Elon Musk Scores Major Win as Delaware Court Tosses Massive Tesla Lawsuits

Image: Tesla

A Delaware court has thrown out three lawsuits against Tesla and Elon Musk, saying they need to be refiled in Texas instead.

The ruling came down on April 13 from the Delaware Court of Chancery. It all comes down to a rule Tesla put in place in 2024 when it moved its official home state from Delaware to Texas. That rule says any shareholder lawsuit filed on Tesla’s behalf has to be heard in a Texas court, not Delaware.

A few shareholder groups, including a Rhode Island government pension fund and a union pension fund from Ohio, had sued Musk and Tesla’s board. They claimed Musk broke his duties to the company by selling Tesla stock using insider information, redirecting Tesla’s money and staff toward his other companies like xAI and X, and that Tesla’s board did nothing to stop him.

The shareholders said Delaware courts should still handle the cases because Delaware’s rules were in place when they originally filed. The court did not buy that argument. The judge pointed out that Tesla had publicly announced its plan to move to Texas on April 17, 2024, before any of the three lawsuits were even filed. Tesla shareholders then voted to approve the move on June 13, 2024, the same day the last lawsuit was filed.

The shareholders also argued that Texas law is worse for investors than Delaware law, so the rule forcing them to Texas should not apply. The court pushed back on that too, basically saying it was not its place to decide which state’s laws are better. It also noted that 63% of Tesla shareholders voted to approve the Texas rule, so it would be unfair to ignore that decision.

Finally, the shareholders claimed they were given misleading information when they voted on the move. The court rejected that as well, ruling that you cannot get out of a venue rule just by saying the vote that created it was flawed.

The people being sued include Elon Musk, his brother Kimbal Musk, board chair Robyn Denholm, and directors Larry Ellison and James Murdoch. The shareholders are expected to take their cases to Texas, where Tesla is now officially based.