This Week in Chancery Court: Musk, Sears Hometown, and JPMorgan

Elon Musk’s unprecedented $55 billion compensation package at Tesla Inc. will get another look from a Delaware judge this week.

Musk testified in Delaware’s Chancery Court last year that he played no role in the pay deal at the electric-car company, and that he was focusing most of his time on reorganizing Twitter Inc.

Here’s a look at what else is on the court’s calendar:

Tuesday: Tornetta v. Musk, Del. Ch., No. 2018-0408, post-trial arguments on 2/21/23.

At issue: A shareholder’s lawsuit claims Tesla’s board failed to exercise independence from Musk as it drew up the 2018 pay package for its CEO. Chancellor Kathaleen St. J. McCormick could order Musk to pay back some or all of the stock awards to Tesla.

Noteworthy: McCormick is the same judge who presided over a showdown between Musk and Twitter last year when he tried to back out of a $44 billion buyout of the social media platform.

Court action: Post-trial arguments.

Musk Claims No Role in Setting His $55 Billion Pay Deal at Tesla

Tuesday: In re Sears Hometown & Outlet Stores Inc. S’holder Litig., Del. Ch., No. 2019-0798, trial begins 2/21/23.

At issue: Ex-Sears CEO Eddie Lampert and his hedge fund face claims they forced a self-dealing buyout of the bankrupt retail giant’s remaining assets. Presented with a liquidation plan that he didn’t like, Lampert replaced Sears Hometown and Outlet Stores Inc. board seats with new directors he chose to fulfill his wishes, the plaintiffs said in a pre-trial brief.

Lampert’s attorneys say nothing he did precluded the board from pursuing the liquidation plan, though evidence at trial will show the management’s plan “would have destroyed” Hometown’s value.

Noteworthy: Sears Hometown, a branch focused on selling appliances, tools, hardware, and garden equipment, filed for bankruptcy in Delaware in December.

Court action: A four-day trial begins Tuesday in Wilmington, Del.

Lampert Accused of Strong-Arm Buyout After Stripping Sears (1)

Thursday: ITG Brands LLC v. Reynolds American Inc., Del. Ch., No. 2017-0129, hearing 2/23/23.

At issue: Vice Chancellor Lori Will must decide how much Imperial Brands Plc’s US unit owes in damages, including payments to the state of Florida, as part of a multibillion-dollar settlement over the health-care costs of smoking.

Imperial subsidiary ITG Brands LLC bought the Winston, Salem, Kool, and Maverick cigarette product lines from Reynolds American Inc. Will ruled in September that the asset purchase agreement requires ITG to pay Reynolds’ share of the settlement.

Noteworthy: Will noted in her summary judgment ruling that Florida won a $170 million court judgment against Reynolds over its failure to make settlement payments during its litigation with ITG.

Court action: Motion for summary judgment on remedies.

Reynolds Beats Imperial Brands on Winston, Salem, Kool Liability

Friday: Javice v. JPMorgan Chase Bank NA, Del. Ch., No. 2022-1179, oral arguments 2/24/23.

At issue: Charlie Javice, who founded the college financial-planning platform Frank in 2017, says JPMorgan Chase & Co. refuses to honor obligations to pay her legal fees in a securities fraud lawsuit in which JPMorgan alleges she falsified the number of students with Frank accounts to “induce” a $175 million sale in 2021. JPMorgan says Javice and another former Frank executive should pay for their own defense.

Court action: Motion for summary judgment.

JPMorgan Says Javice Should Use Own Money for Frank Fraud Fight

Friday: Altieri v. Alexy , Del. Ch., No. 2021-0946 , oral arguments 2/24/23.

At issue: A Mandiant Inc. investor challenged a $1.2 billion take-private sale of the company’s FireEye Inc. cybersecurity business to Symphony Technology Group. The investor alleges the deal violated a law requiring shareholder approval when a company sells “substantially all” of its assets and goodwill. The defendants argue in court documents that a sale of 18% of the company’s assets can’t constitute a “sale of substantially all assets.”

Noteworthy: The plaintiffs notified the court that they plan to discuss a December ruling in an unrelated case that suggested just one single class of shareholders could vote on increasing the number of company shares. That same ruling has prompted over two dozen other companies to flood the court with petitions seeking retroactive validation for common stock issued as part of a blank-check merger with a shell entity.

Court action: Motion to dismiss.

Mandiant, Board Sued Over $1.2 Billion FireEye Take-Private Deal