In our first installment of InMotion last September, we suggested that a recently filed lawsuit by Tesla against the Louisiana Automobile Dealers Association (LADA) and various parties associated with the Louisiana Motor Vehicle Commission (LMVC) was a possible “game changer” that might result in Tesla being able to sell and service Tesla vehicles in Louisiana. The colorful allegations and claims asserted by Tesla are explained in the September 2022 InMotion. In short, Tesla asserted federal and state antitrust claims and constitutional claims against LADA and LMVC commissioners, in their official, and individual capacities, along with several dealerships owned by the commissioners to invalidate Louisiana’s direct sale ban. 

On June 16, 2023, in an 86-page decision, the federal court in New Orleans dashed Tesla’s hopes and dismissed Tesla’s case with prejudice. This decision means that Tesla remains prohibited from directly selling its vehicles to consumers in Louisiana.[1] Unless overturned on appeal, the only path for direct sales in Louisiana is through the legislature which seems extremely unlikely.

With respect to Tesla’s federal antitrust claims, the Court held that the LADA, LMVC commissioners, in their individual capacities, and the dealerships could not be personally liable for antitrust claims pursuant to Noerr-Pennington immunity[2]. However, the court also held that Tesla plausibly alleged that the State of Louisiana did not actively supervise the LMVC destroying the commissioners’ argument that they are immune, in their official capacity. Antitrust immunity for state actors (the LMVC commissioners in their official capacity) is available under the 1943 US Supreme Court, commonly known as Parker immunity.[3] Nonetheless, the court dismissed the federal antitrust claims because “Tesla has failed to ‘allege any specific facts demonstrating an intention on the part of’ each of the commissioners ‘to engage in a conspiracy’ to exclude Tesla from operating in Louisiana.”[4] Of course, pleading a conspiracy is difficult because conspirators generally don’t openly communicate their conspiratorial acts.

The court dismissed all of Tesla’s state law claims against the LMVC defendants in their official capacity because they were shielded by 11th Amendment sovereign immunity. [5] The court focused its analysis of the remaining state law claims on the private defendants. Both of those state law claims (state law antitrust and unfair trade practices) were rejected because both were time-barred because of a one-year statute of limitations on those claims.

The court then turned to dismissing all of Tesla’s constitutional challenges brought against the LMVC commissioners in their official capacity pursuant to 42 U.S.C. §1983 (due process, equal protection, commerce clause). Tesla alleged that its due process rights were violated by the commissioners because they were Tesla’s competitors and not neutral arbiters. The court rejected this because being a competitor was not enough to violate due process. Rather, the court held that Tesla was required to allege that the “‘probability of actual bias on the part of the judge or [commissioner] is too high to be constitutionally tolerable.’”[6] For many reasons, the court held that Tesla had not plausibly alleged a probability of actual bias.

On Equal Protection, the court applied the rational basis review because Tesla was not in a protected class and Tesla’s claim did not implicate a fundamental right. Rational basis review regarding economic legislation, like the Louisiana direct sale ban, “‘allows the States wide latitude, and the Constitution presumes that even improvident decisions will eventually be rectified by the democratic process.’”[7]

For its Commerce Clause claim, Tesla was required to plausibly allege that the direct sale ban was enacted for a discriminatory purpose or to have a discriminatory effect on interstate commerce. The court found that Tesla made no allegation that the Louisiana legislature ‘intended to harm out-of-state interests.”[8] The court rejected Tesla’s argument that the direct sale ban treated in-state dealers differently than out-of-state dealers, like Tesla with its fully integrated sales model. The court held that a state may discriminate based on business form, Tesla’s non-dealer model, without infringing the Commerce Clause.[9] In-state and out-of-state vehicle manufacturers are treated the same under the direct sale ban which satisfies the Commerce Clause.

As of this writing, Tesla’s time to appeal this decision has not lapsed. If Tesla prosecutes an appeal, we will continue to follow this matter. If you have questions about this case, or any other aspect of motor vehicle franchise law, please contact our MVG.

[1] The court acknowledged that Tesla was able, under Louisiana law, to lease vehicles and perform warranty service on those leased “fleet” vehicles. The LMVC’s investigation into Tesla’s leasing and fleet service seemingly served as the basis of many of Tesla’s allegations.

[2] Tesla, Inc. et al. v. Louisiana Motor Vehicle Dealers Assoc., et al., No. 22-2982, 2023 WL 4053438, at *8 (E.D. La. June 16, 2023). Noerr-Pennington immunity provided by Eastern R.R. Presidents Conf. v. Noerr Motor Freight, Inc., 365 U.S. 127, 136 (1961) and United Mine Workers v. Pennington, 381 U.S. 657, 670 (1965).

[3] Tesla, Inc. et al., et al., 2023 WL 4053438, at *10-12. Parker immunity provided by Parker v. Brown, 317 U.S. 341, 351 (1943).

[4] Tesla, Inc. et al., et al., 2023 WL 4053438, at *13.

[5] Id. at 15.

[6] Id. at 15.

[7] Id. at 22.

[8] Id. at 25.

[9] Id. at 26.

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