Tesla Faces Solar Panel-Related Lawsuits
Two lawsuits have recently been filed against energy company Tesla, both pertaining to the solar panel end of the business.
The first lawsuit highlights that SolarCity, the 2016 acquisition that made Tesla's solar business possible, was in financial trouble at the time and that CEO Elon Musk knew about the financial trouble. The other is from Walmart, which is suing Tesla because of solar panels that reportedly went up in flames over several rooftops.
The lawsuit, filed by Tesla shareholder Ellen Prasinos acting on behalf of other company shareholders, alleged that both Musk and Tesla’s board of directors overpaid for the business. There are also allegations of being negligent of conflicts of interest, along with a failure to disclose facts that would be important to such a deal. (The plaintiff is seeking judgement from the Delaware Chancery Court on parts of the case.)
According to the Los Angeles Times, SolarCity auditor Ernst & Young noted shortly after the acquisition that SolarCity did not have enough cash to make obligations. Ars Technica also reports that the compny was "completely insolvent."
A lawsuit on behalf of investors says Tesla’s $2.6B SolarCity buy was a “bailout” for Musk https://t.co/9LPyEpQM7e— Ars Technica (@arstechnica) September 26, 2019
Other claims also include that SolarCity concealed information regarding two payments that were owed to lenders—payments that would have facilitated getting a read on the company’s financial health.
In a statement to the Times, Tesla said the shareholder allegations were not “representative of our shareholders who support our mission and ultimately voted in favor of the acquisition. The accusations made in the plaintiff’s brief are false and misleading, as Tesla and SolarCity published all material information in its proxy and other public filings for all shareholders to consider before deciding on the transaction.”
Based on a court filing that dates back to last year, Tesla responded to allegations that claimed that both companies being so close contributed to decisions made that did not benefit shareholders, which included Musk in a leadership role in Tesla as well as being the largest shareholder of SolarCity. (The solar company was also founded by Musk’s cousins.) There are also reports that SpaceX, another Musk venture, also loaned money to SolarCity.
In 2015, solar company CEO Lyndon Rive, one of Musk’s cousins, told the entrepreneur that the company would need up to $300 million to stay operating. Musk introduced the Tesla solar roof to cultivate support for the deal, but the product did not pan out.
According to CBS News, in late August, Walmart sued Tesla for negligence, alleging that the solar panels caught fire on store rooftops, resulting in millions in damage. In the lawsuit, Walmart notes that fires occurred across seven store rooftops between 2012 and 2018. This is predated by Tesla filing a Notice of Breach and Demand for Cure, a document dated to late July, with the New York County Clerk’s office, in which Tesla claims that Walmart did not honor the agreement. Issues include Walmart allegedly delaying inspections.
Solar panel inspections also reportedly revealed that many of the panels were broken with exposed wiring, resulting in a fire hazard. Walmart claimed that Tesla exhibited “systemic negligence” and “failed to abide by prudent industry practices in installing, operating, and maintaining its solar systems."
Walmart reportedly has a deal with Tesla to install solar panels over 244 stores, though, last May, the retailer asked Tesla to disconnect the solar panel systems it had installed. A fire occurred at a store in California, though the panels had been disconnected for some months.
Editor's Note: Details added about the Tesla-Walmart lawsuit at 9:43 a.m, on Oct. 2, 2019.