Tesla Motors wants a judge to toss out the lawsuit company founder Martin Eberhard filed against current CEO Elon Musk, calling it a groundless personal attack that attempts to stifle Musk's right to free speech.
It's the latest round in the fight between Musk and Eberhard over the legacy of the company -- and the electric car -- they ostensibly worked together to create, and it shows the matter won't be resolved amicably. The squabbling comes as Tesla Motors is gaining traction with a major investment from Daimler and a $465 million loan from the feds to finance construction of the Model S sedan.
Tesla's trip to the courthouse follows Eberhard's lawsuit accusing Musk of taking over the company and orchestrating Eberhard's ouster, then publicly disparaging him in an attempt to "rewrite history" and take credit for the Roadster. Rather than file a counter-suit as expected, Tesla Motors on Monday filed two motions asking a judge, in part, to dismiss the case under a California law that bars lawsuits aimed at stifling free speech.
Besides arguing that Eberhard was a poor CEO who "left the company's finances in shambles," Tesla claims Eberhard's litany of complaints (.pdf) -- which include libel, slander and breach of contract -- have no basis in fact. What's more, the company says, both Eberhard and Musk have a First Amendment right to state, and debate, their versions of the company's history. Eberhard has wasted no chance to do so, the company claims, and should not deny Musk the same opportunity.
"His lawsuit is nothing more than an attempt to curb open discourse on matters of importance to the public and to extract money from Tesla in the bargain," the motions (.pdf and .pdf), filed in San Mateo County, Calif., Superior Court, state. "He also takes the extraordinary (and hypocritical) step of seeking an injunction that would prevent Musk from exercising his free speech rights in public or in private."
In legal terms, Tesla's filings are called an anti-SLAPP motion, and they're filed when defendants believe the suits against them are an attempt to squelch public discourse or inhibit the right to free speech. Such a suit is called a strategic lawsuit against public participation, hence the term "anti-SLAPP" motion.
Eberhard and his attorneys could not be reached for comment Tuesday night, but one of the lawyers, Yosef Peretz, told Reuters he had nothing to say.
"I don't think we will respond at this time," he said. "We will respond to the motion."
UPDATE: Peretz on Wednesday told Wired.com he would not comment on the specifics of Tesla's response but said, "We totally expected the anti-SLAPP motion, and we intend to respond."
The legalese aside, Tesla's motions pull no punches in offering a scathing counterpoint to the version of events Eberhard laid out in his suit.
Eberhard says he founded Tesla in 2002 and Musk came aboard as an investor in 2004. Over the next three years, Musk named three members of Tesla's board, then orchestrated Eberhard's ouster on Nov. 28, 2007. After pushing him out, Eberhard claims, the company withheld his severance package because of a blog post he wrote, and Musk continuously disparaged Eberhard "and compromised Tesla Motors' financial health."
“In his zeal to appropriate Eberhard’s legacy, Musk has instead sullied Tesla Motors’ integrity and blemished Tesla Motors’ reputation and prosperity,” the suit states. (Read our report on the suit here.)
Musk, of course, doesn't see it that way.
In the claims filed Monday, Musk says he met J.B. Straubel -- who later became Tesla's chief technology officer -- in 2003 after Straubel learned of the entrepreneur's interest in electric vehicles. Straubel introduced Musk to the guys at AC Propulsion, a California company that developed the tzero electric sports car. Musk encouraged AC Propulsion to produce the car, but the company wasn't interested and instead introduced Musk to Eberhard, Marc Tarpenning and Ian Wright.
According to one of the two motions, the men had little more than an idea for Tesla Motors when Musk came along.
"At this time, Eberhard, Tarpenning and Wright, to Musk's knowledge, were collecting no salary, had no prototype or intellectual property relating to electric cars, had no formal office space and had obtained no Series A funding for the company," the motion states. "Even the trademark for the company name 'Tesla Motors' was owned by a third party."
Musk "agreed to join in the creation of Tesla" after convincing the other men the company should create the Roadster to prove the viability of electric cars and then focus on developing a family sedan. To save money on legal fees, the men "simply copied" the articles of incorporation for SpaceX, Musk's aerospace venture, according to the motion.
Musk says he provided 98 percent of the company's Series A funding and "more than 90 percent" of Series B funding, then co-led three subsequent rounds. He "has to date invested approximately $75 million in the company," according to the claim.
Once the company was up and running, Musk says in the motions, Eberhard "sought to become the 'face' of the company," publishing a blog, appearing on television, being profiled in magazines and testifying before Congress. But, Musk claims, Eberhard wasn't minding the store.
"Although Eberhard had successfully captured widespread public interest and media attention, he was far less successful at actually doing the work needed at Tesla -- developing a production-ready vehicle in a cost-effective manner," the motion states. "Musk developed serious concerns about aspects of Eberhard's performance as CEO, and he became increasingly convinced that Eberhard lacked the management skills and judgement that would be necessary to accomplish the complex tasks of turning their shared vision into reality."
Those shortcomings became apparent in April, 2007, the motion states, when Eberhard presented a business plan that said the Roadster would cost $65,000 to produce, with costs coming down as production ramped up. A few months later, Timothy Watkins, the managing director of Tesla Investor Valor Equity Partners, "performed an extensive part-by-part analysis" of the car and found the true production cost "would be approximately $120,000, well over the car's $92,000 sale price," according to the motion.
The problem was Tesla had already accepted deposits from about 450 customers and promised them Roadsters for less than $100,000.
Beyond being over budget, the motion claims, the Roadster was behind schedule. (Eberhard attributes the spiraling cost and delays to Musk, whom he says "took a persistent and distracting interest in random details of marginal importance.") Convinced that Eberhard wasn't up to the task, "Tesla's board unanimously agreed that he should be removed as CEO," the motion states. Michael Marks was named interim CEO and Eberhard was named president of technology on Aug. 11, 2007.
Musk says Marks found the problems ran deeper than anyone realized and Eberhard "left the company's finances in shambles" and "had nearly exhausted its cash resources."
Eberhard left Tesla on Nov. 28, 2007. He claims he was told to take a severance package and resign or Musk would convert enough common stock to name three more board members and push Eberhard out. Tesla says the board voted unanimously to fire him and offered him a severance package of $100,000 and other benefits. Tesla says he forfeited the severance after writing a blog post disparaging the company's management, a violation of his separation agreement with the company.
Musk makes no apologies for anything he's said about Eberhard, but motion notes "almost immediately after his removal, Eberhard undertook a campaign of publicly disparaging Tesla and Musk."
That's fine, the company seems to be saying in its response to Eberhard's lawsuit. The history of the company is something of interest to the public, and a topic that should be discussed. But Tesla doesn't think Musk should be barred from telling the story as he sees it.
The final word on that will rest with a judge.
Photo: Tesla Motors
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