Elon moved Tesla from Delaware to Texas; the fight he had in Delaware courts is still continuing–why?

One of my law partners attempted to explain the history of the fight over Musk’s huge compensation package, dating back to 2018.  Actually, some of it is technical legal stuff, and some of it is pretty boring, but the overall picture gives insight into Musk’s incredible focus and the law’s turgid and sometimes overly technical path.  Plus, all things Musk-ish seem to intrigue.

Let’s go back to 2018 when, having successfully obtained huge compensation packages from his board in 2009 and 2012, Musk got a new, multi-billion dollar pay package approved even though he did not have full voting control of the company (and thus the power to pack the board with his personal minions). Delaware law would have applied a more stringent test to board approval (eg a shareholder vote being required) if he controlled the vote to name all directors as a mathematical matter — part of the Delaware balance between favoring corporate management while providing some ultimate protection to shareholders.

Shareholders promptly sued to block the deal, claiming the directors breached their fiduciary duty in approving the huge package.  In October, 2022, the Delaware Chancery Court took five full days of witness testimony, concluded that given his successful past performance and reputation Musk had “soft” or de facto control of the board; the package was voided as there was no shareholder vote.  Plaintiff’s lawyers were awarded $345 Million in attorney’s fees.  [Millions I said–not a typo]

Musk picked up Tesla at that point, moved it to Texas and advised all successful companies to leave Delaware.  He got his raise under Texas law.  But Delaware was not finished with him.

In December of 2025 the Delaware Supreme Court (it sits above Chancery) unanimously reversed the lower court decision, finding that given Tesla’s performance since 2018 Elon deserved the money; they awarded nominal damages of one dollar [a single dollar, not a typo] and killed the $345 Million legal fee; now I am a little fuzzy but I think I heard my partner say that though the plaintiff shareholders lost their lawyers still got a $54 Million fee (last time I lost in court, I didn’t even get carfare home).

The decision turned on factors of how remedies were pleaded, and the Supreme Court (unanimously) failed to address the issue of Musk’s control of the board, nor the fairness of the compensation package, nor the propriety of the board’s original approval.

But wait; there’s more.  The whole episode has led Delaware to amend its corporate statute, only to be faced with litigation that doing so is unconstitutional.  I will spare you the details.

I would be remiss here if I did not put in a plug for our Delaware office, fully expert in all legal matters of Delaware corporate practice.  It seems that no one should just read the Delaware statute and come to the belief that they are clear on what they should be doing.  Forewarned is forearmed.