The Context
A federal class action against Tesla has been formally certified to proceed in the U.S. District Court for the Northern District of California. Judge Rita F. Lin ruled that Tesla’s marketing of “Full Self-Driving” (FSD) capability is plausibly misleading and can be adjudicated with common evidence. The class covers California owners and lessees who purchased FSD between October 2016 and July 31, 2024. The damages model allows for a full refund of the purchase price—$5,000 to $15,000+ per vehicle—potentially exposing Tesla to hundreds of millions of dollars in liability. This is not a final verdict, but it is a decisive liability gateway. A parallel California DMV ruling in December 2025 declared the “Full Self-Driving” branding “actually, unambiguously false.” Tesla has sued the DMV rather than change its marketing. In Florida, a jury awarded over $240 million in a fatal Autopilot crash case, finding Tesla partially responsible for exaggerating the system’s capabilities.
The Risk
In New Zealand, directors owe a duty of care and diligence under section 137 of the Companies Act 1993. If a director knowingly allows or fails to prevent the continued marketing of a product under a name a regulator has declared “actually, unambiguously false,” they may face allegations of breach of duty. The “corporate puffery” defence—arguing that claims like “Full Self-Driving” are mere vague optimism—has been structurally weakened by Judge Lin’s ruling that these are objective, verifiable representations. Under the Fair Trading Act 1986, making false or misleading representations about goods or services can attract penalties of up to $600,000 for an individual and $3 million for a body corporate. Directors who sign off on or fail to challenge such representations may be personally liable. The pattern of adverse judgments—class certification, a regulatory finding of falsity, and a multi-million-dollar jury verdict—constitutes a series of “red flags.” Ignoring them may indicate a conscious disregard of known compliance and product-safety issues, exposing directors to oversight liability under Caremark-style principles in U.S. law and analogous duties under New Zealand’s common law.
The Control
The strategic imperative is clear: directors must demand an immediate, independent audit of all marketing and public representations regarding product capabilities. This audit must assess whether claims are objectively verifiable or constitute puffery that could be deemed misleading. The board should also commission a legal review of the company’s exposure under consumer protection and securities laws, both in New Zealand and in any jurisdictions where the product is marketed. A formal compliance system must be implemented to ensure that all future claims are backed by evidence and approved by legal counsel before publication. The board must also ensure that any regulatory findings or adverse court rulings are promptly disclosed to shareholders and the market. Failure to act now may be framed as a continuing breach of directors’ duties.
The Challenge
These are the critical questions you should be raising at the board table:
| What specific evidence does management have that our product marketing claims are objectively verifiable, and what is the process for approving them? | |
| Has the board received a formal legal opinion on our exposure under the Fair Trading Act 1986 and analogous consumer protection laws in key markets, and what is the quantum of that exposure? | |
| Given the regulatory finding that our branding is “actually, unambiguously false,” what steps have been taken to cease the practice, and why has the board not been presented with a resolution to do so? |