Tesla investors were “coerced” and “uninformed” during Musk pay ratification vote: lawyers

The legal team of Tesla investor Richard Tornetta, who held nine TSLA shares when he filed a complaint in Delaware against CEO Elon Musk’s 2018 CEO Performance Award, is not happy about Tesla’s efforts to urge the court to consider the ratification of Musk’s pay package. As per Tornetta’s lawyers, the ratification vote was coerced and uninformed — and thus invalid. 

In a filing, Tornetta’s lawyers argued that the the Delaware Court should reject the efforts of Tesla’s legal team to consider the ratification of Musk’s compensation plan by the company’s shareholders at the 2024 Annual Stockholders’ Meeting. As could be seen in the filing, Tornetta’s lawyers immediately criticized Tesla for the EV maker’s attempts to revise the court’s initial opinion about the case. 

“Ten leading law firms and an unlimited budget. And they still could not find it. A case, any case, holding stockholders can usurp the Supreme Court’s role and reverse this Court’s trial judgment. Quod erat demonstrandum. Delaware is not Athens. The stockholder franchise—however important—is not a ‘get out of [rescission] free’ card. Defendants’ proposal is a dangerous paradigm shift: Courts would be subject to vox populi, and stockholders could overturn trial judgments,” Tornetta’s lawyers wrote. 

T(h)ornetta

Hearing for the motion to revise the initial opinion now scheduled for August 2nd (rumors for 8/8 were wrong)

Plaintiff’s attorney filed his opposition to this, his arguments are

– The court cannot reopen the closed trial record to consider new evidence
– The… pic.twitter.com/mz3wyAUy57

— Ale𝕏andra Merz (@TeslaBoomerMama) July 15, 2024

The plaintiff’s legal team also argued that despite the successful ratification of Elon Musk’s 2018 pay package at the 2024 Annual Stockholders’ Meeting, shareholders were still coerced and uninformed. The lawyers pointed to Musk’s comments that he would reconsider growing Tesla’s AI efforts if his share of the company was less than 25%, among other things, as a sign of shareholder coercion. 

“As the Ratification vote approached, the press repeatedly reported that rejecting the Ratification would cause Musk to execute his threats to divert critical corporate opportunities from Tesla. These circumstances rendered the Ratification vote coercive—and thus invalid—by making it impossible for stockholders’ to exercise their franchise free of undue external pressure created by [Musk] that distract[ed] them from the merits of the decision under consideration,’ and ‘forc[ing] [stockholders] into a choice between a new position and a compromised position for reasons other than those related to the economic merits of the decision,’” Tornetta’s lawyers wrote. 

They also argued that investors were uninformed since Tesla director Kathleen Wilson-Thompson, who served as the Special Committee of the company’s Board of Directors, was conflicted because a substantial portion of her net worth is tied to the EV maker. “Wilson-Thompson has realized a pre-tax total of approximately $62[M] from the exercise of [Tesla] equity award. Her Tesla shares received through grants were worth ~$150M upon her Committee appointment, which she admits ‘is a meaningful portion of her net worth’… Wilson-Thompson is conflicted just like Denholm,” Tornetta’s lawyers wrote. 

A hearing for the motion to revise the Delaware Court’s initial opinion on the matter is scheduled on August 2, 2024. A number of Tesla shareholders who voted in the ratification of Musk’s pay package have noted that they intend to attend the hearing if it is public. 

Rochard Tornetta’s lawyers’ filing (via PlainSite) can be viewed below. 

gov.uscourts.delch.2018-0408-KSJM.405.0 by Simon Alvarez on Scribd

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