A former corporate-defense lawyer handled case that led to Tesla CEO’s pay deal being nixed
The case that brought down Elon Musk’s multibillion-dollar pay package at Tesla was driven by a lawyer who spent decades representing big companies like Goldman Sachs and 21st Century Fox, and a shareholder who played drums in a heavy-metal band.
The bombshell decision, issued Tuesday in the Delaware Court of Chancery, came more than five years after a Tesla shareholder originally filed suit, asking the state’s business-law court to cancel Musk’s pay package at the electric-car maker.
The suit, filed in 2018, alleged that Tesla’s chief executive controlled the approval process and that the board misled investors, who later approved it. Musk has said he didn’t dictate the terms of his pay plan.
The judge in the case, Chancellor Kathaleen McCormick, found that the process for securing approval of Musk’s compensation was “deeply flawed,” and agreed this week to rescind the CEO’s package, which was valued at a maximum of $55.8 billion.
“This would be as though it never happened,” said Greg Varallo, lead lawyer for the single shareholder plaintiff, Richard Tornetta, referring to the board’s decision to award the package. Varallo and his team defeated a team of lawyers led by heavyweight New York law firm Cravath, Swaine & Moore and its former chairman, Evan Chesler.
The case was originally filed by lawyers from Friedman Oster & Tejtel and Delaware-based Andrews & Springer, which also represents Tornetta in a separate lawsuit that began in 2019. That suit, which is ongoing, is challenging the sale of Pandora Media to Sirius XM.
Friedman Oster & Tejtel is based in New York, but it specializes in corporate-misconduct cases in Delaware, said principal David Tejtel. Tornetta’s lawyers at Andrews & Springer didn’t respond to requests for comments.
Varallo, 64, and several other lawyers at Bernstein, Litowitz, Berger & Grossmann, joined the litigation in 2021. At the time, Tornetta had just survived a motion to dismiss by Tesla’s board of directors, raising the likelihood that the case could go to trial. Tejtel said the original legal team recognized it was going to be a massive undertaking.
“It made sense to enlist reinforcements,” he said, on the decision to bring on Varallo. The trial began in 2022.