Elon Musk won $56 billion pay package despite judge declaring it void, Tesla argues

Tesla claims Elon Musk won his legal battle over his $56 billion pay package because shareholders voted in favor of compensation, even though a judge rescinded it earlier this year, according to a court filing made public on Friday.

The company’s filing comes two weeks after Tesla shareholders voted to ratify the 2018 stock option package. Tesla held the vote after a Delaware judge in January issued a ruling voiding the compensation because Musk improperly controlled the negotiation process and the company misled shareholders about key details.

Uncertainty in the case looms over Musk’s relationship with Tesla, which is struggling with slower sales and tougher competition. He has said that he could develop some products outside the company if he doesn’t get a larger ownership stake.

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Tesla laid out its arguments in its motion for how the judge, Delaware Chancellor Kathaleen McCormick, should draft the final order needed to implement the January ruling. Tesla said the final order should state that “judgment is entered in favor of defendants.”

The shareholders’ legal team wants the judge to uphold her original ruling voiding Musk’s pay package. They want her to order Tesla to pay them potentially billions of dollars in Tesla stock as compensation for legal fees.

Tesla has said a fair fee could be as low as $13.6 million.

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

McCormick will hear oral arguments on legal fees on July 8 and could take at least a few weeks before deciding.

Even if he doesn’t reverse his January ruling, he could acknowledge that the shareholder vote showed there was little value in winning the case because Tesla shareholders want record compensation. That would undermine the plaintiff’s request for attorney fees, which is based on the value they provided to the company by rescinding the pay package.