Tesla Inc. and the State of Michigan have settled the automaker's constitutional challenge to the state's refusal to grant it a Class A license, which would have allowed Tesla to open a company-owned dealership.
The lawsuit, filed in federal court in 2016 and scheduled to go to trial this year, grew out of a 2014 amendment to Michigan's automobile dealer law that made it unlawful for an automaker to open its own retail store, essentially forcing manufacturers to distribute cars through franchised dealers.
I detailed the nefarious circumstances and effects of the 2014 legislation in the University of Michigan Law School article "Tesla, Dealer Franchise Laws, and the Politics of Crony Capitalism."
There are two important terms to the settlement:
1. The state will not contest Tesla's right to operate service centers in Michigan through a subsidiary.
2. The state will not contest Tesla's right to market cars to consumers in Michigan through a "gallery" model.
This settlement allows Tesla to sell and service cars in Michigan as it wants and thus represents a total victory for Tesla in the state. It could also be a tipping point in Tesla's ongoing battle for the right to engage in direct distribution in other states.