Tesla Motors’ decision to purchase the former NUMMI automotive manufacturing facility in Fremont, California might have been one of its shrewdest business decisions to date. 

Not only did Tesla Motors [NASAQ:TSLA] obtain a pre-built facility --complete with the essential machinery it needed to build its 2012 Model S Sedan -- at the heavily-discounted fire-sale price of $59 million, but it helped offer skilled jobs to those who had previously been made redundant when the factory closed under General Motors’ bankruptcy

But now a developer in New Mexico, where Tesla had originally planned to build a factory, is suing the electric automaker for picking California over New Mexico.

According to Gigaom, the claimant in the case, Rio Real Estate Investment Opportunities, filed a law suit back in May against Tesla for fraud, breach of contract, negligent misrepresentation and negotiating in bad faith.

The developer claims it entered into a binding development agreement with Tesla in February 2007 to build a new factory in New Mexico that Tesla would then lease from it for $1.35 million a year for ten years, plus a 2 percent annual increase. 

In early 2008, the deal became public when New Mexico Governor Bill Richardson publicly announced Tesla had chosen the Cactus State as the home of Model S manufacturing. 

NUMMI plant in Fremont, California

NUMMI plant in Fremont, California

Less than six months later however, the then-Californian Governor Arnold Schwarzenegger leaked the news that Tesla had decided to build the Model S in California, scuppering New Mexico’s hopes of being home to Tesla.

In the official court filing with the New Mexico State Court, Rio Real Estate Investment Opportunities claims it spent money on creating environmental reports, obtaining relevant government permits, and drawing up engineering designs for the site as a consequence of signing the 2007 contract with Tesla.

When Tesla changed its mind about where to site its Model S factory, Rio Real Estate Investment Opportunities said it suffered financially. 

Tesla Motors does not comment on pending litigation, as it has consistently told reporters.

At the moment, Tesla has mad no official statement concerning the case, other than to deny the allegations. 

It has also sought to move the trail from New Mexico State Court to Federal Court. 

The first hearing is on September 18, in Albuquerque, New Mexico.


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