Tesla can challenge Louisiana direct sales ban, US appeals court rules

By Jonathan Stempel

(Reuters) -A divided federal appeals court on Monday revived a lawsuit in which Tesla (NASDAQ:), the electric car company run by billionaire 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. It upheld her dismissal of Tesla’s equal protection claim.

Tesla had sued members of the Louisiana Motor Vehicle Commission, dealerships owned by individual commissioners, and the Louisiana Automobile Dealers Association in August 2022.

It accused various defendants of exploiting their control of the motor vehicle commission to drive Tesla from the market by targeting its sales model, which does not use a network of franchised dealers.

Tesla accused Louisiana officials of illegally banning direct sales since 2017 and restricting the leasing and servicing of its vehicles in the state.

Circuit Judge Jerry Smith wrote that Tesla sufficiently alleged that the defendants had “plausible actual bias,” citing emails from the commission’s executive director assuring Tesla rivals that their complaints would be addressed.

The dissenting judge, Dana Douglas, would have upheld the dismissal of Tesla’s case.

“The issue is whether a company can change the composition of a state’s regulatory commission because it merely disagrees with state law which the commission is required to enforce,” she wrote. “But Tesla cannot use this court as an end-run around the legislative process.”

Lawyers for Tesla did not immediately respond to requests for comment. The defendants’ lawyers did not immediately respond to similar requests.

Smith was appointed to the bench by Republican President Ronald Reagan. Circuit Judge Catharina Haynes, an appointee of Republican President George W. Bush, concurred in much of the result. Douglas was appointed by Democratic President Joe Biden.

The appeals court returned the case to U.S. District Judge Sarah Vance in New Orleans, who had dismissed it in June 2023.

The case is Tesla Inc et al v. Louisiana Automobile Dealers Association et al, 5th U.S. Circuit Court of Appeals, No. 23-30480.