Case 3:18-cv-04865-EMC Document 489 Filed 10/04/22 Page 1 of 20
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`QUINN EMANUEL URQUHART & SULLIVAN, LLP
` Alex Spiro (appearing pro hac vice)
` alexspiro@quinnemanuel.com
`Andrew J. Rossman (appearing pro hac vice)
` andrewrossman@quinnemanuel.com
` Ellyde R. Thompson (appearing pro hac vice)
` ellydethompson@quinnemanuel.com
`Jesse Bernstein (pro hac vice forthcoming)
` jessebernstein@quinnemanuel.com
`51 Madison Avenue, 22nd Floor
`New York, New York 10010
`Telephone: (212) 849-7000
`
` Michael T. Lifrak (Bar No. 210846)
` michaellifrak@quinnemanuel.com
` Kyle Batter (Bar No. 301803)
` kylebatter@quinnemanuel.com
`865 South Figueroa Street, 10th Floor
`Los Angeles, California 90017-2543
`Telephone: (213) 443-3000
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`Attorneys for Defendants Tesla, Inc., Elon Musk,
`Brad W. Buss, Robyn Denholm, Ira Ehrenpreis,
`Antonio J. Gracias, James Murdoch, Kimbal Musk,
`and Linda Johnson Rice
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`UNITED STATES DISTRICT COURT
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`NORTHERN DISTRICT OF CALIFORNIA
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`IN RE TESLA, INC. SECURITIES
`LITIGATION
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` Case No. 3:18-cv-04865-EMC
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`DEFENDANTS’ TRIAL BRIEF
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`Case No. 3:18-cv-04865-EMC
`DEFENDANTS’ TRIAL BRIEF
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`Case 3:18-cv-04865-EMC Document 489 Filed 10/04/22 Page 2 of 20
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`TABLE OF CONTENTS
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`Page
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`PRELIMINARY STATEMENT ........................................................................................................1
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`I.
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`KEY EVIDENCE ...................................................................................................................2
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`A.
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`B.
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`C.
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`D.
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`E.
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`F.
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`Evidence On Negotiations Concerning The Ability To Take Tesla Private ..............2
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`Evidence Concerning Mr. Musk’s Discussion With Tesla’s Board
`Concerning A Take-Private Transaction At $420 Per Share .....................................3
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`Evidence On The August 7 Statements About A Potential Go-Private
`Transaction .................................................................................................................3
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`Evidence Concerning Mr. Musk’s Discussions With Investors And
`Advisors Following The August 7 Tweets .................................................................4
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`Evidence On Mr. Musk’s August Update To Shareholders And Board
`Meeting .......................................................................................................................5
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`Evidence Going To The Legal Elements Of Materiality And Scienter .....................6
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`II.
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`THEORY OF THE CASE ......................................................................................................7
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`A.
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`Plaintiff Will Not Be Able To Prove His 10(b) And 10b-5 Claim ............................7
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`1.
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`2.
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`Plaintiff Will Not Prove Any Material Misrepresentations Or
`Scienter ...........................................................................................................7
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`Plaintiff Will Not Be Able To Prove Loss Causation ..................................10
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`B.
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`C.
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`Plaintiff Cannot Prove Damages ..............................................................................11
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`Plaintiff Will Not Be Able To Prove His 20(A) Claim ............................................12
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`III.
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`CONTROLLING ISSUES OF LAW ...................................................................................13
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`A.
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`B.
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`C.
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`D.
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`E.
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`Legal Elements Of Falsity And Scienter ..................................................................13
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`Reliance On The Fraud-On-The-Market Presumption .............................................14
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`Disaggregation For Purposes Of Loss Causation .....................................................14
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`Good Faith Defense For Directors Under Section 20(a) ..........................................15
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`Apportionment Of Liability .....................................................................................15
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`Case 3:18-cv-04865-EMC Document 489 Filed 10/04/22 Page 3 of 20
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`TABLE OF AUTHORITIES
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`Cases
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`Page
`
`Amgen Inc. v. Conn. Ret. Plans & Trust Funds,
` 568 U.S. 455 (2013) ................................................................................................................... 14
`Arthur Children’s Trust v. Keim,
` 994 F.2d 1390 (9th Cir. 1993) .................................................................................................... 13
`Basic Inc. v. Levinson,
` 485 U.S. 224 (1988) ........................................................................................................... 7, 9, 14
`Burgess v. Premier Corp.,
` 727 F.2d 826 (9th Cir. 1984) ...................................................................................................... 13
`Curry v. Yelp Inc.,
` 875 F.3d 1219 (9th Cir. 2017) .................................................................................................... 11
`Dura Pharma, Inc. v. Broudo,
` 544 U.S. 336 (2005) ................................................................................................... 6, 10, 14, 15
`Erica P. John Fund, Inc. v. Halliburton Co.,
` 563 U.S. 804 (2011) ..................................................................................................................... 9
`Gebhart v. S.E.C.,
` 595 F.3d 1034 (9th Cir. 2010) .................................................................................................... 15
`GIA-GMI, LLC v. Michener,
` No. C06-7949 SBA, 2007 WL 2070280 (N.D. Cal. July 16, 2007) ............................................ 9
`Halliburton Co. v. Erica P. John Fund Inc.,
` 573 U.S. 258 (2014) ............................................................................................................... 7, 14
`Hollinger v. Titan Cap. Corp.,
` 914 F.2d 1564 (9th Cir. 1990) .................................................................................................... 13
`Howard v. Everex Sys., Inc.,
` 228 F.3d 1057 (9th Cir. 2000) .................................................................................... 7, 12, 13, 15
`In re Alphabet, Inc. Sec. Litig.,
` 1 F.4th 687 (9th Cir. 2021) ..................................................................................................... 7, 14
`In re Energy Recovery Inc. Sec. Litig.,
` No. 15-CV-00265-EMC, 2016 WL 324150 (N.D. Cal. Jan. 27, 2016) ..................................... 13
`In re Intrexon Corp. Sec. Litig.,
` No. 16-CV-02398-RS, 2017 WL 732952 (N.D. Cal. Feb. 24, 2017) .................................. 10, 11
`In re Omnicom Grp., Inc. Sec. Litig.,
` 597 F.3d 501 (2d Cir. 2010) ....................................................................................................... 11
`In re Quality Sys., Inc. Sec. Litig.,
` 865 F.3d 1130 (9th Cir. 2017) ...................................................................................................... 8
`In re REMEC Inc. Sec. Litig.,
` 702 F. Supp. 2d 1202 (S.D. Cal. 2010) ...................................................................................... 11
`In re Sci. Atlanta, Inc. Sec. Litig.,
` 754 F. Supp. 2d 1339 (N.D. Ga. 2010) ...................................................................................... 11
`In re Stac Elecs. Sec. Litig.,
` 89 F.3d 1399 (9th Cir. 1996) ........................................................................................................ 7
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`Case 3:18-cv-04865-EMC Document 489 Filed 10/04/22 Page 4 of 20
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`
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`In re VeriFone Sec. Litig.,
` 11 F.3d 865 (9th Cir. 1993) ........................................................................................................ 12
`Lentell v. Merrill Lynch & Co.,
` 396 F.3d 161 (2d Cir. 2005) ....................................................................................................... 15
`Loos v. Immersion Corp.,
` 762 F.3d 880 (9th Cir. 2014) ................................................................................................ 10, 11
`Nuveen Mun. High Income Opportunity Fund v. City of Alameda,
` 730 F.3d 1111 (9th Cir. 2013) .............................................................................................. 10, 12
`Paracor Fin., Inc. v. Gen. Elec. Cap. Corp.,
` 96 F.3d 1151 (9th Cir. 1996) ...................................................................................................... 13
`Phillips v. LCI Int’l, Inc.,
` 190 F.3d 609 (4th Cir. 1999) ...................................................................................................... 10
`Rok v. Identiv, Inc.,
` No. 15-CV-5775-CRB, 2016 WL 4205684 (N.D. Cal. Aug. 10, 2016) .................................... 11
`Sgarlata v. PayPal Holdings, Inc.,
` No. 17-CV-06956-EMC, 2018 WL 6592771 (N.D. Cal. Dec. 13, 2018) .................................. 13
`Special Situations Fund III QP, LP v. Brar,
` No. 14-CV-04717-SC, 2015 WL 1393539 (N.D. Cal. Mar. 26, 2015) ...................................... 12
`Tarapara v. K12 Inc.,
` No. 16-CV-4069-PJH, 2017 WL 3727112 (N.D. Cal. Aug. 30, 2017) ........................................ 8
`TSC Indus., Inc. v. Northway, Inc.,
` 426 U.S. 438 (1976) ..................................................................................................................... 8
`United States v. Goyal,
` 629 F.3d 912 (9th Cir. 2010) ........................................................................................................ 9
`Zucco Partners, LLC v. Digimarc Corp.,
` 552 F.3d 981 (9th Cir. 2009) ...................................................................................................... 12
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`Statutory Authorities
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`Rule 10(a)-(b) .................................................................................................................................. 15
`Rule 13(b)2-2 .................................................................................................................................. 10
`15 U.S.C. § 78t ............................................................................................................................ 7, 12
`15 U.S.C. § 78t(a) ........................................................................................................................ 7, 13
`15 U.S.C. § 78u-4(b)(4) .................................................................................................................. 10
`15 U.S.C. § 78u-4(f) .................................................................................................................... 7, 15
`15 U.S.C. § 78u-4(f)(3)(A)(iii) ........................................................................................................ 16
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`Case 3:18-cv-04865-EMC Document 489 Filed 10/04/22 Page 5 of 20
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`PRELIMINARY STATEMENT
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`On August 7, 2018, Elon Musk conveyed the truthful message to the public that he was
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`considering taking Tesla private at $420 per share. He followed this statement with details of the
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`proposed funding for the transaction that the Court considered to be “literal[ly]” false. But those
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`details were not materially false or materially misleading because they did not differ in any material
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`way from the actual state of affairs, as evidenced by the market’s own reaction to subsequent
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`disclosures. Yet Plaintiff seeks billions of dollars in this case based on unprecedented theories of
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`market impact and loss causation that are divorced from both the facts and the established case law.
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`As this Court has confirmed, Plaintiff must prove—and the jury must decide—that the
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`challenged statements about the potential go-private transaction were materially false and misleading.
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`To prove material falsity, Plaintiff must demonstrate that the statements about funding gave the
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`impression of a state of affairs that differed in a material way from the one that actually existed. He
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`cannot meet this burden in light of, among other things, (1) the actual content of Mr. Musk’s
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`statements and those of others (which indicated the remaining contingencies of the potential
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`transaction), (2) Mr. Musk’s conversations with the Saudi sovereign wealth fund (the “PIF”), and (3)
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`the reports of multiple witnesses and numerous contemporaneous communications that the PIF’s
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`Managing Director indicated that it was committed to whatever funding (and structure) was necessary
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`to take Tesla private. Similarly, Plaintiff will be unable to prove that Mr. Musk knew or recklessly
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`disregarded that his statements were materially false, as needed to meet his burden on scienter.
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`Relatedly, Plaintiff will not be able to establish reliance through the fraud-on-the-market
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`presumption. Plaintiff will be unable to prove that the statements the Court found to be literally false
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`were material, as he is required to do to invoke the presumption. As Defendants will show at trial, any
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`inaccurate statement regarding the status of funding did not move the market, given that Tesla’s stock
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`price increased after Mr. Musk subsequently gave further details on the steps remaining before any
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`go-private transaction could occur. The increase in response to Mr. Musk’s initial tweets was thus a
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`reaction to his indisputably true statement that he was considering taking Tesla private at $420 per
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`share and demonstrates that Mr. Musk’s other statements in the tweets were immaterial to the market.
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`As to loss causation, the facts and the price movements of Tesla’s securities, including those
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`Case 3:18-cv-04865-EMC Document 489 Filed 10/04/22 Page 6 of 20
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`discussed above, will demonstrate that Mr. Musk’s statements were not the proximate cause of any
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`economic loss. Among other things, Plaintiff must (a) isolate the inflation due to the alleged
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`misrepresentations, (b) identify corrective disclosures of those alleged misrepresentations that resulted
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`in statistically significant price declines, and (c) disaggregate confounding information. Plaintiff has
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`not (and cannot) do any of that. And Plaintiff will not be able to establish damages with any
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`reasonable certainty. His entire theory rests on a flawed model that fails to disaggregate increases in
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`stock price caused by Mr. Musk’s true statement that he was considering taking Tesla private from the
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`allegedly false statements and relies on an unprecedented “leakage” theory seeking recovery for all
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`declines in stock price—even those not caused by a corrective disclosure.
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`Finally, Plaintiff’s claim against the members of Tesla’s Board of Directors under Section
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`20(a) fails for the independent reason that Tesla’s directors did not exercise “actual power or control”
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`over Mr. Musk’s alleged misstatements. In any event, they did not induce any violation and acted in
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`good faith, that is, without knowledge or reckless disregard that any statement was materially false.
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`I.
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`KEY EVIDENCE
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`A.
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`Evidence On Negotiations Concerning The Ability To Take Tesla Private
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`The PIF is Saudi Arabia’s sovereign wealth fund, with $225 billion in assets as of August
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`2018. The PIF had tried to persuade Mr. Musk to take Tesla private for years. At multiple meetings
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`between Mr. Musk and Yasir Al-Rumayyan, the PIF’s Managing Director, Mr. Al-Rumayyan
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`expressed a desire to fund a take-private transaction. For example, on March 7, 2017, Mr. Al-
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`Rumayyan met Mr. Musk for dinner at Tesla’s factory. At the dinner meeting, the group discussed an
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`investment that would allow Tesla to go private. They also discussed the estimated $30-60 billion that
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`would be needed. Mr. Al-Rumayyan expressed that the PIF could easily provide the necessary
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`funding. Mr. Musk expressed interest in the potential transaction and conveyed that going private
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`would enable Tesla to better focus on its long-term strategy.
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`A week before the August 7 tweets, Mr. Musk and Sam Teller, Mr. Musk’s chief of staff, met
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`with Mr. Al-Rumayyan and his colleagues at the Tesla factory. At that time, Mr. Al-Rumayyan
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`informed Mr. Musk that the PIF had already invested billions of dollars in Tesla—acquiring roughly
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`five percent of the company. Mr. Al-Rumayyan explained that “the only thing that was limiting them
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`Case 3:18-cv-04865-EMC Document 489 Filed 10/04/22 Page 7 of 20
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`at 5 percent was the reporting requirement[,] [a]nd they wished to have a much larger stake and
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`wanted to help Tesla go private.” Mr. Al-Rumayyan reiterated that “he had wanted to do so from the
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`very beginning,” since their first meeting in January 2017. Mr. Al-Rumayyan stated: “I am the
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`decision maker. So long as the Crown Prince supports me, and he does, that’s it. It’s done.” Mr. Al-
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`Rumayyan emphasized that Mr. Musk should “let us know how you want to do this. We want to do
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`this.” Mr. Musk understood based on these conversations that, if he wanted to take Tesla private, the
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`PIF would do it. Other witnesses confirm Mr. Musk’s account of the discussions.
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`B.
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`Evidence Concerning Mr. Musk’s Discussion With Tesla’s Board Concerning A
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`Take-Private Transaction At $420 Per Share
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`On August 2, 2018, Mr. Musk emailed Tesla’s Board after the close of trading and proposed to
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`take Tesla private for $420 per share. He arrived at the price by adding a 20 percent premium to the
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`stock price and rounding up from $419. He expressed his “firm belief that Tesla can operate more
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`effectively as a private company for the next several years.” That evening, the Board held a meeting
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`(without Mr. Musk) where Tesla’s CFO, Deepak Ahuja, briefed the Board on the PIF’s proposal to
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`fund a take-private transaction. The Board held another meeting on August 3, this time including Mr.
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`Musk. Mr. Musk explained that the PIF was willing to fund the transaction. The Board agreed that
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`Mr. Musk should reach out to large investors to see if they would remain in a private Tesla. Mr. Musk
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`believed that, to avoid selective disclosure, there would need to be a public disclosure first.
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`In early August 2018, Mr. Musk met with prospective legal counsel who could assist with a
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`take-private transaction. On August 6, Mr. Musk also spoke with Egon Durban of Silver Lake
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`regarding the transaction. Mr. Musk told Mr. Durban that the PIF wanted to take Tesla private, but he
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`would prefer to have a broader investor base.
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`C.
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`Evidence On The August 7 Statements About A Potential Go-Private Transaction
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`On August 7 at 9:18 a.m., the Financial Times reported that the PIF had acquired a $2 billion
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`stake in Tesla. Mr. Musk was worried that whoever had leaked the investment would also leak the
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`PIF’s interest in taking Tesla private and that such a leak might include inaccurate information that
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`could cause confusion in the market. Mr. Musk felt obligated to disclose his consideration of a
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`potential take-private transaction to create “a fair playing field,” where “[p]eople can make their own
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`Case 3:18-cv-04865-EMC Document 489 Filed 10/04/22 Page 8 of 20
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`assessment about whether there would be a take private at a premium or not” and decided that the best
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`way to gauge investors’ interest in his proposal was to make a public announcement. Thirty minutes
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`after the Financial Times report, Mr. Musk tweeted: “Am considering taking Tesla private at $420.
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`Funding secured.” Some investors interpreted “funding secured” as “a strong verbal commitment,
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`with funds available and parties willing to execute quickly.” (Ex. 33) Others, including the class
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`representative and an investor witness whom Plaintiff has designated for trial, understood “funding
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`secured” to mean that somebody “was willing to write a check…Money was there, funding was
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`certain” (Littleton Dep. 120:11-19) or that a buyer “expressed a strong interest” and that Mr. Musk
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`confirmed the buyer “had the financial means” to take Tesla private. (Fries Dep. 65:1-8; 63:9-24.)
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`Later that day, Mr. Musk sent Tesla’s employees an email, a copy of which was then posted on
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`Tesla’s blog, entitled “Taking Tesla Private.” In it, Mr. Musk reiterated, “I’m considering taking
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`Tesla private at a price of $420/share,” and went on to explain why. He added, “a final decision has
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`not yet been made,” and the proposal “would ultimately be finalized through a vote of our
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`shareholders.” He linked to this post on his Twitter account, including a short cover note: “Investor
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`support is confirmed. Only reason why this is not certain is that it’s contingent on shareholder vote.”
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`The next morning, Tesla’s Board announced that Mr. Musk had opened a discussion about taking
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`Tesla private, and that it was “taking the appropriate next steps to evaluate this.”
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`D.
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`Evidence Concerning Mr. Musk’s Discussions With Investors And Advisors
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`Following The August 7 Tweets
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`Over the next several days, and consistent with his belief that existing shareholders should
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`have a say, Mr. Musk spoke with several institutional investors. While Mr. Musk initially believed
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`that most institutional shareholders would want Tesla to go private, he eventually learned that they
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`were, on average, “lukewarm” about the idea.
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`At the same time, Mr. Musk continued his discussions with Mr. Al-Rumayyan. On August 10,
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`Mr. Al-Rumayyan told Mr. Musk for the first time that the transaction would have to be approved by
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`certain committees within the PIF. Mr. Musk was surprised; Mr. Al-Rumayyan told Mr. Musk at the
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`July 31 meeting that he was the PIF’s decision-maker and had the support of the Crown Prince. Mr.
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`Musk conveyed to Mr. Al-Rumayyan that this was not what he understood from the July 31 meeting.
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`Case 3:18-cv-04865-EMC Document 489 Filed 10/04/22 Page 9 of 20
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`Mr. Al-Rumayyan apologized for the misunderstanding and reiterated that he was “unequivocal”
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`about his desire to invest in Tesla. Also on August 10, Mr. Musk met with Mr. Durban to discuss the
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`take-private transaction. The next day, Mr. Musk told the Board that he had engaged Mr. Durban to
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`lead the deal team, had hired deal counsel, and was considering retaining a second law firm. Mr.
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`Musk also met with Goldman Sachs about a go-private transaction. Both Goldman Sachs and Silver
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`Lake identified a number of potential investors, independent of the PIF, interested in taking Tesla
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`private and confirmed there was sufficient capital to fund such a transaction.
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`In the days following the “funding secured” tweet, and after news outlets began to question the
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`PIF’s level of involvement in the potential transaction, Mr. Musk communicated with Mr. Al-
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`Rumayyan to confirm that the PIF had committed to fund Tesla to go private. Mr. Musk’s non-public
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`statements to Mr. Al-Rumayyan demonstrate his belief that funding was secured as a practical matter
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`after their meeting. For example, on August 10, Mr. Musk wrote Mr. Al-Rumayyan, “when we met at
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`Tesla recently, you said that you were the decision-maker for PIF, that you had wanted to do the Tesla
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`take-private deal for two years, and that this was supported directly by the Crown Prince. I checked
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`with my team who were in that meeting in case I remembered something wrong and they confirmed
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`this exactly.” Mr. Al-Rumayyan responded that he would “work on [a] PIF statement” to fix the
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`incorrect public perception that the PIF was not working on a go-private a deal with Tesla.
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`E.
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`Evidence On Mr. Musk’s August Update To Shareholders And Board Meeting
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`Before the markets opened on August 13, Mr. Musk posted an “Update on Taking Tesla
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`Private” on Tesla’s blog. The post included additional details regarding Mr. Musk’s funding
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`discussions with the PIF and the various actions that would need to be completed before the
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`transaction could move forward. Mr. Musk explained why he said “funding secured” in his August 7
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`tweet. Mr. Musk noted that he had “engaged advisors to investigate a range of potential structures and
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`options” to get to a “more precise understanding” on how many shareholders might remain if Tesla
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`became private. The market did not view this information as revelatory—Tesla’s stock price barely
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`moved at all, and in fact rose slightly from the prior day’s close.
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`Mr. Musk learned through his discussions with existing investors that many wanted Tesla to
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`remain public. For some institutional investors, it would have been much harder for them to maintain
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`Case No. 3:18-cv-04865-EMC
`DEFENDANTS’ TRIAL BRIEF
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`

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`Case 3:18-cv-04865-EMC Document 489 Filed 10/04/22 Page 10 of 20
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`stock in a private Tesla than Mr. Musk had anticipated. Mr. Musk also came to learn, contrary to his
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`understanding on August 7, that he may not be able to structure the transaction in a way that allowed
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`all existing retail shareholders to remain. In light of these considerations, Mr. Musk announced at the
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`August 23 Board meeting that he had decided not to move forward with a take-private transaction.
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`Mr. Musk explained his decision to shareholders in a blog post the next day.
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`F.
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`Evidence Going To The Legal Elements Of Materiality And Scienter
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`On April 1, 2022, the Court granted partial summary judgment, finding that the statements
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`“Funding secured,” “Investor support is confirmed,” and “Only reason why this is not certain is that
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`it’s contingent on a shareholder vote,” were literally false and/or misleading and that Musk had
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`knowledge of the underlying facts when he made them. (Dkt. No. 387.)
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`However, as the Court made clear at a June 16, 2022 hearing, its holding was limited to
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`finding that the challenged statements were “false statement[s]…in a literal sense, not in a legal
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`sense.” (6/16/22 Hr’ing Tr. at 4:14-23.) The Court made the same finding as to scienter. (Id. (“[A]nd
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`similarly with scienter, no reasonable juror could find that Mr. Musk did not know or didn’t act in
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`disregard to the inaccuracy—the factual inaccuracy, not the legal.”). To avoid any doubt, the Court
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`stated “[t]o be clear, I did not find materiality with respect to the misrepresentation or a reckless
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`disregard or knowingly scienter with regard to any such material representation.” (Id. at 5:4-8.)
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` It thus remains up to Plaintiff to prove and the jury to resolve if the statements were
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`“materially false” and made with scienter as to their “material falsity.” See Dura Pharma, Inc. v.
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`Broudo, 544 U.S. 336, 341 (2005) (plaintiff must prove defendant made a “material misrepresentation
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`(or omission)”); In re Alphabet, Inc. Sec. Litig., 1 F.4th 687, 701 (9th Cir. 2021) (scienter satisfied by
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`“a reckless omission of material facts”). Additionally, the jury must make specific determinations
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`regarding Mr. Musk and the Tesla directors’ states of mind. To determine whether the directors acted
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`in “good faith” and are absolved of Section 20(a) control person liability, the jury must decide whether
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`they acted with scienter. 15 U.S.C. § 78t(a); Howard v. Everex Sys., Inc., 228 F.3d 1057, 1065 (9th
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`Cir. 2000). And the jury also must determine whether Mr. Musk or any other Defendant violated
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`securities laws either “knowingly” or “reckless[ly]” to apportion liability, which again requires the
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`evaluation of state of mind evidence. 15 U.S.C. § 78u-4(f).
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`Case No. 3:18-cv-04865-EMC
`DEFENDANTS’ TRIAL BRIEF
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`

`

`Case 3:18-cv-04865-EMC Document 489 Filed 10/04/22 Page 11 of 20
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`The Tesla directors, at the time Plaintiff alleges they “adopted” the tweets, understood, based
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`on the information they had, that Mr. Musk’s statements meant that funding for a go-private
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`transaction was available. Mr. Musk also understood, as Mr. Teller testified, that Mr. Al-Rumayyan
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`was the decision maker for the PIF and that, based on Mr. Al-Ramayyan’s representations, the PIF
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`was committed to taking Tesla private and would provide the necessary funding.
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`II.
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`THEORY OF THE CASE
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`A.
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`Plaintiff Will Not Be Able To Prove His 10(b) And 10b-5 Claim
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`To prevail on a claim under Section 10(b) or Rule 10b–5, “a plaintiff must prove (1) a material
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`misrepresentation or omission by the defendant; (2) scienter; (3) a connection between the
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`misrepresentation or omission and the purchase or sale of a security; (4) reliance upon the
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`misrepresentation or omission; (5) economic loss; and (6) loss causation.” Halliburton Co. v. Erica P.
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`John Fund, Inc., 573 U.S. 258, 267 (2014) (emphasis added, quotations omitted). Plaintiff will not
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`prove the required elements.
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`1.
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`Plaintiff Will Not Prove Any Material Misrepresentations Or Scienter
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`A misstatement concerning a security is material only if there is a substantial likelihood a
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`reasonable investor would consider the fact important in deciding whether to buy or sell that security.
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`Basic Inc. v. Levinson, 485 U.S. 224, 231-32 (1988); In re Stac Elecs. Sec. Litig., 89 F.3d 1399, 1408
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`(9th Cir. 1996). A statement is not materially false unless it “affirmatively create[s] an impression of
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`a state of affairs that differs in a material way from the one that actually exist[s].” In re Quality Sys.,
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`Inc. Sec. Litig., 865 F.3d 1130, 1144 (9th Cir. 2017); Tarapara v. K12 Inc., No. 16-CV-4069-PJH,
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`2017 WL 3727112, at *15 (N.D. Cal. Aug. 30, 2017) (same).
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`Mr. Musk’s August 7 statement that he was “considering taking Tesla private at $420 [per
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`share]” is undisputedly true, and his statements that “[f]unding [was] secured,” as well as his related
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`statements that followed, were not materially false. Among other things: (1) The PIF approached Mr.
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`Musk in 2016 to discuss investing in Tesla; (2) Mr. Al-Rumayyan, on behalf of the PIF, met with Mr.
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`Musk throughout 2017 to discuss taking Tesla private; (3) Mr. Al-Rumayyan met with Mr. Musk on
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`July 31, 2018 and told Mr. Musk that the PIF had just invested billions of dollars in Tesla to
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`communicate its seriousness, that the PIF continued to want to take Tesla private and would take
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`Case No. 3:18-cv-04865-EMC
`DEFENDANTS’ TRIAL BRIEF
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`

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`Case 3:18-cv-04865-EMC Document 489 Filed 10/04/22 Page 12 of 20
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`whatever steps necessary to achieve that outcome, and that Mr. Al-Rumayyan had carte blanche
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`authority from the Crown Prince of Saudi Arabia to devote the capital necessary to do so; (4) Mr.
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`Musk and other Tesla executives present at the meeting reasonably understood Mr. Al-Rumayyan and
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`the PIF to be committing whatever funding was necessary to complete the go-private transaction; and
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`(5) Mr. Musk confirmed his understanding that funding was secured in numerous communications
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`with Mr. Al-Rumayyan.
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`Mr. Musk’s August 7 statement that “Investor support is confirmed. Only reason why this is
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`not certain is that it’s contingent on a shareholder vote” is likewise not materially false and was made
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`with additional context that Plaintiff attempts to ignore. Specifically, Mr. Musk publicly disclosed
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`other “contingencies” in a Tesla blog post linked to his August 7 tweet, which stated clearly that he
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`was “considering taking Tesla private,” and that “[t]his proposal to go private would ultimately be
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`finalized through a vote of [Tesla’s] shareholders.”
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`Plaintiff will not be able to prove to a jury that the statements were mat