Tesla Corporate Shift to Texas Ruled Valid by Delaware Judge (1)

Tesla Inc.'s move to Texas after a Delaware judge voided Elon Musk’s record $56 billion pay package complied with the company’s charter and corporate law, the same judge said in a ruling made public Tuesday.

Chancellor Kathaleen St. Jude McCormick rejected a bid to invalidate the reincorporation, saying the case involved the same issues resolved last year in a separate lawsuit that sought to block Trade Desk Inc.'s move to Nevada. Both shareholder suits said the companies violated charter provisions requiring a two-thirds investor vote—Tesla’s shift to Texas got only 63% approval—for certain types of governance changes.

The brief decision by McCormick, chief judge of Delaware’s Chancery Court, referred directly to the reasoning offered by a different judge in the Trade Desk ruling last November. A reincorporation isn’t a charter amendment, even when it has the same practical effect, the Trade Desk decision said.

McCormick, who handles all of Musk’s major Delaware cases, has fielded a year-long barrage of online attacks from the world’s wealthiest person and his devoted social media followers since killing his 2018 CEO pay deal.

In addition to going after McCormick personally and the judiciary more broadly, the tech titan has urged other companies to follow him out of Delaware, a call that seemed to gain little momentum until his new role in the second Trump administration amplified his power and sway virtually overnight. Delaware—home to nearly 70% of Fortune 500 companies—funds about 25% of its budget with corporate franchise fees.

The fiercely debated phenomenon, dubbed “DExit,” is dividing the state’s close-knit legal community and driving potentially seismic changes to a body of corporate law that sets the tone for businesses nationwide.

The relocation challenge filed by Tesla investor Donald Ball—who named Musk and other board members as additional defendants—also took aim at other aspects of the shareholder vote last June that approved the redomestication and sought to retroactively validate the compensation deal struck down by McCormick.

Musk made a novel effort to reinstate his pay based on that “ratification” vote, but the judge shot him down in December, when she also awarded $345 million to the lawyers who led the case.

The other sections of Ball’s lawsuit—which concern the shareholder vote’s mechanics and the company’s disclosures about it—remain pending.

Ball is represented by McCollom D’Emilio Smith Uebler LLC and Kaskela Law LLC. DLA Piper LLP (US) represents Tesla. Musk and most of the other board members are represented by Richards, Layton & Finger PA and Sullivan & Cromwell LLP. One director is represented by Abrams & Bayliss LLP.

The case is Ball v. Tesla Inc., Del. Ch., No. 2024-0622, 3/3/25.