Lawsuit over Elon Musk’s influence in SolarCity acquisition moves ahead

A Delaware judge has rejected a request from Elon Musk and Tesla to dismiss a lawsuit filed against them regarding Tesla’s purchase of SolarCity. The judge said it is “reasonably conceivable that Musk is Tesla’s controlling stockholder.”

Vice Chancellor Joseph R Slights III sided with the stockholders. The judge’s written ruling on the case included:

The combination of well-pled facts relating to Musk’s voting influence, his domination of the board during the process leading up to the acquisition against the backdrop of his extraordinary influence within [Tesla] generally, the board level conflicts that diminished the board’s resistance to Musk’s influence, and … Musk’s own acknowledgements of his outsized influence, all told, satisfy [shareholders’] burden to plead that Musk’s status as a Tesla controlling stockholder is reasonably conceivable.

The suit against Tesla/SolarCity/Musk is a combination of five lawsuits on a similar topic that were filed in the summer of 2016 after the merger was announced. The judge presiding over the cases pushed the consolidation.

In January 2017 Tesla asked for the suit to be dismissed, arguing that Musk’s influence wasn’t as strong as suggested. Tesla’s lawyers noted that prior case law had found that stockholders with larger percentages than Musk had been found to not be controlling interests. Additionally, Tesla noted that even if all votes by Tesla directors and officers were set aside, the balance of votes by other shareholders would still have been in favor the acquisition.

Tesla has continued to slow solar power lease rollouts, recently falling behind SunRun as the largest residential solar company in the United States. In 2017 the company remained the second largest commercial solar developer in the nation, however these projects were mostly holdovers from earlier SolarCity work.