Bui-Ford v. Tesla, Inc.

Background

Tesla designs, manufactures, markets, and sells electric vehicles. The plaintiffs alleged that Tesla knowingly designed and distributed over-the-air software updates that reduced the battery capacity and driving range of some Model S and Model X vehicles by at least 20 percent without adequate warning. They alleged that some vehicles automatically downloaded and installed the updates, while other owners received a notice asking them to install an update. The plaintiffs alleged that some owners paid third parties hundreds of dollars to reverse the updates and that some batteries became inoperable, requiring replacement batteries costing up to $15,000.

The plaintiffs asserted claims under the federal Computer Fraud and Abuse Act, California’s Computer Data Access and Fraud Act, California’s Unfair Competition Law, and trespass to chattels, a claim alleging unauthorized interference with personal property. They also asserted trespass-to-chattels claims under the laws of Florida, Virginia, Michigan, Washington, Arizona, and Texas. The plaintiffs sought to proceed on behalf of a nationwide class or, alternatively, state-specific subclasses.

CFAA Claims

The court dismissed the Computer Fraud and Abuse Act claim under 18 U.S.C. § 1030(a)(4) because the plaintiffs did not adequately allege that Tesla obtained something of value through the alleged unauthorized computer access.

The court found that all plaintiffs except Sun Cao adequately alleged that Tesla knowingly transmitted software that intentionally damaged their vehicle batteries without authorization under § 1030(a)(5)(A). The court also found that Plaintiffs Damji, Rumman, Meas, Schaefer, Bomhof, Manuel, Ward, and Bucklin adequately alleged unauthorized access under §§ 1030(a)(5)(B) and (C), because they alleged that Tesla pushed updates to their vehicle systems without prompting or notice. Plaintiffs Bui-Ford, Walker, Smith, and Butler voluntarily downloaded the updates, and the court held that their allegations of misleading omissions did not adequately establish unauthorized access under those subsections.

The court also held that the Computer Fraud and Abuse Act’s loss requirement was not met by allegations that the plaintiffs lost battery value alone. Repair or replacement costs could qualify as a loss. Smith alleged such costs, but the court concluded that Bui-Ford, Cao, Walker, Damji, Rumann, Schaefer, Meas, Ward, and Butler did not allege a qualifying loss because they did not repair or replace their batteries.

Accordingly, the court dismissed Bui-Ford, Cao, Walker, Damji, Rumann, Schaefer, Meas, Ward, and Butler’s Computer Fraud and Abuse Act claims as to all statutory prongs. Smith’s claim could proceed only under § 1030(a)(5)(A). The court denied the motion to dismiss the Computer Fraud and Abuse Act claims as to all other plaintiffs. The dismissed claims were dismissed with leave to amend, and the court granted Smith leave to amend his claim.

California Computer-Access Claims

The court dismissed the plaintiffs’ claims under subsections (c)(3) and (c)(7) of California’s Computer Data Access and Fraud Act because the plaintiffs did not allege that Tesla overcame technical or code-based barriers to access their vehicle computers. The court concluded that the plaintiffs adequately alleged unauthorized alteration under subsection (c)(4), but only Plaintiffs Smith, Manuel, Bomhof, and Bucklin adequately alleged an economic loss or damage required for that claim.

The court therefore dismissed Bui-Ford, Walker, Damji, Cao, Meas, Rumman, Schaefer, Ward, and Butler’s California Computer Data Access and Fraud Act claims with leave to amend. It denied the motion to dismiss the claim as to the other plaintiffs. The court also rejected Tesla’s argument that California law could not apply to non-California plaintiffs at this stage, because the plaintiffs alleged that at least some decisions concerning the updates or responses to them were made at Tesla’s engineering headquarters in Palo Alto, California.

California Unfair-Competition Claims

The plaintiffs sought an injunction requiring Tesla to stop updating software or changing vehicle performance without consent. The court held that money damages would adequately compensate the plaintiffs for past and future battery-related injuries. It therefore granted the motion to dismiss each plaintiff’s California Unfair Competition Law claim, with leave to amend.

Trespass-to-Chattels Claims

For the California trespass-to-chattels claims, the court held that the plaintiffs plausibly alleged that Tesla intentionally interfered with their vehicle batteries without authorization and that the alleged degradation reduced the batteries’ condition, quality, or value. The court found that all plaintiffs except Cao stated such a claim. It granted the motion to dismiss Cao’s California trespass-to-chattels claim with leave to amend and denied the motion to dismiss the claim as to the other plaintiffs. The court declined to resolve choice-of-law issues at the motion-to-dismiss stage.

The plaintiffs also asserted trespass-to-chattels claims under Florida, Virginia, Michigan, Washington, Arizona, and Texas law. The court concluded that Tesla’s argument about physical contact with personal property did not require dismissal of the claims under Florida, Virginia, Michigan, Washington, or Arizona law. It found a clear prohibition on this type of cyber-trespass claim only under Texas law. The court granted the motion to dismiss Manuel and Ward’s Texas trespass-to-chattels claim and denied the motion to dismiss the Florida, Virginia, Michigan, Washington, and Arizona trespass-to-chattels claims.

Class Allegations and Case Status

The court denied Tesla’s motion to strike the proposed class allegations. It explained that courts in the district rarely strike class allegations before discovery based on whether the proposed class could ultimately satisfy the requirements for class certification, and the record did not justify departing from that practice.

The court allowed the plaintiffs to file an amended complaint within 21 days, solely to correct the deficiencies identified in the order. If no amended complaint were filed by that deadline, the claims dismissed in the order would be dismissed with prejudice.