Delaware Judge Kathaleen McCormick has once again sided against Elon Musk…
After ruling against the billionaire in July 2022 when he tried to break his $44 billion contract to buy Twitter, and again in January 2024 when she initially rescinded Musk’s record (but “deeply flawed” according to her) $56 billion performance-based compensation package (determining that Tesla deceived shareholders when the all stock compensation was approved in 2018), she has once again ruled that pay package.
Musk’s legal team argued that McCormick should reverse her earlier decision because Tesla had conducted a shareholder vote to “ratify” the 2018 pay plan at the company’s annual shareholder meeting in June, per CNBC.
In fact, 72% of Tesla shareholders voted in June to approve the company’s CEO’s pay package.
The judge said Musk’s attorneys made an argument with multiple “fatal flaws,” including their argument that the shareholder vote was enough to validate the pay package after the fact.
“The large and talented group of defense firms got creative with the ratification argument, but their unprecedented theories go against multiple strains of settled law,” McCormick said in her ruling.
McCormick ruled that the vote on the payment package did not have a “ratifying effect” on the current case, because shareholders had not ratified the payment plan prior to her ruling.
“Were the court to condone the practice of allowing defeated parties to create new facts for the purpose of revising judgments, lawsuits would become interminable,” she wrote.
In addition to rejecting the revisions, Quartz reports that Monday’s decision granted $345 million in attorney fees to the lawyers who successfully challenged Musk’s pay plan on behalf of Tesla shareholders.
The court deemed this amount an “appropriate sum to reward a total victory.”
Tesla has the option to pay this fee in either cash or by issuing stock that can be sold on the open market.
While Musk could appeal the decision to the Delaware Supreme Court, this ruling could have broader implications for how companies structure executive compensation and the role of shareholder votes in such decisions.
This is the judge https://t.co/c0NGTraJfO pic.twitter.com/svrp39JxmQ
— zerohedge (@zerohedge) December 2, 2024
Finally, the judge has some interesting ‘friends’…
“Before becoming the head of the Delaware Chancery Court, McCormick worked at a Delaware law firm called Young Conaway.
This firm and its employees have been major donors to President Joe Biden for decades.
In 2016, Hunter Biden hosted a gubernatorial campaign event for Congressman John Carney, with then-Vice President Joe Biden as the guest speaker.
This event took place at the Law Offices of Young Conaway in Wilmington, Delaware.
Carney, a close friend of Joe Biden for the last four decades, later became governor and nominated Kathaleen McCormick, a partner at Young Conaway, to her position on the Delaware Chancery Court.
In a March 2018 email, Hunter Biden claimed to personally know every judge on the Delaware Chancery Court while threatening legal action against his Chinese business partners.
“I will bring the suit in the Chancery court in Delaware – which as you know is my home state and I am privileged to have worked with and know every judge on the chancery court.
… another clear example of the Biden administration and its allies weaponizing the American legal system against their political opponents.”
Judge Kathaleen McCormick rescinded Elon Musk’s $55 billion Tesla compensation package, overturning the company’s board and 80% of its shareholders.
McCormick also ruled against @elonmusk during his Twitter acquisition.
Before becoming the head of the Delaware Chancery Court,… pic.twitter.com/k2F4CHDJuT
— KanekoaTheGreat (@KanekoaTheGreat) February 1, 2024
Tesla issued a statement on X shortly after the decision, confirming that it will appeal her decision….
A Delaware judge just overruled a supermajority of shareholders who own Tesla and who voted twice to pay @elonmusk what he’s worth.
The court’s decision is wrong, and we’re going to appeal.
This ruling, if not overturned, means that judges and plaintiffs’ lawyers run Delaware…
— Tesla (@Tesla) December 2, 2024
There is also the fact that Musk’s move to relocate his business to Texas (after telling people on X after the original ruling that “companies should get the hell out of Delaware”) which could change things, but it is is unclear how this will proceed for now.
