Shareholder derivative lawsuit filed against Tesla board of directors

By Jessica Karmasek | May 2, 2017

Courtesy of Tesla Inc.

WILMINGTON, Del. (Legal Newsline) - A Delaware federal judge has granted an order to seal a complaint filed against the board of directors for electric car maker Tesla Inc.

Plaintiffs Arkansas Teacher Retirement System, Boston Retirement System, Roofers Local 149 Pension Fund, Oklahoma Firefighters Pension and Retirement System, KBC Asset Management NV, ERSTE-SPARINVEST Kapitalanlagegesellschaft m.b.H, Stichting Blue Sky Active Large Cap Equity Fund USA and Aaron Rocke filed their shareholder derivative complaint in the U.S. District Court for the District of Delaware April 21.

They allege, according to a motion for permission to file under seal, also filed April 21, violations of federal securities laws and state laws.

“Plaintiffs have contemporaneously with this motion filed a Complaint derivatively on behalf of nominal defendant Tesla Inc. against the members of Tesla’s Board of Directors relating to Tesla’s acquisition of SolarCity Corporation,” the motion states.

The named defendants include Tesla co-founder, CEO and board chairman Elon Musk, and directors Brad W. Buss, Robyn M. Denholm, Ira Ehrenpreis, Antonio J. Gracias, Stephen T. Jurvetson and Kimbal Musk.

Tesla, itself, is a nominal defendant in the lawsuit -- meaning it is named because of a technical connection with the matter in dispute, but it is not necessarily responsible or at fault.

In November, Tesla’s shareholders “overwhelmingly” approved its acquisition of SolarCity Corp., the largest solar energy services provider in the U.S.

The deal is valued at about $2 billion.

Excluding the votes of Elon Musk and other affiliated shareholders, more than 85 percent of shares voted were cast in favor of the acquisition, according to a Tesla news release. SolarCity’s shareholders also approved the acquisition.

According to the plaintiffs’ motion to seal, their complaint cites to and attaches as an exhibit certain nonpublic documents produced by Tesla to plaintiffs.

“The parties have entered into confidentiality agreements agreeing to treat these materials as confidential,” the plaintiffs wrote.

Judge Leonard P. Stark granted the plaintiffs’ motion to seal.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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