September 28, 2020

Tesla seeks sanctions after dousing car-fire suit


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David Siegel, Irell & Manella partnerBy Marisa Kendall, From The Recorder

SAN FRANCISCO — Lawyers for Tesla Motors Inc. are seeking sanctions against two plaintiffs firms after a federal judge found a securities lawsuit they filed against the luxury car company “utterly failed” to plead an actionable claim.

The plaintiffs lawyers with Pomerantz and Glancy Binkow & Goldberg accused Tesla of making false statements about the risk of fire posed by batteries in the company’s electric cars. In a motion filed Thursday in the Northern District of California, Tesla’s attorneys with Irell & Manella argued plaintiffs didn’t investigate their claims, and ignored facts that showed the cars were not prone to fires and actually some of the safest on the market.

“As this court recognized over and over, plaintiffs’ allegations were either incoherent or devoid of any factual support,” wrote the Irell team, “and some of those allegations were outright disproven by the cited documents or plaintiffs’ own confidential witnesses. But plaintiffs ignored this evidence and pressed on with their baseless claims.”

Irell & Manella is seeking reimbursement for attorney fees and costs under Rule 11 of the Federal Rules of Civil Procedure.

Plaintiffs lawyer Matthew Tuccillo of Pomerantz’s New York office denied the allegations in an email.

“The motion for sanctions is entirely unwarranted and will be vigorously opposed,” he wrote. “Moreover, we respectfully disagree with the court’s decision and intend to appeal.”

U.S. District Judge Charles Breyer dismissed the case in September, saying, “I’m at a total—I mean total—loss understanding the basis for this lawsuit.” He denied plaintiffs leave to amend their claims.

Tuccillo argued for plaintiffs during the hearing, and Irell & Manella partner David Siegel of Los Angeles argued for Tesla.

Plaintiffs lawyers based their claims largely on three battery fires reported in Model S cars over two months in 2013. The suit alleged Tesla executives outfitted the cars with high-energy lithium ion batteries, which increased the life of the cars’ charge but also led to a greater risk of fire. Executives did not try to mitigate the danger by installing protective sleeves or shielding, according to the complaint.

Plaintiffs lawyers also claimed Tesla executives made false statements during the class period that the Model S was the “safest car in America,” and that it was less likely than gasoline-powered cars to catch fire.

In their motion for sanctions, Tesla’s lawyers said plaintiffs ignored “the fact that in each of the three alleged class period fires, the car operated exactly as designed by warning the driver to pull over, preventing the fire from spreading, and keeping all passengers unharmed from the fire—even the driver in Mexico who crashed his Model S into a concrete wall and a tree after driving over 100 miles per hour.”

The suit wasted court resources and forced Tesla to spend time and money defending frivolous litigation, the Irell team wrote. “If ever there was an appropriate occasion to impose sanctions and mandatory fee shifting under the [Private Securities Litigation Reform Act], this is the case.”

IMAGE: David Siegel, Irell & Manella partner Jason Doiy / The Recorder

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