Earlier last month, Walmart filed a lawsuit against Tesla after the retail giant’s 7th store caught fire atop of the Tesla solar panels that were installed on one of Walmart’s stores. After years of back and forth of inspection, maintenance, re-energizing, and negotiation, Walmart finally said that they want the solar panels removed in all 248 Walmart stores. However, there are two sides to the story. In this article, we will cover Walmart’s POV and Tesla’s POV.
Walmart filed a multi-million dollar lawsuit against Tesla. The retail giant says Tesla’s “negligent installation and maintenance” of solar panels caused fires on the roofs of as many as seven Walmart stores since 2012. Walmart’s suit alleges breach of contract, gross negligence, and failure to live up to industry standards. After a long process of periodic maintenance and diagnosis of the problem, when the 7th Walmart solar panel caught fire, Walmart asked Tesla to remove all the solar panels that were previously installed in all 248 Walmart locations and to pay for the damages caused by Tesla’s negligence.
Walmart claimed that “Tesla routinely deployed individuals to inspect the solar systems who lacked basic solar training and knowledge.” In the suit, they alleged that Tesla failed to ground its solar and electrical systems properly and that Tesla-installed solar panels contained a high number of defects that were obvious and Tesla should have found and repaired it before they led to fires.
“This is a breach of contract action arising from years of gross negligence and failure to live up to industry standards by Tesla with respect to solar panels that Tesla designed, installed and promised to operate and maintain safety on the roofs of hundreds of Walmart stores,” Walmart said in the court filing.
Walmart says that Tesla’s own inspections revealed “a total of 157 action items requiring repairs or replacement of system components, 48 of which Tesla itself characterized as reflecting conditions that rendered the sites unsafe or potentially unsafe.”
Walmart’s own follow-up inspections turned up even more problems. Walmart’s investigation “revealed that Tesla had engaged in widespread, systemic negligence and had failed to abide by prudent industry practices in installing, operating, and maintaining its solar systems,”
Walmart further stated that despite the months of back-and-forth, Tesla hasn’t paid a single cent on the damages, consulting/inspection fees, or the attorneys’ fees that Walmart incurred as a result of the fires at Denton, Indio, Beavercreek, and Yuba City.
According to arstechnica, among the problems Walmart claims to have identified:
- “Many of the Tesla solar panels inspected by Walmart were suffering from hotspots, resulting in cracking of the back sheets on solar modules and compromising electrical insulation.”
- “Making matters worse, Tesla had flagged or identified hotspots by placing pieces of tape over the affected areas. Because this tape prevented sunlight from reaching the solar panel, it exacerbated the problem by further concentrating heat.”
- “Tesla teams consistently failed to torque (or tighten) field-made connectors.” “The lack of torquing [sic] leads to moisture and water intrusion.”
- “Sharp points—from, among other items, rough concrete or metal edges—were cutting into or abrading wires. In other cases, temperature changes resulted in the expansion and contraction of wires over time, moving the wires and resulting in their abrasion or exposure.”
- Multiple sites had improper grounding.
Walmart said that they spent months trying to get Tesla to fix this issue but the response was unsatisfactory which led to this lawsuit. In its demand, Walmart wanted Tesla to pay back $8 million in cost that the retailer incurred due to the fires and other issues with the solar power system.
From Tesla’s POV, Tesla pointed out Walmart’s lack of willingness to cooperate despite its ongoing efforts to resolve the issues. In Exhibit 249 of the suit, contains a letter drafted by Tesla’s legal counselors to their Walmart counterparts written on July 29, 2019, indicate that even after both Tesla’s and Walmart’s independent inspections of several sites determined their safety and suitability for re-energizing, Walmart still wouldn’t agree to return them to service. Rather, Walmart demanded that all their solar agreements be amended to make Tesla liable for issues that could, for example, be the fault of Walmart’s own negligence or misconduct. Walmart offered Tesla a ‘take it or leave it’ agreement or Tesla will not be re-energizing any of the systems in their previously signed contracts. The letter further stated that ongoing negotiations were continuously stalled by Walmart. At one point, Tesla wasn’t able to review Walmart’s inspector’s reviews because the company had stopped paying their salary and thus both the inspector and Walmart were ‘unable to release them’ to Tesla. Towards the end of the letter, it said that at no point did Walmart ask Tesla for a ‘root cause’ of the original fires. Walmart’s inspectors had provided their final conclusions that were not shared with Tesla.
Taken directly from the letter, depicts Tesla’s frustration with the entire process:
“My client has had enough. Walmart cannot negotiate (and renegotiate) a protocol for inspection; then try to impose new, extra-contractual conditions on the exercise of Tesla’s contractual rights; then invite negotiation over those improper, unreasonable conditions; and then refuse to negotiate. Walmart has unfortunately wasted time and diverted resources while undermining the goodwill that Tesla had sought to preserve throughout this process.” (p. 8)
“We also disagree with Walmart’s contention that its consultants have ‘confirm[ed] Tesla’s systemic, widespread breaches and negligence.’ The parties’ Agreements anticipate that the systems will require periodic maintenance and repair in a manner that is entirely customary within the solar power industry. The fact that some sites in fact need maintenance and repair – especially sites that have been idle for a year now – is neither surprising nor a breach of any Agreement. The fact that thorough, comprehensive inspections have identified areas for improvement and opportunities for error correction is equally unsurprising. Tesla welcomes the chance to improve its processes, tools, and monitoring, but that too is not evidence of any breach.” (pp. 11-12)
Looking at both Walmart and Tesla’s POV, it’s hard to ignore the fact that Walmart’s reaction seems like it is trying to break financial ties with Tesla, which included paying Teslar for the power its solar systems generated and, wanting to recover the damages the fires caused to Walmart’s stores, which Tesla agreed to.
Undoubtedly, Tesla needed to take action in these cases, and they have and are willing to do so but under very stringent and expensive conditions. Tesla’s letter cited ten instances of Walmart fires that were completely unrelated to their solar installations to make this point.
Whatever Walmart’s intentions are, there is an underlying message to learn from this incident: partnership, not friendship. Partnership is a business matter. When things are not going accordingly, and if the opportunity to repudiate on an agreement comes up, no matter how willing the other party is to cooperate, Walmart can seize that opportunity through money and power.
Walmart and Tesla’s joint statement
Fortunately, days after the lawsuit, Walmart and Tesla issued a joint statement confirming that they are working to address all the issues together and aim to re-energize the systems:
“Walmart and Tesla look forward to addressing all issues and re-energizing Tesla solar installations at Walmart stores, once all parties are certain that all concerns have been addressed. Together, we look forward to pursuing our mutual goal of a sustainable energy future. Above all else, both companies want each and every system to operate reliably, efficiently, and safely.”