Tesla, Inc. v. La. Auto. Dealers Ass'n

677 F.Supp.3d 417

TESLA, INC., et al. v. LOUISIANA AUTOMOBILE DEALERS ASSOCIATION, et al.

CIVIL ACTION NO. 22-2982

United States District Court, E.D. Louisiana

Signed June 16, 2023

Mark Raymond Beebe, Diana Cole Surprenant, Jennifer Claire Bergeron, Jeffrey M. Surprenant, Adams and Reese LLP, New Orleans, LA, Jeremy Evan Maltz, Pro Hac Vice, Lehotsky Keller Cohn LLP, Washington, DC, Katherine Yarger, Pro Hac Vice, Lehotsky Keller LLP, Denver, CO, for Tesla, Inc., et al.

Claude F. Reynaud, Jr., Jeanne C. Comeaux, Breazeale, Sachse & Wilson, L.L.P., Baton Rouge, LA, David Higbee, Pro Hac Vice, Jacob Michael Coate, Pro Hac Vice, Shearman & Sterling LLP, Washington, DC, Nicholas Gallagher, Pro Hac Vice, Paul D. Clement, Pro Hac Vice, Clement & Murphy, PLLC, Alexandria, VA, for Louisiana Automobile Dealers Association.

Harry Joseph Philips, Jr., John P. Murrill, Taylor, Porter, Brooks & Phillips LLP, Baton Rouge, LA, Lamont P. Domingue, Voorhies & Labbe, Lafayette, LA, Patrick Joseph Schepens, Timothy William Hassinger, Galloway, Johnson, Tompkins, Burr & Smith, Mandeville, LA, for Defendants Gregory Lala, Stephen Guidry.

Harry Joseph Philips, Jr., John P. Murrill, Taylor, Porter, Brooks & Phillips LLP, Baton Rouge, LA, Richard Edward Sarver, Kansas Guidry, Robert A. Waldrup, Chloe Marie Chetta, Barrasso, Usdin, Kupperman, Freeman & Sarver, LLC, New Orleans, LA, Patrick Joseph Schepens, Timothy William Hassinger, Galloway, Johnson, Tompkins, Burr & Smith, Mandeville, LA, for Allen O. Krake.

Harry Joseph Philips, Jr., John P. Murrill, Taylor, Porter, Brooks & Phillips LLP, Baton Rouge, LA, Andrea V. Timpa, Patrick S. McGoey, Schonekas, Evans, McGoey & McEachin, LLC, New Orleans, LA, Patrick Joseph Schepens, Timothy William Hassinger, Galloway, Johnson, Tompkins, Burr & Smith, Mandeville, LA, for V. Price LeBlanc, Jr., Keith P. Hightower, Keith M. Marcotte, Wesley Randal Scoggin, Donna S. Corley, Terryl J. Fontenot, Maurice C. Guidry.

Harry Joseph Philips, Jr., John P. Murrill, Taylor, Porter, Brooks & Phillips LLP, Baton Rouge, LA, Patrick Joseph Schepens, Timothy William Hassinger, Galloway, Johnson, Tompkins, Burr & Smith, Mandeville, LA, Colin Derrick Sherman, Sherman & Lacey, LLP, Mobile, AL, for Eric R. Lane.

Harry Joseph Philips, Jr., John P. Murrill, Taylor, Porter, Brooks & Phillips LLP, Baton Rouge, LA, Patrick M. Bollman, W. Raley Alford, III, Stanley, Reuter, Ross, Thornton & Alford, LLC, New Orleans, LA, Patrick Joseph Schepens, Timothy William Hassinger, Galloway, Johnson, Tompkins, Burr & Smith, Mandeville, LA, for Kenneth Mike Smith.

W. Raley Alford, III, Patrick M. Bollman, Stanley, Reuter, Ross, Thornton & Alford, LLC, New Orleans, LA, for P.K. Smith Motors, Inc.

Harry Joseph Philips, Jr., John P. Murrill, Taylor, Porter, Brooks & Phillips LLP, Baton Rouge, LA, Patrick Joseph Schepens, Timothy William Hassinger, Galloway, Johnson, Tompkins, Burr & Smith, Mandeville, LA, for Defendants Scott A. Courville, Raney J. Redmond, Joseph W. Westbrook, Joyce Collier LaCour, Thomas E. Bromfield, Edwin T. Murray.

Patrick S. McGoey, Andrea V. Timpa, Schonekas, Evans, McGoey & McEachin, LLC, New Orleans, LA, for T & J Ford, Inc., Golden Motors, LLC, Holmes Motors, LLC, Airline Car Rental, Inc., Shetler-Corley Motors, Limited, LeBlanc Automobiles, L.C., Morgan Buick GMC Shreveport, Inc.

Chloe Marie Chetta, Richard Edward Sarver, Kansas Guidry, Robert A. Waldrup, Barrasso Usdin Kupperman Freeman & Sarver, L.L.C., New Orleans, LA, for Ford of Slidell, LLC.

Colin Derrick Sherman, Sherman & Lacey, LLP, Mobile, AL, for Gerry Lane Enterprises, Inc.

Patrick S. McGoey, Schonekas, Evans, McGoey & McEachin, LLC, New Orleans, LA, for Morgan Pontiac, Inc.

Lamont P. Domingue, Voorhies & Labbe, Lafayette, LA, for Stephen L. Guidry, Jr.

SECTION "R" (2)

ORDER AND REASONS

SARAH S. VANCE, UNITED STATES DISTRICT JUDGE

Before the Court are defendants' motions to dismiss plaintiffs' first amended complaint.¹ Plaintiffs oppose defendants' motions.² For the following reasons, the Court grants defendants' motions.

I. BACKGROUND

This case arises from a dispute regarding Louisiana's laws regulating new motor vehicle sales, leasing, and warranty repairs, and the way those laws have been applied to plaintiffs. Plaintiffs are Tesla, Inc., an American manufacturer of electric vehicles; Tesla Finance LLC, a wholly owned subsidiary of Tesla, Inc.; and Tesla Lease Trust, title holder to vehicles that are leased under a leasing program managed by Tesla Finance LLC (collectively, "Tesla").³ Defendants are the Louisiana Automobile Dealers Association ("LADA"), a trade association that represents nearly 350 new motor vehicle and heavy truck dealers in Louisiana; eighteen commissioners of the Louisiana Motor Vehicle Commission (the "Commission") in their individual and official capacities; and ten car dealerships.⁴

Tesla contends that it is a "disruptive" member of the automobile market due to its "unique sales, leasing, distribution, and service model," by which it engages with customers directly rather than through franchised car dealerships.⁵ Tesla asserts that unlike franchised dealerships, which foster "high-pressure, commissions-driven environment[s]," its retail locations are designed to educate consumers about electric vehicles and demonstrate Tesla's products and services.⁶ Tesla contends that it sells and leases its vehicles at uniform and transparent prices without any dealer markup or fees, which are omnipresent at franchised dealerships, and that it provides warranty repair and services for Tesla vehicles directly.⁷ It alleges that this model, which provides its customers with a low-pressure retail experience and high-quality repair service, has procompetitive advantages for consumers,⁸ whereas franchised dealerships serve the interests of entrenched franchised dealers at consumers' expense.

Tesla asserts that because its unique approach to selling, leasing, and servicing vehicles threatens the traditional franchised dealership model, Tesla's competitors across the country have "pursued every avenue to bar Tesla from the market," including "promoting protectionist legislation and coopting state regulatory authority."⁹ Tesla contends that its competitors in Louisiana have taken a similar approach by collectively engaging in two strategies to exclude Tesla from the motor vehicle market in Louisiana.¹⁰

A. The Direct Sales Ban

The first strategy Tesla's competitors allegedly employed was successfully lobbying the Louisiana Legislature in 2017 to amend Louisiana Revised Statute section 32:1261(A)(1)(k)(i) to prohibit manufacturers like Tesla from selling vehicles directly to consumers.¹¹

The pre-2017 version of the law provided that no manufacturer may "sell or offer to sell a new or unused motor vehicle directly to a consumer except as provided in this Chapter." La. Rev. Stat. Ann. § 32:1261(A)(1)(k)(i) (2016). Tesla contends that its competitors, including LADA, an entity allegedly controlled by and designed to support franchised dealers,¹² successfully lobbied the Louisiana Legislature to amend the law in 2017. The amended version of the law provides that no manufacturers may "sell or offer to sell a new or unused motor vehicle directly to a consumer" without using a franchised dealer. La. Rev. Stat. Ann. § 32:1261(A)(1)(k)(i) (2017).

Tesla notes that LADA's involvement in the change in the law is evidenced by a statement in which LADA's president, non-party Will Green, referred to the amendment as "our bill in 2017."¹³ Tesla further asserts that State Representative Tanner Magee, who proposed the language that ultimately became the 2017 amendment, stated that the amendment was "on behalf of the Auto Dealers Association."¹⁴ Tesla contends that it, along with other electric vehicle manufacturers, did not pursue a license to sell vehicles in Louisiana after 2017.¹⁵

B. Leasing and Warranty Repairs

The second alleged strategy of Tesla's competitors was to abuse their control of state regulatory power to curb Tesla's other business operations in Louisiana. In particular, Tesla contends that defendants formed a "cartel" that conspired to prevent Tesla from leasing its vehicles and providing warranty repairs and servicing in Louisiana.¹⁶

The Commission is an eighteen-member entity created by the Louisiana Legislature "within the office of the governor." La. Rev. Stat. Ann. § 32:1253(A). The commissioners are appointed by the governor. Id. The Commission also employs an Executive Director who is "in charge of the [C]ommission's office." Id. § 32:1253(D). The Commission is tasked with enforcing Louisiana's laws regulating the sale, leasing, and servicing of vehicles. Of the eighteen commissioners, three are non-licensee members of the public. Id. § 32:1253(A)(3)(a). The three non-licensee commissioners have limited responsibilities: Their "sole function" is hearing and deciding disputes between, among other entities, manufacturers and motor vehicle dealers. Id.

The remaining fifteen commissioners must be licensees of the Commission. Id. § 32:1253(A)(2). Of the fifteen licensee commissioners, six must be primarily engaged in different parts of the industry than the sale of new cars. Id.¹⁷ Accordingly, under Louisiana law, nine of the commissioners may be "primarily engaged in the business of" selling new cars. See id. Tesla alleges that these nine commissioners "directly compete with Tesla in the market for automobile sales, leasing, and servicing."¹⁸ Tesla alleges that each of these nine commissioners, all of whom are LADA members,¹⁹ own franchised dealership businesses and are thus "beholden to the dealership model" and "strive to protect it."²⁰ In other words, Tesla concludes that of the fifteen commissioners that wield meaningful regulatory power over the motor vehicle industry in Louisiana, a controlling majority of nine²¹ are Tesla's direct competitors. Tesla further asserts that, although the remaining six do not directly compete with Tesla in the new car...