New Mexico may be The Land of Enchantment, but at least one developer from the state is less than charmed with Tesla Motors.

The electric-vehicle maker has been sued by Rio Real Estate Investment Opportunities for what the developer says was an agreed-upon deal for Tesla to produce its Model S battery-electric sedan in New Mexico, according to website Gigaom.

Tesla allegedly reached an agreement in early 2007 to have Rio Real Estate build a 150,000-square-foot factory and lease it out to the automaker for $1.35 million a year for 10 years. Instead, Tesla decided to start Model S production in California after reaching an agreement with Toyota in 2010 to make the cars at the old NUMMI Toyota-General Motors joint venture plant in the San Francisco Bay Area. We asked Tesla for comment on the matter, but Tesla spokeswoman Shanna Hendriks told AutoblogGreen that the company does not comment on pending litigation.

Tesla, which in June started deliveries of the Model S, said last week that its second-quarter loss widened by 84 percent to $106.5 million because expenses jumped and revenue fell as the company geared up for the car's debut.


I'm reporting this comment as:

Reported comments and users are reviewed by Autoblog staff 24 hours a day, seven days a week to determine whether they violate Community Guideline. Accounts are penalized for Community Guidelines violations and serious or repeated violations can lead to account termination.


    • 1 Second Ago
  • 20 Comments
      SVX pearlie
      • 2 Years Ago
      Key quote from GCR: "In early 2008, the deal became public when New Mexico Governor Bill Richardson publicly announced Tesla had chosen the Cactus State as the home of Model S manufacturing. " Tesla signed an agreement, a "meeting of the minds", which was further reinforced publicly. If Telsa didn't disavow their agreement, they're on the hook. If Tesla were smart, they'd settle ASAP.
      brotherkenny4
      • 2 Years Ago
      I'd rather hear whether Tesla has been able to increase their production rate on the S. Will they hit 5000 this year?
        Val
        • 2 Years Ago
        @brotherkenny4
        They said 1000 times at the last earnings call that 5000 cars will be delivered. Even if they deliver 4900 in the last week before new year's eve. If you have any reason to doubt them, sell your shares now and cut your losses while there is still time.
        throwback
        • 2 Years Ago
        @brotherkenny4
        If they have to pay for backing out of the deal, hitting 5000 cars may be impacted.
          Rotation
          • 2 Years Ago
          @throwback
          They won't have to pay anything on this suit before the end of the year. The legal gears grind a lot slower than that.
      Marco Polo
      • 2 Years Ago
      What a lot of bar room lawyers ! The truth of the issues in this matter in are yet to be established, (if ever) so at the present time everything is just speculation and legal bluster. The issues of fraudulent conduct in a civil case require a much lower standard of proof, (even a different interpretation), than in a criminal trial, but it's still very difficult to establish and something I would expect to see withdrawn in settlement negotiations. Except, when it comes to settling litigation, Elon Musk is not a settling sort of litigant. He loves a verdict. But if ever a case cried out for settlement, it's this case. Still as I say, until a trial takes place, and sworn testimony is tested, any opinion is just idle speculation. What is more interesting, is will Tesla Motors declare the claim as a contingent liability, and for what amount ?
      Actionable Mango
      • 2 Years Ago
      I don't know whether they have a case or not, but when this happens where I work, we would have paid the expenses. Our business partners likewise pay our expenses when they do this to us. It's ethical business practice.
      RC
      • 2 Years Ago
      Folks love to make money out of thin air. Bet the claimed "damages" are all hypothetical.
        Rotation
        • 2 Years Ago
        @RC
        You're talking about New Mexico real estate here. Fiction is the order of the day. See Rio Rancho.
        Letstakeawalk
        • 2 Years Ago
        @RC
        They seem to have a legitimate complaint. They spent money to make preparations required by Tesla - they're at least able to prove "damages" based on that financial loss. Likewise, Tesla has a very poor record in court actions; they consistently lose. I'm surprised it took so long to take action, but then again, they simply might have been waiting to make sure that Tesla had the ability to pay the judgement. Winning a case against a bankrupt entity is a very hollow victory.
          JakeY
          • 2 Years Ago
          @Letstakeawalk
          The statue of limitations on breach of written contract is 4 years from the breach, so it looks like they waited for the last minute to file a complaint. It's pretty close to 4 years now: the alleged agreement was signed on Feb 2007 and Tesla announced their move to California in June 30, 2008. They filed this complaint on June 12, 2012, so they had less than a month to go before they don't even have a case. If Tesla can prove that they already contacted this development company before June 12, 2008 that they don't intend to build in New Mexico anymore, then they don't even have a case. http://www.courts.ca.gov/9618.htm And I agree with PeterScott. Reading the filing, they only have one signed document from Tesla and it was not a binding document (it was just a "good faith" document with no provisions for failure to adhere to it). Unless they can prove Tesla signed that document without the intention of building in New Mexico, I don't think they have a case.
      PeterScott
      • 2 Years Ago
      Checking the actual filing, it doesn't look like they have a case. They have one signed document. But that is essentially an agreement in principle to get things in motion, but it clearly states it isn't binding until follow on paperwork is signed, which it seems, it never was.
        Letstakeawalk
        • 2 Years Ago
        @PeterScott
        The agreement was that the two parties agreed to get things going - with the understanding that a future contract was forthcoming. The complaint is that Tesla really had no intention of entering into a second contract (thus was not acting in good faith) and that such actions by Tesla caused a financial loss to the real estate developers.
        PeterScott
        • 2 Years Ago
        @PeterScott
        I should have prefaced that with IANAL.
      PR
      • 2 Years Ago
      The bar is very high for the fraud claims they are making. It is going to be very hard for them to elevate what is a breach of contract case to the level of showing intent to defraud. Companies in big deals like this almost always have to expend dollars in the effort to win a contract. That is part of the cost of winning these kinds of contracts. You have to spend money in order to make money in almost every business, and this is no exception. Unless the other party agrees ahead of time to pay for your costs if a final contract isn't signed, those costs are your own business expense. Nothing in the intent agreement required either party to pay the expenses for the other party if no contract were actually signed.
      Spec
      • 2 Years Ago
      The number of lawsuits Tesla gets involved in is a little worrying: -Legal Dispute with various founders that ended up with booting out some founders -Legal dispute with Fisker and the design of cars -Legal dispute with the people designing a transmission for the Roadster -This new real estate dispute. Part of it is just business. But they seem to get into a lot of disputes. I hope that is just a random anomaly.
        2 Wheeled Menace
        • 2 Years Ago
        @Spec
        True. Bigger question in my eyes is.. what were they doing setting up shop in New Mexico? Nearby Oregon could use the work ( and wages could be low ), Michigan and surrounding areas could use the work ( and wages could be low there too, plus they have plenty of factories available at a low cost! ) The whole thing stinks!
          PR
          • 2 Years Ago
          @2 Wheeled Menace
          New Mexico offered an incentive package more appealing than anything that Oregon or Michigan may have offered. It is just yet another basic case of corporations negotiating much lower effective tax rates than the actual statutory rates.
          MTN RANGER
          • 2 Years Ago
          @2 Wheeled Menace
          Last time I checked, New Mexico was in the USA. ;)
        Letstakeawalk
        • 2 Years Ago
        @Spec
        Legal dispute with Top Gear/BBC - which was also a loss for Tesla.
    • Load More Comments