In re Tesla Inc. Securities Litigation

Background

Glen Littleton brought a securities class action against Tesla, Inc.; Elon Musk; and Tesla’s Board of Directors. The claims arose from two August 2018 tweets by Musk about taking Tesla from a public company to a private company. The case had been pending in the Northern District of California since August 2018 and was already proceeding toward trial.

The defendants moved under 28 U.S.C. § 1404(a) to transfer the case to another federal district or continue the trial. They argued that extensive negative publicity about Musk, combined with layoffs at Twitter, created either actual or presumed juror prejudice in the Northern District of California. The defendants also filed an administrative motion to seal portions of their reply brief that quoted juror questionnaire responses and the questionnaire responses attached as exhibits.

Legal standard

The court explained that a district judge has broad discretion over a motion to change venue. A defendant must show actual prejudice or presumed prejudice to justify a venue change. Prejudice is presumed only in extreme cases in which the trial community is saturated with prejudicial and inflammatory publicity about the matter being tried. The court also noted that large and diverse jury pools can reduce the risk that publicity will prevent a fair trial.

Court’s analysis

The court held that the publicity did not establish presumed prejudice. Although the press had devoted significant attention to Musk, most of the coverage concerned matters unrelated to this case, including his personal life and businesses. The defendants did not dispute that the articles were factually accurate, and the court found that most of the coverage it reviewed was primarily factual rather than inflammatory. The court also noted that only one of the hundreds of articles reviewed by the defendants apparently referenced Musk’s “funding secured” tweet, according to an assertion the defendants did not rebut.

The court rejected the argument that Twitter’s layoffs established presumed prejudice. It reasoned that layoffs affecting approximately 1,000 employees could not reasonably be presumed to bias a jury pool drawn from a district with well over five million people. The questionnaire responses supported that conclusion: none of the potential jurors worked for Twitter, and only two or three knew someone who did.

The court treated the 190 questionnaire responses as the best evidence of whether the defendants could receive a fair trial. The responses included 27 solely positive views of Musk, 38 neutral views, 49 mixed views, and 76 negative views. The court also found that 131 respondents said that Musk’s and Tesla’s involvement in the case would not prevent them from being fair. After reviewing the questionnaires, conducting additional questioning, and accommodating defense requests for separate questioning of certain prospective jurors, the court seated nine jurors who met the court’s fairness and impartiality requirements.

Disposition

The court denied the defendants’ motion to transfer venue or continue the trial. The court separately granted the defendants’ administrative motion to seal the portions of the reply brief quoting juror questionnaire responses and the attached questionnaire responses. The order disposed of Docket Nos. 537 and 561. Judge Edward M. Chen signed the order on February 1, 2023.