Kessler Topaz is co-lead counsel in a derivative and class action on behalf of Tesla, Inc. and its minority stockholders challenging Tesla’s 2016 acquisition of SolarCity Corporation. Plaintiffs allege that the acquisition was essentially a bailout of the financially struggling SolarCity, which was founded and run by Elon Musk’s cousins. At the time of the acquisition, Elon Musk was Chairman of both Boards of Directors and the largest stockholder of both Tesla and SolarCity. Six of the seven members of Tesla’s Board of Directors, their family members and/or business partners were investors in SolarCity and therefore benefited from the acquisition, which allowed SolarCity to escape an impending threat of bankruptcy.
First obtaining non-public books and records of Tesla relating to the acquisition, Plaintiffs filed an action in the Delaware Court of Chancery alleging that the Board’s approval of the acquisition constituted a breach of fiduciary duties and a waste of Tesla’s assets. On March 28, 2018, the Court denied defendants’ motion to dismiss, holding that it is reasonably conceivable that Elon Musk controlled Tesla’s Board of Directors in connection with the acquisition. The case will now proceed toward a trial on the merits.