In a unanimous 106-page opinion, the Delaware Supreme Court has upheld the Delaware Chancery Court’s judgment in favor of Elon Musk in a case involving Tesla’s acquisition of SolarCity in 2016. Tesla shareholders claimed the deal was really the bailout of an insolvent company (of which Musk was the biggest shareholder) and he used his influence to push the deal through. The shareholders sought $13 billion in damages, which was the amount Musk received in the takeover.

Entirely fair: The case spotlights the “entire fairness standard,” the highest degree of scrutiny, which has two prongs: (1) whether the board of directors followed a fair process; and (2) whether a fair price was achieved. The trial court weighed both factors in finding that the deal was fair and that Musk did not exert undue influence on the process. The state’s Supreme Court agreed, saying the record showed that the acquisition was “entirely fair.”

In terms of the price, the trial court looked to the market price of SolarCity, but the plaintiffs claimed that the company was insolvent because of material information that was not publicly disclosed. The trial court disagreed. And, while the Supreme Court noted that that “there was an error in the trial court’s fair price analysis,” it was not reversible.

The case is In re Tesla Motors Stockholder Litig., 2023 Del. LEXIS 178, and a case analysis and full court opinion are on the BVLaw platform.