Tesla Legal Fight: It's On
No trial date has been set
Updated 5:07 PM EDT, Wed, Dec 9, 2009
A judge is refusing to toss out a lawsuit by a founder of Tesla Motors that accuses the electric car maker and its chief executive of libel, slander and several other allegations.
Martin Eberhard claims CEO Elon Musk unfairly blamed him for Tesla's well-documented financial woes in interviews with the media and in postings on the company's blogs. Eberhard also is suing to recover a $100,000 severance package the company took away from him because Tesla said he violated a non-disparagement agreement.
Yosef Peretz, who represents Eberhard against Tesla and Musk, says a San Mateo County Superior Court judge issued a written tentative ruling Tuesday refusing to toss out the lawsuit. The ruling says it appears Eberhard's lawsuit will prevail.
The lawsuit seeks not only to gag Musk but also compel him and the company to publish statements in specific major media outlets such as The New York Times that Eberhard and Marc Tarpenning are the only true founders of the company, which they incorporated in 2003.
Musk, who made millions with the sale of his company PayPal to eBay Inc. for $1.5 billion in 2002, joined Tesla the following year as chairman when he invested $6.35 million of the $6.5 million the company raised in its first round of funding. Musk said in court documents that he has invested $75 million in Tesla so far.
Musk argues that Eberhard's tenure as chief executive from 2004 to 2007 was so disastrous that it has taken him two years of 100-hour workweeks to remake the company. He said in an interview Tuesday that investments alone did not make him a "founder," but that his full-time commitment during the last two years to turn around a company gives him claim to the label.
"We had to basically rebuild the company," Musk said. "He did a lot of things that were to the detriment of Tesla."
Eberhard's lawyer, Yosef Peretz, would not comment or make Eberhard available.
But in his lawsuit, Eberhard blames Musk for many of the cost overruns that plagued the company during his tenure as chief executive. Eberhard claims that Musk became distracted by minor details such as what kind of door latches to install rather than involve himself in core production issues.
Eberhard and Musk have been trading vitriolic barbs in the media and on blogs since Musk allegedly forced Eberhard from the company in 2007. Musk today, as he did then, maintains that Eberhard nearly ran the company out of business by selling for $92,000 a car that cost more than $140,000 to build.
Their dispute has generated widespread online debate and divided loyalties among alternative-fuel enthusiasts and car buffs who follow Tesla as closely as technology buffs track Apple Inc.
There's no question that Eberhard and Marc Tarpenning, who made millions in 2000 when they sold their e-book company NuvoMedia to Gemstar-TV Guide International Inc., launched Tesla Motors in July 2003. Eberhard named the company after Nikola Tesla, a prominent electrical engineer and contemporary of Thomas Edison.
"I find it weird that he thinks he's a founder," said Tarpenning, who added that Musk's involvement with the company was nonetheless vital to its creation. Tarpenning, who left Tesla last year but still retains an ownership interest, said he remains on "pretty good terms" with both men but could not care less about the "founder" label.
"They are sort of dwelling on the past," Tarpenning said. "I wish they would just shake hands."
No trial date has been set.
Copyright Associated Press / NBC Philadelphia
First Published: Jul 29, 2009 5:24 PM EDT on NBC Bay Area
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