Case Name: Tesla Securities Litigation
Verdict: Not Liable for Losses
Claim Filing Deadline: Ah. well... 'Twas not to be.
He did it. Elon Musk pulled off the ultimate
stunt.
No, he did not to land a rover on the sun, and he
did not turn a profit at Twitter. He did something even harder:
Musk brought a securities litigation all the way
to trial and won a jury verdict.
In late January, trial began over what plaintiffs claimed was a pair of reckless Tweets on August 7, 2018:
"Am considering taking Tesla private at $420. Funding secured." The
second Tweet went: “Investor support is confirmed. Only reason why this is not
certain is that it’s contingent on a shareholder vote.”
Plaintiffs argued that these comments took
investors on a volatile and damaging ride. Prospects for a Tesla victory were
bleak. Given the poor track record of the few securities litigations that actually make
it to trial, the fact that the judge already ruled before the trial that the Tweets
were untrue, and the fact that Musk and Tesla had previously settled with the SEC for
$40 million over the same allegations, signs were pointing to a Tesla loss. And
a costly one at that.
However, the jury did not see a link between
Tesla’s market volatility and Musk’s Twitter posts. After only an hour of
deliberations, the jury found in favor of the defense.
Many investors—and D&O officers—might ask is
whether this case could set a precedent. More trials? More total victories for corporations?
Some defense attorneys have already thrown cold water on that prospect. Martin
Roth, an attorney at Kirkland & Ellis, told Law360, “I think [the verdict
is] an interesting data point, but I don't think it's going to change anyone's
analysis of a specific case based on their specific factual context."
The fact then remains that if a case survives a motion to dismiss, it is likely to settle. In the same Law360 (titled, by the way, "Musk Victory Unlikely To Move The Needle On Securities Trials") the author cited Cornerstone Research's analysis showing that 43% of all litigations filed since 1997 have been dismissed, which leaves a lot of potential for settlements. And given the cost of litigation, there will remain little desire to go to trial.
Chicago Clearing is tracking this case for any post-trial developments. Lead attorney for Tesla plaintiffs, Nicholas Porritt, told Reuters, “We are disappointed with the verdict and are considering next steps.”
If you have questions about this or any of the
hundreds of active securities litigations and settlements, please give us a
call at 312-204-6970.
Further Reading:
Case website:
https://www.teslasecuritieslitigation2018.com/
Commentary from the defense attorney perspective:
News:
https://www.nytimes.com/2023/02/03/business/elon-musk-tesla-investor-trial.html
Cornerstone Research has released its yearly securities
class action litigation report and found dramatic increases in the number of
settlements and in the average settlement pools. (The link to the full report
is below.)
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