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Tesla shareholder lawsuit against SolarCity deal set to proceed

FILE PHOTO - Elon Musk, Chairman of SolarCity and CEO of Tesla Motors, speaks at SolarCity's Inside Energy Summit in Manhattan, New York October 2, 2015. REUTERS/Rashid Umar Abbasi/File Photo

(Reuters) - A class action lawsuit by Tesla Inc shareholders against the electric car maker's chief executive, Elon Musk, and the company's board over the SolarCity deal was set to proceed after a Delaware judge refused to dismiss it.

Tesla agreed to buy solar panel installer SolarCity for $2.6 billion in an all-stock deal in 2016.

Musk was the biggest shareholder in both Tesla and SolarCity at that time, and his SolarCity shares were converted to $500 million of Tesla shares.

It is "conceivable that Musk, as a controlling stockholder, controlled the Tesla board" during the SolarCity deal, the judge commented https://courts.delaware.gov/Opinions/Download.aspx?id=270820.

The lawsuit alleged that the board breached its duties to shareholders in approving the SolarCity deal.

(Reporting by Nivedita Balu in Bengaluru; Editing by Sriraj Kalluvila)