Another Model X crash, driver says autopilot was engaged

[Eclectic]

Thank you - excellent answer. This raises the obvious question - to what degree is a public company protected from liability by relying on its counsel - if that counsel made a mistake? Can an attorney round up a bunch of folks who bought the offering, then attempt to sue Tesla and say that the shares were overpriced because Tesla left out a material fact? And if so, let's hypothesize that you are right - Tesla's attorneys did make a mistake and the AP fatality is deemed to be material by a judge. What then? Would Tesla have some kind of giant liability insurance policy which would pay out $ as a judgement or settlement for Tesla in a case like this because the CEO simply did what his lawyers said he could do? Or would Tesla have to pay $ in some way from its own coffers, not those of its insurance company.

If a public company relies on counsel to not include a fact that turns out to be material, counsel could be held liable if a court finds that counsel did not act reasonably in making the determination. And yes, absolutely, many securities class actions have been filed based on claims of material omissions. The odds are that it would be an expensive back and forth between Tesla and the lawyers' malpractice carrier and it would take forever to settle. The likely sequence would be that Tesla loses a 10b-5 claim, pays out the damages and files a claim against the law firm that provided the SEC counsel.

As a Tesla owner who finds Autopilot to be a very useful tool, I think this will end up being much ado about nothing, but it most certainly will get the government poking around and mucking up the adoption of the technology.

 

[NikeWings]

"I'm sure that at the time of the May securities offering, Tesla's lawyers made a determination that the incident did not rise to the level of being material ... With that said, I think that Tesla's securities lawyers made a mistake in deeming this to not be material and Musk's mini-tirade made him look like a fool. He has no idea what materiality means for purposes of Rule 10b-5 (the SEC's anti-fraud rule)."

@Eclectic How can something be determined material if its not yet determined to be "whatever its going to be" during the offering window? Cautious, proactive, better judgment etc....all up to the board to manage their behavior but materiality test is not conclusive. Tough to even say abusive. However, things are way too cute and throwing tantrums don't help.

Would you expect TSLAs outside counsel to have issued a written opinion on disclosure appropriateness or would they avoid? It looks like Wilson Sonsini was behind the offering.

 

[msnow]

Thank you - excellent answer. This raises the obvious question - to what degree is a public company protected from liability by relying on its counsel - if that counsel made a mistake? Can an attorney round up a bunch of folks who bought the offering, then attempt to sue Tesla and say that the shares were overpriced because Tesla left out a material fact? And if so, let's hypothesize that you are right - Tesla's attorneys did make a mistake and the AP fatality is deemed to be material by a judge. What then? Would Tesla have some kind of giant liability insurance policy which would pay out $ as a judgement or settlement for Tesla in a case like this because the CEO simply did what his lawyers said he could do? Or would Tesla have to pay $ in some way from its own coffers, not those of its insurance company.

I'm certain that withholding a material fact (if that was the case, big "if") is both unlawful from the perspective of the SEC and opens a company up to shareholder lawsuits. So it's a double whammy as I understand it.
I also recall someone from Tesla Friday, in the context of the fatality, saying that they did not have liability insurance so they would have to self fund a judgement in that regard. That may be a harbinger of their coverage for shareholder lawsuits, don't know for sure.
I'd be very interested to hear what @Eclectic has to say on this.

 

[ecarfan]

I think this is the [report] being referenced, sourced from the office of defects and investigation within the NHTSA...
http://www-odi.nhtsa.dot.gov/acms/cs/jaxrs/download/doc/UCM530776/INOA-PE16007-7080.PDF

According to that document, it is a "preliminary investigation", not a "report".

 

[NikeWings]

According to that document, it is a "preliminary investigation", not a "report".

Agree and thats why I [bracketed] and made light of it. While you and I may not view it as a report, others see this section "FAILURE REPORT SUMMARY" and call it a report.

EDIT: removed the jibberish up top.....actually its "preliminary evaluation".

 

[EarlyAdopter]

As pointed out in another thread, the interesting part here is a Model X was involved in a roll over accident and the driver and passenger are ok. Tesla's crash enigneering was put to the test and came out solid.

 

[Ulmo]

Elon and Tesla are seriously getting unfairly dragged in the mud the past few weeks. I was interviewed by the Wall Street Journal this weekend about autopilot

Fair or not, people are interested in what the autonomous driving mode quality will be in the future, and they are looking at the performance of the autonomous assistance features (or whatever it's called ... AP) now to see what quality it might have in the future.

Yes, there are people like me who test-drove Tesla Model S's with AP, and learned to steer it back straight when it went head-on into freeway medians and large 18 wheeler trucks and accelerated into stopping vehicles on freeways (yes, that happened to me while test-driving in clear conditions on California freeways near Fremont), and the way I look at it, is that that means I have to constantly be in control. But, what others will see is not that I have to constantly be in control, but what would happen if for some reason I was not constantly in control. They see the problems with AP, and I see the fact that AP is not something where the car will drive itself.

Because the definition of "AP" is murky to me, can we just call the future stuff "self driving" or "drive itself" (SD or DI), vs. the current "semi-helpful" mode it currently does (what's that, SH)?

Edit: I see that "AP" stands for "autopilot". Whatever that means.

 

[buckerine]

"I'm sure that at the time of the May securities offering, Tesla's lawyers made a determination that the incident did not rise to the level of being material ... With that said, I think that Tesla's securities lawyers made a mistake in deeming this to not be material and Musk's mini-tirade made him look like a fool. He has no idea what materiality means for purposes of Rule 10b-5 (the SEC's anti-fraud rule)."

@Eclectic How can something be determined material if its not yet determined to be "whatever its going to be" during the offering window? Cautious, proactive, better judgment etc....all up to the board to manage their behavior but materiality test is not conclusive. Tough to even say abusive. However, things are way too cute and throwing tantrums don't help.

Would you expect TSLAs outside counsel to have issued a written opinion on disclosure appropriateness or would they avoid? It looks like Wilson Sonsini was behind the offering.

Disagree. I'm sure he knows full well that the materiality threshold is not in any way a bright line rule. There is a difference between the media blowing something out of proportion and an event having a material impact on Tesla's financial standing. Given that the share price hasn't taken much of a beating (if at all) after all this went public, I think it's safe to say that this has not proved to be very material. Shareholders don't sue for no reason - they sue when they lose money.

 

[Drivin]

Are the CEOs of other major car companies required to report fatalities when they offer stock ?

.

How many other CEOs are saying that if other cars had this feature 500,000 lives a year would be saved...do the "bloody math" ?

Isn't that just marketing hype that could mislead customers by stating it is "bloody math" ?

 

[omarsultan]

Perhaps loyal Tesla fans would not care about knowing that an important part of Tesla's technology may have failed and may cause regulators to step in, but I suspect most financial investors would most certainly want to know of such a thing. They may end up still investing after reviewing the disclosure, but 10b-5 is about providing information, not what investors do with that information.

I think the nuance here is if the technology failed at all and Tesla (and now the NHTSA) have the information to make that determination. If the AP worked as designed and disclosed and the accident is a result of operator error, I am not sure I would find fault with Tesla's reasoning and I am not sure this would be any more material than the Tesla that flew 80' though the air and landed in a field because the the young drive hit the onramp at high speed--both are corner cases and not indicative of a fundamental flaw that will need to be resolved.

 

[Electroman]

That incident is material only if Tesla believes that death happened squarely due to failure of AP.

But it was not. AP worked exactly as intended and the driver caused the crash and his own death.

So why would Tesla disclose this as if it was their fault, when it was not?

So what the Fortune guy is saying is: it doesn't matter if it was ultimately proved one way or the other, Tesla should have simply come out and admitted they are guilty first as soon as there was a crash somewhere with AP on.

This is stupid and ridiculous.

 

[Electroman]

Fair or not, people are interested in what the autonomous driving mode quality will be in the future, and they are looking at the performance of the autonomous assistance features (or whatever it's called ... AP) now to see what quality it might have in the future.

Yes, there are people like me who test-drove Tesla Model S's with AP, and learned to steer it back straight when it went head-on into freeway medians and large 18 wheeler trucks and accelerated into stopping vehicles on freeways (yes, that happened to me while test-driving in clear conditions on California freeways near Fremont), and the way I look at it, is that that means I have to constantly be in control. But, what others will see is not that I have to constantly be in control, but what would happen if for some reason I was not constantly in control. They see the problems with AP, and I see the fact that AP is not something where the car will drive itself.

Because the definition of "AP" is murky to me, can we just call the future stuff "self driving" or "drive itself" (SD or DI), vs. the current "semi-helpful" mode it currently does (what's that, SH)?

Edit: I see that "AP" stands for "autopilot". Whatever that means.

I am not sure if you are just making this up. You would have seen report after report here on how good the AP is and how it reduces the stress. I have driven over 10k miles in AP and I have not seen a single behavior you mentioned. I am going to assume you are exaggerating

 

[msnow]

I think the nuance here is if the technology failed at all and Tesla (and now the NHTSA) have the information to make that determination. If the AP worked as designed and disclosed and the accident is a result of operator error, I am not sure I would find fault with Tesla's reasoning and I am not sure this would be any more material than the Tesla that flew 80' though the air and landed in a field because the the young drive hit the onramp at high speed--both are corner cases and not indicative of a fundamental flaw that will need to be resolved.

As an investor I would want it disclosed that there was a fatal accident that is being investigated and Autosteer was active. Of course the legal/compliance people should wordsmith it including any nuances. But as someone who is in the risk and compliance business it's better (and safer) to disclose than not to. Shareholders could then weigh whether potential media attention or liability would have an impact on their investment decision.

 

[msnow]

I am not sure if you are just making this up. You would have seen report after report here on how good the AP is and how it reduces the stress. I have driven over 10k miles in AP and I have not seen a single behavior you mentioned. I am going to assume you are exaggerating

I've had AP since day one and it has never reduced stress for me. If you read through this forum you'll find people on both sides of this. It's still too squirrelly to be relaxing but it's getting better.

 

[KaiserSoze]

As pointed out in another thread, the interesting part here is a Model X was involved in a roll over accident and the driver and passenger are ok. Tesla's crash enigneering was put to the test and came out solid.

That's fortunate given that Tesla claims they were unable to roll the X themselves, and thus did not test it themselves. Perhaps they can hire the driver.

 

[Electroman]

I've had AP since day one and it has never reduced stress for me. If you read through this forum you'll find people on both sides of this. It's still too squirrelly to be relaxing but it's getting better.

If you use it in conditions where it is supposed to be used and works best - it is GREAT.

just like a normal cruise control. If you turn on normal cruise control in stop and go traffic or back roads it is a pita.

 

[nexsuperne101]

I would have thought the only way to roll a vehicle with such a low centre of gravity would be to trip-flip it. Its where you run wide going round a bend, and slide sideways into a kerb, stopping all sideways motion instantly through the wheels, but the body carries on, pulling the whole vehicle over to its side or roof.

 

[calisnow]

I also recall someone from Tesla Friday, in the context of the fatality, saying that they did not have liability insurance so they would have to self fund a judgement in that regard.

Wow. I assume the lack of insurance would be due to the actuarial difficulty in calculating the financial risks at play, due to this being brand new technology and uncharted legal territory.

 

[S4WRXTTCS]

I've had AP since day one and it has never reduced stress for me. If you read through this forum you'll find people on both sides of this. It's still too squirrelly to be relaxing but it's getting better.

For me TACC has been the component that has reduced the stress. It works great in removing a lot of the annoyances out of driving. It's orders of magnitudes better at what it does than AP.

AP has a few issues here and there. It's really dependent on the road quality, the speed, and the traffic. It's definitely too squirrelly for me as well especially while passing semi trucks at 80mph.

If I had someone else drive my car I'd tell them to enjoy TACC, but be careful of AP when X, Y, or Z happens.

 

[calisnow]

I hope this tale doesn't turn out to be a mashup of Icarus and Preston Tucker