DOVER, Del. (AP) – A Delaware judge has upheld his ruling that Tesla must reinstate Elon Musk’s multibillion-dollar pay package.
Chancellor Kathaleen St. Jude McCormick on Monday rejected the request of the lawyers of the leaders of Musk and Tesla companies to vacate their sentence earlier this year and demand that the company withdraw the payment that has never happened before.
McCormick also rejected an equally unprecedented and substantial request for fees by the plaintiff’s attorneys, who argued that they were entitled to legal fees in the form of more than $5 billion in Tesla stock. The judge said that these lawyers should be paid 345 million dollars.
The rulings came in a lawsuit filed by a Tesla customer who challenged Musk’s 2018 compensation package.
McCormick concluded in January that Musk created the special pay package in sham negotiations with directors who were not independent. The compensation package was originally worth $56 billion, but that amount has changed over the years based on Tesla’s valuation.
Following the court’s decision, Tesla shareholders met in June and approved Musk’s 2018 pay package for the second time, again with a large margin.
Defense attorneys then said that the second vote made it clear that Tesla shareholders, who had full knowledge of the 2018 plan violations that McCormick mentioned, were adamant that Musk was entitled to the package. They asked the judge to withdraw his order ordering Tesla to withdraw the payment package.
McCormick, who was skeptical of the defense’s arguments during the August trial, said in Monday’s ruling that those arguments were flawed.
“A large and talented group of defense firms have developed and challenged the treaty, but their unprecedented doctrine contradicts many forms of settled law,” McCormick wrote in a 103-page opinion.
The judge noted, among other things, that a shareholders’ vote standing alone cannot approve a judge’s transaction.
“Even if a shareholder vote could be satisfactory, it cannot do so here due to numerous errors in the proxy statement,” he added.
Meanwhile, McCormick found that the request of $5.6 billion by the shareholder’s lawyers, which had previously reached $7 billion based on Tesla’s sales price, went too far.
“In the case of overpaying, it was a bold inquiry,” McCormick wrote.
Attorneys for the Tesla shareholder argue that their work resulted in a large “reward” to return shares to Tesla that otherwise would have gone to Musk and dilute the shares held by other Tesla investors. They value that benefit at $51.4 billion, using the difference between the stock price during McCormick’s January tenure and the strike price of the additional 340 million options granted to Musk.