By Tom Hals
WILMINGTON, Delaware (Reuters) -Tesla and opponents of Elon Musk’s compensation clashed on Friday over ways to resolve the legal quagmire over the CEO’s $56 billion pay package and billions of dollars in potential legal fees posed by the case has been generated, has flooded.
Tesla (NASDAQ:) said in a lawsuit that a Delaware judge should recognize a Tesla shareholder vote in favor of the pay package and reverse its January ruling invalidating the compensation.
In response, shareholder attorneys said the vote to ratify Musk’s pay has no legal effect and that the only way for Tesla to challenge the January ruling is to appeal to the Delaware Supreme Court.
The shareholder attorneys said that before Tesla can appeal, Chancellor Kathaleen McCormick (NYSE:) must determine the legal fee the company must pay to pay them for winning the case.
They had previously asked for 29 million Tesla shares, which is worth more than $5 billion. But on Friday they said Tesla could alternatively pay at least $1.1 billion in cash, which would be justified by court precedent, although they described that as “unfairly low.”
Tesla and the legal team of Richard Tornetta, the shareholder who sued over the pay package, have struggled over the best way to resolve the case and compensate the company’s CEO.
Musk said earlier this year that unless he had a larger stake in Tesla, he would prefer to build some products outside the company, creating uncertainty about its future as Tesla struggles with slower sales and fiercer competition.
Tesla investors voted in favor of the stock options package on June 13. Many investors said they believed Musk should be rewarded because the company’s value increased more than tenfold after the pay package was originally agreed in 2018.
Tesla urged the judge to set aside the compensation dispute and determine the impact of the shareholder vote, which in turn could dramatically reduce legal costs.
It said it plans to file a motion to overturn the January ruling and should win the case now.
The company has argued that by having the pay package reviewed by an independent board member and re-approved by shareholders, it resolved McCormick’s finding that Musk dominated pay negotiations and that shareholders lacked key information in the 2018 vote.
Tornetta’s legal team rejected this approach. They argued that the board’s process for proposing a ratification vote was flawed, that the law was abused by Tesla, and that the shareholder vote was coerced by Musk’s threats to take potential products from Tesla.
The shareholders’ lawyers want a decision on their legal costs as the next step in the case.
When the company reached its latest pay package milestone, it was worth $56 billion, according to Tesla. The package is worth about $48 billion at Friday’s share price of $182.19.
