July 21, 2024

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Tesla begins legal battle to recover Musk’s pay

Tesla begins legal battle to recover Musk’s pay

Written by Tom Hales

WILMINGTON, Del. (Reuters) – Tesla Inc has begun its fight for legal recognition of a shareholder vote in favor of Elon Musk’s record compensation, telling a Delaware judge that it “significantly impacts” her ruling to void the pay, according to a letter published on Monday.

Tesla wrote to counsel Kathleen McCormick that the parties in the pay package case must now lay out their legal interpretations of Musk’s pay certification on Thursday, rather than moving forward with the case according to the prior timeline.

“Tesla shareholders’ approval of certification significantly impacts the claims and issues in this action, including the court’s ultimate ruling,” Tesla lawyers for McCormick said in the letter, which was filed with the Court of Chancery on Friday.

Greg Varallo, a lawyer for shareholders in the case against the pay package, said the certification has “no legal impact” on the case, and that he will explain his argument in a brief scheduled to be released on Friday.

Tesla said the certification process was “new” and it was not clear whether McCormick and the Delaware Supreme Court would accept the outcome.

Tesla argued that the certification has now addressed the issues raised in the McCormick ruling in January.

The judge found that Musk had control over the 2018 process that led to the pay package and that Tesla concealed key information from shareholders about the ease of goals the company had to achieve in order for Musk to receive his wages.

A special committee of its board of directors reviewed the pay package and determined it was in the best interests of shareholders, which Tesla said resolved the problem of Musk’s dominance in the process.

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The vote was corrected by providing shareholders with hundreds of pages of additional disclosures, including McCormick’s 200-page opinion.

McCormick also must determine the legal team’s fees to shareholders before Tesla can appeal its ruling to the Delaware Supreme Court.

Shareholder lawyers are seeking about $5 billion in Tesla stock as legal fees, and Tesla has said they should get about $13.6 million.

(Reporting by Tom Hales in Wilmington, Delaware; Editing by Franklin Paul)