In re Tesla Motors, Inc. Stockholder Litigation – SolarCity acquisition satisfies “entire fairness” review

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Abstract: Under the business judgment rule, courts generally defer to a board of director’s decisions regarding corporate transactions. However, if a plaintiff can show that a board acted in bad faith, engaged in illegal acts, was grossly negligent or had a conflict of interest, courts will generally apply the more stringent “entire fairness” test to evaluate the board’s actions. This article summarizes a recent case that demonstrates how this test works. A sidebar explains how fairness opinions may help avoid valuation disputes. In re Tesla Motors, Inc. Stockholder Litigation, 298 A.3d 667 (Del. 2023). Kahn v. M & F Worldwide Corp.,88 A.3d 635 (Del. 2014).