A divided federal appeals court on Monday revived a lawsuit in which Tesla, the electric car company led by Elon Musk, challenged Louisiana’s ban on direct vehicle sales to consumers. In a 2-1 decision, the 5th U.S.
Circuit Court of Appeals in New Orleans reversed a lower court judge’s dismissal of Tesla’s constitutional due process claim and vacated her dismissal of its antitrust claim, while upholding the dismissal of Tesla’s equal protection claim.
Tesla initially filed the lawsuit in August 2022 against members of the Louisiana Motor Vehicle Commission, dealerships owned by individual commissioners, and the Louisiana Automobile Dealers Association.
The company accused these defendants of using their control over the motor vehicle commission to undermine Tesla’s sales model, which bypasses traditional franchised dealers.
Tesla alleged that Louisiana officials have been illegally banning direct sales since 2017 and have imposed restrictions on the leasing and servicing of its vehicles in the state.
Circuit Judge Jerry Smith, writing for the majority, stated that Tesla had sufficiently alleged “plausible actual bias” on the part of the defendants, referencing emails from the commission’s executive director that assured Tesla’s competitors their complaints would be addressed.
However, Circuit Judge Dana Douglas dissented, arguing that the court should not allow a company to challenge the composition of a state’s regulatory commission simply because it disagrees with state law. She emphasized that Tesla should not use the court as a means to circumvent the legislative process.
The case now returns to U.S. District Judge Sarah Vance in New Orleans, who had originally dismissed it in June 2023. The appeals court’s decision has reopened Tesla’s legal challenge, allowing the company to continue pursuing its claims against Louisiana’s ban on direct sales.
The case is titled Tesla Inc et al v. Louisiana Automobile Dealers Association et al, 5th U.S. Circuit Court of Appeals, No. 23-30480.
