Delaware Business Litigation Report

Court of Chancery Denies Post-Trial Motions Seeking to Enjoin Tesla Defendants

Tornetta v. Musk, C.A. No. 2018-0408-KSJM (Del. Ch. May 28, 2024)
Following the Court of Chancery’s post-trial opinion concerning Elon Musk’s compensation from Tesla (summarized here), Tesla submitted stockholder proposals to ratify Musk’s compensation package and to move Tesla’s state of incorporation to Texas. Concerned that the defendants would use these proposals to avoid enforcement of the Court’s prior decision, the plaintiffs moved to enjoin the defendants from litigating this action or issues relating to the action outside of Delaware, requested a constructive trust over the common stock underlying certain options, and sought to reorder the normal sequence of events and order a final implementing order to ensure that the post-trial opinion was enforceable. The defendants opposed and argued that Tesla would still be a Delaware corporation at the time of the vote, that success of the ratification proposal would not affect any liability incurred prior to the conversion, a final implementing order was unnecessary, and the idea that the defendants would seek to avoid the Court’s jurisdiction was speculative. The Court interpreted the defendants’ positions as certifying that they did not intend to litigate any matter related to this action outside Delaware, that litigation relating to the ratification proposal would be subject to a Delaware forum selection provision, the defendants would not argue that the Court’s post-trial opinion was not enforceable based on the lack of an implementing order alone, and that the defendants would not argue that recission is unachievable solely as a result of a successful vote on the proposal to re-domesticate in Texas. Based on these representations, the Court denied the plaintiffs’ motions.

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