Tesla, Inc. v. Delaware Division of Motor Vehicles

CourtSuperior Court of Delaware
DecidedSeptember 23, 2022
DocketN21A-09-001 CLS
StatusPublished

This text of Tesla, Inc. v. Delaware Division of Motor Vehicles (Tesla, Inc. v. Delaware Division of Motor Vehicles) is published on Counsel Stack Legal Research, covering Superior Court of Delaware primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Tesla, Inc. v. Delaware Division of Motor Vehicles, (Del. Ct. App. 2022).

Opinion

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

TESLA, INC., ) ) Appellant, ) ) v. ) ) C.A. No. N21A-09-001 CLS THE DELAWARE DIVISION OF ) MOTOR VEHICLES, ) ) Appellee. ) ) )

Date Submitted: June 16, 2022 Date Decided: September 23, 2022

Upon Appellant’s Appeal from the Delaware Division of Motor Vehicle’s Denial of Appellant a Dealer’s License. AFFIRMED.

OPINION

Kelly E. Farnan, Esquire, and Tyler E. Cragg, Esquire, Richards, Layton & Finger, P.A., Wilmington, DE, 19801, Attorneys for Appellant, TESLA.

George T. Lees III, Esquire, Delaware Department of Justice, Dover, Delaware, 19901, Attorney for Appellee, State of Delaware, the Delaware Division of Motor Vehicles.

SCOTT, J. 1 INTRODUCTION Before the Court is Tesla, Inc.’s (“Tesla”) appeal of a final order from the

Delaware Division of Motor Vehicle (“DMV”) denied Dealer License Application

(“2020 Dealer Application”). Respondent, Tesla Motors, Inc., is a California

company that designs, develops, manufactures, and distributes electric vehicles.

Tesla vehicles are sold in galleries and shopping mall locations, and Tesla does not

maintain an inventory of vehicles. To purchase a Tesla vehicle, consumers must

place a reservation for a vehicle which is later manufactured to their specifications.

Tesla does not operate a dealership with cars on the lot and sells its vehicles directly

to consumers. Tesla maintains a gallery in Delaware, located in the Christiana Mall.

Upon filing for a dealer’s license and after a hearing before a Hearing Officer, its

application was denied because the Delaware Motor Vehicle Franchising Practices

Act (“Franchising Act”) prohibits manufacturers of new cars to sell directly to

consumer. Tesla now appeals the final order executed by DMV denying it a dealer’s

license.

FACTS While the appeal from this case stems from Tesla’s 2020 dealer application,

it is important to note Tesla requested approval of its “Gallery” at the Christiana

Mall in 2019. According to the Division’s denial letter of Tesla’s 2020 dealer license,

in a letter from Tesla dated January 15, 2019, Tesla acknowledged the existence of

2 6 Del. C. § 4913 (“Franchise Act”), which prohibits a manufacturer from directly or

indirectly owning an interest in a dealer or dealership, to operate or control a

dealership, or to act in the capacity of a dealership. The record does not include the

documents from the previous application for the Christiana Mall Gallery.

Moving forward almost two years after operating its Gallery, Tesla submitted

its application for a dealer’s license on December 21, 2020. In a letter to Tesla dated

April 19, 2021, the Division denied the application under § 4913 of the Franchise

Act. Tesla requested a hearing in a letter dated April 30, 2021 and asserted

substantive grounds for its objections to the denial. Specifically, Tesla asserted the

DMV’s decision constituted reversible legal error because the franchising statute

only bars manufacturers engaging in franchising practices from acting as motor

vehicle dealers. Additionally, Tesla asserted the denial deprived Tesla of

fundamental rights, thwarts the interests of the community and reliance on the

Franchise Act by the DMV to deny its application was misplaced. DMV made Tesla

aware the dealer licensing hearing would be two hours, explaining Tesla would be

given one hour to present its evidence and arguments while the DMV also received

one hour. Tesla objected to the two-hour procedure as it needed more than its one

hour and DMV allowed for a four-hour hearing.

On June 23, 2021, the administrative hearing requested by Tesla was heard in

Dover, Delaware. Tesla was represented by Mr. Auerbacher, Catherine Chio, 3 Esquire and Zachary Kahn, Esquire. Karen Carson, Chief of Compliance and

Investigations testified for the DMV. For Tesla, Professor Daniel A. Crane testified

against DMV’s objection. Zachary Kahn testified as a witness, as well as three

citizens who supported Tesla being granted a dealer’s license.

At the closing of the hearing, DMV argued the correct method review for

Tesla was to file a Declaratory Judgment Action pursuant to 10 Del. C. § 6501 and

further argued the Delaware Legislature was the proper entity to resolve the issue.

On July 23, 2021, the Hearing Officer issued the decision affirming the denial

of Tesla’s 2020 Dealer Application. Subsequently, On August 9, 2021, Division

Director Jana Simpler issued a final decision upholding the Hearing Officers

decision. Tesla then filed this appeal on September 3, 2021.

On June 16, 2022, this Court heard oral argument on this matter.

PARTIES CONTENTIONS a. Tesla’s Position Tesla, in its opening brief, presents four major arguments: (1) Tesla is entitled

to a dealer’s license because 21 Del. C. (“Licensing Act”) authorizes licensure of

non-franchising manufacturers, (2) The Division exceeded its authority because the

licensing act does not authorize denial of a license for noncompliance with the

Franchising Act, (3) Nothing in the Franchising Act prohibits non-franchising

4 manufacturers from selling vehicles directly, and (4) DMV administrative review

procedures violate Delaware law.

First, Tesla argues the Licensing Act authorizes licensure of non-franchising

manufacturers because the licensing act “prohibits only franchising manufacturers

from obtaining a license, not non-franchising manufacturers.” To reach this

conclusion, Tesla asserts the language of the Licensing Act demands Tesla is not

considered a dealer. The language of the Licensing Act prescribes a dealer shall not

include “either a manufacturer or distributor who sells or distributes vehicles to

licensed dealers or a person employed by a manufacturer or distributor to promote

the sale of the vehicles of the manufacturer or distributor, if that manufacturer,

distributor or person does not sell vehicles to retail buyers.”1 Therefore, as a non-

franchising manufacturer that does not sell its vehicles through licensed dealers,

Tesla argues it is not prohibited from obtaining a dealer’s licenses.

Next, Tesla argues the Licensing Act does not authorize denial of a license for

noncompliance with the Franchising Act, so the Division exceeded its authority by

denying Tesla’s Application on the grounds of a Franchising Act violation. Tesla

cites the Licensing Act to support a license may be denied for the specific reasons

1 21 Del. C. § 6301(3)(f) (2017) 5 contained in the statute.2 None of the reasons listed in the Licensing Act for denial

of a license include failure to comply with the Franchising Act, therefore, Tesla

argues the 2020 Dealer Application may not denied on such grounds.

Additionally, Tesla argues there is nothing in the Franchise Act prohibits non-

franchising manufacturers from selling vehicles directly. The Franchising Act

prohibits a manufacturer to act in the capacity of a dealer except as provided in the

section. Tesla argues it is not a manufacturer as prescribed under the Franchising

Act. The definition of manufacturer, as applied to the Franchising Act is “any person,

2 A dealer license applied for or issued pursuant to this chapter may be denied, suspended, or revoked for any 1 of the following reasons: (1) Material misstatement or omission on the application for a dealer license. (2) Failure to maintain an established place of business, business phone or Division of Revenue Dealer Business License.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Hart Twin Volvo Corporation v. Commissioner of Motor Vehicles
327 A.2d 588 (Supreme Court of Connecticut, 1973)
Funk v. Unemployment Insurance Appeal Board
591 A.2d 222 (Supreme Court of Delaware, 1991)

Cite This Page — Counsel Stack

Bluebook (online)
Tesla, Inc. v. Delaware Division of Motor Vehicles, Counsel Stack Legal Research, https://law.counselstack.com/opinion/tesla-inc-v-delaware-division-of-motor-vehicles-delsuperct-2022.