Automotive News: Tesla wins first round in Massachusetts dealers lawsuit

[CapitalistOppressor]

Fair warning, I'm not a lawyer. But I'm fairly comfortable in navigating my way through dense legalese and I've had to report on lawsuits before.

Based on my reading of the order, this was a pretty brutal takedown of the plaintiffs. It's only a ruling on the requested preliminary injunction, but there is a reason that the dealers are talking appeal. Basically their case is toast. According to the legal precedent (and plain text of the law) that the judge cited, only a Tesla affiliated dealer or distributer would have standing to bring suit. No such independant entities exist, and I doubt that Tesla is planning on suiing itself anytime soon.

So the lawsuit still technically exists, because this ruling was only on the injunction that the dealers requested. The Judge denied the request, and I suppose that might be considered a "soft" win because the case still exists. But the fact that the reason is lack of standing, and in fact that nobody CAN have standing, means that the case is all but over at this level.

Tesla has to jump through hoops and formally ask for the case to be dismissed (if it hasn't already been filed, but a plaintiff request for emergency relief gets litigated before a defense request for dismissal AFAIK), but I don't see how the dealers can accomplish anything at this point, and their only path forward seems to be an appeal. Based on the clear text of the law and previous rulings cited by the judge I would assume (in a non-expert sort of way) that an appeal is unlikely to succeed.

I suppose there might be aspects of the case that might not have been included in the request for a preliminary injunction, but again AFAIK when you file for that type of relief all the issues are on the table.

 

[dsm363]

I hope they can cite this case in Texas once it gets thrown out. Not sure if it works like that though since an entirely different state of course.

 

[Arnold Panz]

I have now had an opportunity to read the judge's Order in this case and can offer some insights. First, this was a motion by the dealers for a Temporary Restraining Order (TRO) to stop Tesla IMMEDIATELY from running the Natick store. Basically, a TRO is used when a party thinks that some irreparable harm will come to them if some behavior or action is going to continue. It's a fairly high standard to reach, and the three part test laid out by the Judge in his Order lays out the threshold that they need to reach to get a TRO granted. A TRO hearing/decision is NOT a decision on the merits (ie, a "final" decision), so even if the dealers lose on appeal, they can theortically still prosecute their case to completion with full discovery etc. (although a explained below this is unlikely here). This decision only relates to the irreparable harm (and likelihood of success on the merits), so Tesla isn't out of the woods simply by winning at this stage, and an appeal of the TRO decision is quite common as well.

That said, those who have read this as strongly in Tesla's favors are exactly right. The Judge really never gets to the merits because first he decides that the dealer association probably don't have "standing" to bring this case because they are not directly impacted by Tesla's actions. Standing basically means that someone has to be directly impacted to bring a claim -- you cannot bring a lawsuit on behalf of another injured or harmed party, and they didn't show the harm to them, even if there might be a technical violation of the statute.

The Judge goes on to say that the individual dealers also don't have standing either because the purpose of the law is to protect dealers from their manufacturers, which obviously isn't the case here,vand to protect the public, which is not suffering any harm here. No harm, no foul.

As a practical matter, if the dealers lose this on appeal (and based on what's written, though I haven't checked the cited cases, I'd say they have a very hard appeal to win), I'd say the case is over. There aren't going to be any new facts that come out in discovery that could change the outcome -- this is really a simple case on the facts and a clean interpretation of the law. I wouldn't hazard a guess on whether Tesla will win on the appeal, but if they do then this case is done which is great news and the right outcome.

Dave, unfortunately I don't think that this case can be cited in Texas. Unless the laws are identical (and even then it's unlikely), state laws are completely separate and sovereign, so they wouldn't look to another state's interpretation of its own laws for guidance for themselves. However, I would fully expect the same analysis (no harm to anyone, not the intent of the law)to apply. However, Texas judges are elected if I'm not mistaken, and auto dealers are active politically, so the judge there could potentially face some political pressure to rule in their favor.

 

[dsm363]

Dave, unfortunately I don't think that this case can be cited in Texas. Unless the laws are identical (and even then it's unlikely), state laws are completely separate and sovereign, so they wouldn't look to another state's interpretation of its own laws for guidance for themselves. However, I would fully expect the same analysis (no harm to anyone, not the intent of the law)to apply. However, Texas judges are elected if I'm not mistaken, and auto dealers are active politically, so the judge there could potentially face some political pressure to rule in their favor.

Thanks. That's kind of what I figured as well but good to know it might still provide some benefit. Tesla could bring it up as an example of dealerships overstepping their bounds but it wouldn't directly have any impact on Texas. I'm sure you are right about the political pressures involved here. I think they will have a much more difficult time here than anywhere else in the US.

 

[Larry Chanin]

I have now had an opportunity to read the judge's Order in this case and can offer some insights.

Josh,

Tesla has an opening for General Counsel.:wink:

Tesla's GC Hits the Brakes

Whitaker said that he was "jubilant" when he learned Monday that the plaintiffs' request for a preliminary injunction had been denied earlier this month. Massachusetts State Automobile Dealers Association v. Tesla Motors, 01691B, was the first formal legal action taken against Tesla by a dealership, and Whitaker said he is now confident that the company will be able to fend off objections in other states.

"It is really critical for the company that it be able to implement its sales and distribution strategy as planned," he said.

Larry

 

[Arnold Panz]

Josh,

Tesla has an opening for General Counsel.:wink:

Tesla's GC Hits the Brakes


Larry

Larry, good find! I used to think that would be my dream job, but if I took that job, when I wrote snarky posts here about the mistakes "senior executives" are making I'd be criticizing myself! Plus, I think they have plenty of fish in the sea in NoCal to choose from that they don't need to look across the country for a GC.

On the other hand, I'm 99.99% certain that there are no qualified applicants who know more about Tesla or the Model S than me!

 

[jerry33]

Larry, good find! I used to think that would be my dream job, but if I took that job, when I wrote snarky posts here about the mistakes "senior executives" are making I'd be criticizing myself!

That might be a good thing. One of the problems that leaders fall into is surrounding themselves with people who think like they do rather than people who will give opposing views.

 

[Arnold Panz]

That might be a good thing. One of the problems that leaders fall into is surrounding themselves with people who think like they do rather than people who will give opposing views.

I couldn't agree more. But after reading some of the posts from frustrated Sig owners waiting for their car with their complaints about communcation and the Sig tax, I don't think Tesla wants to hear my opinion, or any dissenting opinions on certain issues. I was pretty vocal (here on TMC) at the time they came out with the Sig pricing that it was a huge mistake, and the extra revenue (around $7m, I estimate) wasn't worth the loss of good will, and that they were setting themselves up for no margin for error. Truthfully, it makes me sad that I was right about that, and continue to hold the faintest hope that someone will knock some sense into them and try to really make it right with Sig owners in some way.

I've seen the benefit at my company of being the contrary voice (which the lawyer often has to do) and have occasionally helped save well-meaning executives from stepping into big mistakes. I hope they hire someone who isn't afraid to speak her mind and they occasionally take dissenting opinions into account.

 

[Norbert]

I was pretty vocal (here on TMC) at the time they came out with the Sig pricing that it was a huge mistake, and the extra revenue (around $7m, I estimate) wasn't worth the loss of good will, and that they were setting themselves up for no margin for error.

Nothing against you as a GC... though regarding that, I'd be curious how much they'd have gotten if they had auctioned each Signature Model S.

 

[Arnold Panz]

Nothing against you as a GC... though regarding that, I'd be curious how much they'd have gotten if they had auctioned each Signature Model S.

No offense taken! My willingness to speak my mind on unpopular positions internally within a company have sometimes caused problems for me, but I consider it my duty to do so as an executive in a company, especially when I feel strongly about an issue.

No doubt Tesla could have made more money with an auction, and frankly probably could have jacked up the price of the Sigs and gotten a few more bucks in the process. But this is, IMHO, classic "bean counter" short term thinking. It's easy to do this because the benefit is tangible ("We got an extra $7 million!"), whereas what's lost (customer goodwill, reputation etc.) is much harder to quantify, especially for a bean counter, but I think has a much longer lasting negative impact on a company, especially one like Tesla trying to establish itself.

For example, I have a good friend who canceled his Sig when the pricing came out, and eventually bought a Panamera instead. All over $7000. How many people would he have influenced had he gotten a Sig? He was more excited than I was about the car and Tesla before the pricing came out and would talk it up to everyone. How many people would AnOutsider, Jkam, Kroneal, myself (and many others) have proselytized to with so much greater enthusiasm had we not had less than ideal experiences in the past few months? Just read the thread about delivery concerns to get a flavor of love lost for Tesla these past few months. My strong belief is that the difference between charging extra for a Sig, as opposed to a slight discount (for what is a fully loaded car) would have made *all* the difference for us early adopters as our patience wore thin with communications issues, production delays, and cars being produced/delivered out of order.

Right now, with supply the issue and not demand, it doesn't matter much, but sooner or later, Tesla hopes to be selling 20,000 of these every year, plus thousands of Model X, and eventually tens of thousands of Gen III, and will need to dramatically increase demand. Early adopting Sig owners would be the best people, and in the best position, to help drive this demand.

Do I absolutely love the car? You bet. Do I still "sell" Tesla to people? Sure I do. But I also give warning about being a startup with "growing pains" and that you need patience to deal with buying a car from them because things are far from perfect. It's certainly not the sales job I used to do, and that's a direct result of the Sig pricing, because had I not been charged the Sig premium my patience would have been close to infinite with the issues the past few months. Multiply my experience times several dozen people (maybe more), and the ripple effect of all of those people, and my experience tells me that it will eventually cost Tesla many multiples more in sales (eventually) than $7 million.

When you are sitting in an executive board meeting, though, it's hard to argue against the bean counters because they have tangible money to show, whereas what I'm talking about here is much less concrete, impossible to prove, and a much longer term play. Seeing that Tesla was acting like a more typical company in this respect was deeply surprising and disappointing to me when it happened, and subsequent events have confirmed my original opinion.

This is why I never blamed any Tesla employees, ever, and am deeply appreciative of their efforts. They were put in a really difficult situation because they had to make up for executive-level (bad) decisions by trying to provide communications and explanations for situations not of their creation (Sig premium, production delays, lack of customer service hires etc.). Talk about a thankless task! It's like Andy Reid blaming the defensive coordinator or players for the team sucking instead of looking in the mirror (sorry for those who don't get that analogy), but I've seen that a lot where management makes a poor decision, and then expects the folks in the ground to fix it with customers.

 

[Norbert]

No offense taken!

I'm not sure why you are writing all this, as I've been not only reading, but also posting in the thread you refer to.

First, that wasn't just rhetoric, as I really wouldn't have anything against you as GC.

Then, my point is simply that they haven't max'ed out how much they could have charged, as a "bean counter" might have done, but that they have simply attached a value to being one of the first 1,000 to receive a car which they already knew was going to be a very very good one. Tesla has been created to avoid a disaster. They intend to provide a great customer experience as well, however this is not their "mission" in the first place. In this context, one does not buy loyalty with discounts. Tesla is not profitable yet, and has been in a "high risk" phase in which survival was anything else than guaranteed. A few million here and there quickly add up. I trust Tesla made the right choices, also about were *not* to cut down cost. The road will remain bumpy as long as we have a disaster in front of us. I'm not sure if you share that view, however I believe it is integral to the company's conception.

 

[vfx]

...
For example, I have a good friend who canceled his Sig when the pricing came out, and eventually bought a Panamera instead. All over $7000. How many people would he have influenced had he gotten a Sig? He was more excited than I was about the car and Tesla before the pricing came out and would talk it up to everyone. How many people would AnOutsider, Jkam, Kroneal, myself (and many others) have proselytized to with so much greater enthusiasm had we not had less than ideal experiences in the past few months? Just read the thread about delivery concerns to get a flavor of love lost for Tesla these past few months. My strong belief is that the difference between charging extra for a Sig, as opposed to a slight discount (for what is a fully loaded car) would have made *all* the difference for us early adopters as our patience wore thin with communications issues, production delays, and cars being produced/delivered out of order.

Right now, with supply the issue and not demand, it doesn't matter much, but sooner or later, Tesla hopes to be selling 20,000 of these every year, plus thousands of Model X, and eventually tens of thousands of Gen III, and will need to dramatically increase demand. Early adopting Sig owners would be the best people, and in the best position, to help drive this demand.

Do I absolutely love the car? You bet. Do I still "sell" Tesla to people? Sure I do. But I also give warning about being a startup with "growing pains" and that you need patience to deal with buying a car from them because things are far from perfect. It's certainly not the sales job I used to do, and that's a direct result of the Sig pricing, because had I not been charged the Sig premium my patience would have been close to infinite with the issues the past few months. Multiply my experience times several dozen people (maybe more), and the ripple effect of all of those people, and my experience tells me that it will eventually cost Tesla many multiples more in sales (eventually) than $7 million.

When you are sitting in an executive board meeting, though, it's hard to argue against the bean counters because they have tangible money to show, whereas what I'm talking about here is much less concrete, impossible to prove, and a much longer term play. Seeing that Tesla was acting like a more typical company in this respect was deeply surprising and disappointing to me when it happened, and subsequent events have confirmed my original opinion.

This is why I never blamed any Tesla employees, ever, and am deeply appreciative of their efforts. They were put in a really difficult situation because they had to make up for executive-level (bad) decisions by trying to provide communications and explanations for situations not of their creation (Sig premium, production delays, lack of customer service hires etc.). Talk about a thankless task! It's like Andy Reid blaming the defensive coordinator or players for the team sucking instead of looking in the mirror (sorry for those who don't get that analogy), but I've seen that a lot where management makes a poor decision, and then expects the folks in the ground to fix it with customers.

You could find posts very similar to this 5 years ago with the Roadster. A startup all over again.

 

[Krugerrand]

It's not possible to make everyone happy.

 

[ckessel]

You could find posts very similar to this 5 years ago with the Roadster. A startup all over again.

It's a bit disappointing Tesla didn't apparently learn from those experiences 5 years ago. Not fatal I suppose, but disappointing.

 

[Arnold Panz]

It's a bit disappointing Tesla didn't apparently learn from those experiences 5 years ago. Not fatal I suppose, but disappointing.

Extremely disappointing. The group back then was as or more passionate, but much smaller in size so Tesla might not have heeded the warning signs.

 

[Norbert]

It's a bit disappointing Tesla didn't apparently learn from those experiences 5 years ago. Not fatal I suppose, but disappointing.

Or you could say they once more successfully avoided going bankrupt in the ramp-up phase, and learned from the first time, not coming nearly as close this second time.

 

[jerry33]

The problem here is that we don't have the entire picture, only our perception of it. So we're like the blind men describing the elephant.

 

[ckessel]

Or you could say they once more successfully avoided going bankrupt in the ramp-up phase, and learned from the first time, not coming nearly as close this second time.

I'm not sure what money management has to do with customer service.

Tesla could have charged their Sig premium purely under "early access" and "selectiveness" and been honest about it up front rather. The folks choosing to buy a Sig would have changed, but they probably still would have sold out.

 

[Norbert]

Tesla could have charged their Sig premium purely under "early access" and "selectiveness" and been honest about it up front rather. The folks choosing to buy a Sig would have changed, but they probably still would have sold out.

I'm not sure what you are saying there. Are you thinking they were expecting people wouldn't notice the price difference, that they could hide it? And that there should have been a separate announcement?

- - - Updated - - -

The problem here is that we don't have the entire picture, only our perception of it. So we're like the blind men describing the elephant.

Kind of agree with this.

 

[ckessel]

I'm not sure what you are saying there. Are you thinking they were expecting people wouldn't notice the price difference, that they could hide it?

I talked about being "honest" about the Sig pricing up front and you're talking about "hiding" things. If when I say "honest", you're reading "hide" then I've got no idea how to answer you.