By Tom Hals
WILMINGTON, Delaware (Reuters) – Tesla began its fight for legal recognition of a shareholder vote favoring Elon Musk’s record compensation, telling a Delaware judge that it “significantly impacts” her ruling voiding the pay, according to a letter made public on Monday.
Tesla wrote to Chancellor Kathaleen McCormick that the parties in the pay package case should now lay out their legal interpretations of Thursday’s ratification of Musk’s pay, rather than moving ahead with the case on the prior schedule.
“The approval of ratification by Tesla’s stockholders significantly impacts the claims and issues in this action, including the court’s final judgment,” Tesla attorneys told McCormick in the letter, which was filed with the Court of Chancery on Friday.
Greg Varallo, a shareholder attorney in the case against the pay package, said the ratification had “no legal effect” on the case and that he would explain his argument in a brief due Friday.
Tesla has said the ratification process was “novel” and it was unclear if McCormick and the Delaware Supreme Court would accept the result.
Tesla has argued that the ratification has now cured the problems raised in McCormick’s ruling in January.
The judge found Musk controlled the 2018 process that led to the pay package and that Tesla concealed key information from shareholders about the ease of the targets the company had to meet for Musk to be paid.
A special committee of its board reviewed the pay package and determine it was in the best interest of shareholders, which Tesla said fixed the problem of Musk’s dominance in the process.
The vote was corrected by providing shareholders hundreds of pages of added disclosures, including McCormick’s 200-page opinion.
McCormick also has to determine a fee for the shareholder legal team before Tesla can appeal her ruling to the Delaware Supreme Court.
The shareholder’s attorneys are seeking around $5 billion, in the form of Tesla stock as a legal fee and Tesla argued they should be paid around $13.6 million.
(Reporting by Tom Hals in Wilmington, Delaware, Editing by Franklin Paul)
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