A Delaware judge has reaffirmed her earlier decision to nullify Tesla CEO Elon Musk’s $56 billion compensation package, after a recent shareholder vote in favor of reinstatement, according to court documents filed Monday.
Chancellor Kathaleen McCormick of the Delaware Court of Chancery stood firm on her January ruling that deemed the pay package excessive and invalid. The latest decision comes as a blow to Tesla and its shareholders, who, according to earlier court filings, had voted to re-approve Musk’s pay package in June after the January judgment.
In her 101-page opinion, McCormick rejected Tesla’s attempt to “reset” the situation through the June vote.
“Were the court to condone the practice of allowing defeated parties to create new facts for the purpose of revising judgments, lawsuits would become interminable,” she said.
The judge criticized Tesla for making multiple material misstatements in its proxy statement regarding the shareholder vote, asserting that the company could not use the vote as a “cure-all” to justify restoring Musk’s compensation, court documents show.
Tesla’s stock fell 1.4 percent in after-hours trading following the decision, according to market data.
In addition to upholding her previous ruling, McCormick ordered Tesla to pay $345 million in attorney fees to the legal team representing the shareholder plaintiff, which cannot be paid in cash or Tesla stock. This amount, while substantial, falls short of the $5.6 billion initially requested by the attorneys, court documents reveal.
Bernstein Litowitz Berger & Grossmann, one of the law firms representing the plaintiff, said they were satisfied with the ruling.
“We are pleased with Chancellor McCormick’s ruling, which declined Tesla’s invitation to inject continued uncertainty into Court proceedings,” the firm stated.
The case, originally filed in 2018 by shareholder Richard Tornetta, challenged the legality of Musk’s compensation package. Tornetta’s attorneys argued that Delaware law does not allow companies to use ratification votes to overturn court rulings.
McCormick’s January decision found that Musk had improperly influenced the 2018 board process to negotiate his pay package. The judge said Tesla’s board was “beholden” to Musk, citing conflicts of interest due to close personal and financial ties, court documents show.
Following the January ruling, Tesla shareholders sent thousands of letters to the court, expressing concerns that rescinding Musk’s pay could lead him to focus on other ventures or potentially leave the company, court records show.
The contested pay package—described by McCormick in her January ruling as the “biggest compensation plan ever—an unfathomable sum”—was valued at $101.4 billion as of Dec. 2, according to Equilar, a compensation consulting firm.
Musk’s 2018 compensation plan offered him stock grants equivalent to about 1 percent of Tesla’s equity for each of the 12 operational and financial milestones achieved by the company and did not include a guaranteed salary.
The ruling leaves open the possibility for Musk and Tesla to appeal to the Delaware Supreme Court once McCormick enters a final order, which could happen as early as this week. Legal experts say that such an appeal process could take up to a year to resolve.
Musk, who had previously criticized the judge’s decision on his social media platform X and encouraged companies to leave Delaware and reincorporate in Texas, did not immediately respond to requests for comment by NTD News, The Epoch Times’ sister media.
