Suing Elon Musk for Exaggerating Isn’t a Winning Legal Strategy
A case brought in 2017 ended with a court deciding damages were not warranted despite overly optimistic production estimates.
In 2017, Gregory Wochos, a clinical neuropsychologist in Wisconsin, owned a very pricey stock: Tesla. The company was losing hundreds of millions of dollars every quarter, but Wochos and other investors believed fervently that Chief Executive Officer Elon Musk was on the verge of producing an electric car for the masses. Indeed, the Model 3 was already in production. Musk—and Tesla—promised the world that the company would soon churn out 5,000 a week. No wonder the stock was up 84% in the first nine months of 2017!
Uh-oh. On Oct. 2, Tesla reported that it had manufactured only 260 Model 3s in the third quarter of the year. It blamed the problem on “production bottlenecks.” The stock dropped 3.91%. Within days, Wochos filed a class action in the U.S. District Court for the Northern District of California against Tesla, Musk, and two other top executives at the company, alleging that they’d made “materially false and misleading statements.” In other words, Wochos was suing Musk—Elon Musk!—for (allegedly) exaggerating.