Elon Musk Pay Deal Decision Appealed to Delaware High Court (1)

A group of Tesla Inc. shareholders are appealing a month-old decision to void chief executive officer Elon Musk‘s blockbuster $56 billion pay package.

Florida shareholders ARK Investment Management LLC, David Israel, and Kurt Panouses filed the notice of appeal in the Supreme Court of Delaware docketed on Dec. 31 over the ruling to block what would be the largest CEO compensation deal in US history. The notice also targets Chancellor Kathaleen St. J. McCormick’s $345 million award in attorneys fees.

McCormick ruled early last year and again in December that the CEO and board breached fiduciary duty to Tesla investors in approving the record-breaking compensation plan, siding with stockholders who brought the derivative lawsuit, including Richard J. Tornetta, in 2018. Tesla shareholders had voted to reapprove the pay package after the chief judge of the Delaware’s Chancery Court dashed it.

“We want on this appeal to re-enfranchise Tesla shareholders and make their votes count,” said attorney Tom Grady of GradyLaw, one of the firms representing the Florida investors. He said in a phone call that twice—in 2018 and 2024—over 70% of shareholders voted to approve the pay package. “It’s ‘unfathomable’ that we could get a greater percentage of shareholders to approve that,” Grady said, applying the term McCormick used in describing the compensation deal.

Klehr Harrison Harvey Branzburg LLP also represents the Florida shareholders. Bernstein Litowitz Berger & Grossmann LLP and Andrews & Springer LLC are named in the notice as representing Tornetta. Musk and the board were represented by Ross Aronstam & Moritz LLP and others in Delaware Chancery. None of these firms immediately responded to a request for comment.

The case is Tornetta v. Musk, Del., No. 534,2024, notice of appeal 12/31/24.