Tesla Board Vows Not to Move Musk Pay Court Fight to Texas
A Tesla Model S during the Montreal Electric Vehicle Show in Montreal, Quebec, Canada, on Friday, April 19, 2024. Prime Minister Justin Trudeau is offering more tax breaks to automotive firms to put their electric vehicle factories in Canada, as companies including Honda Motor Co. and Toyota Motor Corp. consider lucrative new investments.
(Bloomberg) — Tesla Inc.’s directors say they don’t want a do-over in Texas of the Delaware court battle that killed co-founder Elon Musk’s $56 billion pay package — regardless of whether shareholders approve reincorporating the electric-car maker in the Lone Star state.
Lawyers for Tesla’s board say an investor who persuaded a Delaware judge to void Musk’s record-setting pay package is raising “hypothetical” fears about a June proxy vote on whether the company should ditch Delaware and reinstate Musk’s compensation plan.
Tesla directors “have not threatened, and do not intend, to seek to litigate any issue relating to this action in any other forum,” the board’s lawyers said in a Delaware Chancery Court filing made public Wednesday. The company made similar arguments in an April filing.
Musk called for Tesla to move its corporate home to Texas after Delaware Chancery Judge Kathaleen St. J. McCormick in January rescinded his pay package over director conflicts of interest and the company’s failure to properly disclose the plan’s details.
Richard Tornetta, the shareholder who won the ruling after a 2022 trial, wants the judge to issue an order ahead of the June 13 annual shareholder meeting barring Tesla from litigating the pay issue anywhere other than the First State.
Greg Varallo, a lawyer representing Tornetta, declined to comment Wednesday. It’s unclear what impact an order from McCormick retaining the dispute in Delaware would have on the case. If Tesla reincorporates in Texas and its board approves Musk’s pay there, an investor would have to challenge it with a new lawsuit under Texas law.
McCormick has set a July 8 hearing to issue a final order in the case and review a request by Tornetta’s lawyers to paid for their work with 29 million Tesla shares — currently worth about $5 billion.
Tesla’s directors argued in this week’s filing that the proxy vote is being held under Delaware law and any fears about further litigation are speculative.
The case is Tornetta v. Musk, 2018-0408, Delaware Chancery Court (Wilmington).
(Updates with details on vote being held under Delaware law in ninth paragraph)
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