Tesla’s lockdown lawsuit is about much more than Tesla

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Tesla’s lawsuit against a county government to open its Fremont, Calif. factory will do more than impact whether the company can continue making cars there. It could also, according to legal experts, help define how America reopens amid the coronavirus pandemic, and even more broadly, influence the power states have over local governments.

Tesla’s suit, filed in the U.S. District Court for Northern California, came just days after its CEO, Elon Musk, referred to coronavirus lockdown orders as ‘fascist.’ Then late Monday, Musk declared that his company’s factory would reopen in direct defiance of orders by Alameda County, where the plant is located.

The standoff is high-stakes for Tesla. The Fremont factory is the only plant producing Tesla cars, such as the Model 3 sedan, for the U.S. and European markets. Every day it is not making cars threatens the company’s bottom line.

But several health law experts say the case could have broader implications as U.S. states move to end coronavirus lockdowns. In particular, it may influence whether courts elsewhere rule that state-level orders trump city or county orders. In South Carolina, for instance, there has been uncertainty over whether the City of Greenville can enact a stronger stay-at-home order than the rest of the state.

The outcome of Tesla’s case could be particularly influential because the carmaker is the highest-profile company to sue in opposition to lockdown orders. Other suits have come from smaller businesses, which have also alleged unconstitutional violations of due process and equal protection, or argued that they are essential businesses that should be free to open.

Tesla’s decision to openly defy government health orders—it reopened its factory this week despite the county government’s position—should not impact the court case itself, according to Edward Richards, a Louisiana State University law professor who has previously worked with the U.S. Department of Justice on pandemic preparedness issues.

“[Tesla] is willing to put their money where their mouth is,” says Richards. “That’s partly because they say the locality doesn’t have the authority to do this. If the judge finds that to be true … the locality can’t do anything.”

Tesla’s suit makes three main arguments, according to James Hodge, a health-law specialist at Arizona State University. Tesla argues, first, that the mixed messages sent by Alameda County violated the company’s constitutional right to the due process of law. Tesla further argues that, because factories in different parts of California are subject to different restrictions, its constitutional right to equal protection has been violated. Finally, the company argues that Alameda County’s more-restrictive orders are pre-empted by statewide orders, which it says give it clearance to operate.

All of the experts interviewed for this article urged caution in assessing the case, because Alameda County has not yet had the chance to respond in court filings with its own version of events. Still, Hodge says that there is some merit to the due process claim. Alameda County’s published guidelines stated that businesses that install “distributed solar, storage, and/or electric vehicle charging systems” could remain open, which Tesla says includes the Fremont factory. The county, says Tesla, later contradicted those statements in ordering the factory closed.

“If you act in an arbitrary or vague way,” says Hodge, referring to the county, “you’re outside the bounds of due process.”

Tesla’s equal protection argument is less persuasive both to Hodge and to Wendy Parmet, law professor and director of the Center for Health Policy and Law at Northeastern University. Tesla’s claim compares the treatment of its facility in Alameda County with the decision made in a different county. Parmet says comparing two different jurisdictions isn’t relevant to an equal protection claim.

“That makes almost no sense. Because [equal protection is] a question of whether the [same] county is acting differently to other businesses within their jurisdiction,” she says.

The third leg of Tesla’s case may be the most impactful, whether or not it helps Tesla directly. The company argues that the orders issued by California Gov. Gavin Newsom supersede any orders at the county level, and that the reopening of factories elsewhere in California indicates that the state approves of factories like Tesla’s reopening.

The question of whether states can force cities or counties to adopt specific pandemic-related policies is about to become a much bigger one as more states open up. Tesla’s case could act as a precedent of sorts if, for instance, a city in Georgia decides to impose stricter lockdown orders as the broader state reopens, and the state tries to overrule it.

Experts were divided on how the preemption question might play in Tesla’s case.

“Gov. Newsom did not preempt all [local orders],” says Hodge. “He just said if a county is directly violating the order, the state preempts. Otherwise, some of it is subject to local decision-making.” Richards, by contrast, describes Tesla’s argument that the state order takes precedence as “fairly strong.”

According to Parmet, Tesla’s case is part of an ongoing “backdrop of contestation between state and local governments” on states’ ability to override local ordinances. States have placed limits on local government regulations on ridesharing and minimum wage in recent years, but there remains uncertainty about whether those moves are legal. The Tesla case, according to Parmet, could help further clarify the question.

If a judge rules in Tesla’s favor, the company would be clear to reopen. The county could also rescind or revise its order, ending the case before it goes before a judge.

It’s less clear what would happen if Tesla loses, given that the factory reopened on May 11. In a public statement and letter sent to Tesla the same day, Alameda County said it is “addressing this matter using the same phased approach we use for other businesses which have violated the Order in the past, and we hope that Tesla will likewise comply without further enforcement measures.”

The court case is on an accelerated timeline, so could be decided in a matter of weeks.

Regardless of the legal outcome, Tesla’s aggressive opposition to lockdown orders could threaten its reputation as a company focused on social good. That’s particularly true because of Musk’s vocal defiance of public health orders, which polls find the vast majority of Americans support.

Alyssa Altman, an analyst who covers Tesla for the consulting firm Publicis Sapient, says that if the company appears to be focused on its own finances rather than worker safety, Tesla “could lose that perception of trying to take the world to a different place, emotionally as well as environmentally.”

Source: Fortune

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