(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