Tesla CEO Elon Musk encountered a significant legal setback this week, witnessing the loss of his $56 billion pay package in what is considered one of the most substantial legal defeats in the history of the United States. The case, an unexpected challenge brought forth by former heavy metal drummer Richard Tornetta, resulted in victory for the latter on Tuesday. Tornetta, who owned a mere nine shares of Tesla when he initiated the lawsuit in 2018, successfully argued that the massive pay deal was unfair to him and all fellow Tesla shareholders, as reported by Reuters.
This legal battle, initiated by Tornetta in 2018 and reaching trial in late 2022, represents a notable challenge for Elon Musk, who had previously triumphed in various trials related to defamation, breaches of duty to shareholders, and violations of securities laws. Tornetta’s background, with an interest in audio gear for car-customizing enthusiasts showcased online, contrasts with the typical profile of individuals pursuing corporate accountability. Notably, he has shared light-hearted videos about his gadget creations and drumming performances with his metal band, “Dawn of Correction.”
Delaware, renowned for setting corporate case precedents, has witnessed cases led by investors with minimal shareholdings influencing US corporate law. According to Eric Talley, a corporate law professor, law firms often collaborate with investors to bring cases on a contingency basis.
Tornetta, like other Tesla shareholders, stands to benefit from the case, saving the company substantial sums that a compliant board might have paid to Musk. Critics argue that cases initiated by individual investors may lead to potentially abusive litigation. A decade ago, Delaware faced challenges from retail investors challenging merger deals, often resulting in settlements that critics deemed meaningless.
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