Musk, Tesla Wrongly Given Arbitration Award, Ninth Circuit Says

Elon Musk and Tesla Inc. shouldn’t have been granted an arbitration award in a defamation lawsuit brought by a former top company engineer, a federal appeals court ruled Monday.

Cristina Balan’s lawsuit failed to satisfy the federal amount-in-controversy requirement of at least $75,000, and thus, the lower court didn’t have subject-matter jurisdiction to confirm the arbitration award, Judge Lawrence VanDyke said in an opinion for the US Court of Appeals for the Ninth Circuit. VanDyke reversed the award confirmation and ordered the suit to be remanded and dismissed for a lack of jurisdiction.

“For diversity jurisdiction to attach, the suit must be between citizens of different states, and the ‘amount in controversy’ must exceed $75,000,” VanDyke said. “In this case, both avenues are dead ends.”

Balan worked on car batteries at Tesla Motors Inc. She said the company would put her engraved name on its battery modules as a sign of how important her work was to the company. But after the Huffington Post wrote about her in a positive light and quoted her questioning aspects of Tesla’s leadership in 2017, the company hit back with public criticisms. Tesla allegedly falsely stated that she engaged in criminal acts and took company money and resources to complete a personal project and travel on the company’s tab.

Balan sued in 2019—prompting Tesla to move to compel arbitration—contending she wasn’t bound by a mandatory arbitration agreement contained in her employment contract.

Balan’s claims were barred under California’s one-year statute of limitations, Tesla and Musk said, and the arbitrator granted an award in their favor on each of her claims. The district court confirmed the award in 2022, and Balan appealed.

Parties seeking relief under the Federal Arbitration Act must establish an independent jurisdictional basis for a federal court’s jurisdiction, VanDyke wrote. And the district court improperly took a “look through” approach to establish jurisdiction when the facts from Tesla’s award petition should establish jurisdiction on its face alone.

While a “look through” approach is permissible for some aspects of the FAA, it doesn’t apply when moving to confirm an arbitration award, VanDyke wrote.

“On its face, a petition to confirm a zero-dollar award cannot support the amount in controversy requirement,” VanDyke said.

Tesla argued that the court doesn’t have jurisdiction to dismiss the case either since it requested a stay of the suit under a different section of the FAA, the opinion said. But Tesla’s contention is incorrect, VanDyke said, since the suit is governed by the FAA’s language to confirm an arbitration award.

Judges Daniel P. Collins and Salvador Mendoza Jr. joined the opinion.

Morgan Lewis & Bockius LLP represents Musk and Tesla. Hawgood Hawgood & Moran LLP represents Balan.

The case is Tesla Motors Inc. v. Balan, 9th Cir., No. 22-16623, 4/14/25.