Tesla pushes back on investor's latest move in Elon Musk's pay package row

By Jef Feeley
 

Tesla Inc. says the shareholder who won a court order in Delaware killing co-founder Elon Musk’s $56 billion pay package is jumping the gun in asking the judge to bar the billionaire from moving the executive-compensation dispute to Texas.
 

Tesla investor Richard Tornetta is raising false alarms about the company’s proxy asking shareholders to support reincorporating the manufacturer in Texas and reinstate Musk’s voided pay, John Reed, one of Tesla’s attorneys, said in a Delaware Chancery Court filing Thursday.

Musk has been threatening to move Tesla’s corporate home from Delaware to Texas after Judge Kathaleen St. J. McCormick in January rescinded his record-setting pay package over director conflicts and Tesla’s failure to properly disclose the plan’s details. Tornetta wants McCormick to issue an order barring Musk from litigating the pay issue anywhere other than Delaware.

“There are no pending or threatened actions in Texas or anywhere else” aimed at re-litigating the pay suit and Musk has done nothing that would interfere with McCormick issuing a final judgment in the case, Reed said in a letter to the judge.

Greg Varallo, one of Tornetta’s lawyers, didn’t immediately respond to an email seeking comment on Tesla’s latest filing.

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, that would presumably have to be challenged in a new lawsuit under Texas law.

McCormick has set a July 8 hearing to review a request by Tornetta’s lawyers for attorney fees and issue a final order in the case. The investor’s lawyers want the judge to rule on their injunction request before Tesla’s June 13 annual meeting, when the proxy vote is due to take place.

In his letter, Reed said Tornetta’s lawyers may be seeking to influence Tesla shareholders’ decision on whether to support moving incorporation to Texas and reinstating for Musk the largest executive compensation package in US history.

Reed urged McCormick not to publicly respond to Tornetta’s demand for an injunction against moving the case to Texas because it “might unfairly impact the stockholder votes at the company’s annual meeting.”

Tornetta’s lawyers says a Texas move could allow Musk and his fellow directors to “evade, block, or otherwise interfere” with the judge’s ruling on the billionaire’s pay. 

They also want McCormick to order the creation of an escrow account for 29 Tesla million shares, currently worth about $5 billion — in keeping with their unusual request to be paid for their work in stock. The lawyers expressed concern about potentially having to also seek fee approval from a judge in Texas.

Reed argued that sequestering the shares would amount to “an impermissible pre-judgment attachment” of Tesla assets and criticized the Tornetta side’s understanding of “the facts and mechanics” of how the company’s stock is authorised.

The case is Tornetta v. Musk, 2018-0408, Delaware Chancery Court (Wilmington)