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Tesla / AMC: If You Don't Have Anything Nice To Say...
NGL, I'm so, so tired.
From the night of February 20th, 2023 — when the first AMC complaint was filed — until last Friday when the Court of Chancery’s involvement in the case came to a close with the entry of the Proposed Order and Final Judgment, my life entered something of a dual-track time warp where I had two full-time jobs: my regular one, and a second one following these consolidated cases obsessively. Of course when things finally wrapped, it was going to be jarring. And jarring, it has been. On many levels, and for many people, much more than for me.
My mother may have died when I was young, but she taught me many things before she died. One thing she instilled deep within me was that if you do not have anything positive to contribute to a conversation, you should keep quiet. If you don't have anything nice to say, you know the old saw. Perhaps that teaching — coupled with the monster case of burnout I experienced after the death of my business partner’s own mother a few months ago — will help explain my silence over the past weeks.
I’m so very tired. Everything that I have to say feels like a complaint. I know that this, too, shall pass. And I know that what there is to do is to take the time to focus on the things that were shuffled to the side over the past half year — all the things that had been relegated to the sidelines for the “extraordinary” and “once-in-a-lifetime” opportunity of Twitter v. Musk that were then quickly given the same treatment in light of what was happening with AMC no sooner than they had made it back onto my desk to be addressed. And I wouldn’t do it any differently. It was worth diving so deep into the weeds. But I’d be lying if I said there wasn’t a cost. And don’t worry, I’m going to take the time that I need, and I am going to do what I need to take care of myself. Because if I don’t, I’m not going to be of much use to you all.
There’s so much to debrief from the AMC case and how it all went down, but I’m honestly not ready to do it yet in a way that doesn’t feel caustic. Just let me tell you a little bit about how the Tesla settlement is going and you’ll see where my head is at. You’ll want to send me packing back on my little hiatus back to my day job for a few more weeks while I get my mind right, I promise.
First, let’s get things straight to finish out the AMC saga in the Court of Chancery. The clock has started ticking on the appeal to the Delaware Supreme Court, and possibly to the Supreme Court of the United States. The length of that path is as yet to be determined. Of course, I will follow it along for you as it goes. It will be at a much more sane and hopefully manageable pace.
The Court of Chancery ruled on the objector’s fee for Rose Izzo and granted the request for a $3,000 incentive fee and for $212,700 in attorneys’ fees for Izzo’s counsel. By my count, this is the largest fee for an objector who did not take over the case in the Court’s history, although the math feels retconned in a way that I think in good faith should have led to a larger number. I don’t have the patience to walk through the minutiae at the moment other than to give one example that’s stuck in my craw that’s probably one of those things that I should just let go but … when the Court says that it “expressly considered three separate inputs to [a] downward adjustment, of which [one Izzo expressly gets credit for proferring]. Thus, I conclude that Izzo was responsible for one third,” the Court fails to consider that the other two downward adjustments both effectively to a fair degree involved Izzo’s existence as an objector, which seems … oddly (but then again not) like vibes of always trying to ensure that objectors do not get credit in any and every way possible for whatever happens.
Anyway, perhaps suffice it to say that the part that bothers me the most is where Izzo is faulted for the following kind of things: “[S]he proffered no evidence to support her predicted [theory of the possible reason for a future stock price drop that, in fact, actually eventuated]” or “[H]er argument was too underdeveloped to be persuasive or useful.”
DOES NO ONE AROUND HERE OWN A CALENDAR? Has anyone actually seen how long objectors get to prepare their objections? Has anyone thought about how these things actually work in the real world?
I think this is a good time to transition to the Tesla matter because I’m about to say something that I regret, and it’s all of a piece. And I still need like two mental health weeks to recover from what is way too much burnout and way too many overdue tasks in my primary job that need tending to.
To answer my rhetorical screams into the void above, it’s patently obvious that the answers are, in order: apparently not, at least not one that is regularly utilized; either no, or they don’t care, and I guess not, or again, no one gives af.
Because here’s how it’s going down in the Tesla settlement. And read carefully, because if you are a Tesla stockholder, you probably are just getting some half-assed notice of this settlement now and you have about three days to draft up an objection. And, by the way, find counsel willing to draft and file it in that time (ha!), because we all saw how it went down for those who didn’t hire counsel in the AMC matter — spoiler alert: not great) and you don’t just have to put in an objection with reasonable theories or useful information or decent objections, you apparently have to do something like file expert reports or put evidence in the record or do other things that seem absolutely bonkers unrealistic, if you want any chance of your counsel being compensated for going to the trouble of filing the objection. Which, by the way, is very unlikely to happen … and so, you can see, that counsel is very unlikely to take on your objection if you ask them to file it on contingency, because if they just read that AMC opinion, WHY IN THE WORLD WOULD THEY? And if you don’t get counsel, your objection is very unlikely to be persuasive to the Court. It’s like the tenth circle of Dante’s hell.
I am so tired. I am so tired of having to spell all this for people who don’t understand because no one has ever explained it, because the people who do understand it apparently actually are fine with it just the way that it is … but that makes me absolutely batshit crazy, because: HOW CAN THEY BE OKAY WITH IT? These are smart people whom I deeply respect. ::sigh::
For example, here are the facts in the Tesla case, let’s see if you can make the conclusions without me having to do any all caps screaming from here on out.
July 19, 2023: Scheduling Order Entered (the proposed documents were filed a few days before this, so my Substack about the settlement was published even before this was entered on the 18th, and my follow-up post on the 19th, which just shows that you should be a subscriber lol).
The Stipulation of Settlement lists certain information about the settlement, but the briefs in support of the settlement weren’t due to be filed until August 31, 2023, however, when they were filed, they were filed under seal, for some reason, so they were not available to the public under Rule 5.1 for an additional five business days. Due to the Labor Day holiday, this means that they did not become available until Monday, September 11, 2023.
The Stipulation of Settlement does not list the amount of attorneys’ fees and expenses sought, so potential objectors had no way of knowing whether they want to object on that issue until receipt of the brief.
It turns out that Plaintiff requests an award of $1,023,779 in out-of-pocket litigation expenses and $229,600,687 in attorneys’ fees, consisting of 25% of the monetary benefit achieved (net of expenses) before valuing governance reforms. Yes, that’s $229 million dollars.
The Stipulation of Settlement is just over 36 pages long (much of which is stock language), and the Brief in Support of Settlement is 78 pages long, accompanied by a seven-page forensic and financial affidavit, which — just by the bare math — would suggest that there is a lot of additional information that could inform a potential stockholders basis for objection that would be required. This would particularly be so if objectors are going to be held to high standards for providing detailed bases for objections (and perhaps even evidence or expert analysis) to have any solid hope of securing a fee for their counsel’s efforts in anything but the most highly unusual edge case such as AMC. What’s perhaps worse is that 36 of the 45 exhibits cited in the brief were filed under seal (comprising 755 out of 869 pages of document production exhibits relied upon in the Brief) and those exhibits do not come out from under seal via the Rule 5.1 standard process, so stockholders do not have access to those absent some further process, which further process they are unlikely to know exists or have the time to pursue in the real world.
Just to say what is unhelpfully inferable only to the people who already know in the iykyk way, access to this discovery is available (especially post-AMC) through a maze of steps that are basically inscrutable to anyone who cannot afford counsel, and I’ve already convinced myself that no one in their right mind would take on an objector on contingency at this point. And moreover, creating a system like that that has been the point of this system for a long while. And that’s all been in service of making sure that objectors’ counsel don’t abuse the system. God forbid. Phew, so glad we avoided that morass. Meanwhile, plaintiffs’ attorneys are starting to request eight figure awards on the regular (and two of the five nine figure requests in history came this year, one granted in Dell / one pending here), which absolutely certainly does not have any unintended consequences, I’m sure. No way that could be ripe and fertile ground for absolutely rampant abuse. Bullet dodged.
Thanks to what has been called “the Delaware Two-Step” where the calendar calculations run forward from a Rule 5.1 extended deadline for the brief being made public, and then backward from a certain number of business days prior to the hearing, objectors are left with a minimal number of days to process the brief, determine whether they want to lodge an objection, find competent counsel, and have their counsel draft a viable objection. If one were skeptical, you could imagine that the process were not set up to actually incentivize such behavior in good faith.
Here, by the way, that twelve-day redactions period led to — as far as I can tell — exactly zero actual redactions in the brief, which I’m sure I would be told was the best possible outcome (and it definitely is), but I’m also very skeptical of the fact that it required such time to come to such an outcome.
The thing that makes me very, very tired is that although I am now providing everyone with a copy of the brief here, I have no idea how anyone else was realistically supposed to know where to find it or how to get it in any world in which normal human people live. And if someone says that regular stockholders should get it from FSX, I literally will scream. But I mean, you would think that since there’s a whole-ass website set up called: http://www.tesladetroitderivativeaction.com/court-documents.aspx that the actual least that they could do is to post the briefs, but of course, they do not. And maybe someone’s wrist will get slapped again or someone will now put the briefs up on their website, but how many times do we have to do this nonsense until someone gives a fck in advance for the benefit of stockholders?
It turned out that website did not even exist for a long time (it was just a “this website is under construction page” when I wrote the last Substack, so at least it’s an improvement, I’m sure I should be grateful for what we get, I mean, compared to AMC, at least there’s a website that actually links to the documents instead of whatever rabbit holes you had to go down to find your way to the documents there). Maybe in this case, folks will do their thing and try to gaslight me by uploading the briefs once someone gets wind of someone ::cough me cough:: calling them out, but the website does currently post the much-less-helpful documents, and right now, that’s it. Currently none of the counsel’s sites post the brief either. Perhaps that, too, will change upon notification. Always post hoc.
Also, here’s the Forensic Affidavit, because I won’t hold my breath that they will post that even if they do get around to posting the brief.
The only quasi-useful thing this website does is to tell you that the objections deadline is September 21, 2023, but actually (g-d damn it), now that I look at it, I’m not sure that’s even right.
The Scheduling Order requires the following:
At the Settlement Hearing, any Tesla stockholder who desires to do so may appear personally or by counsel, and show cause, if any, why the Settlement in accordance with and as set forth in the Stipulation should not be approved as fair, reasonable, and adequate and in the best interests of Tesla and its stockholders; why Final Judgment should not be entered in accordance with and as set forth in the Stipulation; or why the Court should not grant the Fee and Expense Application of Plaintiff’s Counsel; provided, however, that unless the Court in its discretion otherwise directs, no Tesla stockholder, or any other Person, shall be entitled to contest the approval of the terms and conditions of the Settlement or (if approved) the Final Judgment to be entered thereon, or the Fee and Expense Award, and no papers, briefs, pleadings, or other documents submitted by any Tesla stockholder or any other person (excluding a party to the Stipulation) shall be received or considered, except by order of the Court for good cause shown, unless, no later than fifteen (15) Business Days prior to the Settlement Hearing, such person files with the Register in Chancery, Delaware Court of Chancery, 500 North King Street, Wilmington, DE, 19801, and serves upon the attorneys listed below: (a) a written notice of intention to appear that includes the name, address, and telephone number of the objector and, if represented by counsel, the name and address of the objector’s counsel; (b) include documentation sufficient to prove that the objector owned shares of Company common stock as of the date of the Stipulation, and contain a statement that the objector continues to hold such shares as of the date of filing of the objection and will continue to hold those shares as of the date of the Settlement Hearing; (c) a detailed statement of objections to any matter before the Court; and (d) the grounds thereof or the reasons for wanting to appear and be heard, as well as all documents or writings the Court shall be asked to consider. These writings must also be served by File & ServeXpress, by hand, by first-class mail, or by express service upon the following attorneys such that they are received no later than fifteen (15) Business Days prior to the Settlement Hearing:
Andrew S. Dupre Sarah E. Delia
MCCARTER & ENGLISH LLP
Renaissance Centre 405 N. King Street, 8th Floor Wilmington, DE 19801
Counsel for Plaintiff
Raymond J. DiCamillo Kevin M. Gallagher Kyle H. Lachmund
RICHARDS, LAYTON & FINGER, P.A.
920 N. King Street Wilmington, DE 19801 (302) 651-7700
Attorneys for Defendants Elon Musk, Brad Buss, Robyn M. Denholm, Ira Ehrenpreis, Lawrence J. Ellison, Antonio J. Gracias, Stephen T. Jurvetson, Linda Johnson Rice, James Murdoch, Kimbal Musk, Kathleen Wilson- Thompson, and Hiromichi Mizuno
Jason C. Jowers Sarah T. Andrade
BAYARD, P.A. 600 N. King Street, Suite 400 Wilmington, DE 19801 (302) 655-5000
Attorneys for Nominal Defendant Tesla, Inc.
The key there is “no later than fifteen (15) Business Days prior to the Settlement Hearing,” and the settlement hearing is on October 13, 2023.
WHY IS EVERYTHING SO EXHAUSTING, because here I am — not really supposing to be giving random legal advice over the internet, but also very annoyed that no one can just tell poor fcking stockholders who have enough to figure out what the actual date on the calendar is properly as to when they have to get their objection in by because I do not believe that the date on that website is correct. I was pretty freaking sure that the deadline was September 22, 2023, and then the website popped up saying September 21, 2023, and I wracked my brain trying to figure out why tf it would say September 21, 2023, and I finally figured out that I think the calculation is including Indigenous Peoples’ / Columbus Day, but there’s two small (large) problems with that: 1.) neither of those are not Delaware State Holidays, and 2.) the Delaware Court of Chancery rules time calculations that I believe are used to interpolate these constraints demand reference to Delaware State Holidays when doing calculations. So … I personally believe that the deadline would be calculated as September 22, 2023. But obviously, you should never take random advice from some weirdo on the internet, that would be very unsafe and inadvisable. But it’s superiorly annoying that it’s even a question, and it’s supremely unjust that it’s something that stockholders should have to spend a moment of their short few days having to fuss over while they are busy trying to determine whether or not they want to file an objection to the merits of this settlement.
Did I mention that I’m tired? I’m tired of these things being so half-assed. I’m tired of having to yell about it on the internet, straight into the void. I’m tired of no one doing anything about it. I’m tired of so much. And I’m sure by now you are tired of hearing me whinge about it. I’m tired of hearing me whinge about it! So, I’m going to stop. I’m going to touch some grass, go on a short walk on a long pier (hang out at the beach, not vice versa, don’t worry) and find the center again. Let’s hope it holds.
P.S. If I had more energy, I would do a whole rant about all the Tesla stockholders who are telling me about how they are just now getting notice of settlement from brokers like E*TRADE from Morgan Stanley, just now on September 16th, 2023 when the Notice Provision in the Scheduling Order directed these notices to go out sixty days before the settlement hearing, and yet, inevitably, notice will be likely be found to be problem, just fine, because those who object will have figured out there is a settlement to object to, and those who don’t, won’t. And no one can object on behalf of anyone else who may not have received notice. If the message is: “take your settlement, whatever it is, and stfu,” can’t we just be intellectually and morally honest about that?
[remainder of this rant redacted]
Good night, and good luck. Love y’all. I’ll report back after the hearing. Also, lmk in the comments if you have thoughts on the brief, presuming you don’t have jobs or lives or other things to do ofc, because what stockholder would be burdened by such things.