Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—Mass. Sup. Jud. Ct.: Tesla steers clear of claims it operated an unauthorized dealership, (Sep 16, 2014)

By Greg Hammond, J.D.

The Massachusetts State Automobile Dealers Association, Inc. (MSADA) could not bring suit against premium electric vehicle maker Tesla Motors, Inc. for allegedly running an unaffiliated motor vehicle dealership. In affirming the lower court’s order of dismissal, the Massachusetts Supreme Judicial Court concluded that MSADA lacked standing under the Massachusetts motor vehicle dealer law (Massachusetts State Automobile Dealers Association, Inc. v. Tesla Motors MA, Inc., September 15, 2014, Botsford, M.).

Background. MSADA is a statewide organization that represents the interests of new auto and truck franchised dealerships in Massachusetts. The organization, along with two dealerships, filed suit against Tesla Motors, Inc. and its subsidiary, Tesla Motors MA, Inc. (collectively, Tesla), alleging that the two companies operated an automobile dealership showroom without a license. Although Tesla was not a member of MSADA, and the dealership plaintiffs never sold any Tesla brand vehicles, they alleged that Tesla violated the Massachusetts motor vehicle dealer law, G. L. c. 93(B), sections 3(a) and 4(c) (10), by operating a factory-owned store selling its vehicles. The superior court dismissed the complaint for lack of standing, and MSADA appealed.

Standing. G. L. c. 93(B), section 3(a) declares unlawful the use of “unfair methods of competition and unfair or deceptive acts and practices,” as defined in sections 4 and 4(c). Under section 4(c)(10), it is unlawful for a manufacturer to “own or operate, either directly or indirectly through any subsidiary, parent company or firm, a motor vehicle dealership located in the commonwealth of the same line make as any of the vehicles manufactured, assembled or distributed by the manufacturer or distributor.”

MSADA urged the court to read the statutes literally, and to find that the organization had standing to bring a private cause of action against Tesla. However, the court determined that it was not entirely clear that the plain language of the statute applied to Tesla’s conduct, as a question remained as to whether Tesla’s business model involved the operation of a “motor vehicle dealership” under Massachusetts law.

Looking to the legislature’s intent, the court noted that the purpose of the statute historically was to protect automobile dealers from unfair and deceptive practices directed at them by their “own brand manufacturers and distributors.” With regard to the statute, the court noted that it would be anomalous to find “a lone provision giving dealers protection against competition from an unaffiliated manufacturer.” Further, it identified a number of papers, one of which was authored by MSADA, noting that the statute—then bill—would prevent manufacturers from directly competing “with their own dealers” by indirectly owning or operating dealerships in Massachusetts. Consequently, the court determined that the statute prohibits manufacturer-owned dealerships when the manufacturer already had an affiliated dealer or dealers in Massachusetts. Because the plaintiffs were not affiliated with Tesla, the court concluded that their complaint was properly dismissed for lack of standing.

The case number is SJC-11545.

Attorneys: Thomas S. Vangel and James F. Radke (Murtha Cullina LLP) for the Massachusetts State Automobile Dealers Association, Inc. Richard P. Campbell (Campbell Campbell Edwards & Conroy PC) for Tesla Motors MA, Inc. and Tesla Motors, Inc.

Companies: Tesla Motors, Inc.; Tesla Motors MA, Inc.; Massachusetts State Automobile Dealers Association

Cases: FranchisingDistribution StateUnfairTradePractices MassachusettsNews