Tesla Motors Inc. filed suit Thursday after Michigan denied it a license to open a store to sell directly to customers, saying a state law violates its constitutional rights and protects hometown rivals such as General Motors Co.

The suit, filed in U.S. District Court for the Western District of Michigan, names three state officials: Michigan Gov. Rick Snyder, Attorney General Bill Schuette and Secretary of State Ruth Johnson, the latter whose department rejected Tesla's application for a dealership license last week.

"We are currently reviewing the suit," a spokeswoman for the attorney general's office said in a statement.

Tesla has been fighting state franchise laws around the country, trying to set up its own retail locations while facing intense resistance from independent franchise dealers and auto makers. A hodgepodge of state laws were originally set up to protect independent dealers from being closed by manufacturers.

The Palo Alto, Calif., auto maker argued Michigan is distinguishing without legitimate justification between manufacturer-owned dealerships and franchised dealerships not owned by auto makers.

"These irrational classifications do not further any legitimate government interest and exist solely for the purpose of protecting two discrete Michigan-based interest groups—Michigan's franchised auto dealers and Michigan-based manufacturers—from economic competition," Tesla said in the suit.

Tesla lawyers hope a 2013 federal appeals court ruling in New Orleans could bolster their case against such state franchise laws. The case involved an abbey trying to sell coffins during a casket shortage, only to find state law restricted sales to those licensed by the Louisiana Board of Funeral Directors. The court ruled in the abbey's favor.

Such "economic liberty" arguments have found favor among some circuit courts, Northwestern University law professor John McGinnis said.

"The argument is that these regulations have no public-regarding reason, they're just there for protectionism," he said. "It's still not clear that Tesla is going to win; I'm saying that this case is better or more plausible than it would've been a decade ago."

Tesla is also arguing that the state is impeding the free flow of commerce among the states.

Separately, Tesla on Thursday began updating software in its vehicles in North America, including revisions to Autopilot that Chief Executive Elon Musk has said likely would have prevented a fatal car crash in May.

Write to Tim Higgins at tim.higgins@wsj.com

(END) Dow Jones Newswires

September 22, 2016 14:35 ET (18:35 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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