A Massachusetts Supreme Judicial Court ruling earlier this week in favour of California electric automaker Tesla Motors may have given Tesla Motors and its fans cause for celebration in the long fight against powerful auto dealer associations keen to prohibit Tesla’s direct to customer sales model, but that doesn’t mean that its long fight is anywhere near done yet.
In fact, fresh from backing from the highest court in the Commonwealth of Massachusetts, Tesla’s legal team headed back to the familiar battle ground of New Jersey in an attempt to up the ante in an ongoing fight against the state’s dealer-backed Motor Vehicle Commission.
This time, as Automotive News reports, Tesla is heading to the state courts, arguing that the NJMVC did not have the authority it needed to prohibit Tesla from selling direct to customers within the state or force it to turn its existing Tesla Stores into sale-prohibited Tesla Galleries.
What’s more, Tesla is using the ruling from the recent Massachusetts to set a logical precedent in New Jersey: namely, that without any franchisee-franchisor relationships, Tesla cannot be held to the same laws as other automakers who do use the traditional franchised dealer model. Essentially, argues Tesla, the Franchise Statue, on which the NJMVC made its ruling back in the spring, can’t be used in this case.
Back in March, the NJMVC — responsible for setting and policing a wide range of New Jersey motor vehicle legislation — hurriedly voted in the controversial PRN 2013-138 regulation which made it illegal for Tesla Motors [NASDAQ:TSLA] to sell direct to customers within the Garden State.
While the meeting at which the regulation was voted in was a planned, regular meeting of the NJMVC, the agenda was quickly changed at the last minute to include the controversial proposal, giving Tesla and its fans barely any time to respond publicly. (Luckily, we were able to respond quickly enough to get our New Jersey resident Michael Thwaite to Trenton in time to cover the event live in real-time, and you can read the live-blog from the day here.)
At the time, Tesla’s aides had decried the clandestine actions of the NJMVC, saying that it had been working with the state and legislators for months to develop a law which would both protect Tesla’s interests and those of the auto dealer associations who felt threatened by its business model. Despite working hard in what seemed to be a productive solution, Tesla said that the regulation was pushed in at the last minute in nothing short of a ‘backroom deal’.
Shortly after the regulation was voted in, New Jersey Republican Governor Chris Christie — his own office under investigation for corruption at the time — challenged those who disagreed with the regulation to work with their representative to change the law. Luckily, it didn’t take long for pro-electric car Assemblyman Timothy Eustace, working with Senator Raymond Lesniak in the upper house, to introduce two different bills designed to give Tesla a reprieve from the tough NJMVC ruling.
Since then, the Assembly has unanimously passed Eustace’s bill, but without a vote as yet from the Seante, the legislation has not yet made it onto the books.
According to Jim Appleton, president of the New Jersey Coalition of Automotive Retailers — the very group which is believed to have been behind the rush NJMVC ruling earlier this year — Tesla’s latest legal case is pointless.
“Something may be on the governor’s desk and signed before they even decide to grant oral arguments at all,” he said, indicating that the Senate is close to voting on its own auto dealership regulation which would allow Tesla to offer sales and service within the state from its existing Tesla Gallery locations.
But the challenge here is that while the proposed Senate bill would allow Tesla to sell direct to customers form its existing locations, it would also require Tesla to sign a franchisee agreement with an independent third-party dealer to operate a third store in the state, something Tesla is vehemently opposed to.
As always, we’ll be keeping a close eye on this case — and we’ll let you know more as it progresses through the courts.
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