In re Tesla Motors, Inc. Stockholder Litigation
Delaware Court of Chancery
2018 WL 1560293 (2018)
When Tesla acquired SolarCity, CEO Elon Musk (defendant) owned about 22 percent of each company's stock and chaired SolarCity, converting his SolarCity holdings into over $500 million in Tesla shares; Tesla shareholders (plaintiffs) sued, alleging Musk breached fiduciary duties as Tesla's controlling shareholder by dominating the board during the acquisition, given his outsized influence as Tesla's visionary, his history of ousting a prior CEO who disagreed with him, his description of Tesla as "his company" forming a pyramid with SolarCity and SpaceX, his personal bailout of Tesla with his own money, and his control over the company's corporate filings. Musk moved to dismiss, arguing a 22 percent stake couldn't make him a controlling shareholder.
Does a minority shareholder who exercises actual dominion and control over the corporation's directors and business affairs owe fiduciary duties as its controlling shareholder?