Inside the Elon Musk Pay Package Victory

John is joined by Christopher G. Michel, partner in Quinn Emanuel’s Washington, D.C. office and Co-Chair of the firm’s National Appellate Practice. They discuss Michel’s team’s recent victory before the Delaware Supreme Court, reinstating Elon Musk’s Tesla compensation package, now valued at $139 billion, the largest compensation dispute in corporate history. The 2018 pay package required Musk to meet extremely ambitious growth milestones, including doubling Tesla’s size over a ten-year period, before receiving any compensation. After that, there were a series of 12 levels of compensation corresponding to 12 further growth milestones. The Tesla Board approved the package, as did the shareholders with 70% support. He ultimately achieved all the required milestones, growing the company from $50 billion to over $1 trillion in four years. 

Despite that, a Tesla shareholder owning just nine shares brought a derivative suit, alleging the board breached its fiduciary duties in approving the package. The Delaware Chancery Court found Musk to be a “controlling stockholder” due to his 21% ownership, close relationships with directors, and status as a “superstar CEO.”  As a result, the court applied the “entire fairness” standard, under which defendants must prove that a transaction was entirely fair to the shareholders, and found the package did not meet that standard. The court reasoned that Tesla could have obtained Musk’s services for less or even for free, citing other CEOs who had worked without compensation. It also ruled that shareholder approval was invalid due to inadequate proxy disclosures, including the omission of details about Musk’s social ties with board members. The court rescinded the entire compensation package and awarded the plaintiff’s counsel $345 million in attorneys’ fees.

On appeal, the defense team focused on three main arguments: Musk was not a controlling stockholder, the package met the entire fairness standard, and even if there was a violation, rescission was not an appropriate remedy. The Delaware Supreme Court reversed, holding that rescission was unwarranted and awarding nominal damages of $1. It reinstated the pay package, now valued at $139 billion. It also reduced the attorneys’ fee award to $54 million. The case has influenced legislative changes in Delaware corporate law regarding the definition of controlling shareholders and shareholder ratification.

Podcast Link: Law-disrupted.fm
Host: John B. Quinn
Producer: Alexis Hyde
Music and Editing by: Alexander Rossi

Transcript

Note: This transcript is generated from a recorded conversation and may contain errors or omissions. It has been edited for clarity but may not fully capture the original intent or context. For accurate interpretation, please refer to the original audio. 

JOHN QUINN: This is John Quinn and this is Law, disrupted and today I'm speaking with one of my partners, Chris Michel, who's a partner in our Washington DC office. He's an appellate practitioner, primarily he's got a very distinguished background as a United States Supreme Court clerk, worked in the Solicitor General's office.

Many of you will know the solicitor general's sole job is to represent the United States before the United States Supreme Court. It's a very elite team of lawyers, and the only place Chris could go after that was to Quinn Emanuel. We've been very blessed to have him with our firm, and today we're gonna talk about a case.

Chris, I'll bet a lot of the appellate cases you do are not in the news and nobody ever hears about them. You know, I've had a few in the news, but this one is more in the news than most. And this was a fantastic case to be a part of. Yeah. This case that we're gonna talk about is one of those rare appellate cases where, I'm not gonna say everybody, but not just lawyers, but the general public knew about this, and it had far ranging potential consequences.

We're talking about Elon Musk Tesla pay package case, which a Delaware Chancellor Court judge struck down, rescinded, found that it had not been properly approved or granted and it had potential very serious repercussions. It set in motion a whole, I mean, Elon Musk decided he was, he had had enough of Delaware, reincorporated some of his companies, I think in Texas, there are other companies that started to do the same. 

The Delaware legislature reacted to that because one of the hallmarks who claim to fame of the state of Delaware, it's the home basically of corporate America and the leading authority there in America on corporate governance and all that was started to be put in question, by this case and some other cases that were decided about the same time, and it resulted in some new legislation, and we can talk about that in Delaware, which kind of walked back some of the decisions or the, the principles that were decided in some of these cases, including this case. But let's get to the case, Chris.

What was it? Tell us first about the pay package. That was set aside, I mean, pretty generous pay package. We've all seen some big numbers. 

CHRIS MICHEL: Well, this was a distinctive pay package, John and it did have some big numbers, but if you think about it the right way, it also had some small numbers in it.

So I'll give you a quick description. In 2018, the Tesla board and Elon Musk agreed on this compensation package. In order to make any money at all under this compensation package, Musk had to double the size of Tesla over the next 10 years. If he didn't at least double the size of the company in 10 years, his compensation from Tesla would be zero. If he grew Tesla by at least double and through a series of tranches up to 12 fold, then he would receive compensation under the package, and the maximum compensation. He hit all 12 of those tranches, which by the way was the equivalent of more than the entire United States auto industry as it existed in 2018. 

JOHN QUINN: Say that again. What do you mean? What was more than the entire auto? 

CHRIS MICHEL: The amount of growth that the company would have to achieve in order for him to unlock the top option about 600 billion, and that was more than the combined value of all US auto companies in 2018.

That just gives you a sense of how successful the company had to be in order for him to unlock the top options in this compensation package. And if he did that, he would receive equity worth about 10% of Tesla's total growth, while Tesla stockholders would retain the other 90% of that growth. So he could make a lot of money if he achieves some super high targets.

Exactly right and I think it's worth noting as we did in our briefs, in the Delaware Supreme Court, that at the time this pay package was announced, the New York Times, among other respected sources described it as quote, laughably impossible, and quote about as friendly to shareholders as can be imagined.

And that was because, it seemed extremely unlikely that he would meet those targets, but if in the extremely unlikely event that he did, shareholders would be perfectly happy to share a small amount of that astronomical growth that he had to achieve. And in fact, one reason we know that the pay package was put to a shareholder vote in 2018 and Tesla's shareholders approved it with more than 70% voting in favor.

JOHN QUINN: So it's approved by the board of directors. It's put to the shareholders. It's approved by the shareholders. And what, in the event, what happened? Did he achieve the benchmarks? At what level did, what level did he reach? So, you know, as the world now knows, and it's easy to forget this, in hindsight, he did achieve what everybody thought at the time was impossible.

CHRIS MICHEL: There are famous stories about how he slept on the factory floor in order to get the model threes out and tie Tesla's production goals and partly as a result of that extremely hard work and, and other good decisions that he made at the company Tesla grew from a company worth about $50 billion in 2018 to one worth more than $1 trillion by about 2022.

And that was enough growth to unlock all of the equity options in the compensation package, which ended up being worth about $56 billion by the time it was achieved. I mean, everybody should have been happy then, right? I mean, he entered into this agreement, The New York Times considered the idea laughable that he could achieve it.

JOHN QUINN: He achieved the impossible, had been blessed by the board. He had been blessed by the shareholders. Generally, what could go wrong? Well, it's a fair question. And a lot of shareholders certainly were pretty happy just to give you a rough sense, if a shareholder had invested $10,000 in Tesla at the time of the 2018 agreement, it would've been worth about $150,000 by the time.

CHRIS MICHEL: Elon Musk and the company hit those targets but all it takes to file a lawsuit, you know, and many of your listeners now, is one plaintiff and in this case there was one plaintiff named Richard Tota, who owned nine shares of Tesla and he thought that the company had paid Elon Musk too much.

So he filed what's called a derivative lawsuit in the Delaware Chancery Court claiming that the directors had breached their fiduciary duties in approving Musk's pay package, and he sought rescission or cancellation of the agreement in full. So for those who don't know a derivative action, you know, ordinarily.

JOHN QUINN: A shareholder cannot bring a claim that affects all shareholders equally. They can't bring a claim if they say that corporation's been damaged. That's a claim owned by the corporation, a derivative action. Usually you have to make demands on the board of directors and say, look, we think there's a claim here.

You, the board of directors should authorize the pursuit of this claim and if you do that and the board doesn't act, then you can bring a claim derivatively on behalf of the corporation. And I guess, Chris, what you're saying is this shareholder brought the claim against the directors for a breach of fiduciary duty on behalf of the corporation.

CHRIS MICHEL: That's exactly right. You know, there was another stage of this case that I, will spare your listeners from today, where there was debate about whether he could properly bring the derivative action. But the bottom line is that he was allowed to bring it in the chancery court. He claimed on behalf, nominally on behalf of the company that the directors had breached their fiduciary duties.

And who was the counsel for the plaintiff in the case? It was a respected counsel from Delaware named Greg Varallo from the firm of Bernstein Litowitz. Yes. Yeah, I mean, they're an extremely well known firm that does this type of work. And I think, I mean, it's pretty widely known, they have relationships with shareholders.

JOHN QUINN: And, you know, they're in their practices to bring claims like this on behalf of shareholders. And when, you know, they also bring claims, you know, when the stock prices go down and the like, they'll bring class actions on behalf of shareholders as well. And in this case, typically these cases are brought on a contingent fee basis.

And you and our firm were not involved at the trial court here, is that correct? We were not representing Tesla or any of the directors at the trial court. That's right. There were other respected firms in Delaware and elsewhere who handled the case at the trial level. We ultimately got a little more involved after the trial was over and then mostly got involved at the appellate stage.

Alright, so we know that the court struck down this pay package and actually rescinded it. So I mean, the shareholders got this spectacular increase in value, but the state of play as of the end of the trial was that Elon Musk got nothing. So how, how, how did the, how did the trial, the trial court I know, wrote a very long opinion at one point.

I took a look at it. I think it's like a couple of hundred page opinion 'cause just, I was so curious as to how the chancellor got to this result. I mean, what was the thinking, if you can summarize, of the chancellor in reaching the decision that this had to be rescinded? 

CHRIS MICHEL: There were a lot of issues in the case, and you're right that it was a 200 page post-trial opinion. The first key decision was that Elon Musk was a controlling stockholder of Tesla, which under Delaware law triggers the highest standard of review, A standard of review called entire fairness, in which the defendants have to prove that the transaction was entirely fair to the shareholders. So you're saying if…

JOHN QUINN: If the transaction with a controlling shareholder, you cannot get the benefit of the business judgment rule. There's just no procedural way to get the benefit of that rule. Exactly right, which puts a lot of the question how to define a controlling stockholder. And that is a question on which Delaware Courts have disagreed.

CHRIS MICHEL: In this case, the chancellor found that Elon Musk was a controlling stockholder, even though he only owned about 21% of Tesla stock, which is a lot less than the prototypical majority, the prototypical controlling stockholder who's a majority stockholder, or at a minimum, someone who's almost a majority stockholder and has a lot of other indicia of control.

So what, to preview just a bit, one of the key issues in our appeal was whether he, in fact, does qualify as a controlling stockholder, but that was not the only issue. Yeah. As I recall, from reading it, wasn't there an issue in deciding he was a controlling stockholder? There was some inquiry into his relationships with some of the directors.

JOHN QUINN: I mean there's a history of the, in recent years, Delaware courts looking at relationships between, management and the directors, in things like, do their kids go to the same school? What social relationships do they have to suggest that there really isn't independence here. Am I on the right track or is that a different issue?

CHRIS MICHEL: No, you're on the right track. So what the court here said was it's the mix of his 21% stock ownership, his relationship with other directors, which did include things like, and going on vacations, and other social relationships. And then finally, one of the things that made this kind of a famous opinion in the law, what the court of chancery called his superstar CEO status, wait a second, that gets into whether the entire fairness standard applies, whether somebody is in the news a lot and a superstar.

That's right. The court cited an academic article that said superstar CEOs are more likely to be controlling stockholders because they exert such power over the board through their charisma and their success. Now the article also said it can be really hard to identify exactly who is a superstar, CEO, especially without hindsight, which makes it very difficult for transaction planners.

But the district court, the court of Chancery and this case decided that Elon Musk met that superstar CEO category, and that it was a reason to apply the higher standard of review.

JOHN QUINN: Alright, the higher standard being entire fairness rather than the business judgment rule. Exactly. And so what was the analysis?

CHRIS MICHEL: Okay. The judge decided, I think the entire fairness standard applies here. And how did she go about applying that standard and what did she find? So the Court of Chancery found that the transaction was not entirely fair. There were a lot of different reasons that were invoked, but ultimately it came down to the premise that Tesla could have gotten Elon Musk's services for less.

In fact, the court said maybe they didn't even have to pay him anything at all because he already had a lot of Tesla stock, and that was enough of an incentive for him to try to grow the company. And some other executives, like executives at Meta or Apple have in the past agreed to work without a salary. So Tesla should have tried to do the same thing for him. That was a, a key part of the reasoning. 

JOHN QUINN: Well, wait a second. They put the whole pay package to the shareholders. I mean, let's assume it's not fair, quote unquote, whatever that means. Does this mean that shareholders could not approve an unfair quote unquote unfair pay package.

CHRIS MICHEL: So you're right, the usually, approval by the shareholders is enough to overcome those kinds of fairness concerns. But in this case, another aspect of the court's decision was that the proxy statement in which the company disclosed. The pay package to the shareholders had omitted key pieces of information.

Now, those key pieces of information were those relationships with directors, going to the birthday parties, going on vacation, the things that we were just talking about. So once the court had found that he was a controlling stockholder, a lot of that same reasoning ended up making its way into the disclosure analysis and finding that the disclosure was not adequate and the stockholder approval was not valid.

JOHN QUINN: So pay package rescinded Mr. Musk gets nothing under that and that, as I recall, I think after appeal was filed, the board and the company sent it back to the shareholders again, presumably with more disclosures. They disclosed all the birthday parties and everything else, and the stockholders blessed it again.

CHRIS MICHEL: Exactly right. Yeah. The last key piece of the district court's first decision was that rescission was the appropriate remedy, that rather than, styling some kind of other remedy, the equitable result after all the chancery is a court of equity, was to resend the package in full. And then, as you say the company sent that decision back to the stockholders. 

You're right that the disclosures were a lot more extensive the second time around. And in fact, the company decided that the safest and clearest disclosure would be to just include the entire 200 page court of chancery opinion with the proxy statements.

So every stockholder was informed of every word. You take a document that's already too large and that nobody's gonna read, and you add a technical hundred page legal opinion, so every, any stockholder who wanted to know all of the reasons, could read all of the reasons. And as it turned out, the vote the second time around was almost exactly the same margin as the vote the first time around.

It was about 70% and of course this time it was 70% with the stockholders, knowing that they were gonna have to pay Elon Musk $56 billion. But that the reason they were paying him $56 billion was that they had made about $950 billion based on the growth of the company during that same period. So it seemed like a fair deal to them.

JOHN QUINN: But, you know, the company took that back to the court and the court still wasn't moved by the second shareholder approval with all the disclosures. That's right. The court said for a variety of reasons that the ratification as that second stockholder vote was called, was invalid under Delaware law because either it came too late or the disclosures were still not sufficient.

CHRIS MICHEL: And there were a couple of other reasons as well, but the court ultimately said the stockholders cannot reverse the decision of the court. The court's decision is final in effect, and thus our only option was to, the company's only option to take the case off to an appeal. You know, as we discussed this, and get a flavor here, I think we kind of get a sense about why, because of this case and some other cases around the MLI case, some other cases around the same time, it's starting to be, get to be some real controversy, impatience with the direction, what was perceived to be extreme direction that Delaware courts were going on some of these, on some of these issues, which the legislature ultimately responded to.

JOHN QUINN: So you were in charge of the team, you had a team that worked on this appeal. How did our firm get involved in this? So our firm, as you know and has maybe been featured on prior episodes of this podcast, has a long relationship with Elon Musk.

CHRIS MICHEL: Our partner, Alex Spiro, our partner, Chris Kercher, a number of our other partners have tried major cases for Elon Musk and Tesla and have won. Some victories that few people thought were possible, at the time that those cases arose. And so this is another situation where I think maybe few people thought it was possible to get this decision overturned.

After all, it was a 200 page decision. It was by a very respected judge in Delaware, but I think given our firm's track record, this was the kind of case where, Elon Musk and Tesla wanted to bring us in. And the comp, they also brought in another very respected firm with respected appellate practice, Sullivan & Cromwell. Sullivan Cromwell represented the company, and then we, Quinn Emanuel represented the directors, including Elon Musk, in the appeal, I mean, for those who know, I think we may have one of these cases in prior, episodes of the podcast, but, many of you will remember there was a case that arose out of some children being lost in a cave in Thailand.

JOHN QUINN: Mr. Musk sending over, creating, taking SpaceX engineers to create a submarine to get the kids outta the cave. He sent it over there. British Cave Diver gives an interview, says this is a publicity stunt. Mr. Musk should take his submarine and shove it where the sun doesn't shine. Mr. Musk being a blunt and straightforward man responded to that, that this was a Petto guy he was sure, and he doubled down on that, ultimately sued. The British cave diver came to Los Angeles, where must Musk reside at the time, and sued for defamation. We tried that case, we won that case. There was another case where Mr. Musk announced a tweet that he wanted to, that funding was secured. He wanted to take Tesla Private at $420 a share, funding secured.

Judge determined, took the issue away from the jury, instructed the jury at the beginning of the trial, the trial in the securities fraud class action that funding was not secured. Mr. Musk knew it wasn't secured. The tweet was false. Call your first witness, start the trial. And we won that one too.

So we had had some very significant victories for Mr. Musk in the past and we're very grateful that he turned to us and to Chris for this, this appeal. So, Chris, tell us about how you approached the appeal, what you saw as the key issues and how you addressed those. 

CHRIS MICHEL: Sure. You know, so one of the key issues in any appeal is deciding, which questions you're gonna raise. And when you have a 200 page opinion, really about 300 pages when you count the ratification opinion. There were a lot of different issues that could be raised in this appeal, but ultimately we decided to focus on three issues for the directors and we worked collaboratively with the company and their counsel to focus on, for them to focus on separate issues so that we, you know, used our time and space efficiently and presented a focused set of issues to the Delaware Supreme Court.

Our three issues were that Musk was not a controlling stockholder. That if he was the entire fairness stat, the entire fairness standard was satisfied. And at any event, even if there was liability, rescission was not the appropriate remedy, and given that the plaintiff had not identified any other remedies, the ultimate result should be nominal damages, and the case could be ended on that premise alone. Then the company argued the ratification issue and the company also addressed attorney's fees, which I think I forgot to mention in our description of the case. But ultimately, the plaintiff's counsel were awarded $345 million in attorney's fees.

That was the largest fee award, in Delaware history, but it was actually lower than what they asked for, which was about $5 billion. As a percentage, you have the 56 billion pay package that was rescinded. A bold ask, asking $5 billion in attorney's fees. Wow. But they were, the trial court gave them a 300 million number 345 million.

JOHN QUINN: Still pretty good. Alright. So how do you prepare for an oral argument? How did you prepare for this one? Did you prepare as you usually do? Tell us a little bit about what your preparation process is. 

CHRIS MICHEL: Sure, sure. A good oral argument preparation really starts with the briefing. You know, at every stage of the case in an appeal, you're thinking about how can I best position this case for the court?

And so as we were doing our opening brief and our reply brief, we were developing our key arguments and themes. And once we finished that, we started intensively preparing for the oral argument. One of the most valuable, one of the most valuable tools that any appellate practitioner can employ in preparing for an argument is what we call moot court.

And there you'll have three or four experienced lawyers who have not spent time on the case, who have not worked on the case and are thus coming to the issues fresh. You'll get them to agree to read the briefs and then to ask you questions in the role of the Supreme Court justices. So we did several of those.

We did some internally at Quinn Emanuel. We did some jointly with Sullivan & Cromwell, we did some with our good friends in Delaware or in our co-counsel in Delaware who were involved in this case. And so we got a lot of different perspectives on which issues were resonating the most, which issues were maybe not resonating as much.

And that's very valuable, once you are as close to a case as you always are, as the lawyer getting ready for the argument. 

JOHN QUINN: And did that process actually affect the way that you approached the argument? Did you learn some things, get some feedback, decide I, I should emphasize this, I should drop this? Was there some of that?

CHRIS MICHEL: There was, and it was very valuable feedback. I will tell you, if you do enough mood courts, eventually you end up getting so much feedback that it all contradicts itself. And, you find somebody who supports every argument as the best argument, which at the end of the day, you have to make your own judgments about what you think is most likely to be effective.

But that process was very valuable in, in focusing the issues. And I can say when I was up in the Delaware Supreme Court, all of the questions that I was asked by the court were questions that I had prepared for in the Moots and that had come up, and that's a sign that I had good colleagues and good co-counsel, who were able to help prepare for this argument.

JOHN QUINN: Okay. Well, tell us about your argument and your trip to Delaware. I guess it was in, is it in Dover, not Wilmington, that you have this argument. The Supreme Court sits in Dover, which is the capital of Delaware, not one of the largest cities that I've ever argued in.

CHRIS MICHEL: And there were not a lot of hotel options. Yeah. So one was memorable. One memorable part of this experience for me is that we stayed at the Valley's Casino, at the Dover Motor Speedway, the side of a a big annual NASCAR race the night before the argument. And I remember getting up in the morning of the argument and seeing the sunrise over the speedway, and thinking maybe that was a good metaphor for, you know, a case that had moved fast and had a lot of twists and turns.

I think that's the only day I've ever started an argument on a racetrack. But maybe I'll have to do it more often. Well, hope there weren't any cars whizzing around during the night to get to disturb your sleep. Did you get a good night's sleep that night? You know, I'm a pretty good sleeper and I did get a good night of sleep.

I, you know, but my, my theory on these things is, by the time it's the night before the argument, if you've prepared, if you've thought through the issues, you know what your best arguments are, you're unlikely to find any new ones, in the last few hours. And the best thing you can do is try to just clear your mind, and make sure you're in the best possible state to present your arguments to the court.

JOHN QUINN: So you went to, you went to the court, set the stage for us. Tell us about the courthouse. Was there a, were a lot of people there, were there media? Tell us what it was like. 

CHRIS MICHEL: So the Delaware Supreme Court usually sits in a relatively small courthouse. It's a beautiful historic courthouse dating back to, you know, Delaware's early statehood days, but for a variety of reasons, including the media interest in this case. They moved this argument from the usual Delaware Supreme Court chambers to a larger county courthouse nearby in Dover, so this was a large courthouse. There were a lot of media outside. There were a lot of media inside, as your listeners might know, and federal court, including the US Supreme Court cameras are generally not allowed.

But in state court, those rules don't apply and cameras are allowed. So there was, there were a lot of media. There were cameras there, there were a lot of members of the Delaware bar who were interested in this case there and so it was, you know, a high profile scene.

But I did my best to, do what, I always try to do an argument, which is tune out everything else, and just focus on my arguments to the court. 

JOHN QUINN: How did you feel? I mean, you're up at the podium, you start the argument, you start to get into it, you get some questions, you're responding. I mean, in real time, how did you feel like it was going well?

Did you feel like you were your best self? 

CHRIS MICHEL: I felt like the court was very engaged in the issues. You know, I would, that's what I expected going in, but you never know for sure. It was clear that they had all read the briefs carefully and thought about the case, and the questions were precise, thoughtful questions.

And I thought that I had good answers for them. One thing that I was pleased about in the argument is that I was able to address each of the three issues that I wanted to focus on. The liability issue, that's the controlling stockholder issue, the entire fairness issue, and ultimately the issue. And although all three of those issues were important, one of my thoughts going into the argument was that the court might be attracted to a narrow decision in which they decided only on the remedy as opposed to having to decide the broader issues. And so I think I ended the argument by saying the court could decide that the rescission remedy was improper and that nominal damages is the appropriate remedy for any breach of duty, and in the case on that basis alone. 

And I was happy that was my closing note because I thought that might be something the court would gravitate toward. 

JOHN QUINN: And who was your opponent in the argument? Did the appellate bring in specialty appellate counsel, or was it somebody from the trial team? 

CHRIS MICHEL: It was Greg Varallo from the trial team. He's argued a lot of big cases in the Delaware trial courts and in the Delaware Supreme Court. And he did a commendable job arguing for his clients.

And then the other advocate there was my co-counsel Jeff Wall, arguing for Tesla. He and I were fully aligned. We split our time equally, and address the respective issues that we had covered in our briefs. 

JOHN QUINN: So you sat down, you were pretty satisfied with your performance. How long did it take before you got the decision from the Supreme Court?

CHRIS MICHEL: So we felt good coming out of the argument, but you never know. I've seen a lot of oral arguments that seem to be going one way and a decision that turns out to go the other way. So we took nothing for granted about two months after the argument. I believe it was the Friday before Christmas, near the end of the day, the Delaware Supreme Court put out its opinion, and the court decided, on the narrow grounds that we were hoping it decided just the remedy issue, that the rescission of the pay package was not supported by equity. 

And therefore the decision should be reversed. It did note that it had differences among them just on the liability issues.

So I think those issues, played well at the court and created some differences. But ultimately the court was able to unanimously decide that the remedy was improper and that enough was alone to resolve the case. 

JOHN QUINN: And so what, what does that, what does that mean? Are there then nominal damages?

Does it go back to trial for determining the amount of damages Mr. Musk gets in his full pay package? And what's the resolution on attorney's fees? Is that all resolved now or there's still some issues up in the air? 

CHRIS MICHEL: No, it's all resolved and I think the court liked that it was able to bring a complete resolution to this case.

So yes, Mr. Musk gets the full pay package back. In today's, at today's stock prices that's worth about $139 billion, which shows that Tesla has continued to grow even more, since he earned the pay package. The amount of nominal damages was set by the Delaware Supreme Court at $1. So for Mr. Musk, and the directors, the ultimate result was gaining $139 billion and paying $1 in nominal damages.

And as for attorney's fees, the Delaware Supreme Court adopted what's called a multiplier of the L star amount and awarded about $54 million in attorney's fees. Still a significant amount, but down from the 345 million that the plaintiff's counsel had received in the court of Chancellor. 

JOHN QUINN: And Chris, couldn't you have negotiated a deal here where we'd get a contingent fee, that we'd get some participation in whatever percentage of that pay package that we restored. 

CHRIS MICHEL: I mean, that would've been a pretty good deal for us. John, you know, we talked in this case about the importance of not invoking hindsight bias. But if I had some hindsight, I think I would've called you about that arrangement. Alright, so that's a huge win, huge swing in terms of the chance goes from getting zero to a hundred billion dollar plus. 

JOHN QUINN: Congratulations. That's a fabulous result. I mean, as a, because of this case, as we've discussed, they left the, this case and some others, the legislature adopted some changes.

I know in terms of what's a controlling shareholder, how controlling shareholder is determined, some safe harbors and the like, I don't know if you have any familiarity with those, that legislation? Ultimately because that legislation was not retroactive, ultimately because that legislation did not apply to transactions that had taken place before the date that the legislation was enacted.

CHRIS MICHEL: It did not apply directly in our appeal, but we certainly did become familiar with it. As you say, it changed and clarified the definition of controlling stockholder. I think that may be one issue. Does that mean the future we won't be looking like whose kids go to whose birthday parties and things like that to decide issues about relationships with directors.

I think we're gonna have to see how the court of Chancery interprets it. The legislature, I think, certainly intended to provide more objectivity and more clarity. It does set some precise numbers about how much stock has to be owned in order for a controlling stockholder to be defined. 

For example, Mr. Musk's 21% would not be enough to qualify under the new legislation but there are, like with any new legislation, there are a lot of interpretive issues to be worked out. I do think the Delaware Supreme Court may have thought it was ultimately less important in our case to decide the controlling stockholder question because it knew this new legislation had been adopted and that the real questions going forward would be about how to interpret the definition, in that legislation as opposed to the prior definitions in the Delaware Supreme Court's precedent. 

JOHN QUINN: Well, congratulations, Chris. Fascinating and important case. We're very proud of the job that you and your team, and it was the team. I know a number, a lot of Quin Emanuel lawyers worked with you on this.

Congratulations on the great result you achieved for our client, Mr. Musk. 

CHRIS MICHEL: Thank you, John, and you're exactly right. This would not have been possible without a great team. My partners, our partners, Chris Kercher from New York, Mike Barlow from Wilmington, Delaware, the head of our Wilmington office. A terrific team of associates who were spread across New York, DC and Wilmington, who worked hard on this case at the briefing and the argument stage. Our local council in Delaware and our co-counsel at both Cravath and Sullivan & Cromwell. It was a true team effort among all of those firms and a good result for all.

JOHN QUINN: This is John Quinn. This has been Law, disrupted.

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