Tesla’s Rooftop Solar Firm Escapes Shadow of Investor Suit

Photographer: Michael Nagle/Bloomberg

Tesla’s rooftop solar firm escaped an investor class action after a federal judge dismissed the suit because investors didn’t show the company acted knowingly or intentionally.

The investors didn’t show SolarCity Corp., a Tesla Inc. subsidiary Elon Musk founded with two relatives, acted knowingly or intentionally when it changed its accounting formula prior to its initial public offering, the U.S. Court of Appeals for the Ninth Circuit held March 8.

The investors sued for securities fraud after SolarCity changed its accounting formula, allegedly to misrepresent its profitability, the court said. However, the investors didn’t show the change was the result of intentional or knowing wrongdoing, according to the opinion. Instead, it was equally likely to be the result of an honest mistake due to mismanagement, the court said.

Ignacio E. Salceda and Benjamin M. Crosson, partners, and Cheryl W. Foung, of counsel, all of Wilson Sonsini Goodrich & Rosati’s Palo Alto, Calif. office, represented SolarCity. They didn’t immediately respond to a request for comment.

Jeremy A. Lieberman and Emma Gilmore, partners, and Jennifer Banner Sobers, associate, all of Pomerantz LLP’s New York office, represented the investors. They didn’t immediately respond to a request for comment.

The case is Webb v. SolarCity Corp. , 9th Cir., 16-16440, 3/8/18.