By Tom Hals and Jonathan Stempel
WILMINGTON, Delaware (Reuters) – A Delaware judge ruled on Monday that Tesla CEO Elon Musk is not entitled to receive a $56 billion compensation package even though the electric car company’s shareholders voted to reinstate him.
The decision issued by the judge, Chancellor Kathaleen McCormick of the Court of Chancery, follows his January ruling that called for excessive payments and removed them, surprising investors, and casting doubt on Musk’s future at the most important car manufacturer in the world.
Musk did not immediately respond to an email request for comment.
Tesla said in court that the judge should take into account the vote of the following June by its shareholders in favor of the payment of Musk, the driver of the company that leads many of the progress, and return his compensation.
McCormick said Tesla’s board had no right to hit a “reset” to restore Musk’s pay package.
“If the court were to condone the practice of allowing losing parties to create new facts for the purpose of revising verdicts, lawsuits could end,” he said in his 100-page opinion.
He also said that Tesla made several mistakes in his comments about the vote, and he can’t say the vote was a “cure-all” to justify reinstating Musk’s pay.
“Taken together,” Tesla’s problems and arguments “carry a powerful punch,” he wrote.
Tesla shares fell 1.4% in after-hours trading, after the ruling.
McCormick also ordered Tesla to pay the attorneys who brought the case $345 million, less than the $6 billion they originally requested. He said the fee could be paid in cash or Tesla stock.
“We are pleased with Chancellor McCormick’s decision, which rejected Tesla’s invitation to remain skeptical in the litigation,” said Bernstein Litowitz Berger & Grossmann, one of the three law firms for the plaintiff.
The law firm also said it hoped to defend the court’s opinion if Musk and Tesla appealed.
Musk and Tesla could appeal to the Delaware Supreme Court once McCormick enters the final document, which could come as soon as this week. The appeal can take up to a year to process.
After the January ruling, Tesla shareholders flooded the court with thousands of letters arguing that removing Musk’s pay increased the likelihood of him leaving Tesla or developing other products as a countermeasure to other non-Tesla jobs.
Attorneys for the shareholder, Richard Tornetta, who filed a lawsuit in 2018 against Musk’s compensation package, argued that Delaware law does not allow the company to use an affirmative vote to overturn a lawsuit.