In re Tesla Motors, Inc. Stockholder Litigation

The Delaware Court of Chancery ruled for Elon Musk and members of the Tesla board of directors on claims that they breached their fiduciary duties and engaged in other wrongdoing in connection with Tesla’s 2016 acquisition of the solar energy company SolarCity Corporation, which had liquidity issues. At the time, Musk was the chairman of the SolarCity board of directors and its largest stockholder. The court noted that Musk had authored and released a “Master Plan” in 2006 that declared that Tesla would “accelerate the world’s transition to sustainable energy,” and that SolarCity was “part of this vision” and “specifically mentioned in the Master Plan.” The judge concluded that Musk “was undoubtedly involved in the deal process in ways he should not have been, but fortunately, the Tesla Board ensured nevertheless that the process led to a fair price.” Among other things, the judge concluded that “synergies,” including creation of an “integrated sustainable energy company,” were “a strong rationale” for the acquisition. The court found that “there can be no doubt that the combination with SolarCity has allowed Tesla to become what it has for years told the market and its stockholders it strives to be—an agent of change that will ‘accelerate the world’s transition to sustainable energy’ by ‘help[ing] to expedite the move from a mine-and-burn hydrocarbon economy towards a solar electric economy.’” The court found no basis to conclude that a “fairer price” was available and therefore concluded that the price paid was “entirely fair,” which was not consistent with a breach of fiduciary duty.

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