Tesla Opt-Out California Attorneys

One way Tesla has set itself apart from other auto manufacturers is to sell its vehicles directly to customers rather than through dealerships. As part of this process, Tesla requires buyers to sign paperwork detailing the responsibilities of both the buyer and Tesla, the seller. One clause in this paperwork requires Tesla owners to bring their claims to arbitration rather than to court.

Between 2018 and 2021, Tesla was named in one California lemon law claim for every 1,553 vehicles it sold in the state – a rate much lower than the average auto manufacturer. Claims brought to arbitration, however, aren’t counted in this total. Vehicle owners who seek arbitration in a Tesla lemon law dispute may be at a disadvantage compared to those who can bring their claims in court. 

Tesla allows vehicle owners a limited window of time in which to opt out of arbitration. Here’s what Tesla owners need to know. 

How to Opt-Out of Arbitration When You Buy a Tesla

Tesla’s purchase agreement contains instructions about how to opt out of arbitration. This portion of the purchase agreement reads:

You may opt-out of arbitration within 30 days after signing this Agreement by sending a letter to: Tesla, Inc.; P.O. Box 15430; Fremont, CA 94539-7970, stating your name, Vehicle Identification Number, and intent to opt-out of the arbitration provision. If you do not opt-out, this agreement to arbitrate overrides any different arbitration agreement between us, including any arbitration agreement in a lease or finance contract.

On its face, the process seems simple: Send a letter to Tesla at the listed address, stating your name, vehicle identification number (VIN), and intent to opt out of arbitration, and send this letter within 30 days of signing the purchase agreement. 

Several Tesla owners, however, have discovered that the process isn’t as simple as it first appears. For instance, many Tesla customers order their Tesla online. They sign the purchase agreement when they order, but the Tesla they bought isn’t delivered until later. The Tesla owner may not have access to their Tesla’s VIN when they sign the purchase agreement. The owner cannot complete the opt-out letter without the VINーyet the 30-day clock is ticking. 

In some cases, Tesla buyers may not even realize they have the chance to opt-out. They may miss this clause, which is buried in the purchase agreement. 

In addition, the arbitration clause attempts to limit the right of Tesla owners to file lemon law claims by stating that “if not resolved within 60 days, you agree that any dispute…will not be decided by a judge or jury but instead by a single arbitrator.” 

Why Tesla Owners Should Consider Opting Out of Arbitration

Despite its seemingly low rate of lemon lawsuits in California, Tesla has faced reports of several major mechanical defects with various Tesla vehicles. These include problems with the vehicles’ autopilot and autopark features, airbags, electrical systems, and fit and finish issues. 

Traditionally, vehicle owners who face issues like these file a lemon law claim or work with an experienced lemon law attorney to settle their case with the automaker. Tesla’s arbitration clause, however, requires a vehicle owner to bring their claim to arbitration instead.

What is Arbitration?

In arbitration, a claim is heard by a single third party, called an “arbitrator.” Arbitrators often have some experience in the topic they hear. For instance, an arbitrator in a lemon law claim may have a background in auto manufacturing or consumer law. Arbitrators are trained in arbitration techniques and rules as well.

An arbitrator’s decision is typically binding on both parties. In most cases, the decision cannot be appealed. If the arbitrator doesn’t decide the case in your favor, you have no further options.

Supporters of arbitration claim that arbitration allows disputes to be resolved more quickly and at less expense than courtroom trials. Yet this efficiency can come at a steep cost for vehicle owners.

When Arbitration is the Wrong Choice for Your CA Lemon Law Claim

Arbitration can put a vehicle owner at a disadvantage in a lemon law claim. Reasons arbitration may be a poor fit for your claim include the following:

• Arbitrators are not always neutral. Because arbitrators typically have backgrounds in the type of case they hear, they can be biased toward one side or the other. An arbitrator whose previous career was spent in the legal departments of auto companies, for instance, may be less familiar with your side of the claim than the automakers’ーwhich can influence the arbitrator to believe your side has less merit. 
• You may not be able to bring a claim even if you discover dangerous, illegal, or life-threatening issues. For instance, you may not be able to bring a legal claim even if your Tesla has a deadly defect or you realize the manufacturer has done something illegal, such as engaging in false advertising. Your only choice may be to go to arbitration, where the arbitrator may be ill-equipped to deal with the larger legal or safety issues. 
• Arbitration agreements are typically private. Privacy can seem like a benefit in some instances. When your case involves a dangerous vehicle defect or a case of illegal or unethical behavior, however, privacy can endanger others. The public nature of court records means that the public can more easily learn about problems with Tesla vehicles or the company’s policies before they make a purchase. Being able to bring your case through the court gives you the option to help others as you seek help for your own case.
• Failing to opt out means you give up your Constitutional right to a jury trial. Most lemon law claims never go to a jury. Having the right to bring your claim to a jury, however, gives you additional bargaining power during settlement negotiations. The right to a trial also gives you access to other rights and procedures, like the process of legal discovery, which provides you with more information about what’s going on in your case. You do not have to give up your right to a trial simply because you want to buy a Tesla.
• You may receive less from arbitration than you’re entitled to receive under California lemon law. Arbitration awards are typically lower than lemon law claim settlements or jury verdicts. Even though California’s lemon law entitles you to certain forms of compensation, you may not receive everything you’re owed in an arbitration agreement. For instance, California lemon law requires an automaker to pay your attorney’s fees if you win your claim – but you may not receive an arbitration award that includes the full cost of your attorney’s help. 

Most importantly, opting out of Tesla’s arbitration clause does not prevent you from bringing a later claim to arbitration if you choose. Rather, opting out of Tesla’s arbitration clause merely preserves your right to choose between arbitration or a court claim. You keep the option to decide how to proceed instead of letting Tesla choose for you. 

What If I Missed the Deadline to Opt-Out of Arbitration? 

If you missed the deadline to opt out of Tesla’s arbitration clause, you are not totally out of options. To reach a fair result in your case, however, you will need the help of an experienced California lemon law attorney.

You may choose a lawyer to represent you in arbitration. Many lawyers have experience with the rules and processes of arbitration and have represented clients in arbitration settings before. 

Even if you have past experience with arbitration, having an experienced advocate on your side can help you anticipate and address issues that could affect your case. Your lawyer can also fight to protect your rights during arbitration, such as by preserving your right to appeal or fighting for an outcome that fully compensates you for the harm you’ve suffered. 

Finally, your attorney will stay informed on state and federal attempts to end forced arbitration, such as the federal Forced Arbitration Injustice Reform (FAIR) Act. If passed, such laws will impact the rights of people who signed agreements with forced arbitration clauses, like the Tesla purchase agreement. Your lawyer will know whether any of these bills have become law, when they take effect, and how they affect your options. 

Talk to an Experienced California Tesla Opt-Out Lemon Law Attorney Today

Navigating California’s lemon laws can be tricky, especially when you face the fine print in contracts with automakers like Tesla. While California gives you the right to bring a court case if you buy a lemon vehicle, arbitration clauses like the one in Tesla’s purchase agreement may undermine that right. And while Tesla provides a way to opt out, many vehicle owners miss the opportunity to do so often without intending to do so.

If your Tesla is turning out to be a lemon, don’t burden yourself by tackling the problem alone. Instead, talk to the experienced California lemon lawyers at Wirtz Law. We’ll help you understand and protect your legal rights. To learn more, contact us today to schedule your free and confidential consultation.