Tesla: This is what happens when you [REDACTED] with the City of Detroit
$735m settlement comes for 2020-0477-KSJM City of Detroit v. Elon Musk and Tesla, Inc.
Ok, wow. I will not lie, this Tesla compensation settlement came out of nowhere and just smacked me right upside the face, and left me slack-jawed. It is … kind of stunning.
There is a lot to cover here, but we have to start from the beginning so let’s get straight to work.
There are two pending cases in the Delaware Court of Chancery concerning compensation at Tesla:
C.A. No. 2018-0408-KSJM, Tornetta v. Elon Musk and Tesla, Inc.
C.A. No. 2020-0477-KSJM Police & Fire Retirement System of the City of Detroit v. Elon Musk and Tesla, Inc.
The first case, shorthanded Tornetta, deals with approximately $55 billion in options grants made to Musk, and to be fair, I have referred to it as the “Tesla compensation case” mainly because I referred to the Detroit case as the “director comp case” since it has a much more expansive defendant set than Tornetta, which is limited to Elon’s comp package.
The Tornetta case has been taken under advisement after post-post-trial briefing after post-trial argument and is due for a decision in the coming weeks or months from the Chancellor.
The Detroit case had not yet made it to trial, though it was currently scheduled for November 27, 2023 in front of Chancellor McCormick. Throughout the end of last year and the beginning of this one, the parties had worked to complete fact discovery. Over the past few months, the parties had been engaging in expert discovery, serving opening expert reports on April 28, 2023 and rebuttal expert reports on June 9, 2023. Through that entire period, the parties had “from time to time engaged in arm’s length negotiations in efforts to settle Plaintiff’s Claims without involvement of the Court [… including] in several mediation sessions before JAMS Mediator Robert A. Meyer, as well as numerous settlement communications between Plaintiff and Defendants facilitated by Mr. Meyer.
On June 20, 2023, “following extensive negotiations,” something finally shifted, and the parties “accepted a recommendation from Mr. Meyer to “get their shit together” … no, wait, sorry, I quoted that wrong. The parties accepted a recommendation “relating to the Settlement Options and foregone compensation.” On June 28, 2023, they further agreed “to the corporate governance reforms” in the settlement agreement and finalized the deal.
So … what does it all mean? Is the settlement really worth $735 million dollars like everyone is bandying about on the interwebs? Could it actually be worth even more than that? Is everyone even missing the point? Does anyone even know what’s going on?
Well, sit back, buckle up, and let’s dive in to the documents and find out, because this one is a doozy.