## Facts

- Tesla publicly discussed ambitious 2017 targets for increasing Model 3 production, including a goal of reaching 5,000 vehicles per week by a specified timeframe.
- Between May and November 2017, Tesla and senior officers made statements in SEC filings and public communications describing Model 3 production progress and asserting Tesla was “on track” to meet future production targets.
- These statements were accompanied by risk disclosures warning of potential production delays, bottlenecks, supplier constraints, and other uncertainties affecting ramp-up efforts.
- Tesla later failed to meet the stated production goals on the original schedule, and its stock price declined after disclosures concerning production shortfalls.
- Shareholders who purchased Tesla stock during the period filed a putative class action under Exchange Act § 10(b) and Rule 10b-5, alleging the company overstated progress and concealed manufacturing problems that made the targets unattainable.
- The district court dismissed the second amended complaint with prejudice, concluding the statements were protected forward-looking statements under the PSLRA safe harbor or were not adequately alleged to be false, and denied further leave to amend.

## Issues

1. Whether the challenged “on track” and production-target statements were forward-looking and protected by the PSLRA safe harbor because they were accompanied by meaningful cautionary language (or were not alleged to be made with actual knowledge of falsity).
2. Whether any non-forward-looking components describing present or past facts were adequately pleaded as materially false or misleading under the PSLRA and Rule 9(b).
3. Whether a proposed further amendment adding an additional challenged statement adequately pleaded loss causation.

## Decision

- The Ninth Circuit affirmed dismissal with prejudice.
- The court held that most challenged statements were forward-looking and protected by the PSLRA safe harbor because Tesla provided meaningful, tailored cautionary disclosures addressing the risk of production delays and ramp-up difficulties.
- To the extent any challenged statement included non-forward-looking components, plaintiffs failed to plead with particularity that those contemporaneous representations were false or misleading when made.
- The court affirmed denial of further leave to amend because the proposed added statement failed to plead loss causation; the alleged disclosures and price movements were not tied to revelation of that statement’s falsity.

## Legal Principles

- Under the PSLRA, forward-looking statements (including projections and statements of plans, objectives, or future performance) are not actionable if accompanied by meaningful cautionary language; where that condition is met, protection applies without regard to the speaker’s state of mind.
- Statements that a company is “on track” to meet future goals generally qualify as forward-looking even if they reference current status; in “mixed” statements, the forward-looking portion can be protected while non-forward-looking assertions remain actionable only if adequately pleaded as false.
- A later failure to achieve a projection does not, by itself, establish that earlier projections or opinions were false when made; plaintiffs must allege particularized contemporaneous facts showing falsity.
- Loss causation requires allegations that a corrective disclosure (or materialization of a concealed risk) revealed the misrepresentation and caused the economic loss; absent a market reaction tied to disclosure of falsity, loss causation is insufficient.

## Conclusion

The Ninth Circuit upheld dismissal of the shareholders’ § 10(b) and Rule 10b-5 claims because the alleged “on track” and production-target statements were largely protected forward-looking statements with meaningful cautionary language, any non-forward-looking components were not pleaded as false with the required specificity, and the proposed amendment failed to allege loss causation.


Wochos v. Tesla, Inc., 985 F.3d 1180 (9th Cir. 2021)