What’s The Real Reason Walmart Is Suing Tesla?

August 22nd, 2019 by Johnna Crider

Grab some coffee, because this is going to be a long, detailed read. In fact, you may just want to move the coffee pot into your living room (or wherever you are reading this) and enjoy.

However, if we go back in time, we can actually see that Walmart’s lawsuit against Tesla is pretty much a defense move — not the offense many seem to think at first read (naturally). In fact, it seems that Walmart is just being petty. Let me explain.

On August 20, 2019, Tesla filed a Notice of Breach and Demand for Cure with the New York County Clerk’s office. This was before Walmart decided to sue Tesla. The document was dated July 27, 2019, yet it was officially filed a month later.

“I am writing to follow up on the notice of breach and demand for sure that Tesla sent to Walmart,” the document starts out saying. Read on for a quick breakdown on important takes from the document.

Image courtesy SEIA/Solar Means Business report

“Walmart’s Material Breaches of the Agreements”

Tesla installed, maintains, and operates 248 solar energy systems on the roofs of 248 Walmart stores. These systems are under a contract (Solar Power & Services Agreement or something similar).

Each system has a contract. Some may have specific terms that vary but each one has the same general point: Tesla supplies and maintains the systems and Walmart pays for the use of the equipment or the power it generates.

Walmart breached that contract, according to Tesla. 244 systems are offline because Walmart didn’t honor the agreement, according to Tesla’s claims. Tesla says it has tried to accommodate Walmart’s delays, unreasonable demands, and shifting positions. In other words, the implication is that Walmart was making excuses and dragging this out.

“It is neither necessary nor realistic to attempt to document all of Walmart’s breaches, misconduct, or bad faith in a single letter. Nonetheless, we will summarize that course of conduct to ensure that Walmart is on notice of the claims that Tesla has against it,” the company wrote. Here’s a summary of more info from Tesla’s detailed letter:

1. “The Rooftop Solar Photovoltaic Systems”

Tesla began operating the systems around September 2010, and over the course of 7 years, the numbers added up to 248 systems. Each system passed local inspections and was granted permission to operate. Between 2010 and March of 2018, they collectively generated over 600,000 MWh of electricity.

2. “Without Contractual Obligation, Tesla Accommodated Walmart’s Concerns After Unrelated Thermal Events in Spring of 2018”

In March and May of 2018, the Beavercreek, OH, and Indio, CA, Walmarts experienced unrelated thermal events that were roof fires. After these two fires, Walmart made the demand that Tesla de-energize the other systems at their sites even though none had any history of thermal events and posed no threat or risk — whether from thermal events or something else.

Walmart had no right to demand that these unaffected systems be de-energized. Yet, Tesla went out of its way to submit to the demands of a valued customer. Tesla also agreed to inspect each system to make sure any issues were taken care of — at their own cost. Tesla and its investors are paid based on the energy generated by the systems.

3. “Walmart Caused Delays by Reneging on the First Inspection Protocol”

What this means is that Walmart delayed the inspection process — repeatedly. An example of this was both parties agreeing to a protocol but Walmart not engaging with Tesla regarding the inspection or reports. It didn’t provide any feedback either.

Walmart also hired two consultants and insisted that the protocol be revised with its input. This took months as it negotiated a new protocol and finally reached an agreement in December 2018

4. “Walmart Caused Delays By Imposing Extra-Contractual Conditions on Re-Energization, by Failing to Provide Feedback on Inspection Reports, by Failing to Pay its Consultant and by Not Following Through”

In December, both agreed that Tesla would complete the inspections using the new protocol. The following month, Tesla reviewed the reports with the consultants and they all agreed that all criteria were met for each site. Tesla then asked to re-energize the sites. But, instead, Walmart invited Tesla to its headquarters to discuss re-energization and plan for maintaining the progress the parties made in the prior year.

What this means is that Walmart changed its mind about something else — it was changing up the agreement it had just agreed on and wanted something else: for Tesla to pay for the damages on three sites, attorneys’ fees that were incurred, and the consultant fees.

If Tesla didn’t pay these fees, Walmart would say no to Tesla’s request to re-energize the sites, including the sites that had no issue whatsoever.

Basically: Walmart demanded third parties join in and look over plans. They did, all parties agreed, and when Tesla wanted to re-energize the systems, Walmart said, “Not unless you give us money.”

5. “Walmart’s Belated and New Demand that Re-Energization of 248 Systems Wait for Additional “Root Cause” Analyses for 2 (or Perhaps 4) Systems”

Walmart insists that none of the 248 systems can be re-energized until Tesla provides the root cause. This means Tesla now has to investigate why two panels caught fire, and until they know what started it, Walmart’s going to keep all of the systems offline.

This specific paragraph details a continued back and forth, with Walmart constantly changing its focus, making more demands, suddenly seeming to be happy, and then suddenly unhappy again while making other new random demands.

Quick Recap

Tesla bent over backwards for Walmart. Tesla went the whole nine in regards to ensuring that every single one of the 248 rooftop systems was safe. Tesla also went out of its way to make sure Walmart was satisfied.

Tesla suffered in doing this, though. It incurred expenses and losses, but it was okay with that because it wanted to make sure Walmart was satisfied. The one thing Tesla did not do was waive its right under the contracts. Tesla did its part, but Walmart refused to re-energize the systems.

Walmart is still trying to delay this and now its high-profile lawsuit is really just another one of those delays. Tesla writes:

“The only obstacles to re-energizing the 30 sites that have already been inspected are (a) Walmart’s insistence that it must first send its consultant to verify the reports while failing to take any concrete steps to do so, and (b) Walmart’s repeated practice of imposing unreasonable, extra-contractual conditions and concessions on re-energization. Tesla is certain that if Walmart were to actually examine the inspected sites, it would find that its concerns have been alleviated. But Walmart refuses to even look. Walmart cannot claim breach on sites it has never inspected, agree on an inspection protocol as a means to cure, and then continue claiming breach because it refuses to confirm that its demands for cure have been satisfied. The only real obstacle to Walmart obtaining what it is entitled to under the contract is Walmart itself.”

In other words, Walmart is playing games — games that are costing Tesla and its investors a lot of money.









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