Lemon suit tests Tesla's restrictive sales deals

A lemon-law suit by an unhappy Tesla Model S owner who wants his money back could be the first test of Tesla's restrictive customer sales agreements.

The Wisconsin lawyer handling the state lawsuit against Tesla, a specialist in automobile lemon-law cases, says he believes state law there will overcome what he calls one of the the most unusual sales agreements that he's ever seen -- one he believes are aimed at keeping owners from being able to sue over bad cars in the first place.

Milwaukee attorney Vince Megna also says that Tesla's policy of selling cars directly to consumers -- rather than having franchised dealers -- is another reason that it is tougher for customers to take action if they are dissatisified with their car.

"They are a company that doesn't have to follow state rules," says Megna. "It really puts a person in tough, tough situation."

Megna represents physician Robert Montgomery, who says the $94,770 Tesla Model S that he had delivered in March, 2013 and in the first five months it was out of service 66 days according to Megna, and he wants a refund. Megna says that Montgomery's three demands for a buy-back under the Wisconsin lemon law went unanswered.

Tesla officials, reached for comment, say they can't talk about pending court cases.

Montgomery has had a laundry list of troubles -- not turning on, not going into "drive," door handles that don't work, a faulty battery coolant system and and more. Adding to the lost time, because Tesla has no Wisconsin facilities, the car had to be transported to Chicago for major repairs.

Because the car was out of service for 30 days or more, according to the suit and Megna, it falls squarely under Wisconsin's lemon law -- state laws that generally provide recourse for car buyers if a car is faulty and the maker can't make good on it.

But the case is complicated by Tesla's sales agreement that buyers sign, which Megna is designed to thwart lemon-law suits.

For one, he says, Tesla's deal says that legal disputes must be filed in northern California, where Tesla is based, and where the owner lives. The agreement also mandates that Tesla or the owner can demand arbitration, which could pretty much allow Tesla to prevent cases from going to trial. And if there is a settlement, you can't tell anyone.

"Tesla is like a dictator," Megna says.

Megna argues, however, in the suit that Wisconsin's lemon laws supersede Tesla's sales contract and that is should be allowed to go forward there.

Megna also has done a humorous video to promote the case and we've included it here. As you'll see, the self-described "King of the Lemon Laws" bears more than a passing resemblance in both his deadpan delivery and his eyebrows to Eugene Levy, perhaps best known as the dad in the American Pie movies series.