Elon Musk Is Breaking the Law by Reopening Tesla

(Bloomberg Opinion) -- It’s not exactly the Montgomery bus boycott, and Elon Musk is no Rosa Parks, but Tesla is apparently engaged in a highly unusual act of corporate civil disobedience..Ordered by Alameda County health authorities to keep its Fremont, California mega-plant shuttered, the company opened the factory over the weekend and started making cars. On Monday, its employee parking lot was reported to be almost full, suggesting a near-total reopening..CEO Elon Musk had announced two days earlier that the company would be suing the county in federal court. That lawsuit hasn’t yet yielded any results, however. So far as it’s possible to determine, Tesla is knowingly and intentionally breaking the law..If that sounds extreme, it should. Corporations aren’t supposed to engage in unlawful disobedience. The principles of corporate law treat intentional unlawful conduct as a violation of the corporation’s fiduciary duty to its shareholders..A glance at Tesla’s lawsuit is enough to reveal that the company’s case is not a sure winner. The first and central argument seems to be that because manufacturing cars counts as critical infrastructure exempted from a statewide shutdown under the California governor’s guidelines, Alameda County can’t shut down the plant..The California order, which I reviewed here when it came out, in turn relies on a federal list of critical infrastructure. That list includes transportation sector manufacturing, including car manufacturing. In other words, the California governor’s order didn’t on its own trigger shutdown of the Tesla plant..At the same time, the governor’s order didn’t say that no further restrictions could be applied by local or municipal governments..The county chose to impose standards “more stringent” than those adopted by the state. The county only allowed the opening of what it deemed to be “essential” businesses — which didn’t include the Tesla plant..Tesla’s suit quotes an Alameda County FAQ document that says a business that “installs distributed solar, storage, and/or electric vehicle charging systems” may continue to operate. The same document says that “businesses may also operate to manufacture distributed energy resource components, like solar panels.”.Yet manufacturing whole cars is not the same thing as installing vehicle charging systems. Nor is the making of solar panels the same as making cars..The county has been clear that it isn’t letting the plant open yet. And as a matter of legal principle, there’s no reason that the county can’t be more restrictive than the state, unless the state says it can’t be — which it has not done..In an attempt to deal with this problem, the lawsuit throws in some kitchen-sink style constitutional arguments. It says the county order doesn’t satisfy due process, which is plainly wrong. It says the order discriminates, because another county is allowing car manufacturing — but this is not discrimination, because different counties might reasonably interpret the governor’s order differently. And it says the county order contradicts general state laws — which it does not, in fact, appear to do..The upshot is that Tesla may be ultimately able to pressure the county to allow reopening, but it can’t be confident of winning its lawsuit..And even if Tesla’s legal claims were stronger than they are, it still wouldn’t follow that a corporation should be able to engage in lawbreaking. .Arguably it’s possible to conceive some circumstances where a law is morally unjust and a corporation would be justified in acting like an individual, flouting the law as an act of civil disobedience in order to get it changed. But reopening a for-profit plant — and potentially endangering workers — for the sole purpose of making money isn’t a situation where morality should trump the law..And it should go without saying that it would create a truly terrible precedent if corporations could just ignore laws that they consider to be in violation of their corporate interests..The idea isn’t just that corporations, like everybody else, should be held to account for violating the law. It’s that corporations are themselves creatures of the law, created by legal norms and existing only at the sufferance of the legal system. Corporations aren’t natural persons. They’re legal persons..It’s wrong for a corporation created by law to be empowered to break the law intentionally and consciously and with no credible claim that the law or the legal system is inherently unjust. There is a perfectly valid legal process for Tesla to work with county officials to create conditions that would make reopening safe..In practice, Alameda County may not have the capacity to enforce meaningful sanctions against Tesla for breaking the law. But Tesla’s shareholders do — including by suing the company for breach of its fiduciary duty to its shareholders through lawbreaking. Tesla’s lawsuit may not be the only one in this saga..For a useful scholarly analysis of these issues, see this recent law review article by Professor Elizabeth Pollman of Loyola Law School in Los Angeles. .This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners..Noah Feldman is a Bloomberg Opinion columnist and host of the podcast “Deep Background.” He is a professor of law at Harvard University and was a clerk to U.S. Supreme Court Justice David Souter. His books include “The Three Lives of James Madison: Genius, Partisan, President.” .©2020 Bloomberg L.P.

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Elon Musk Is Breaking the Law by Reopening Tesla

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