U.S. court overturns certification of 3 classes in Tesla misleading advertising lawsuit
Key Facts
The U.S. Court of Appeals for the Ninth Circuit overturned class certification in a case accusing Tesla of misleading California buyers about self-driving capabilities and sent the case back for further proceedings. The decision affects orders that had certified 3 classes of buyers, according to Reuters, giving the company a procedural victory in the dispute over the marketing of its driver-assistance systems. The ruling does not resolve the merits of the misleading advertising allegations, as the lawsuit remains before the courts. Tesla denies the plaintiffs' claims, according to Reuters' account of the company's position. The U.S. Chamber of Commerce had intervened in support of Tesla with a court brief urging the appeals court to overturn the class certification orders.
The grounds for overturning certification centered on the lower court's assumption that all class members had seen the statement about the vehicle's hardware capabilities at the heart of the dispute. The appeals court found that completing a purchase of the Full Self-Driving package did not require visiting the driver-assistance system page displaying that statement. It also rejected the use of Tesla website traffic data alone as proof that all buyers had necessarily seen it. The court said in its memorandum that "these data, standing alone, do not establish that all class members were necessarily exposed to the hardware statement." It thus considered buyers' exposure to the statement decisive in its review of the class certification decision.
The dispute stems from a proposed class action filed against Tesla on September 14, 2022, according to the company's quarterly filing. Tesla said the lower court certified a limited class of California consumers not subject to an arbitration agreement on August 18, 2025. In its report on the lower court's decision, Reuters said the disputed statement appeared in the driver-assistance system section of the company's website from October 2016 to August 2024. Judge Rita Lin had declined to certify a class of Enhanced Autopilot package buyers, according to the same report. The lower court then stayed proceedings on January 5, 2026, pending resolution of the appeal, according to Tesla's filing.
The significance of differences in buyers' exposure to the company's statements also extended to statute-of-limitations defenses, according to the appeals court. In the court's reasoning, the issue was not confined to how the marketing statement reached class members. Having deemed exposure decisive, the court did not rule on the validity of the plaintiffs' proposed damages model. The decision was issued in a memorandum not designated for publication and is not precedent except under exceptions provided by the circuit's rules. The plaintiffs' lawyers challenged the panel's assessment, saying it had not fully appreciated the circumstances of the case and the importance of the hardware statement in Tesla's marketing campaign, according to Reuters.
Tesla describes the enabled features of its Full Self-Driving system as requiring active driver supervision, according to the system's support page. The company stresses that these features do not make the vehicle autonomous, despite the package's name. In its explanation of the product, it says that "the currently enabled features require active driver supervision and do not make the vehicle autonomous." Tesla also links the activation and use of the system's features to technological development. It adds that regulatory approval is also required to activate and use those features, as part of its description of the requirements governing the availability of the system's functions.
On its financial exposure to the lawsuit, Tesla said in its quarterly filing that it could not reasonably estimate the potential loss associated with these claims. That also includes the range of potential losses, according to the filing, as the case returns to the lower court for further proceedings after class certification was overturned. The misleading advertising allegations therefore remain unresolved on their merits, according to Reuters. For its next earnings release, Tesla has set Wednesday, October 21, 2026, to publish its results for the third quarter of 2026. The company said through investor relations that the release would come after the market closes that day.