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Automobile Dealers sue Revenue for violating equal protection rights

JEFFERSON CITY, Mo. – Reuther Ford, Osage Industries and the Missouri Automobile Dealers filed a petition late this afternoon against the Missouri Department of Revenue and its Director Nia Ray asking the court to declare that Missouri law does not permit the department to issue a new motor vehicle dealers license to car manufacturers and to enter an order that prevents the it from renewing or issuing a new motor vehicle dealer license to Tesla.

The parties claim the Missouri Department of Revenue’s has created a special class for Tesla which violates Missouri law. As a result, MADA says the Department’s actions violate the state’s automobile industry, its car manufacturers and the 381 new car and truck dealers’ constitutional equal protection rights.

Revenue granted Tesla the ability to sell direct-to-consumer in 2013, causing an uproar from the dealer industry due to the requirement that they sell through franchise laws laid out in state statute. A legislative fix was attempted in 2014 in the final days of the legislative session, but ultimately failed.

The parties lay out the harm caused to be related to several sections, including Section 407.811 RSMo, where the General Assembly declared the policy to include “fair and impartial regulation of those persons engaged in the manufacturing, distributing, importing or selling of motor vehicles”

The Act specifies that car sales “shall be administered…without unfair or unreasonable discrimination or undue, preference or advantage, “protection against irresponsible vendors and dishonest or fraudulent sales practices,” and a stable, efficient, enforceable, and verifiable method for the distribution of motor vehicles to consumers in the State”

Executive departments can create their own rules within the bounds of the law. However, MADA is arguing that Revenue approving the direct-to-consumer sale by Tesla violates their equal protection rights because they are unable to sell direct-to-consumer.

The representative said Revenue’s actions neglect and jeopardize state statute in place that has created an efficient and effective way of distributing cars in Missouri and makes these state statutes unenforceable.

According to MADA, over 20,000 people are employed by a new car dealer in Missouri. In 2013, Missouri’s new car and truck dealers paid $237 million in taxes at the local, state and federal level and generated $322,539,612 in revenue.

MADA is the largest professional association of motor vehicle dealers in Missouri. Its predecessor organization was founded in 1939, and it has represented the interests of automobile dealers since then.

Reuther Ford is a local, family-owned small business with 40 employees located in Herculaneum, Missouri. Reuther Ford President Steve Reuther has been working in the automobile industry since 1972 and his family has owned automobile dealerships since approximately 1950.

Osage Industries is a Missouri-based manufacturer of vehicles licensed as a manufacturer by the Missouri Department of Revenue and its director Nia Ray. It has been in business in Osage County since 1988. It employs over 90 people and is a member of MADA.

The petition was received by the court at 4:01pm, in the 19th Circuit, which consists of Cole County. The case is State of Missouri, ex rel. Missouri Automobile Dealers Association, et al. v. Nia Ray, Director, Missouri Department of Revenue, et al.

Tesla issued a statement soonafter.

“Today’s lawsuit is a desperate attempt to prevent an innovative company like Tesla from bringing products directly to market,” said Diarmuid O’Connell, Tesla’s VP of Corporate & Business Development. “Missouri law is very straightforward in that it prohibits manufacturers that use independent franchisees from competing directly against them. This has nothing to do with Tesla, which has never used independent franchisees. The fact that MADA tried and failed last year to change existing Missouri law to make it apply to Tesla, proves the frivolousness of this legal challenge.

“The goal of both this lawsuit and anti-Tesla legislation is to create a distribution monopoly that will decrease competition, hurt consumer choice, and limit economic investment in Missouri. We will continue to oppose these efforts to advance anti-free market regulations both in Missouri court and in the legislature.”

The Department of Revenue does not comment on pending litigation.

The documents filed can be seen below.

Petition for Declaratory Judgment and Writ of Prohibition

Suggestions in Support of Petition for Writ of Prohibition