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Tesla argues shareholder vote fixes issues in Musk's pay

package

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Plaintiff's legal team claims shareholder vote has no

legal

impact

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Musk's pay package worth around $48 billion at Friday's

share

price

By Tom Hals

WILMINGTON, Delaware, June 21 (Reuters) - Tesla

and opponents of Elon Musk's compensation clashed on Friday over

ways to resolve the legal quagmire that has engulfed the CEO's

$56 billion pay package and billions of dollars in potential

legal fees generated by the case.

Tesla said in a court filing that a Delaware judge should

recognize a vote by Tesla shareholders in favor of the pay

package and reverse her January ruling that voided the

compensation.

In response, shareholder attorneys said the vote to ratify

Musk's pay has no legal effect and 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 has to determine the legal fee

that the company should be ordered to pay them for winning the

case.

They had previously asked for 29 million shares of Tesla stock,

which is worth more than $5 billion. But on Friday they said

Tesla could as an alternative pay at least $1.1 billion in cash,

which would be justified by the court's precedent, although they

described that as "unfairly low."

Tesla and the legal team for Richard Tornetta, the

shareholder who sued over the pay package, have been wrestling

over the best way to resolve the case and compensate the

company's chief executive.

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 his future while Tesla is

struggling with slower sales and stiffer competition.

Tesla's investors voted on June 13 in favor of the package of

stock options. Many investors said they felt Musk should be

rewarded because the value of the company increased more than 10

times after the pay package was originally agreed in 2018.

Tesla urged the judge to put aside the fee dispute and

determine the impact of the shareholder vote, which in turn

could drastically reduce the legal fee.

It said that it plans to make a motion to reverse the

January ruling and that it should now win the case.

The company has argued that by having the pay package

reviewed by an independent board member and reapproved by

shareholders it fixed McCormick's finding that Musk dominated

the pay negotiations and that shareholders lacked key

information in the 2018 vote.

Tornetta's legal team has rejected that approach. They

argued the board process for proposing a ratification vote was

flawed, the law was misused by Tesla and the shareholder vote

was coerced by Musk's threats to take potential products from

Tesla.

The shareholder lawyers want a decision on their legal fee

as the next step in the case.

When the company achieved the last milestone in the pay

package, it was worth $56 billion, according to Tesla. The

package is worth around $48 billion at Friday's share price of

$182.19.