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.
Plaintiffs’ consolidated action in the Delaware Court of Chancery alleges that the Board’s approval of the acquisition constituted a breach of fiduciary duties and a waste of Tesla’s assets. On January 22, 2020, Plaintiffs reached an agreement in principle with all Defendants other than Elon Musk to resolve all claims asserted against them for $60 million. On February 4, 2020, the Court denied the remaining parties’ cross-motions for summary judgment, holding that Plaintiffs had raised genuine issues of material fact regarding whether Elon Musk controlled Tesla’s Board of Directors in connection with the acquisition and whether material information was withheld from Tesla shareholders when they were asked to vote on the transaction. Previously scheduled to commence on March 16, 2020, the trial has been adjourned until March 29, 2021 in response to the pandemic.