June 09, 2023
On June 6, 2023, the Delaware Supreme Court affirmed the Delaware Court of Chancery’s judgment in favor of Cravath client Elon Musk on all counts in a stockholder derivative suit related to Tesla, Inc.’s (“Tesla”) 2016 acquisition of SolarCity Corp. (“SolarCity”).
Seeking $13 billion in damages, Plaintiffs claimed that Tesla’s $2.1 billion, all‑stock acquisition of SolarCity was a thinly veiled bailout of an insolvent company, driven by Mr. Musk, Tesla’s alleged controlling stockholder, and accomplished through his domination of a conflicted board and efforts to mislead Tesla’s stockholders. Cravath and Mr. Musk argued, among other things, that the deal was the culmination of Tesla’s “Master Plan” to transform from an electric vehicle company to the world’s first vertically integrated clean energy and technology company, which Mr. Musk had publicly announced a decade prior to the deal.
In April 2022, following a highly publicized 11‑day trial, the Court of Chancery held that Mr. Musk had not breached his fiduciary duty and that Plaintiffs’ other ancillary claims failed. The Court reviewed the transaction under the highest degree of scrutiny recognized under Delaware law—the entire fairness standard—finding that “the persuasive evidence reveals that the [SolarCity] Acquisition was entirely fair.” The Court further stated: “[T]here 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.’”
On appeal, the Delaware Supreme Court, sitting en banc, affirmed the Court of Chancery in a 106-page decision, finding that the “record demonstrates that the negotiations were conducted at arm’s‑length, in good faith, with the advice of independent financial and legal advisors, led by an indisputably independent director, and, thus, constituted a fair process that led to a fair price.” The Supreme Court noted “there can be no dispute that the trial court weighed both fair dealing and fair price and found that Musk proved his case.”
The Cravath team included partners Evan R. Chesler, Daniel Slifkin, Vanessa A. Lavely and Helam Gebremariam, and many current and former associates, paralegals and other trial support staff.
The case is In re Tesla Motors, Inc. Stockholder Litigation, Del. Supr., No. 181, 2022 (June 6, 2023).
Deals & Cases
May 02, 2022
On April 27, 2022, the Delaware Court of Chancery granted judgment in favor of Cravath client Elon Musk on all counts in a stockholder derivative suit regarding the 2016 acquisition of SolarCity Corp. (“SolarCity”) by Tesla, Inc. (“Tesla”). The Court of Chancery’s 131‑page opinion in favor of Mr. Musk followed a highly publicized 11‑day trial in July and August 2021, and post‑trial briefing and oral argument held in January 2022.
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