Diaz v. Tesla, Inc.

Background

After both sides finished presenting evidence in a jury trial, Tesla moved for judgment as a matter of law and moved to strike the testimony of Diaz’s financial expert, Charles Mahla. Judge Orrick had denied both motions orally and issued this order explaining those decisions.

Tesla’s judgment-as-a-matter-of-law motion argued that Diaz had not established a contractual relationship with Tesla and had not presented evidence of a contract giving him rights under 42 U.S.C. § 1981. Section 1981 prohibits racial discrimination in the making and enforcement of private contracts.

Judgment as a Matter of Law

A judgment as a matter of law, under Federal Rule of Civil Procedure 50, may be entered when a party has been fully heard and no reasonable jury could legally find for that party on an issue. The court must view the evidence and reasonable inferences in favor of the nonmoving party, accept credibility findings consistent with the verdict, and avoid substituting its own view of the evidence for the jury’s view.

The court identified two legally sufficient ways the jury could find that Diaz had contractual rights supporting his Section 1981 claim.

First, the jury could find that Tesla and Diaz had an employment contract. Under California law, a contract requires parties capable of contracting, mutual consent, a lawful purpose, and consideration. The court explained that the evidence could support mutual consent because Diaz applied to work at Tesla, was hired by a contractor at Tesla’s direction, worked at a Tesla facility, received directions and safety training from Tesla, and worked for Tesla’s business. The evidence could also support consideration because Diaz provided labor and Tesla provided wages through an intermediary.

The jury had found in a special verdict that Tesla was Diaz’s joint employer. The court concluded that Tesla’s use of a staffing company and the fact that the staffing company appeared on Diaz’s paycheck did not, as a matter of law, prevent a finding that Tesla employed Diaz or that the two had an employment contract. The court also stated that contracts do not have to be written.

Second, the jury could find that Diaz was a third-party beneficiary of Tesla’s contract with nextSource, the staffing company that hired Diaz’s staffing company. Under California law, a third party may enforce a contract made for that person’s benefit or for the benefit of a class to which the person belongs. The court concluded that the jury could find that the contract was intended, at least in part, to benefit the employees hired through the arrangement. A clause stating that the agreement created no rights for third parties did not necessarily resolve the issue because the contract and surrounding circumstances could show a contrary intent.

Motion to Strike Expert Testimony

Tesla also moved to exclude Mahla’s testimony about Tesla’s value. The court held that Tesla waived its objection by failing to raise it when Mahla testified or through a pretrial challenge. Tesla had known the content of his testimony for years through expert disclosures and his deposition, did not object when he was qualified as an expert, and remained silent during his testimony.

The court alternatively held that the objection lacked merit. Expert valuation testimony is admissible when it is methodologically sound. Mahla testified that market capitalization could measure a company’s value and calculated Tesla’s market capitalization. Although the calculation involved multiplying the number of shares by the share value, the court found that his testimony provided financial information and helped the jury understand matters beyond the knowledge of laypeople.

Disposition

The court denied Tesla’s motion for judgment as a matter of law and denied Tesla’s motion to strike.