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Eberhard's lawyer Yosef Peretz told the San Jose Business Journal that the co-founder dropped the suit voluntarily but offered no further comment, except to say that more may become public about the case in September. Eberhard's decision follows the judge's recent ruling that the lawsuit could move forward after Tesla filed a motion to dismiss it in June. In May, Eberhard filed the lawsuit in California Superior Court in San Mateo accusing Musk and the company of slander, libel and breach of contract. Eberhard was co-founder of Tesla along with Marc Tarpenning, but he was ousted from the electric car startup in an ugly management shakeout in in November 2007. Click here for comments Eberhard made to The Deal about his disappointment over his departure soon after. Although Eberhard's suit alleged that Musk "compromised Tesla Motors' financial health," the company's own accounting seems to refute those claims, with Tesla announcing earlier this month that it was profitable in July, reporting a net income of $1 million on revenue of $20 million from the sale of 109 Roadsters. This week, the company said it signed a lease to open a powertrain facility, which is expected to employ 350 people, in an old Hewlett-Packard Co. (NYSE:HPQ) facility in Palo Alto, Calif. The company's next milestone is the signing of a lease for a manufacturing facility to build its Model S sedans. In response to a query from The Deal about the status of the Model S facility, a representative of Tesla says: We are still in final lease negotiations. As you know, all smart businesses negotiate contingency leases simultaneously, and we're doing exactly that on several sites in California. If any one site falls through, then we have other options. We are still on target with our timing estimates and anticipate a start of production on the sedan in late 2011. Investors have recognized Tesla's momentum. In January, the company raised a $40 million venture round, and in May it raised $50 million via a partnership with Daimler AG (NYSE:DAI). Even the U.S. government has recognized the company's potential with a $465 million line of credit. - Matthew Wurtzel
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Tesla Motors Inc. co-founder Martin Eberhard dropped a lawsuit against the company and Elon Musk, its chairman, CEO and chief investor, earlier this month, news that was overshadowed by the electric car startup 
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