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Tesla Resolves Latest Lawsuit Over Musk’s Market-Moving Tweets

May 4, 2022, 5:16 PM

Tesla Inc. has resolved the most recent of several investor lawsuits over market-moving Twitter posts by CEO Elon Musk, the world’s richest person, who’s set to buy the social media giant for $44 billion, according to court filings in Delaware.

Vice Chancellor J. Travis Laster tossed the case Tuesday from Delaware’s Chancery Court, a few hours after the two sides docketed a joint stipulation dismissing a shareholder’s bid for internal company files shedding light on Musk’s tweeting habits and Tesla’s policies toward them.

There’s no indication the lawsuit’s conclusion has any direct connection to Musk’s controversial plan to buy Twitter Inc., which the company’s board tentatively accepted just days after adopting a poison pill aimed at blocking the takeover. Musk has sold $8.5 billion worth of Tesla stock as he prepares to finance the acquisition.

Musk—whose pledge to transform Twitter into a safe space for absolute free speech has made advertisers nervous—is a prolific tweeter with 91 million followers. He frequently uses his platform to blast perceived censorship by Twitter and other social media companies.

The apparent settlement Tuesday came about a week after the billionaire lost his bid to exit a 2018 agreement with the Securities and Exchange Commission requiring a Tesla attorney—his so-called “Twitter sitter"—to screen his company-related tweets in advance.

The investor lawsuit sought documents from Tesla to investigate claims that Musk repeatedly breached the SEC deal by tweeting impulsively and recklessly while the company ignored its oversight obligations. It took aim in particular at a Twitter poll asking his followers if he should sell millions worth of Tesla stock.

The suit—filed in December, a few days after Musk was named Time Magazine’s “person of the year"—invoked a state law giving corporate shareholders broad inspection rights if they credibly suspect wrongdoing. Records cases often reflect an attempt to drum up fiduciary breach claims.

The court filing concluding the case Tuesday didn’t expressly state that there’s a settlement, and attorneys for both sides didn’t immediately respond Wednesday to requests for comment or more information.

But the suit was dismissed with prejudice, meaning the Tesla investor voluntarily surrendered the right to refile. Those circumstances usually indicate a settlement or agreement, as does the joint nature of the stipulation. Records cases frequently settle on noncash terms when a company agrees to turn over some documents.

The apparent agreement doesn’t resolve earlier-filed investor lawsuits blaming Musk and other members of Tesla’s board for his “erratic” tweets and claiming they exposed the company to billions in potential losses. Those cases are paused pending the outcome of parallel federal securities claims.

Musk also faces other significant court cases in Delaware, including an investor suit challenging his 2018 pay package that’s headed for trial.

He scored a major win April 28—also in Delaware Chancery Court—against claims he coerced Tesla’s board into an overpriced acquisition of SolarCity Corp., another Musk affiliate. That suit sought up to $13 billion.

Tesla is represented by Abrams & Bayliss LLP and Quinn Emanuel Urquhart & Sullivan LLP. The investor is represented by Heyman Enerio Gattuso & Hirzel LLP and Pomerantz LLP.

The case is Wagner v. Tesla Inc., Del. Ch., No. 2021-1090, 5/3/22.

To contact the reporter on this story: Mike Leonard in Washington at mleonard@bloomberglaw.com

To contact the editor responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com