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Column: Tesla threatened to fire law firm in bid to block Musk pay critic - court document
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Column: Tesla threatened to fire law firm in bid to block Musk pay critic - court document
May 13, 2024 4:04 PM

(The opinions expressed here are those of the author, a

columnist for Reuters.)

By Alison Frankel

May 13 (Reuters) - A Delaware law professor accused

Tesla on Monday of threatening to fire one of its longtime law

firms if he proceeded with plans to file a friend-of-the-court

brief criticizing the company's bid to restore CEO Elon Musk's

$56 billion pay package.

Retired professor Charles Elson of the University of

Delaware alleged in a legal filing that Holland & Knight, for

which Elson has worked for nearly three decades as a consultant,

told him that Tesla said it would end its relationship with the

law firm unless Elson abandoned plans to submit his brief.

Tesla's tactic was "extraordinary and appalling," Elson said

in the filing, which seeks permission from the court to submit

the brief.

After he learned of the electric carmaker's alleged

threat to Holland & Knight, Elson said in the filing, he

resigned from his consulting arrangement "to protect that firm

from retaliation while upholding the important principle of

academic freedom."

Tesla did not respond to a query about Elson's allegations.

Holland & Knight denied in an email statement that it was

pressured by Tesla. "Holland & Knight determined that Charles

Elson's proposed course of action was inconsistent with the

firm's obligations to its client, Tesla," the statement said.

"This determination was not based on any coercion or threats by

anyone, including Tesla."

Holland & Knight represents Tesla in unrelated employment

matters, including a race discrimination suit by a California

civil rights agency and a separate race discrimination case by

the U.S. Equal Employment Opportunity Commission, according to

news reports.

Elson, a corporate governance expert, submitted a previous

friend-of-the-court brief that was cited several times in the

Delaware Chancery Court opinion that voided Musk's pay package.

The judge called the compensation granted by Tesla's board "an

unfathomable sum" that was unfair to shareholders.

Tesla did not raise objections to Elson's first brief, which

argued that Tesla's board did not need to authorize an "unfair"

grant of stock options to incentivize Musk. Delaware Chancellor

Kathaleen McCormick called his argument "persuasive" in her Jan.

30 opinion invalidating Musk's pay.

Elson sought to file his second brief after Tesla announced

last month that it intends to hold a new shareholder vote to

reinstitute Musk's compensation. Elson's proposed brief argues

that Delaware law does not permit the "unprecedented" maneuver

of undoing a Chancery Court judgment through a shareholder vote.

Elson's lawyer, Joel Fleming from the Equity Litigation

Group, sent the proposed new brief to Tesla on Friday morning,

according to Elson's filing. A Tesla lawyer from DLA Piper

called Fleming later that day to assert that Elson had a

conflict of interest, and that Fleming should wait before filing

the proposed brief, Elson's filing said.

The filing did not offer more detail about DLA Piper's call

to Fleming. A DLA lawyer did not provide a response to my query.

Fleming declined to comment.

Elson then received an email from Holland & Knight,

according to the filing, informing him "that the firm represents

Tesla in certain unrelated matters and that Tesla had threatened

to fire Holland & Knight if Professor Elson submitted this

amicus brief."

Elson said in his filing that there is no conflict of

interest because he is not a lawyer at Holland & Knight but only

consults with the firm on corporate governance matters. Elson

also said he is acting as a friend of the court, not an

advocate, in the Musk case.

"I am very disappointed with these events," said Elson in an

interview. He declined to say how much Holland & Knight paid

him, but said the monthly payment "helped cover my mortgage."

Read more:

Tesla tries legal 'Band-Aid' to revive Musk's huge pay deal

Judge voids Elon Musk's 'unfathomable' $56 billion Tesla pay

package

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