Tesla Gets Engineer’s Whole Defamation Case Sent to Arbitration

A former top Tesla Inc. engineer must arbitrate all aspects of her defamation claims against the company over its statements in Huffington Post reports because they all relate to her employment, the Ninth Circuit said Monday.

The trial court incorrectly assessed two allegedly defamatory statements as unrelated to Cristina Balan’s employment and thus outside the scope of the arbitration clause in her contract with Tesla, the appeals court said in an unpublished per curiam opinion.

Balan worked on car batteries during her time at Tesla, from 2010 to 2014, according to her complaint in the U.S. District Court for the Western District of Washington. Tesla put her engraved name on its vehicle battery modules as a sign of how important her work was for the company, she said.

But she left the company in disputed and difficult circumstances, according to the complaint.

The Huffington Post allegedly wrote about her in a positive light in 2017, and quoted her questioning aspects of Tesla’s leadership.

Tesla allegedly hit back days later, also in the Huffington Post. But Balan says the company went too far in its public criticisms, including falsely stating that she had engaged in criminal acts.

Tesla allegedly said she used company time to complete a “secret” personal project and engaged in employment-related misconduct.

The trial court properly sent Balan’s claims relating to those alleged statements to arbitration, the U.S. Court of Appeals for the Ninth Circuit said.

But the trial court kept claims related to two other statements by Tesla in court, and Tesla appealed. Those statements were that Balan illegally recorded conversations at Tesla and that she traveled on the company’s tab to New York, according to the appeals court.

“The district court characterized Tesla’s statement that Balan ‘booked an unapproved trip to New York at Tesla’s expense’ as a statement that only implicated potentially criminal conduct,” the Ninth Circuit said. “However, the statement also involves a dispute about Balan’s conduct in her capacity as an employee,” which requires information about her employment, including whether she needed approval for trips and got approval for that trip, the appeals court said.

The recording statements present “perhaps a closer case,” the court said. But it “requires at least some understanding of Balan’s employment with respect to her workplace environment,” the court said.

Judges Johnnie B. Rawlinson and Jay S. Bybee, along with Judge Barry Ted Moskowitz of the Southern District of California, served on the panel.

Balan represented herself. Sheppard, Mullin, Richter & Hampton LLP and Lane Powell PC represented Tesla.

The case is Balan v. Tesla, Inc., 9th Cir., No. 19-35637, unpublished 3/22/21.