Elon Musk and Tesla have lost a legal battle after a judge ruled against the richest man in the world being given a massive $56 billion pay deal.
Delaware judge Kathleen McCormick shot down the historic reward for Musk, marking the second time the payout has been rejected by the courts.
Musk was set to receive the $56bn in pay from Tesla under a historic compensation package struck in 2018. It was described in court documents as the largest ever seen in public markets.
Tesla moved to ratify the agreement via a shareholder vote, then asked the court to approve it afterwards.
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Judge McCormick called Tesla’s legal argument ‘fatally flawed’ and at times ‘indefensible’ as she denied the motion in a 101-page opinion.
The judge wrote: “The large and talented group of defense firms got creative … but their unprecedented theories go against multiple strains of settled law.
“Novelty is not necessarily damning, but defendants’ novel request flies in the face of the policy bases for all relevant rules of procedure.
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“Were the court to condone the practice of allowing defeated parties to create new facts for the purpose of revising judgments, lawsuits would become interminable.”
As a result of the decision, Tesla shares fell by as much as 1.4 percent in after-hours trading.
The judge also shot down a ‘bold ask’ from the plaintiff’s lawyer who asked to receive their legal fees in the form of $5.6bn in Tesla stock.
On December 2, Tesla released a statement vowing to appeal the verdict to a higher court, saying it was only intending to pay Musk ‘what he is worth’.
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The statement read: “A Delaware judge just overruled a supermajority of shareholders who own Tesla and who voted twice to pay Elon Musk what he’s worth.
“The court’s decision is wrong, and we’re going to appeal.
“This ruling, if not overturned, means that judges and plaintiffs’ lawyers run Delaware companies rather than their rightful owners – the shareholders.”
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Musk agreed and shared the company’s statement on Twitter.
He also declared that ‘shareholders should control company votes, not judges’ while sharing a social media post by investor Cathie Wood, the CEO of Ark Invest, who took issue with McCormick’s decision.
In a tweet she commented: “Based on her @TSLA ruling, DE Judge McCormick is an activist judge at its worst. No judge has the right to determine CEO compensation.
“Shareholders voted twice, overwhelmingly each time, to ratify @elonmusk’s 2018 performance-based pay package. She will lose this fight in Supreme Court. I stand by my original response supporting #Tesla and Elon."
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Musk also retweeted the post by Wood.
Gerrard Kaonga