A U.S. Appeals Court in Louisiana Recently Reversed the Dismissal of Tesla's Dealer Franchise Lawsuit Against the State

In some states, car dealer franchise laws help protect businesses by preventing automakers from selling directly to consumers. That policy has caused headaches for some companies, including Tesla and Rivian, which allow customers to purchase a car online for delivery. Tesla sued the state of Louisiana over its franchise laws in 2022, but the courts threw it out. Recently, however, an appeals court reversed that decision, opening the door for the automaker to proceed with its suit.

The 5th U.S. Circuit Court of Appeals ruled 2-1 to reverse the dismissal. Tesla’s lawsuit targeted the Louisiana Motor Vehicle Commission and the Louisiana Automobile Dealers Association, saying that the groups aimed to drive it out of the state. The automaker does not have a network of dealers but does operate regional service centers, one of which is located in New Orleans.

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

Louisiana isn’t the only state causing headaches for Tesla. Alabama, South Carolina, New Mexico, and others have direct sales bans, and many also prohibit the automaker’s service model. Tesla got around those rules in New Mexico by building a service center on tribal land. Other states have banned Tesla’s gallery model, which lets prospective buyers explore vehicles prior to purchase without making a purchase.

[Images: Tesla]

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