Dec 06, 2013 03:19 PM EST
Tesla Motors Sued for Model S Fires That Damaged Company Value

A law firm has taken action against Tesla Motors, Inc., seeking damages after the recent series of car fires in Tesla vehicles.

Tesla shareholders have until Jan. 7 to contact Pomerantz Grossman Hufford Dahlstrom & Gross LLP to be appointed a lead plaintiff in the class action, said a press release.

The complaint, which can be found online, alleges that Tesla made misleading statements including assertions of the Model S' highest safety rating and the vehicle's lack of prior fire incidents.

According to the class action lawsuit, Tesla failed to disclose that its flagship Model S "suffered from material defects which caused the battery pack to ignite and erupt in flames under certain driving conditions."

Tesla's vehicles are under federal investigation after three cars caught on fire in the last two months. The U.S. National Highway Traffic Safety Administration has asked Tesla Motors for records of property damage claims, consumer complaints and other information, giving the Palo Alto, Calif.-based company until Jan. 14 to respond.

The civil suit claims that Tesla shares fell significantly in conjunction with the three fires. A Model S was filmed burning on a roadside in October, when the video was widely circulated; afterward, Tesla shares reportedly fell more than 6 percent despite the company's assertion that the fire was caused by a collision with road debris.

The second Tesla fire came later that month in Mexico, the company blaming the incident on the car's rate of speed and crash into a tree. A third fire was confirmed in early November, when a Model S caught fire after colliding with road debris under normal driving conditions.

Following news of the third fire, Tesla shares opened at nearly 12.5 percent lower than the previous day. Altogether, Tesla shares have fallen 25 percent since Oct. 1, partly because of the media coverage of the Model S fires, according to Reuters.

Shareholders can contact Robert S. Willoughby at rswilloughby@pomlaw.com or 888.476.6529 (or 888.4-POMLAW), toll free, x237. 

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