Richard Tornetta, who was at the center of Tesla shareholders’ claim that Elon Musk was taking an excessive pay package, is now at the center of claims that Tesla should not be reincorporating to Texas to approve Musk’s voided pay plan.
But Tesla is firing back at Tornetta. John Reed, one of Tesla’s attorneys, said in a Delaware Chancery Court filing this week that Tornetta “is raising false alarms”, according to Bloomberg.
Musk has considered relocating Tesla’s headquarters from Delaware to Texas after a judge revoked his substantial pay package due to conflicts among directors and inadequate disclosure of plan details.
In response, Tornetta is urging the judge to prevent Musk from addressing the pay dispute outside of Delaware. Despite this, no legal actions are currently threatened or pending in Texas, and Musk has not obstructed the issuance of a final judgment in the case, according to Reed’s letter to the judge.
McCormick’s decision on retaining the dispute in Delaware remains uncertain and could affect the case’s outcome. If Tesla relocates to Texas and adjusts Musk’s compensation there, it might trigger a new legal battle under Texas law.
A hearing is scheduled for July 8 to address Tornetta’s lawyers’ request for attorney fees and finalize the case. They aim to secure a ruling on their injunction plea before Tesla’s June 13 annual meeting, where a critical proxy vote will occur, Bloomberg writes.
Reed, in a letter, suggests that Tornetta’s legal moves could sway Tesla shareholders’ decisions on relocating to Texas and reinstating Musk’s record-breaking compensation package. He advises McCormick against publicly addressing Tornetta’s injunction request to prevent influencing shareholder votes unfairly.
Tornetta’s legal team fears that a Texas move could enable Musk and Tesla’s directors to obstruct the judge’s decision on Musk’s pay. They also seek an escrow account creation for 29 million Tesla shares, valued at around $5 billion, as payment.
Recall, Tornetta’s lawyers asked for $6 billion worth of legal fees for their services. “The lawyers who did nothing but damage Tesla want $6 billion. Criminal,” Elon Musk fired back last month.
The reasoning for the excessive fee rests on the fact that the victory to void Musk’s pay plan results in 266 million shares being returned to the company.
On January 31, we wrote that the compensation case, which was launched by Tornetta, argued that Tesla’s board lacked independence in crafting Musk’s pay, a view the judge supported.
Delaware Chancery Court Chief Judge Kathaleen St. J. McCormick cited inadequate disclosures and board conflicts of interest in her ruling. Musk, whose wealth largely comes from Tesla, the top auto company globally, has seen stock options from this plan vest as performance goals were met, though he hasn’t exercised them yet.
The judge wrote earlier this year: “In the final analysis, Musk launched a self-driving process, recalibrating the speed and direction along the way as he saw fit. The process arrived at an unfair price. And through this litigation, the plaintiff requests a recall.”
“The most striking omission from the process is the absence of any evidence of adversarial negotiations between the Board and Musk concerning the size of the grant,” she said in her ruling.
Tyler Durden
Sat, 04/27/2024 – 12:15
