Wilmington law firm sues Tesla CEO Musk and board over tweets

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The Wilmington shareholder  law firm of  Grant & Eisenhofer has brought suit on behalf of institutional investors against Elon Musk and the board Tesla Inc., claiming Musk’s tweets are harming the company and shareholders.

The lawsuit, filed in Delaware Court of Chancery, seeks a  judgment and a permanent injunction against  Musk over his  use of Twitter to make what were termed as  inaccurate statements about the company.

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 The suit also alleges that the Tesla CEO and directors breached their fiduciary duty to shareholders by failing to rein in Musk on his statements.

Grant & Eisenhofer is representing the Laborers’ District Council and Contractors’ Pension Fund of Ohio, a Tesla shareholder.

The suit notes that last August, Musk tweeted that he had secured funding for a plan to take the electric company private at a certain share price, a statement which turned out to be untrue. That led to a settlement with the U.S. Securities and Exchange Commission which required Tesla and   Musk each to pay a $20 million fine and the implementation of a policy that required  Musk’s statements on social media to be pre-approved. He was also forced to step down as the company’s chairman. But in February, the SEC asked a court to hold  Musk in contempt after Musk tweeted, without prior vetting by counsel, that Tesla would produce about 500,000 cars this year.

Tesla and Musk have been under pressure to bring the price of the Tesla 3 electric automobile to the $35,000 mark. Musk recently announced the $35,000 vehicle. At the same time, Tesla announced a cost cutting program that should close most showrooms.

Grant & Eisenhofer filed the lawsuit under seal; a public version is expected to be available by March 12. The firm has petitioned Vice Chancellor Joseph R. Slights III to hold a hearing as soon as possible on the plaintiffs’ claims.

Bernstein Litowitz Berger & Grossman LLP and Gardy & Notis LLP are co-counsel in the case on behalf of additional investors.

 

 

 

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