A group of investors has filed a lawsuit against Tesla Inc. and CEO Elon Musk for allegedly violating their fiduciary duty based on tweets Mr. Musk sent over the past year, including one saying he had secured funding to take the company private.
Tesla investors in the suit, including the $2.1 billion Ohio Laborers' District Council and Contractors Pension Fund, Westerville, are seeking a declaratory judgment against Mr. Musk and the Tesla board for violation of their fiduciary duty, injunctive relief related to Mr. Musk's Twitter use, and monetary damages. The lawsuit was filed under seal, and a public version is expected to be available by March 12, according to a news release from Grant & Eisenhofer, the law firm that made the filing in the Delaware Court of Chancery.
The Securities and Exchange Commission accused Mr. Musk of misleading investors and, in a settlement agreement in September, forced him to step down as chairman, and fined both him and Tesla $20 million each.
Also, the settlement requires Mr. Musk to obtain preapproval of any written communications that contain, or reasonably could contain, information material to Tesla or its shareholders. In February, the SEC filed a motion for an order to show cause why Mr. Musk should not be held in contempt for violating the agreement after he tweeted that Tesla would produce about 500,000 cars in 2019.
"His conduct has not only cost Tesla shareholders dearly but threatens to expose the company to even greater liability and litigation in the future," said Michael Barry, director at Grant & Eisenhofer, in the news release. "For its part, the board of directors has been completely ineffective, and in fact Tesla still identifies Mr. Musk's personal Twitter account as a source of official disclosures by the company. It has to stop."
Tesla did not immediately respond to a request for comment.