Antitrust Law Daily Tesla owner lacks standing to challenge constitutionality of ‘anti-Tesla’ statute
Friday, June 7, 2019

Tesla owner lacks standing to challenge constitutionality of ‘anti-Tesla’ statute

By Lee P. Dunham, J.D.

Tesla owner’s complaint against South Carolina alleging that his constitutional rights were violated by provisions of a state statute prohibiting automakers from establishing or owning vehicle dealerships or repair facilities dismissed.

A complaint filed by a Tesla owner challenging the constitutionality of S.C. Code Ann. §56-15-45, which makes it unlawful for a vehicle manufacturer or affiliated entities to own, operate, or control motor vehicle dealerships or repair facilities in South Carolina, was dismissed by the federal district court in Columbia, South Carolina for lack of standing. On the defendants’ motion to dismiss, the court found that the vehicle owner had failed to adequately allege the three elements of standing: injury in fact, traceability, and redressability (Meyer v. McMaster, June 6, 2019, Childs, J.).

The plaintiff alleged violations of the Due Process Clause of the Fourteenth Amendment, Equal Protection Clause of the Fourteenth Amendment, and the Dormant Commerce Clause of Article I of the United States Constitution, seeking declaratory and injunctive relief from S.C. Code Ann. § 56-15-45, which makes it unlawful for a vehicle manufacturer or affiliated entities to own, operate, or control motor vehicle dealerships or repair facilities in South Carolina, with certain limited exceptions. Tesla’s unique direct sales model allows it to sell its vehicles directly to consumers over the Internet and through a worldwide network of stores owned and operated by Tesla. The plaintiff asserted that the statutory provisions were unconstitutional as "protectionist legislation" which "act[s] as an outright ban on Tesla’s direct-to-consumer sales model, effectively giving franchised dealers a state-sponsored monopoly on car sales within South Carolina."

The defendants moved to dismiss, arguing, inter alia, that the plaintiff lacked Article III standing to challenge the constitutionality of the statute, as he had not alleged a "harm sufficient to establish standing" and cannot bring a suit on behalf of a third-party. In response, the plaintiff argued that he had suffered an injury because had had been forced to shop for, test drive, pick up, and repair his vehicles in North Carolina, which presented a "present and future harm to his finances," and that the court could provide redressability for his injuries, because "[a] lift on the restriction of Tesla operations in the state would guarantee they would open dealerships and service locations."

The court rejected the plaintiff’s arguments as to standing, holding that in order to establish Article III standing, a plaintiff must show (1) an injury in fact, (2) a sufficient causal connection between the injury and the conduct complained of, and (3) a likelihood that the injury will be redressed by a favorable decision, and that the plaintiff had failed to establish any of these three elements.

First, the court noted that an injury in fact must be "distinct from a ‘generally available grievance about government," and that the plaintiff’s allegations were insufficiently particular, as every South Carolina citizen—not just the plaintiff—could allege that South Carolina’s law caused them to have to travel for vehicle maintenance and purchases.

Second, the court held that the plaintiff’s injuries were insufficiently traceable to the statute because actions of a third party beyond the court’s control, Tesla itself, had impacted the plaintiff. The court held that "[w]hile South Carolina’s statute may create barriers for Tesla, ultimately, it is Tesla that has made the decision to not open a location within South Carolina when it is not completely foreclosed from doing so under the statute…. Indeed, South Carolina’s law provides a provision in which a manufacturer, including Tesla, may utilize a franchisee to sell its vehicles…. Tesla, not Defendants, has made the business decision to not open a South Carolina location and operate pursuant to S.C. Code § 56-15-45, thereby making it the true trace of [plaintiff]’s alleged injury." Because the plaintiff had "no way of knowing" whether Tesla is the entity deciding not to enter South Carolina, he could not establish traceability because South Carolina’s statute affirmatively allows manufacturers, including Tesla, to utilize a method for opening a dealership within South Carolina.

Finally, the court held that the plaintiff had not sufficiently alleged the element of redressability, because he had failed to allege or suggest in his complaint that Tesla would open dealerships in South Carolina if this court were to invalidate South Carolina’s dealership statute and order Defendants to provide Tesla with a dealer’s license. Although the plaintiff had an "implicit belief" that this was the case, the court held that such belief was merely speculative.

The case is No. 3:19-cv-00173-JMC.

Attorneys: Thomas Jefferson Goodwyn, Jr. (Goodwyn Law Firm LLC) for Austin Meyer. James Emory Smith, Jr., SC Attorney General's Office, for Henry McMaster.

MainStory: TopStory FranchisingDistribution SouthCarolinaNews

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