Tesla Motors Inc (NASDAQ:TSLA) Seeks To Challenge States’ Direct Sale Ban By Going To The Federal Court

Tesla Motors Inc (NASDAQ:TSLA) is willing to take state direct sales ban to the federal court with the aim of opening up six states that include Texas. Currently, the company is weighing on a combination of state legislation, dealer applications, and others actions that might open up the sell, though if this does not work, it may take the case to the federal law.

The company’s legal staffs have been studying a 2013 federal appeals court ruling that allowed St. Joseph Abbey in New Orleans to sell monk-made coffins without seeking a funeral director’s license. The case emerged during a casket shortage after Hurricane Katrina had occurred. The Abbey had tried to sell the coffins but was restricted by state law that only allowed sales to licensed groups only.

The six states where Tesla is banned from making direct sales include Michigan, Arizona, Connecticut, Utah, West Virginia, and Texas. The states account for approximately 18% of U.S. new-vehicle market. They might be crucial to Tesla as it introduces its current Model 3 Electric Sedan. The company will unveil this model this week at a price of $35,000, which is the same as an average gasoline-powered vehicle.

The company last year managed to get direct sales in Maryland, New Jersey, and Georgia. Todd Maron, Tesla’s chief counsel, notes that Tesla is currently battling immediate sales ban, and all options are on the table. He further pointed out that it is widely accepted that laws that are protectionist are not proper.

The ruling in favor of St Joseph Abbey might give Tesla the precedent it needs to join an ‘economic Liberty’ issue that is currently in dispute between circuit courts in the U.S. John McGinnis a Northwestern University law professor notes. The second Circuit Court of Appeal has in the past upheld legislation that requires licensing to sell products even when there is no apparent reason for it except protecting existing business from new competition.

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