Musk Won $56B Pay Because of Vote, Tesla Argues in Court

Tesla is claiming Elon Musk won his legal battle over his $56 billion pay package because shareholders voted for the compensation, despite a judge rescinding it earlier this year, according to a court filing just made public.

The company's filing on Friday comes two weeks after Tesla shareholders voted to ratify the 2018 package of stock options. Tesla held the vote following a January ruling by a Delaware judge to void the compensation because Musk improperly controlled the negotiation process and the company misled shareholders about key details.

The uncertainty in the case hangs over Musk's relationship with Tesla, which is struggling with slower sales and stiffer competition. He has said he might develop some products outside the company if he does not obtain a larger ownership stake.

Tesla made its argument in its proposal for how the judge, Chancellor Kathaleen McCormick of Delaware's Court of Chancery, should craft a final order that is needed to implement the January ruling. Tesla said the final order should state that "judgment is entered for the defendants."

The shareholders' legal team wants the judge to stick with her original ruling voiding Musk's pay package. They want her to order Tesla to pay them potentially billions of dollars worth of Tesla stock as a legal fee award.

Tesla's has said a fair fee might be as low as $13.6 million.

On Thursday, McCormick ordered the parties to begin preparing briefs laying out their views on the effect of the shareholder vote on the case. She also asked the parties to agree on a date in late July or early August for oral arguments on the issue.

McCormick will hear oral arguments over the legal fee on July 8 and she might take at least a few weeks before ruling.

Even if she does not reverse her January ruling, she might recognize that the shareholder vote demonstrated that there was little value in winning the case because Tesla shareholders want the record-breaking compensation. That would undermine the plaintiff's attorneys fee request, which is based on the value they provided to the company by rescinding the pay package.