The Delaware Court of Chancery on Wednesday allowed an investor lawsuit against Elon Musk and Tesla Motors Inc. to proceed, finding there is reason to believe Musk controlled the Tesla board when the company paid $2.6 billion to acquire a debt-saddled firm that he helped to found.

In a “close call,” Vice Chancellor Joseph R. Slights III sided with a class of investors who argued Musk used his influence as a controlling stockholder to lock a conflicted board of Tesla directors into accepting what amounted to a bailout for Musk's SolarCity Corp. in 2016.

The finding denied Musk and individual Tesla directors' business judgment protections in their bid to dismiss the suit, paving the way for discovery in the year-and-a-half old case.

Musk and the Tesla defendants tried to have the case tossed under the state Supreme Court's Corwin doctrine, arguing an “uncoerced, fully informed majority vote of disinterested stockholders” insulated the SolarCity acquisition from the plaintiffs' direct and derivative claims. Because Musk only held a 22 percent stake in Tesla at the time, they said, he could not have dominated the deal.

But Slights looked to a variety of other factors raised by the plaintiffs, including Musk's own public acknowledgments of his sway over the Palo Alto, California-based designer of electric cars and energy-storage products.

“The combination of well-pled facts relating to Musk's voting influence, his domination of the board during the process leading up to the acquisition against the backdrop of his extraordinary influence within the company generally, the board level conflicts that diminished the board's resistance to Musk's influence, and the company's and Musk's own acknowledgements of his outsized influence, all told, satisfy plaintiffs' burden to plead that Musk's status as a Tesla controlling stockholder is reasonably conceivable,” he wrote in a 58-page memorandum opinion.

Tesla's press shop did not respond to a request for comment Thursday.

The plaintiffs sued over the all-stock acquisition in September 2016, alleging breaches by Musk and the Tesla board in approving the deal. According to the investors, Tesla overpaid for SolarCity at Musk's repeated urging without accounting for a serious liquidity crisis at the struggling solar-energy firm.

By the time Tesla and SolarCity inked the deal in July of that year, SolarCity's debt had ballooned to more than $3 billion and the company was struggling to meet important benchmarks as it was trying to open a key manufacturing plant in Buffalo, New York. Still, the plaintiffs said, Tesla's directors approved the deal, which valued SolarCity at more than $25 per share—well above the range identified by Tesla's financial adviser.

According to the complaint, Tesla did not explore any other strategic options or form a special committee to evaluate the deal.

Shareholders ultimately approved the transaction at the ballot box, even though a vote was not required under the Delaware corporate law. Tesla directors and officers who owned stock in SolarCity did not vote. However, the complaint alleges that six out of the seven Tesla board members had conflicts of interest when they approved the deal.

Attorneys for Musk and the Tesla directors did not respond Thursday to calls seeking comment on the ruling.

An attorney for the plaintiffs was not immediately available to comment.

The plaintiffs are represented by attorneys from Grant & Eisenhofer; Prickett, Jones & Elliott; Labaton Sucharow; Friedlander & Gorris; Guttman, Buschner & Brooks; Robbins Geller Rudman & Dowd; Kessler Topaz Meltzer & Check; and Bernstein Litowitz Berger & Grossmann.

The defendants are represented by David E. Ross, Garrett B. Moritz and Benjamin Z. Grossberg of Ross Aronstam & Moritz, and William Savitt, Graham W. Meli, Steven Winter and David E. Kirk, of Wachtell, Lipton, Rosen & Katz.

The case is captioned In re Tesla Motors Stockholder Litigation.