issue on procedural grounds,” the company’s lawyers said in a court filing. “That is simply wrong as a matter of law.”
Tesla’s attorneys say the statements targeted by the DMV “cannot possibly mislead any consumer acting reasonably under the circumstances,” according to court filings.
Attorneys also claim the company publishes disclaimers stating that its vehicles equipped with driver assistance systems require active driver supervision and do not make the vehicle autonomous.
“In other words, although both the First Amendment and California law require the full context of any challenged statements to be considered, the DMV tries to hide from that context,” attorneys for Tesla said in its court filing.
Attorneys also accuse the state of “cherry picking” certain words it doesn’t like, ignoring the context in which those words are used, and restricting constitutional free speech rights, among other claims.
The judge heard arguments June 7 at the Oakland office of Administrative Hearings and made the ruling three days later.
California Attorney General Rob Bonta’s office referred questions to the DMV regarding whether the state’s request to remove Tesla’s license to manufacture or sell automobiles in the state was unique to the company.
The DMV did not respond to a request for comment on deadline.
The electric vehicle company’s CEO Elon Musk moved the company from Palo Alto, California, to Texas in 2021 during the COVID-19 pandemic, saying the state’s restrictive health regulations made operations difficult.
The DMV’s lawsuit against Tesla is one of several the company faces in California and other states over workplace conditions and its self-driving features.
The company also faces federal investigations into whether defects in its autopilot features have contributed to fatal crashes. Another federal probe by prosecutors and the Securities and Exchange Commission is looking into whether Tesla made misleading claims about its autopilot features to the public.
And a California judge certified a class-action lawsuit in May against the company, finding “severe and pervasive race harassment” against its black workers at a Tesla factory.
