*

Pay package worth $101 billion as of Monday

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Musk criticized judge, suggested companies reincorporate

in

Texas

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Tesla ordered to pay $345 million in attorney fees

(Adds Tesla statement in paragraph 3, investor comment,

background on Tesla stock and Musk role advising Donald Trump in

paragraphs 11-15, Tesla supporter's quote in paragraphs 21-22)

By Tom Hals and Jonathan Stempel

WILMINGTON, Delaware, Dec 2 (Reuters) - A Delaware judge

ruled on Monday that Tesla CEO Elon Musk still is not

entitled to receive a $56 billion compensation package despite

shareholders of the electric vehicle company voting in June to

reinstate it.

The ruling by the judge, Chancellor Kathaleen McCormick of

the Court of Chancery, follows her January decision that called

the pay package excessive and rescinded it, surprising

investors, and cast uncertainty over Musk's future at the

world's most valuable carmaker.

Musk did not immediately respond to an emailed request for

comment. Tesla in a statement on X said, "The ruling is wrong,

and we're going to appeal," saying that the judge had overruled

a supermajority of shareholders.

Musk and Tesla can appeal to the Delaware Supreme Court as

soon as McCormick enters a final order, which could come as soon

as this week. The appeal could take a year to play out.

Tesla has said in court filings that the judge should

recognize a subsequent June vote by its shareholders in favor of

the pay package for Musk, the company's driving force who is

responsible for many of its advances, and reinstate his

compensation.

McCormick said Tesla's board was not entitled to hit "reset"

to restore Musk's pay package.

"Were the court to condone the practice of allowing defeated

parties to create new facts for the purpose of revising

judgments, lawsuits would become interminable," she said in her

101-page opinion.

She said a ratification vote like the one used by Tesla had

to be conducted before the trial and a company cannot ratify a

transaction involving a conflicted controller. She had

determined Musk controlled the pay negotiations.

She also said Tesla made multiple material misstatements in

its proxy statement regarding the vote, and could not claim the

vote was a "cure-all" to justify restoring Musk's pay.

Tesla shares fell 1.4% in after hours trade, after the

ruling.

Gary Black, managing partner of The Future Fund, which owns

Tesla stock, said on X that he believed the Delaware Supreme

Court was more pragmatic than McCormick. "I doubt this ruling

will be resolved anytime soon, and it will likely be overturned

by a more moderate court along the way," he wrote.

The pay package had awarded Musk stock options if the

company hit performance and valuation goals.

While the award originally was valued at up to $56 billion,

Tesla's shares have surged 42% since Nov. 5, when Republican

candidate Donald Trump, supported by Musk, won the U.S.

presidential election. Following that rally, the pay package is

worth about $101 billion.

The ruling comes as Musk has been tasked by Trump with

creating a more efficient government by slashing spending. The

role as co-lead of the new Department of Government Efficiency

would be informal rather than a government position, allowing

Musk to keep his job at Tesla as well as leading other companies

including rocket maker SpaceX.

Musk threw himself behind Trump's election campaign and

has become a close adviser in the process.

PAY DAY FOR PLAINTIFF'S LAWYERS

McCormick also ordered Tesla to pay the attorneys who

brought the case $345 million, well short of the $6 billion they

initially requested, but still one of the largest fee awards

ever in securities litigation. She said the fee could be paid in

cash or Tesla stock.

"We are pleased with Chancellor McCormick's ruling, which

declined Tesla's invitation to inject continued uncertainty into

Court proceedings," said a statement from Bernstein Litowitz

Berger & Grossmann, one of the three law firms for the

plaintiff.

The law firm also said it looked forward to defending the

court's opinion if Musk and Tesla appealed.

After the January ruling, Tesla shareholders flooded the

court with thousands of letters arguing that rescinding Musk's

pay increased the possibility he would leave Tesla or develop

some products like artificial intelligence at ventures other

than Tesla.

Mom-and-pop investors and Musk's influential fans helped

Tesla and Musk win the June shareholder vote and many were

speaking up on social media against Monday's decision.

"Beyond the pedantic details of legal procedure, the bigger

issue here is that the voice of shareholders is being

overruled," Omar Qazi said in a post on X from the handle

@WholeMarsBlog after Monday's ruling.

"If they can't consider the vote in this case, hopefully

they'll consider it on appeal," said Qazi who has more than

551,000 followers.

McCormick in January found that Musk improperly

controlled the 2018 board process to negotiate the pay package.

The board had said that Musk deserved the package because he hit

all the ambitious targets on market value, revenue and

profitability.

After the January ruling, Musk criticized the judge on his

social media platform X and encouraged other companies to follow

the lead of Tesla and reincorporate in Texas from Delaware,

although it is unclear if any companies did so.

The judge in her January ruling called the pay package the

"biggest compensation plan ever - an unfathomable sum." It was

33 times larger than the next biggest executive compensation

package, which was Musk's 2012 pay plan.

Musk's 2018 pay package gave him stock grants worth around

1% of Tesla's equity each time the company achieved one of 12

tranches of escalating operational and financial goals.

Musk did not receive any guaranteed salary. Tornetta argued

that shareholders were not told how easily the goals would be

achieved when they voted on the package.