January 18, 2021

DCTRS

Damascus Center for Theoretical and Civil Rights Studies

Former Tesla engineer stands up to Elon Musk with lawsuit

The woman from human resources opened the doors — those big heavy fire doors with the push bars. She led the way through an unlighted, windowless room, draped in plastic, smelling of paint. Cristina Balan grew nervous. “This doesn’t look like the way to Elon’s office,” she thought to herself.

She was led, she said, through another door into a room where she saw two large men in security uniforms behind desks. They were ordered to wait outside. Balan’s boss walked in. Balan was told to sit in a rolling desk chair. They were joined by a company lawyer.

The day was not proceeding as planned.

Weeks earlier, in a companywide email, Tesla Chief Executive Elon Musk had dumped on the concept of corporate hierarchy. Find “the fastest way to solve a problem to the benefit of the whole company” and don’t worry about your boss, he told them. Go straight to the top, if need be.

Balan took him up on it. An automotive engineer at the electric car maker’s Fremont, Calif., assembly plant, she was motivated by Tesla’s save-the-planet mission and wanted it to succeed, she said.

So she was bothered to see what she believed were contracts awarded based on friendships more than quality and price. She had also been raising concerns about floor mats installed in the then-new Model S that tended to curl up under the pedals, a potential safety hazard. Defective mats have caused crashes in other automakers’ vehicles.

She sent Musk an email and asked for a meeting.

A few days later, the HR manager appeared at her desk and said, “So you want to talk to Elon, right? Well, let’s go.” But as soon as Balan saw the dark room with the plastic drapes, “I knew I should have returned to my desk,” she said. “This is weird, I thought. This is not going to be a meeting with Elon.”

Instead, Balan said, she was forced to resign, an event that launched a six-year legal journey leading to where she is today: about to face off against Tesla — on her own, without an attorney — in the U.S. 9th Circuit Court of Appeals.

Defamation is the main claim in Balan’s suit against Tesla — the company accused her of criminal behavior on a popular online news site but provided no evidence to back up the charge. Balan says her professional reputation suffered damage so severe she can’t find a company willing to hire her. “They tell me, ‘We’d like to hire you, but we can’t afford to be on Musk’s blacklist,’” she said.

More than 1,000 lawsuits have been filed against Tesla and Musk, a number of them alleging defamation, including the case in which Musk called a rescue diver who criticized him a “pedo” on Twitter and a “child rapist” in an email to a reporter without offering evidence. (A Los Angeles jury found the diver was not defamed.)

But Balan’s appeals case goes beyond defamation. It raises questions about the limits of the legal practice known as mandatory arbitration, about whether an arbitration agreement can follow an employee for years or even decades after they’ve left a company — which is what Tesla lawyers argue as they attempt to keep the case out of court.

Millions of employees in corporate America are asked to sign arbitration contracts, often with little knowledge of what they’re signing away. Given Tesla’s high profile, said Imre Szalai, an arbitration expert at the Loyola University New Orleans College of Law, “this will be a leading case on the topic of arbitration and defamation.”

Pliers. No dolls.

Cristina Balan grew up with grease under her fingernails in the Transylvania region of Romania. Other girls played with dolls. She took engines and motors apart and put them back together again. “I was fascinated with everything mechanical,” she said. “My toys were pliers and screwdrivers.”

That set off some cluck-clucking among the neighbors. “I got a lot of badmouthing,” said her father, Ion Carstoc, then a mechanic at Romania’s national automotive research center and now retired. “I’ll never forget, one [neighbor] called me names, telling me to be a responsible parent. She said, ‘Cristina’s got oil on her clothes, she’s got oil in her hair. You need to teach her how to be a woman!’”

Balan shrugged off the neighbors. After earning an engineering degree at Transylvania University of Braşov, she was hired by Boeing and traveled the world to work with suppliers for the 787 aircraft. In 2010, Tesla hired her to help design the battery pack for the now-iconic Model S all-electric luxury sedan.

Based on evidence reviewed by The Times, Balan was well regarded by fellow workers and managers. Her performance reviews were glowing. She was known as a hard worker who put in long hours and was dedicated to creating high-quality products.

From an email sent to Balan’s team at Tesla.

Her initials are etched onto the battery pack clamshell cases she designed, which still can be found in older versions of the Model S. A performance review, entered in court, lauded her, saying, “She is often consulted by engineers from various departments when they come upon perplexing design and CAD challenges.” (CAD stands for computer-aided design.)

A 2014 email from Daniel Ho, a top Tesla executive who now runs the Model 3 program, singled Balan out for praise. “Without creative engineers like you, this place would be just another car company,” he said. “DON’T LET THAT HAPPEN!” Ho did not respond to requests for comment.

Safety concerns

Balan’s problems began after she joined the interior fittings team. She developed a way to replace flip-down sun visors with touch-based windshield-dimming technology. Tesla never adopted it, but emails show the idea was reviewed by Musk, who urged that development be continued.

All seemed to be going well until Balan came across what she considered sketchy dealings on supplier contracts and the curling floor mats. She said interior-engineering supervisors at the time acknowledged safety issues but noted that a recall on the floor mats would have been expensive.

After she emailed her concerns to Musk, a Tesla lawyer took her aside, she said, and told her that if she continued to push matters, she should remember that some of her friends at Tesla had green card applications pending. (Contacted by The Times, the lawyer denied saying this.)

Tesla was struggling for solvency at the time. It hadn’t yet become a stock market darling. Cash flow was low. The future depended on the Model S’ success.

Money wasn’t the only problem. Musk was dealing with quality-control issues, some potentially dangerous. The company was installing cooling systems in earlier versions of the Model S that it knew were prone to leak. After recent stories on the matter, the National Highway Traffic Safety Administration has acknowledged it is conducting an investigation. Following reports that wheels fell off due to cracked ball joints and control arms, the Chinese government recently ordered a major recall of older Model S cars. Tesla says it will obey, but the company has blamed China’s drivers for the problem, not its own products.

The success of the Model S project was the top priority at Tesla in April 2014, when Balan was walked into that security office. According to Balan’s recollection, the HR manager strongly suggested she drop her complaints about the supplier contracts. Balan said no. “OK, this is your exit interview,” Balan recalls being told. She was handed resignation papers and asked to sign them. When she protested, she said, a Tesla official threatened to have her led outside in handcuffs and told her, “This is what happens if you don’t know how to keep your mouth shut.”

Balan felt intimidated and wanted to get out of there, she said. Even so, she insisted on adding a line to the documents: “I’m resigning for the position that I was put in a month ago bc I dare to speak up to the Sr management, also bc people that had the chance to speak up were threatened…” she wrote. The security guards escorted her from the building and into the parking lot.

But Tesla wasn’t through with her yet. After she filed an arbitration claim against the company, the Huffington Post ran a 2017 story about her case. After it ran, Tesla communications executive Dave Arnold demanded that the online publication run a 600-word Tesla response in full. In part, it read, “Ms. Balan spent company time working on a ‘secret project’ without her manager’s approval and booked an unapproved trip to New York at Tesla’s expense to visit a potential supplier for her own personally-created project. She also illegally recorded internal conversations within Tesla without anyone’s permission, which is clearly criminal conduct.”

Arnold’s piece offered no evidence to substantiate his assertions, and the Huffington Post later took the story down, though an archived version remains online.

A Model S team surprised Balan by having her initials etched on the car's battery packaging.

A Model S team surprised Balan by having her initials etched on the car’s battery packaging.

The “secret project,” Balan has shown through emails and other documents entered in court, was no secret at all. It was the windshield sun visor project that had attracted support from Tesla top executives, including Musk, whom she briefed personally about the technology behind it, according to emails entered into evidence.

Doug Field, then Musk’s operational right hand man, issued several emails on the topic, including one that read, “This one is a no-brainer; let’s spend the money. It might be too late for [Model] X but this could be a big feature on future vehicles.” (Field, now an executive at Apple, told The Times he preferred not to discuss the case.)

As to Balan’s “unapproved” trip to New York, Rich Heley — then head of manufacturing technology at Tesla and now an engineering executive at Facebook — sent Balan an email that stated “you should go to ny.” (Heley declined to comment.)

Balan filed her defamation claim in January 2019.

Staying out of court

After a public offensive by Tesla’s media department failed to deter Balan, the company’s lawyers took a different approach: Keep the whole thing in arbitration and under wraps.

The arbitration system in the U.S. goes back to 1925, when Congress passed the Federal Arbitration Act. The main purpose was to relieve the burden on the court system by moving business contract disputes into another forum. The variety of cases subject to arbitration has mushroomed since then. By the 1980s, the insistence that new hires sign arbitration agreements as a condition of employment became standard practice.

A 2018 study by Alexander J.S. Colvin for the Economic Policy Institute estimates that 60 million American workers have signed arbitration contracts with their employers — and that such contracts are more common for low-wage workers.

Law professor Szalai found that 80% of the 100 largest U.S. companies have used arbitration in workplace disputes, and said the actual percentage was almost certainly higher.

Presented with Balan’s claim that she had been defamed, Tesla’s lawyers pointed to her employment agreement to argue the matter must remain in private arbitration and not in public court.

Marsha J. Pechman, senior judge of the U.S. District Court in Seattle, disagreed. In June 2019, she found that although some of Tesla’s allegations were directly related to employment and must remain in arbitration, others could be tried in federal court, including whether Balan was defamed by Tesla’s assertion of criminality. She noted that Tesla had not made a case to back up the charge.

The judge also questioned Tesla’s legal stance: “It’s your position that, if 30 years from now there is a newspaper article that the plaintiff finds somehow maligns her, that no matter how old she is, no matter how far away her employment was from this, that she has to arbitrate it? She has forever signed away any cause of action that might mention her prior employment?” she said, according to a transcript.

Tesla lawyers had no direct answer but filed an appeal to the 9th Circuit. Oral arguments were set to begin in November, but Tesla lawyers won a continuance to March. The lawyers said they were busy with other trials. Balan thinks they’re trying to wear her down.

The effect of Tesla’s claims against her follow her to this day, she said. She continues to be pilloried on Twitter by some of Musk’s more extreme supporters.

Musk’s track record

Although the details in Balan’s case are unique, Musk’s proclivity to launch personal attacks on critics is not. Musk has gone after reporters (including this one), short sellers, whistleblowers and internal critics.

The Times repeatedly sought comment from all parties involved. None of the three law firms that have worked for Tesla on the defamation case would comment. Tesla no longer has a public relations department and does not respond to media inquiries; The Times sent emails to investor relations and several corporate executives, without response. Dave Arnold, now an executive at Facebook, did not respond to several emails seeking comment. The Huffington Post did not respond to a request for comment.

It’s no secret that those with plenty of money can use delay tactics to wear down less-flush opponents, as they run out of money to pay their own lawyers. That’s a reason Balan, with a stated net worth of $50,000, gives to explain why she is representing herself — she doesn’t have to pay lawyers, so time is her only expense.

Judges tend to support arbitration because it relieves pressure from enormous caseloads, saving the system money and time. (More recently, the COVID-19 pandemic has brought civil proceedings in California to a near-standstill.) Employers like it, Szalai said, not just for speed and convenience, but also because the proceedings are often kept secret, and new hires often sign contracts that ban them from joining class-action lawsuits.

That keeps issues such as sexual harassment and racial discrimination hidden from view, he said, though there are occasional attempts at reform. A bill to limit mandatory arbitration was passed by the U.S. House of Representatives in 2019 but was never taken up by the Senate. At Tesla, shareholders rejected an arbitration reform proposal in September.

Some attempts are successful. In 2019 Google ended mandatory arbitration after a 2018 walkout by employees demanding it be abolished.

‘I want to clear my name’

Balan is preparing for the appeals court hearing from a makeshift office in her 11-year-old son’s bedroom, her HP computer on a small wooden desk with a brown glass top. When her son gets rambunctious, she takes her iPad and moves to her car.

In her defamation suit, she’s asking for legal expenses and whatever punitive damages the court sees fit. She said she’d welcome any monetary awards, but money’s not her motivation.

“First of all, I want to clear my name,” she said. “I want to see the pride in my parents’ eyes that they’ve had for me all my life. And I want to show the level of vindictiveness Tesla can go to when they want to destroy somebody.”

The 9th Circuit Court of Appeals will determine whether she’s able to make her case in a public courtroom — and perhaps whether many others like her will be free to do so in the future.