Ex-Tesla engineer fights arbitration award at Ninth Circuit

SAN FRANCISCO (CN) — A former Tesla engineer who claims she was fired after raising safety concerns asked a Ninth Circuit panel to vacate an arbitration award in Tesla’s favor, arguing state court is the proper place to hash out the validity of the award.

Before becoming Tesla’s legal rival, Cristina Balan was a rising star at the company — so much so that her initials were found on the batteries of every Tesla the company built. However, she was fired in 2014 because, she claims, she raised safety concerns about a design flaw that could impact the car’s braking.

Tesla later went on to publicly accuse her of criminal activity in an article on an online news website, prompting her to file a defamation lawsuit in 2019. The former engineer claims the electric car company tarnished her reputation when it accused her of using its resources for a “secret project” during her employment — accusations that amount to embezzlement under U.S. law.

After some success in federal court, the Ninth Circuit ruled that her lawsuit was subject to an arbitration agreement she signed with Tesla. An arbitrator later found in favor of the company and dismissed her defamation claims. Tesla filed in the Northern District of California to confirm the award in late 2021, which a federal judge did the following year.

Balan returned to the Ninth Circuit, claiming now that under the Federal Arbitration Act, her arbitration decision should have been confirmed in state court, not federal.

“The threshold issue before this court is jurisdiction,” her attorney, William Moran of Arthur William, told a Ninth Circuit panel Thursday.

Relying on Badgerow v. Walters , a case where the Supreme Court narrowed federal courts’ jurisdiction to confirm or vacate arbitration decisions, Moran said the panel should give Balan a chance to fight the arbitration award in the proper venue.

“I’m just trying to figure out the practical details here — is the reason because you think that that’s a better forum for attacking the arbitration award?” asked U.S. Circuit Judge Lawrence VanDyke, a Donald Trump appointee.

Moran said it’s what Congress intended, but then acknowledged: “But also, to be really honest with you, we would get another bite at the apple.”

Tesla’s attorney Michael Weil, of Morgan, Lewis and Bockius, said the panel should uphold the arbitration award.

“So maybe she gets another bite at state court, but the standard is not going to be different,” Weil said, to which U.S. Circuit Judge Daniel Collins, also a Trump appointee, joked, “Well, it gets it out of this court."

U.S. Circuit Judge Salvador Mendoza Jr., a Joe Biden appointee, rounded out the panel.

The stakes are high for Balan, who told the BBC this lawsuit may be her only chance at professional redemption. Since her firing, she claims her professional reputation has suffered so much that companies have refused to hire her for fear of being on Tesla CEO Elon Musk’s blacklist.

But more than her reputation, Balan said she’s doing it for her legacy. She is currently in remission after a stage 3B breast cancer diagnosis, which has required multiple deadline extensions in court and delayed proceedings. She doesn’t want her son to grow up thinking her mother was a thief.

The outlook appeared bleak for Balan, who planned on representing herself before the Ninth Circuit, as she has always done, until a few months ago when she met Moran through a friend.

“Cristina suffered unspeakable reputational harm when Tesla falsely cast her as a thief to silence her," Moran told Courthouse News in the hallways outside the courtroom. “This case is not just about money, but also her right to be heard so that she can clear her name of those libelous aspersions.”

An attorney for Tesla did not respond to requests for comment.

The Federal Arbitration Act allows a party in an arbitration agreement to seek several kinds of assistance from a federal court, including either compelling parties to abide by the decision or vacating it completely. However, federal courts may or may not have jurisdiction to decide such a request.