Tesla Motors Inc. filed suit Thursday after Michigan denied it a license to open a store to sell directly to customers, saying a state law violates its constitutional rights and protects hometown rivals, such as General Motors Co.
The suit, filed in U.S. District Court for the Western District of Michigan, names three state officials: Michigan Gov. Rick Snyder, Attorney General Bill Schuette and Secretary of State Ruth Johnson, the latter whose department rejected Tesla’s application for a dealership license last week.
“We are currently reviewing the suit,” a spokeswoman for the attorney general’s office said.
Tesla’s bid to open its own dealerships has faced fierce resistance around the country from independent franchise dealers and traditional auto makers. In some states, Tesla has had to fight to open stores while in others it has defended against dealers and auto makers looking to shut Tesla stores down. Independent automotive dealers traditionally have held sway in states where they have successfully urged legislators to create laws protecting them from being closed by manufacturers.
In 2014, that fight took on greater attention as Tesla fought in Detroit’s backyard. Mr. Snyder enacted legislation that shut down Tesla’s direct-to-customer sales in the state—a bill GM had urged the governor to sign.
Tesla’s suit seeks a permanent injunction preventing Michigan from enforcing the law. The Palo Alto, Calif., auto maker argues the state doesn’t have a legitimate reason to prohibit a nonfranchise auto maker, such as Tesla, from selling in the state.
“These irrational classifications do not further any legitimate government interest and exist solely for the purpose of protecting two discrete Michigan-based interest groups—Michigan’s franchised auto dealers and Michigan-based manufacturers—from economic competition,” Tesla said in the suit.
Tesla lawyers hope a 2013 federal appeals court ruling in New Orleans could bolster their case against such state franchise laws. The case involved an abbey trying to sell coffins during a casket shortage, only to find state law restricted sales to those licensed by the Louisiana Board of Funeral Directors. The court ruled in the abbey’s favor.
Such “economic liberty” arguments have found favor among some circuit courts, Northwestern University law professor John McGinnis said.
“The argument is that these regulations have no public-regarding reason, they’re just there for protectionism,” he said. “It’s still not clear that Tesla is going to win; I’m saying that this case is better or more plausible than it would’ve been a decade ago.”
Tesla is also arguing that the state is impeding the free flow of commerce among the states.
“The dormant commerce clause argument may be persuasive, because the law does seem to restrict the free flow of commerce among the states, but again we’ll have to see how Michigan responds,” said Carl Tobias, a law professor at the University of Richmond.
Separately, Tesla on Thursday began updating software in its vehicles in North America, including revisions to the Autopilot feature that Chief Executive Elon Musk has said likely would have prevented a fatal car crash in May.
The software rollout is gradual, beginning in North America and spreading globally over the coming weeks, Tesla said. Among the changes in the latest version, first detailed Sept. 11, is a greater reliance on a Tesla vehicle’s radar for guidance when the Autopilot feature is engaged.