A divided federal appeals court has reignited Tesla’s legal challenge against Louisiana’s ban on direct vehicle sales, marking a significant development in the electric car company’s ongoing battle to defend its sales model. In a 2-1 decision, the 5th U.S. Circuit Court of Appeals in New Orleans overturned a lower court’s dismissal of Tesla’s constitutional due process claim and vacated the dismissal of its antitrust claim. However, the court upheld the dismissal of Tesla’s equal protection claim.
Tesla, led by CEO Elon Musk, initiated the lawsuit in August 2022, targeting members of the Louisiana Motor Vehicle Commission, dealerships owned by individual commissioners, and the Louisiana Automobile Dealers Association. The company alleged that these entities exploited their control over the motor vehicle commission to drive Tesla out of the market by targeting its direct sales model, which bypasses the traditional network of franchised dealers. Tesla also accused Louisiana officials of illegally banning direct sales since 2017 and restricting the leasing and servicing of its vehicles within 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, citing emails from the commission’s executive director that assured Tesla’s competitors their complaints would be addressed. In contrast, the dissenting judge, Dana Douglas, argued that Tesla should not be allowed to challenge state law by seeking to change the composition of the state’s regulatory commission through the courts.
The case now returns to U.S. District Judge Sarah Vance in New Orleans, who had previously dismissed it in June 2023. The appeals court’s decision provides Tesla with another opportunity to contest Louisiana’s restrictions on its sales and service model.
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.
