Michigan denies Tesla lawsuit allegations

Michael Wayland, and Melissa Burden

State officials are denying allegations that Gov. Rick Snyder and others have treated Tesla Motors Inc. unfairly or unconstitutionally in the company’s attempts to sell and service its all-electric vehicles in Michigan.

In a response Thursday to a federal lawsuit filed by Tesla in September, the state repeatedly calls the company’s interpretation of state laws “incorrect” and denies that a 2014 provision to state franchised dealer laws were unconstitutionally instituted to block the Palo Alto, California-based luxury electric vehicle maker from operating in Michigan.

The state argues the automaker was not allowed to sell its vehicles prior to the amendment, which became known as the “anti-Tesla bill,” under state law that was established in 2000 — three years before Tesla incorporated as a company.

“The statutory scheme that plaintiff claims discriminates against plaintiff has existed in its current form since before plaintiff existed as a company,” the state says in its response.

Tesla’s complaint argues the “only conceivable reason” for the law is “to reward the dealers’ generous lobbying efforts by handing them a monopoly.” It singled out Detroit-based General Motors Co. as throwing “its weight” behind the 2014 amendment.

Tesla filed the lawsuit Sept. 22 in federal court in western Michigan against Snyder, Michigan Secretary of State Ruth Johnson and Attorney General Bill Schuette. None of the defendants, according to the state’s response, “have violated any of plaintiff’s constitutional rights, or any rights whatsoever.”

In an odd twist, the state argues that Tesla “has never sought the ability to directly sell its vehicles in Michigan but only licenses to operate dealerships.”

But to sell vehicles in Michigan, as state officials have repeatedly pointed out, a company must operate through a franchised dealer.

The state declined comment, citing the pending litigation.

Tesla, in an email to The Detroit News on Friday, said: “If it’s the state’s position that Tesla can sell its cars directly to consumers, Tesla welcomes that opportunity and invites the state to work with us so that we can start serving our customers in Michigan as soon as possible.”

Earlier this month, Tesla opened a gallery showroom inside the Nordstrom department store at Somerset Mall in Troy. The 700-square-foot space includes a Model X SUV for consumers to look at, but consumers can’t buy anything there. Instead, they are referred to go online for product details and to order. The gallery is expected to remain open for at least six months.

Before the October 2014 law amendment, Tesla believed it had a right to not just open a retail store here, but a full dealership.

On Dec. 9, Snyder, in response to questions about Tesla opening a gallery in Michigan even though it can’t sell vehicles there said: “That’s a whole issue that I’ve said would be a good topic for the Legislature to look at, to say what about new manufacturers and those issues. I would encourage our Legislature to look at when they deem appropriate.”

The state Secretary of State’s office denied Tesla’s new-dealership license request in September. A used car dealership license also was denied. The denials followed the October 2014 state law signed by Snyder that bans automakers from selling vehicles directly to consumers. The legislation, passed overwhelmingly by the Michigan Legislature, was backed by the state’s new-car dealership lobby. The law was believed to have closed a loophole that Tesla has used in other states to maintain company-owned retail stores and bypass the dealership route.

The governor said then that the law “clarifies and strengthens” an existing long-standing law that prohibited direct sales of new cars in Michigan. Previous state law prohibited automakers from selling new vehicles directly to retail customers except through its franchised dealers; the revised law removed the word “its,” which Tesla viewed as a strike against the company.


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