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Tesla launches legal battle to reinstate Musk's salary

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By Tom Hals

WILMINGTON, Delaware (Reuters) – Tesla began its fight to legally recognize a shareholder vote in favor of Elon Musk's record compensation, telling a Delaware judge that it “significantly impacts” her decision to repeal the compensation, according to a letter released on Monday.

Tesla wrote to Treasury Secretary Kathaleen McCormick that the parties in the pay package dispute should now set out their legal interpretations of Thursday's ratification of Musk's salary, rather than moving the case forward as originally planned.

“Tesla shareholders' approval of the ratification has significant implications for the claims and issues in this litigation, including the Court's final judgment,” Tesla McCormick's lawyers said in the letter filed with the Court of Chancery on Friday.

Greg Varallo, a shareholder attorney in the lawsuit challenging the compensation package, said the ratification had “no legal impact” on the case and he would explain his argument in a brief due Friday.

Tesla said the ratification process was “novel” and it was unclear whether McCormick and the Delaware Supreme Court would accept the outcome.

Tesla argues that ratification resolves the problems raised by McCormick's ruling in January.

The judge concluded that Musk controlled the 2018 process that led to the compensation package being determined and that Tesla withheld important information from shareholders about how easy it was to achieve the goals Musk had to meet in order to get paid.

A special committee of the board of directors reviewed the compensation package and concluded that it was in the best interests of shareholders. According to Tesla, this solved the problem of Musk's dominance.

The vote was corrected by providing shareholders with hundreds of pages of additional disclosures, including McCormick's 200-page statement.

McCormick must also set a fee for the shareholder rights team before Tesla can appeal her ruling in the Delaware Supreme Court.

The shareholder's lawyers are demanding around $5 billion in Tesla shares as legal fees, while Tesla argued that they should be paid around $13.6 million.

(Reporting by Tom Hals in Wilmington, Delaware, editing by Franklin Paul)