By Tom Hals
WILMINGTON, Delaware (Reuters) – Tesla began its fight for legal recognition of a shareholder vote in favor of Elon Musk’s record compensation, telling a Delaware judge it will have a “significant impact” on its ruling voiding the pay is stated, according to a letter made public on Monday.
Tesla wrote to Chancellor Kathaleen McCormick that the parties in the pay package case must now explain their legal interpretations of the ratification of Musk’s pay on Thursday, rather than proceeding with the case as per the previous schedule.
“The approval of Tesla shareholders’ ratification has a significant impact on the claims and issues in this action, including the court’s final judgment,” Tesla attorneys told McCormick in the letter, which was filed with the Court on Friday or Chancery.
Greg Varallo, a shareholder attorney in the case against the pay package, said the ratification had “no legal effect” on the case and that he would explain his argument in a brief on Friday.
Tesla has said the ratification process was “new” and that it was unclear whether McCormick and the Delaware Supreme Court would accept the result.
Tesla has argued that the ratification has now resolved the issues raised in McCormick’s ruling in January.
The judge ruled that Musk controlled the 2018 process that led to the compensation package and that Tesla hid key information from shareholders about the ease of the targets the company needed to meet to get Musk paid.
A special committee of the board of directors reviewed the compensation package and determined it was in the best interests of shareholders, solving the problem of Musk’s dominance in the process, according to Tesla.
The mood was corrected by providing shareholders with hundreds of pages of added disclosures, including McCormick’s 200-page opinion.
McCormick must also set compensation for the shareholder legal team before Tesla can appeal its ruling to the Delaware Supreme Court.
The shareholder lawyers are seeking about $5 billion in the form of Tesla stock as legal compensation, and Tesla argued they should be paid about $13.6 million.
(Reporting by Tom Hals in Wilmington, Delaware, editing by Franklin Paul)
