🚘 How Tesla’s Broken Promise on Full Self-Driving Led Us to Arbitration — And a Refund
In June 2021, my wife and I purchased our third Tesla—a 2021 Model Y. Our first, a CPO 2013 Model S P85 purchased in 2016, thrilled us with its electric powertrain but lacked any autonomous features. Our second, a CPO 2016 Model S 90D bought in 2019, was dual motor and equipped with Autopilot 1.0 and other features not found on the earlier model.
By 2021, we needed a car that sat higher than a Model S to accommodate my wife’s mobility issues, so we focused on the Model Y. We were intrigued by Tesla’s so-called “Full Self-Driving” (FSD) Capability—pitched as the future of autonomous driving. Elon Musk himself claimed in 2019 that cars with FSD would rise in value, unlike human-driven cars (https://www.thedrive.com/news/28877/price-of-future-tesla-cars-with-self-driving-tech-will-rise-significantly-ceo-elon-musk-tweets).
But FSD was more than hype for us. The promise of a car that could drive my wife around gave us hope that she’d maintain independence as her motor skills declined. We paid an extra $10,000 for FSD.
A Lawyer’s Perspective
I’ve practiced law nearly 40 years (www.dobinlaw.com), tried around 100 arbitrations (and handled far more than that), and served as an arbitrator myself. I don’t sue over every slight. But shortly after delivery, it became obvious we paid ten grand for features Tesla would not or could not deliver. Given that FSD was about 15% of our car’s purchase price, this was a material breach of contract.
Most consumers are intimidated by Tesla’s mandatory arbitration clause buried in its paperwork. Many lawyers won’t even touch cases with mandatory arbitration. But as an experienced arbitration lawyer (and a lifelong “car guy”), I welcomed the forum. An added bonus is that, under AAA’s Consumer Rules, Tesla is required to pay all the costs of the arbitration and the arbitrator.
Delivery Without Delivery
When Tesla delivered our Model Y in September 2021, FSD was not active. Tesla later introduced a “Safety Score” system, requiring owners to prove they were “safe” drivers—based on secret, undisclosed criteria—before unlocking a limited FSD beta. This requirement was nowhere in any paperwork related to the purchase.
Ironically, our insurance company, State Farm, had a telematics beacon that gave us high safety scores. Tesla’s opaque system never deemed us worthy. Despite careful driving, FSD, even in beta form, stayed locked.
Meanwhile, reports showed that FSD—even when unlocked—still required driver intervention and had other issues. It was clear Tesla’s “Full Self-Driving” was nowhere near autonomous.
Adding insult, our Model Y’s trade-in value dropped because Tesla disables FSD eligibility when a car is sold or traded in to a non-Tesla dealer. Tesla’s practice not only denied us the feature we paid for but also reduced our car’s resale value.
Tesla’s “Required” Settlement Demand — A Black Hole
Tesla’s agreement required sending a written demand to resolutions@tesla.com and waiting 60 days before filing arbitration. We complied with a detailed refund demand, but only received an automated reply:
Thank you for contacting Tesla. If your concern is related to a legal matter, we will get in touch with you. For all other matters, please Contact Us here.
No one from Tesla ever contacted us. The requirement appeared designed to delay or discourage consumers rather than resolve disputes. Perhaps it fell into the void left when Tesla dismantled its media relations department.
Filing for Arbitration
After 60 days passed with no response, we filed a demand with the American Arbitration Association (AAA), as Tesla’s agreement required. Tesla initially ignored AAA’s deadline to pay the arbitration fee, delaying the processing of the case—a tactic that can discourage consumers who don’t know their rights. We pressed on, filing a Notice of Readiness on May 31, 2024. Tesla eventually retained outside counsel and engaged in the arbitration. Four months had already passed since the first email to Tesla.
The Hearing and the Truth
Almost a year after filing, the evidentiary hearing was held via Zoom. Tesla produced one witness: a Field Technical Specialist who admitted he hadn’t checked what equipment shipped with our car, hadn’t reviewed our driving logs, and didn’t know details about the FSD system installed on our car, if any. He hadn’t spoken to any sales rep we dealt with or reviewed the contract’s integration clause.
He was a service technician, not a lawyer or salesperson. But that’s who Tesla brought to the hearing. At the end, I genuinely felt bad for him because Tesla set him up to be a human punching bag—someone unprepared to answer key questions, forced to defend a system he clearly didn’t understand. While I was examining him, a Tesla in-house lawyer sat silently, while the company’s outside counsel tried to soften the blows of the witness’ testimony.
That’s right, Tesla had two lawyers on the arbitration Zoom to take on the defense of a $10,000 case.
I testified about the Safety Score, which Tesla never mentioned in the contract. Tesla’s own production included a 24-page PDF of a webpage about the Safety Score—equivalent to 22 feet of printed paper—but the Tesla witness couldn’t explain how it worked or where, when, or if, it was disclosed.
Critically, Tesla’s purchase agreement contained a standard integration clause stating that only terms in the contract (or documents explicitly referenced) were binding. Tesla’s attempt to rely on unreferenced webpages—including some retrieved from the Wayback Machine (www.archive.org)—backfired. As any lawyer knows, integration clauses exist to exclude outside promises from controlling the contract.
Meanwhile, a January 2025 earnings call confirmed our suspicions: Elon Musk acknowledged that Hardware 3 (HW3), the computer in our Model Y, could not support the promised FSD features. Musk admitted upgrading HW3 would be “painful and difficult” for Tesla. He expressed that he was somewhat relieved that a relatively small number of customers would need to be upgraded.
The Final Award
On June 30, 2025, the arbitrator ruled Tesla breached the purchase agreement by failing to disclose the Safety Score prerequisite. The arbitrator wrote, “the evidence is persuasive that the feature was not functional, operational, or otherwise available,” and ordered Tesla to refund $10,600 (the $10,000 FSD option price plus tax) within seven days. Tesla also had to pay the AAA and arbitrator fees of $7,975.
We have received and deposited the check. Tesla has satisfied the award.
Considering the likely cost of Tesla’s outside counsel and internal time spent, the company probably spent far more than our refund defending a clearly indefensible practice. The math doesn’t math.
Lessons for Other Consumers
My situation is unique: I’ve spent my career litigating and arbitrating. Most consumers won’t know how to navigate this. But if you bought FSD, were blocked by Tesla’s Safety Score, and lost value on trade-in, don’t assume you’re powerless. Write to resolutions@tesla.com and demand a refund—Tesla might have learned its lesson. Or you may get the same response that I did and still have to file an arbitration.
If you’re uncomfortable contacting Tesla directly, consider retaining an experienced consumer rights attorney to help you assert your rights. Don’t let Tesla’s arbitration clause scare you — you have options.