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Delaware Court of Chancery
Case No. 2018-0408-KSJM
Richard J. Tornetta v. Elon Musk

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EFiled: Jul 12 2024 03:31PM EDT
Transaction ID 73562914
Case No. 2018-0408-KSJM
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

RICHARD J. TORNETTA, derivatively on

behalf of all other similarly situated
stockholders of TESLA, INC.,
Plaintiff,
v. C.A. No. 2018-0408-KSJM
ELON MUSK, ROBYN M. DENHOLM,
ANTONIO J. GRACIAS, JAMES
MURDOCH, LINDA JOHNSON RICE,
BRAD W. BUSS, and IRA EHRENPREIS,
Defendants,
and
TESLA, INC, a Delaware corporation,
Nominal Defendant.

PLAINTIFF’S OMNIBUS BRIEF IN OPPOSITION TO THE INDIVIDUAL

DEFENDANTS’ MOTION TO REVISE THE POST-TRIAL OPINION AND
NOMINAL DEFENDANT TESLA, INC.’S JOINDER

Of Counsel: BERNSTEIN LITOWITZ BERGER

Jeroen van Kwawegen & GROSSMANN LLP
Margaret Sanborn-Lowing Gregory V. Varallo (Bar No. 2242)
BERNSTEIN LITOWITZ BERGER Glenn R. McGillivray (Bar No. 6057)
& GROSSMANN LLP 500 Delaware Avenue, Suite 901
1251 Avenue of the Americas Wilmington, DE 19801
New York, NY 10020
ANDREWS & SPRINGER LLC
Jeremy S. Friedman Peter B. Andrews (Bar No. 4623)
Spencer M. Oster Craig J. Springer (Bar No. 5529)
David F.E. Tejtel David M. Sborz (Bar No. 6203)
FRIEDMAN OSTER Andrew J. Peach (Bar No. 5789)
& TEJTEL PLLC Jackson E. Warren (Bar No. 6957)
493 Bedford Center Road, Suite 2D 4001 Kennett Pike, Suite 250
Bedford Hills, NY 10507 Wilmington, DE 19807
Counsel for Plaintiff
Dated: July 12, 2024
TABLE OF CONTENTS

Page

PRELIMINARY STATEMENT ...............................................................................1

BACKGROUND.......................................................................................................2

I. Facts Pertinent to Defendants’ Motion .................................................2

II. Ratification-related Facts Outside the Trial Record .............................4

A. Musk Converts Tesla into an AI and Robotics Company ..........4

B. Musk Threatens to Divert AI and Robotics Opportunities

from Tesla Absent 25% Ownership............................................5

C. Musk Rages Against the Opinion...............................................5

D. The Board Answers Musk’s Call to Action................................6

E. The Board Underscores AI’s Vital Importance to Tesla,

Threatens Stockholders with a $25B+ Accounting Charge,
and Materially Misleads Stockholders .......................................8

F. Tesla’s Board Launches a Massive Campaign to Secure

“Ratification” Approval..............................................................9

G. As Tesla Tanks, Musk Touts AI and Robotics, and

Identifies the Ratification as Crucial to His 25% Demand.......10

H. Musk—and the Board—Directly Tie the Ratification to

Musk’s Threats .........................................................................12

I. Tesla’s Pro-Ratification Campaign Continues .........................13

J. Tesla Re-Emphasizes its Identity as an AI/Robotics

Company and Threatens Stockholders .....................................15

K. Musk Executes on His Threats to Divert AI and Robotics

Opportunities from Tesla; Stockholders Get the Message .......15

L. ISS, Glass Lewis, and Others Oppose Ratification ..................17

i
M. Musk Prematurely Declares Victory ........................................18

ARGUMENT ..........................................................................................................20

I. Chancery Rules Do Not Permit the Requested Relief ........................20

II. The Law of the Case Precludes Ratification.......................................27

III. Defendants Have Waived Ratification................................................32

IV. The Grant Cannot Be Ratified Under Section 204 .............................35

V. Ratification Cannot Override a Post-Trial Breach of Loyalty

Judgment .............................................................................................38

A. A Post-Trial Stockholder Vote Cannot Supplant The Court

..................................................................................................38

B. No Delaware Court Has Ever Held—or Should Hold—

that a Stockholder Vote Trumps a Post-Trial Judgment...........39

1. The Court Can Disregard Ratification of a

Defectively Designed Plan: Kerbs .................................41

2. Ratification, Even if Applicable, Is Not Absolute..........43

3. Ratification of a Loyalty Breach Is Irreconcilable

with 8 Del. C. § 102(b)(7)(i) and Delaware Public
Policy..............................................................................44

VI. Even if, Arguendo, Ratification Could Have Any Legal Effect,
Improper Approval, Coercion, Illegality, and Material
Disclosure Failures Vitiated This Vote...............................................47

A. The Ratification Is Invalid Because It Was Not Validly

Approved ..................................................................................47

B. “Ratification” Is Invalid Because the Vote Was Coerced ........48

1. Musk’s Explicit Threats .................................................49

2. The Threat of a $25B+ Financial Consequence .............52

3. Defendants’ Remaining Coercion Arguments Fail ........54

ii
C. “Ratification” Is Invalid Because It Was Not Fully
Informed ...................................................................................56

D. “Ratification” Was Invalid Because It Was Illegal ..................61

VII. Even If, Arguendo, the Ratification Vote Could Be Injected into
the Long-Closed Trial Record and Had Any Legal Effect, It
Would Not Change the Judgment .......................................................62

A. An Entire Fairness Burden Shift Is Unavailable and

Improper, But Regardless, Would Not Change the
Judgment...................................................................................63

1. If, Arguendo, “Ratification” Could Have Any

Legal Effect, It Would Merely Shift the Entire
Fairness Burden..............................................................63

2. A Burden Shift Under Entire Fairness Would Not

Change the Outcome. .....................................................64

B. De-Escalation of the Review Standard Is Unavailable and

Improper, But Would Not Change the Judgment .....................66

1. MFW Applies to Any Attempt to De-Escalate the

Review Standard ............................................................66

2. Defendants Did Not—and Cannot—Meet Their

MFW Burden ..................................................................68

3. Even De-Escalation of the Review Standard to

Business Judgment Cannot Change the Outcome..........68

CONCLUSION .......................................................................................................69

iii
TABLE OF AUTHORITIES

Page(s)

Cases

Ams. Mining Corp. v. Theriault,

51 A.3d 1213 (Del. 2012)...................................................................................64

Amirsaleh v. Bd. of Trade of City of N.Y., Inc.,

27 A.3d 522 (Del. 2011).....................................................................................32

Andra v. Blount,
772 A.2d 183 (Del. Ch. 2000) ............................................................................32

Applied Energetics, Inc. v. Farley,

239 A.3d 409 (Del. Ch. 2020) ............................................................................36

Arnold v. Soc’y for Sav. Bancorp, Inc.,

678 A.2d 533 (Del. 1996)...................................................................................61

Bachtle v. Bachtle,
494 A.2d 1253 (Del. 1985).................................................................................20

Bell v. Kirby Lumber Corp.,

413 A.2d 137 (Del. 1980)...................................................................................24

Calma v. Templeton,
114 A.3d 563 (Del. Ch. 2015) ............................................................................40

Carlson v. Hallinan,
925 A.2d 506 (Del. Ch. 2006), clarified on other grounds,
2006 WL 1510759 (Del. Ch. May 22, 2006) .....................................................22

CCSB Fin. Corp. v. Totta,

302 A.3d 387 (Del. 2023)...................................................................................45

Chester Cnty. Emps.’ Ret. Fund v. KCG Holdings, Inc.,

2019 WL 2564093 (Del. Ch. June 21, 2019) .....................................................60

Corwin v. KKR Fin. Holdings,

125 A.3d 304 (Del. 2015)...................................................................................29

iv
Del. Cnty. Emps. Ret. Fund v. Sanchez,
124 A.3d 1017 (Del. 2015).................................................................................57

In re Cysive, Inc. S’holders Litig.,

836 A.2d 531 (Del. Ch. 2003) ............................................................................64

Daniel D. Rappa, Inc. v. Hanson,

209 A.2d 163 (Del. 1965)...................................................................................22

In re Dell Techs. Inc. Class V S’holders Litig.,

2020 WL 3096748 (Del. Ch. June 11, 2020) ...............................................50, 54

Eisenberg v. Chi. Milwaukee Corp.,

537 A.2d 1051 (Del. Ch. Dec. 1987)..................................................................58

Emerald Partners v. Berlin,

726 A.2d 1215 (Del. 1999)...........................................................................21, 33

Emerald Partners v. Berlin,

787 A.2d 85 (Del. 2001).....................................................................................31

Encite LLC v. Soni,

2011 WL 6225270 (Del. Ch. Dec. 13, 2011) .....................................................31

In the Matter of the Appraisal of Enstar Corp.,

513 A.2d 206 (Del. Ch. 1986) ......................................................................34, 35

Fitzgerald v. Cantor,
2000 WL 128851 (Del. Ch. Jan. 10, 2000) ............................................22, 23, 27

Frank G.W. v. Carol M.W.,

457 A.2d 715 (Del. 1983)...................................................................................31

Gantler v. Stephens,
965 A.2d 695 (Del. 2009)...................................................................................56

Gilmartin v. Adobe Res. Corp.,

1992 WL 71510 (Del. Ch. Apr. 6, 1992)............................................................58

Gradient OC Master, Ltd. v. NBC Univ., Inc.,

930 A.2d 104 (Del. Ch. 2007) ......................................................................50, 54

v
Harrison Metal Cap. III, L.P. v. Mathé,
2024 WL 1299579 (Del. Ch. Mar. 27, 2024) .....................................................37

Houseman v. Sagerman,
2015 WL 7307323 (Del. Ch. Nov. 19, 2015).....................................................43

J.P. Crown Tr. v. BitNile Holdings,

C.A. No. 2022-0904-LWW (Del. Ch. Oct. 20, 2022)
(TRANSCRIPT) .................................................................................................60

Kahn v. Lynch Commc’n Sys., Inc.,

638 A.2d 1110 (Del. 1994).................................................................................30

Kahn v. M & F Worldwide Corp.,

88 A.3d 635 (Del. 2014)...............................................................................33, 34

Kahn v. Tremont Corp.,

694 A.2d 422 (Del. 1997)...................................................................................57

Keenan v. Eshleman,
2 A.2d 904 (Del. 1938).......................................................................................40

Kerbs v. Cal. E. Airways,

83 A.2d 473 (Del. Ch. 1951) ........................................................................41, 42

Kerbs v. Cal. E. Airways,

90 A.2d 652 (Del. 1952)..............................................................................passim

Kerbs v. Cal. E. Airways,

94 A.2d 217 (Del. Ch. 1953) ........................................................................41, 42

In re KKR Fin. Holdings LLC S’holder Litig.,

101 A.3d 980 (Del. Ch. 2014) ......................................................................47, 48

Lacos Land Co. v. Arden Grp., Inc.,

517 A.3d 271 (Del. Ch. 1986) ............................................................................48

Lewis v. Vogelstein,
699 A.2d 327 (Del. Ch. 1997) ............................................................................29

Lola Cars Int’l Ltd. v. Krohn Racing, LLC,

2010 WL 1818907 (Del. Ch. Apr. 23, 2010)................................................21, 24

vi
Manichaean Cap., LLC v. SourceHOV Holdings, Inc.,
2020 WL 3097678 (Del. Ch. June 11, 2020) .....................................................22

Manti Holdings, LLC v. Authentix Acquisition Co., Inc,

261 A.3d 1199 (Del. 2021).................................................................................45

Mellado v. McDowell,
2023 WL 621134431 (Del. Ch. Sept. 20, 2023).................................................37

Michelson v. Duncan,
407 A.2d 211 (Del. 1979).............................................................................29, 33

In re Mobilactive Media, LLC,

2013 WL 1900997 (Del. Ch. May 8, 2013) .......................................................24

Modlin v. Iselin,
1986 WL 202 (Del. Ch. May 16, 1986) .............................................................25

New Castle Cnty. v. Pike Creek Recreational Servs., LLC,

82 A.3d 731 (Del. Ch. 2013), aff’d, 105 A.3d 990 (Del. 2014) .........................31

In re Numoda Corp.,
128 A.3d 991 (TABLE), 2015 WL 6437252 (Del. 2015)).................................37

In re PLX Tech. S’holders Litig.,

C.A. 9880-VCL (Del. Ch. April 15, 2015) (TRANSCRIPT).............................60

Lebanon Cnty. Emps.’ Ret. Fund v. Collis,

2023 WL 2582399 (Del. Ch. Mar. 21, 2023), rev’d on other
grounds, 311 A.3d 773 (Del. 2023)....................................................................20

In re Saba Software, Inc. S’holder Litig.,

2017 WL 1201108 (Del. Ch. Mar. 31, 2017) ...............................................48, 50

Salladay v. Lev,
2020 WL 954032 (Del. Ch. Feb. 27, 2020)..................................................47, 48

Sciabacucchi v. Liberty Broadband Corp.,

2017 WL 2352152 (Del. Ch. May 31, 2017) ...............................................48, 53

Siegman v. Columbia Pictures Ent., Inc.,

1993 WL 10969 (Del. Ch. Jan. 15, 1993) ....................................................25, 31

vii
Solomon v. Armstrong,
747 A.2d 1098 (Del. Ch. 1999) ..........................................................................40

Southpaw Credit Opportunity Master Fund v. Roma Rest. Hldgs.,

2017 WL 3701232 (Del. Ch. Aug. 22, 2017).....................................................26

Taylor v. Jones,
2006 WL 1510437 (Del. Ch. May 25, 2006) ...............................................28, 29

In re Tesla Motors, Inc, S’holder Litig.,

2022 WL 1237185 (Del. Ch. Apr. 27, 2022)......................................................46

In re Tesla Motors, Inc. S’holder Litig.,

298 A.3d 667 (Del. 2023)...................................................................................46

Totta v. CCSB Fin. Corp.,

2022 WL 4087800 (Del. Ch. Sept. 7, 2022).......................................................25

In re Tri-Star Pictures, Inc., Litig.,

1989 WL 112740 (Del. Ch. Sept. 26, 1989).......................................................24

Tuckman v. Aerosonic Corp.,

394 A.2d 226 (Del. Ch. 1978) ............................................................................34

In re U.S. Robotics Corp. S’holders Litig.,

1999 WL 160154 (Del. Ch. Mar. 15, 1999) .......................................................27

In re USACafes, L.P. Litig.,

600 A.2d 43 (Del. Ch. 1991) ..............................................................................43

Vianix Del. LLC v. Nuance Commc’ns, Inc.,

2011 WL 487588 (Del. Ch. Feb. 9, 2011)....................................................22, 23

In re Walt Disney Co. Deriv. Litig.,

906 A.2d 27 (Del. 2006).....................................................................................68

Weinberger v. UOP, Inc.,

457 A.2d 701 (Del. 1983)...................................................................................64

Williams v. Geier,
671 A.2d 1368 (Del. 1996).................................................................................48

viii
Zirn v. VLI Corp.,
1994 WL 548938 (Del. Ch. Sept. 23, 1994).......................................................25

Zutrau v. Jansing,
2014 WL 6901461 (Del. Ch. Dec. 8, 2014), aff’d, 123 A.3d 938
(Del. 2015)..........................................................................................................21

STATUTES & OTHER AUTHORITIES

8 Del. C. § 102(b)(7)(i)......................................................................................44, 45

8 Del. C. § 204.......................................................................................35, 36, 37, 47

8 Del. C. § 225(c) ....................................................................................................41

H.B. 127 syn., 147th Gen. Assem. (2013)...............................................................35

Securities Exchange Act of 1934, Rule 14a-9 .........................................................61

11 WRIGHT & MILLER, Federal Practice and Procedure § 2857 (3d ed.) ................20

C. Stephen Bigler & John Mark Zeberkiewicz, Restoring Equity:

Delaware’s Legislative Cure for Defects in Stock Issuances and
Other Corporate Acts, 69 BUS. LAWYER 393 (2014).....................................35

John W. Noble, Fixing Lawyers’ Mistakes: The Court’s Role in

Administering Delaware’s Corporate Statute, 18 U. PA. J. BUS. L.
293 (2016) ..........................................................................................................35

Tabby Kinder & Stephen Morris, I Might Wake Up to a Tweet. I

Don’t Wake Up to a Strategy Shift, Financial Times (May 17,
2024)...................................................................................................................14

Trisha Thadani, Tesla shareholders cast votes on Elon Musk’s $50[B]

pay package, Washington Post (June 12, 2024).................................................17

Tom Krisher, Future of Elon Musk and Tesla are on the line this week
as shareholders vote on massive package, AP News (updated June
13, 2024).............................................................................................................16

ix
PRELIMINARY STATEMENT1

Ten leading law firms and an unlimited budget. And they still could not find

it. A case, any case, holding stockholders can usurp the Supreme Court’s role and

reverse this Court’s trial judgment. Quod erat demonstrandum. Delaware is not

Athens. The stockholder franchise—however important—is not a “get out of

[rescission] free” card. Defendants’ proposal is a dangerous paradigm shift: Courts

would be subject to vox populi, and stockholders could overturn trial judgments.

Defendants’ attempt to inject into this Action a new “ratification” (the

“Ratification”)—not part of the long-closed trial record—fails at the outset. Rule 59

is the only way to reopen the record, and its application here violates virtually every

factor courts consider under that rule. That reason alone warrants denying the

Motion.2

But even if the Court were to reopen the record and consider this second

“ratification”—19 months after trial and five months after full adjudication of all

claims—it is inutile here under fundamental Delaware law and for reasons specific

to this particular ratification attempt, which was vitiated by blatant coercion and

material non-disclosures. And if the Court were to grant leave to reopen the record,

1Undefined capitalized terms have the meaning provided in the Court’s January 30, 2024
post-trial opinion (the “Post-Trial Opinion,” “Opinion,” or “Op.”) (Dkt. 294).
2 Individual Defendants’ Motion to Revise the Post-Trial Opinion (the “Motion”)
(Dkt. 396).
Plaintiff would be permitted discovery and further trial proceedings regarding the

contested facts. The absurdity of embarking on that course at this stage underscores

that the requested relief would cause the very “manifest injustice” to Plaintiff that

Rule 59 rejects.

It is time for the Court to end Defendants’ charade. The Court cannot reopen

the record to consider the Ratification, and even if it could, “ratification” is

ineffective. The Court should deny the Motion and enter the

Order and Final Judgment without further delay.

BACKGROUND

I. FACTS PERTINENT TO DEFENDANTS’ MOTION

Plaintiff filed this Action in June 2018 and tried it from November 14-18,

2022. Post-trial proceedings concluded on April 11, 2023.

The Court’s January 30, 2024 Opinion found for Plaintiff, ordered the Grant’s

rescission, and directed the parties to confer on a “final order implementing this

decision…to bring this matter to a conclusion at the trial level.”3 After Defendants

refused to engage on a final order, Plaintiff acceded to Defendants’ request that

Plaintiff file the Fee Petition.4 After that filing, Defendants still refused to engage.5

3 Dkt. 294, Post-Trial Opinion, dated Jan. 30, 2024 (“Op.”), 192, 200.
4 Dkt. 296.
5 Dkt. 304.

2
On March 18, the Court entered a fee briefing schedule and set a July 8

fee hearing.6 On April 17, multiple new firms appeared for Tesla, announcing a

June 13 “ratification” vote.7

Plaintiff promptly filed expedited motions to preserve the Court’s judgment

and jurisdiction,8 which the Court denied given Defendants’ assurances that the

Opinion was a “final judgment on the merits” and ratification “would [not] ‘interfere

with this Court’s…ability to enter a final judgment so that the case may be

appealed.’”9

On June 20, Tesla moved to vacate the briefing schedule and brief the

Ratification’s impact, newly asserting: “Defendants will move for entry of judgment

in their favor based upon the Ratification.”10

On June 26, Defendants submitted a [Proposed] Order and Final Judgment

reversing the Court’s Opinion and “Enter[ing] [Judgment] for the Defendants.”11

On June 28, Defendants filed the Motion and supporting brief.12

6 Dkts. 302, 304.

7 Dkt. 306, 2.
8 See Dkts. 308-11.
9 Dkt. 340, 6 (quoting Dkt. 324, ¶5).
10 Dkt. 386, ¶10.
11 Dkt. 392.
12Individual Defendants’ Opening Brief in Support of Their Motion to Revise the Post-
Trial Opinion (“IDOB”) (Dkt. 396).

3
II. RATIFICATION-RELATED FACTS OUTSIDE THE TRIAL
RECORD

The Ratification—and all related facts—are outside the trial record and cannot

affect the Opinion. Plaintiff provides these facts solely for the Court’s benefit in

adjudicating Defendants’ Motion.

A. Musk Converts Tesla into an AI and Robotics Company

“Musk has repeatedly stated that Tesla is an AI and robotics company

[and]…is worth virtually nothing without self-driving, its main AI product.”13

Tesla’s recent filings agree: “[W]e are increasingly focused on products and services

based on [AI], robotics and automation.”14

On January 3, 2024, Musk stated: “Tesla is an AI/robotics company that

appears to many to be a car company.”15 Musk “ma[de] moves to ensure that this is

the only path for Tesla, like canceling the cheaper Tesla vehicle…in favor of its

upcoming Robotaxi.”16

13[Link]
robotics/.
14 Tesla, Form 10-K (Jan. 26, 2024), at 33 [Link]
/data/1318605/000162828024002390/[Link].
15Elon Musk (@elonmusk), X (Jan. 3, 2024 12:51am), [Link]
1742423298217033776.
16[Link]
robotics/.

4
B. Musk Threatens to Divert AI and Robotics Opportunities from
Tesla Absent 25% Ownership

On January 15, Musk posted on X: “I am uncomfortable growing Tesla to be

a leader in AI & robotics without having ~25% voting control….Unless that is the

case, I would prefer to build products outside of Tesla.”17

Musk’s efforts to “ensure that [AI/robotics] is the only path for Tesla” made

it “really concerning when [he] suggested that he is ‘uncomfortable’ building AI

products at Tesla unless he has ‘25% control over the company’—something he

doesn’t have right now—partly because he decided to sell [$20B+] of Tesla shares

to buy Twitter.”18

C. Musk Rages Against the Opinion

The Court issued the Opinion around 4:30 p.m. on January 30. 44 minutes

later, Musk posted on X: “Never incorporate your company in the state of

Delaware.”19 Two hours later, Musk purported to poll X users: “Should Tesla

change its…incorporation to Texas, home of its physical headquarters?”20 At 12:09

17Elon Musk (@elonmusk), X (Jan. 15, 2024 3:55pm), [Link]

1746999488252703098?lang=en.
18[Link]
robotics/.
19Elon Musk (@elonmusk), X (Jan. 30, 2024 5:14pm), [Link]
1752455348106166598?lang=en.
20Elon Musk (@elonmusk), X (Jan. 30, 2024 7:40pm), [Link]
1752491924848820595?lang=en.

5
a.m. on February 1, Musk posted: “Tesla will move immediately to hold a

shareholder vote to transfer state of incorporation to Texas.”21

D. The Board Answers Musk’s Call to Action

The Board—including Musk—first discussed Redomestication just five days

after the Opinion.22 That Board consisted—and still consists—of:

• Musk;

• Kimbal Musk;

• Denholm, Ehrenpreis, and Murdoch, all of whom the Court

ruled not independent of Musk23;

• Wilson-Thompson, who “has realized…approximately $62[M]

from the exercise of equity awards received for her service on
[Tesla’s] Board,” owned ~$150M in Tesla shares,24 and adopted
a Rule 10b-5 trading plan to sell 36% of her Tesla shares five
days before accepting her special committee (“Committee”)
appointment25;

• Joe Gebbia, who attended social gatherings with Musk where

“Musk took ketamine recreationally…multiple times,”26 and
resigned from the Committee because he was “concerned their

21Elon Musk (@elonmusk), X (Feb. 1, 2024 12:09am), [Link]

1752922071229722990?lang=en.
22 IDOB Ex. A (“New Proxy”), 29/296.
23 Op. 125-27.
24 Tesla, Form 14A, E-28 (Apr. 29, 2024), [Link]
r/data/1318605/000110465924053333/tm2326076d15_def14a.htm.
25 Tesla, Form 10-Q (Apr. 23, 2024), [Link]

0001318605/000162828024017503/[Link], at 34.
26 [Link]

6
friendship” could create issues and “Musk had discussed
purchasing a house from [Gebbia’s] start-up”27; and

• JB Straubel, Tesla’s co-founder—and CTO for 14 years—who

is also founder/CEO of Tesla business partner
Redwood Materials, Inc.28

On February 10, the conflicted Board formed a two-person Committee—

Gebbia and Wilson-Thompson.29 After Gebbia resigned, Wilson-Thompson

became “a committee of one.”30 Wilson-Thompson then requested the Committee

add other independent directors, but her request was denied by conflicted Denholm,

Ehrenpreis, and management.31 Tesla concedes the Committee “did not

substantively re-evaluate the amount or terms of the [Grant] and did not engage a

compensation consultant. It did not negotiate with Mr. Musk.”32

Despite the Committee’s and its advisors’ inability to “predict with certainty

how a stockholder vote to ratify the [Grant] would be treated under Delaware law,”33

27[Link]
house-musk-2024-06-03/; see also New Proxy 40/296.
28 New Proxy 14/296.
29 IDOB 6.
30 Id. 7; see also New Proxy 19/296.
31 New Proxy, 245/296 E-26.
32 Id. 97/296.
33 Id. 95/296.

7
on April 16 the Committee recommended—and the Board approved—the

Ratification and Redomestication proposals.34

Tesla’s April 17 preliminary proxy indicated its annual meeting would move

from May 8 to June 13 to accommodate the Ratification and Redomestication

proposals.35

Denholm’s Letter to Stockholders opened the New Proxy, stating: “We do not

agree with what the Delaware Court decided, and we do not think that what the

Delaware Court said is how corporate law should or does work.”36 The Board asked

Tesla’s stockholders to “help fix this issue” by “voting to approve ratification of [the

Grant].”37

E. The Board Underscores AI’s Vital Importance to Tesla,

Threatens Stockholders with a $25B+ Accounting Charge, and
Materially Misleads Stockholders

In the New Proxy’s introduction, the Board underscored AI’s vital importance

to Tesla by discussing Tesla’s development of “revolutionary technologies” in AI

and “our progress in [AI] via full self-driving and optimus.”38

34 Id. 37/296, 96/296.

35 Id. 31/296.
36 Id. 4-6/296.
37 Id.
38 Id. 5/296.

8
The New Proxy threatened stockholders that rejecting “ratification” would

force Tesla “to negotiate a replacement compensation plan with Mr. Musk,” which

would (i) “need to be of a similar magnitude to the [Grant],” (ii) “likely result in a

very large, incremental accounting charge for compensation expense” and

(iii) “potentially result in an accounting charge in excess of $25 billion.”39 Denholm

later reiterated that “ratification saves stockholders from a new charge for a new

compensation plan.”40

F. Tesla’s Board Launches a Massive Campaign to Secure

“Ratification” Approval

Upon announcing the Ratification on April 17, “Tesla and Musk [] unleashed

a furious lobbying effort to get the [Grant] approved, in posts on X, television

appearances and in [SEC] filings….”41 Tesla “pull[ed] out all the stops to get

[“ratification”] approved, hiring outside personnel and even readying Board

members for a ‘tour’ of sorts that will entice shareholders to vote in one direction.”42

39 Id. 98/296 (emphasis added).

40[Link]
4ee6b38e (emphasis added).
41 [Link]
42 [Link]
approved/.

9
Tesla “hired a strategic adviser to help bolster the campaign” and “set up an

investor website…dedicated to wooing retail shareholders,”43 which broadcasted

alarmist rhetoric like: “[The] future value we are poised to deliver for you is at

risk…We need your vote NOW to protect Tesla and your investment.”44 And

despite famously eschewing paid product advertising, Tesla “roll[ed] out new ads—

including paid posts on Musk-owned X—urging investors to vote.” 45

G. As Tesla Tanks, Musk Touts AI and Robotics, and Identifies the

Ratification as Crucial to His 25% Demand

On April 23, Musk leveraged Tesla’s Q1 earnings call to underscore AI and

robotics’ vital importance to Tesla, and the Ratification’s vital importance to his

25% demand.

“Tesla’s first-quarter earnings report was dreary….Auto sales dropped

13%....Free cash flow turned negative,”46 and “profits fell 55%.”47 Tesla also

“announced its intentions to lay off more than…14,000 people.”48 But Musk

43 Id. (internal quotations omitted).

44[Link]
wide-margins/.
45[Link]
elon-musk-46-billion-6ea31ea5.
46[Link]
[Link].
47 [Link]
48 Id.

10
“suggested investors focus their attention elsewhere”49—i.e., Tesla “should be

thought of as an A.I. and robotics company,”50 and “[i]f somebody doesn’t believe

Tesla is going to solve autonomy…they should not be a[] [Tesla] investor….”51

Musk stated Tesla’s notional robotics product, Optimus, “will be more valuable than

everything else combined.”52

Confirming the market’s internalization of Tesla’s AI and robotics-based

promises, “Tesla’s shares soared 13%...despite the disappointing results,”53 and

“[t]he stock’s rally picked up steam during the earnings call as Musk veered to

[Tesla’s AI/robotics] future.”54

Notably, when asked during the earnings call how he could obtain the 25% of

Tesla he demanded, Musk responded: “[S]hareholders have an opportunity to ratify

or re ratify, the compensation. I guess I can’t say that, but that is a fact….[And] if

49 [Link]
[Link].
[Link]
50

[Link].
51 Tesla, Q1 2024 Earnings Call Transcript (Apr. 23, 2024),
[Link]
call-transcripts/2024/04/23/tesla-tsla-q1-2024-earnings-call-transcript/.
52[Link]
call-transcript/.
53 [Link]
[Link].
54 Id.

11
the company generates a lot of positive cash flow, we could obviously buy back

shares.”55

H. Musk—and the Board—Directly Tie the Ratification to Musk’s

Threats

On May 18, Musk reaffirmed his threat to divert AI and robotics opportunities

from Tesla, uniting that threat with the Ratification:

The media explained: “By approving of this post, [Musk] appears to say that

these conditions are needed for him not to divert AI and robotics products away from

55 Tesla, Form 14A (Apr. 23, 2024), [Link]

000110465924051405/tm2326076d20_defa14a.htm (Tesla proxy filing embedding (only)
that question and answer) (emphasis added).

12
Tesla: [G]et 25% voting power over Tesla[.] Reincorporate Tesla in Texas[.]

[R]eapprove his 2018 compensation package[.]”56

On May 22, Tesla included the post in an SEC proxy filing.57

The market received the message. MSN reported: “Elon Musk ‘restates threat

to leave Tesla’ without $56b pay award & 25% company control.”58

I. Tesla’s Pro-Ratification Campaign Continues

Meanwhile, Tesla’s Board remained laser-focused on securing stockholder

approval of the “ratification”.

On May 15, The Wall Street Journal (“WSJ”) reported: “Denholm and others

at the company plan to spend the next several weeks crisscrossing the globe to rally

support from shareholders.”59

Denholm also denigrated the Court’s Opinion. For example, a May 17

Financial Times article quoted Denholm describing aspects of the Opinion as “crap”

56[Link]
robotics/) (emphasis added).
57Tesla, Form 14A (May 18, 2024), [Link]
000110465924064005/tm2413800d9_defa14a.htm.
58[Link]
tesla-without-56b-pay-award-25-company-control/ar-BB1mRuoN?a%E2%80%A6.
59 [Link]
elon-musk-46-billion-6ea31ea5.

13
and “absolute BS.”60 Meanwhile, Musk continued publicly attacking the Court and

its Opinion.61

On May 29, the market reported that “Musk is offering factory tours to 15

Tesla shareholders who vote on his $56[B] pay package at the upcoming meeting,

the latest effort by [Tesla] to rally votes….”62

Tesla’s “unusual and public effort to rally support for Musk’s pay”63 persisted

to the June 13 meeting, completing “two months [spent] rallying support for the

measures, putting particular emphasis on the [Grant.]”64

60Tabby Kinder & Stephen Morris, I Might Wake Up to a Tweet. I Don’t Wake Up to a
Strategy Shift, Financial Times (May 17, 2024).
61 See, e.g., Elon Musk (@elonmusk), X (Feb. 1, 2024 11:17pm),
[Link] (“She has done more to
damage Delaware than any judge in modern history.”); Elon Musk (@elonmusk), X (Feb.
1, 2024 1:30pm), [Link]
(“Change your state of incorporation out of Delaware before they lock the doors.”).
62 [Link]
compensation-votes/73893602007/; see also, e.g., [Link]
musk-tesla-stockholders-56-billion-pay-package-wide-margins/.
63 [Link]
compensation-votes/73893602007/.
64[Link]
resolutions-will-pass-by-wide-margins?embedded-checkout=true.

14
J. Tesla Re-Emphasizes its Identity as an AI/Robotics Company and
Threatens Stockholders

On June 3, Denholm sent stockholders a letter, which the Board then filed

with the SEC.65 The letter first re-emphasized Tesla’s identity as an AI and robotics

company: “Driven by our ambitious mission to accelerate the world’s transition to

sustainable energy, we have…advanced AI-powered technologies, including Full

Self-Driving, and are developing Optimus, a humanoid robot[.]”66 It then conjured

a parade of horribles purportedly necessitating the Ratification’s approval,

including: (i) “[o]ur future success is also at risk. The…Court has nullified a deal

that our Board made with Elon,” and (ii) “The Court’s decision…threatens Tesla’s

ability to innovate, attract top talent and continue executing our strategy.”67

K. Musk Executes on His Threats to Divert AI and Robotics

Opportunities from Tesla; Stockholders Get the Message

The press revealed on June 4 that “Musk diverted a sizable shipment of AI

processors that had been reserved for Tesla to his social media company X,” and

“[b]y ordering Nvidia to let privately held X jump the line ahead of Tesla, Musk

pushed back [Tesla’s] receipt of more than $500[M] in graphics processing

units…by months, likely adding to delays in setting up the supercomputers Tesla

65Tesla, Form 14A (June 3, 2024), [Link]

000110465924067896/tm2413800d17_defa14a.htm.
66 Id.
67 Id.

15
says it needs to develop autonomous vehicles and humanoid robots.”68 The article

further explained that to achieve Musk’s promised AI-based future, “Tesla requires

plenty of Nvidia’s GPUs which are specialized for AI training and workloads. Those

chips are in limited supply due to soaring demand….”69

Musk later “confirmed he diverted [AI] chips away from Tesla [] to his X

Corp. and xAI Corp. ventures[.]”70 The market recognized these actions as Musk

executing on his threats,71 which would continue if stockholders rejected

“ratification.” Widely disseminated articles reported that if stockholders rejected

“ratification”: (i) “the CEO could deliver on threats to take [AI] research to one of

his other companies[] [o]r…even walk away[;]”72 (ii) “shareholders should be

prepared for a significant slowdown in its AI efforts,” and “Musk has threatened to

leave the company and build futuristic technology, including robotics and artificial

68 [Link]
[Link].
69 Id.
70 [Link]
chip-procurement-plans-cnbc-says.
71 [Link]
(“Until [securing 25% ownership], the CEO said he would ‘prefer to build products outside
of Tesla’—and that’s exactly what he’s doing.”).
72 See, e.g., Tom Krisher, Future of Elon Musk and Tesla are on the line this week as
shareholders vote on massive package, AP News (updated June 13, 2024); see also, e.g.,
[Link] (same).

16
intelligence, elsewhere[;]”73 and (iii) “[t]he implications and consequences…could

be potentially huge….Musk has already said…that he wants a 25 percent equity

stake in Tesla, and if he does not get it, he would consider building AI technology

somewhere else.”74

Bernstein sought to quantify the threats’ impact, stating that “if the pay

package is rejected,” Tesla stock could decrease by “5%+.”75

L. ISS, Glass Lewis, and Others Oppose Ratification

“ISS and Glass Lewis recommended voting against “ratification,” a

combination that is often outcome-determinative.”76 California State Teachers’

Retirement System, Norway’s sovereign wealth fund (the second-largest

73 Trisha Thadani, Tesla shareholders cast votes on Elon Musk’s $50[B] pay package,
Washington Post (June 12, 2024). See also [Link]
chair-elon-musk-exit-pay-deal/ (Morgan Stanley “wrote on June 4 that if Musk does not
achieve a 25% voting stake in the EV giant, ‘Tesla shareholders should be prepared for
Tesla to significantly slow down/curtail its direct investment in sensitive/advanced AI
efforts.’”).
74 [Link]
approved/.
75 [Link]
know-8660682#:~:text=Bernstein%20analysts%20said%20that%20%22if,%2C%20but%
20likely%20more%20muted.%22.
76 IDOB 11.

17
worldwide),77 CalPERS,78 and the New York City Pension Funds—among others—

also publicly opposed “ratification.”

M. Musk Prematurely Declares Victory

On June 11, the WSJ reported that “Musk himself [] joined meetings with key

Tesla investors to get out the vote,” which he “usually skips.”79

At 7:50 p.m. on June 12—one day before the June 13 vote—Musk decided to

“front-run[] [Tesla’s] annual meeting,”80 posting “[b]oth Tesla shareholder

resolutions are currently passing by wide margins!” and including a chart purporting

to show that voting on the Ratification assured Musk a “Guaranteed win”81:

77 [Link]
know-8660682#:~:text=Bernstein%20analysts%20said%20that%20%22if,%2C%20but%
20likely%20more%20muted.%22.
78[Link]
opposed-by-calpers-ceo-cnbc-reports-2024-05-29/. Upon CalPERS announcing it would
oppose “ratification,” Musk groused that “CalPERS broke the deal” and “is breaking their
word.” Id.
79 [Link]
is-coming-down-to-the-wire-70dd96eb.
80 [Link]
resolutions-will-pass-by-wide-margins?embedded-checkout=true.
81 Elon Musk (@elonmusk), X (June 12, 2024 10:50pm),
[Link]

18
That night, Tesla filed proxy materials including Musk’s post and the

embedded chart.82 The financial media reported that “shareholders were in favor of

[Musk’s] compensation package”83 and “charts suggest[ed] the proposals had been

approved.”84

82Tesla Form 14A (June 12, 2024), [Link]

000110465924070994/tm2413800d27_defa14a.htm.
83 [Link]
84 [Link]
resolutions-will-pass-by-wide-margins?embedded-checkout=true (emphasis added). See
also, e.g., [Link]

19
On June 13, Tesla reported that stockholders approved the “Ratification”.85

ARGUMENT

I. CHANCERY RULES DO NOT PERMIT THE REQUESTED RELIEF

Defendants’ Motion to “revise” the Post-Trial Opinion is procedurally

improper. Neither rule invoked by Defendants—59(a) and 54(b)—permits the

requested relief. The Court should deny the Motion on that basis alone.

Defendants’ reliance on Rule 59(a) is plainly improper. Rule 59(a) only

allows the Court to “reopen…the trial record”86 to consider newly-discovered

evidence (i.e., evidence “in existence at the time of trial” but hidden), not new

evidence (i.e., evidence not “in existence at the time trial.”).87 Because this

“ratification” did not exist “at the time of trial,” a Rule 59(a) motion is improper.

.html#:~:text=About%2072%20percent%20of%20shares,a%20court%20to%20reinstate
%20it.&text=Tesla%20shareholders%20decisively%20backed%20a,the%20vote%20rele
ased%20on%20Friday (“Mr. Musk said the pay vote was set to be approved before the
official results were announced.”).
85 Dkt. 377.
86 See IDOB 13.
87 Lebanon Cnty. Emps.’ Ret. Fund v. Collis, 2023 WL 2582399, at *7 (Del. Ch. Mar. 21,
2023), rev’d on other grounds, 311 A.3d 773 (Del. 2023) (finding under Chancery and
Federal Rules “‘new’ as opposed to ‘newly discovered’ evidence” is inadmissible post-
trial); 11 WRIGHT & MILLER, Federal Practice and Procedure § 2857 (3d ed.) § 2808 (“[T]o
comply with Rule 59, the court must find that the newly discovered evidence itself, as well
as the facts that it supports, were in existence at the time of trial.” (emphasis added));
Bachtle v. Bachtle, 494 A.2d 1253, 1255 (Del. 1985) (“[T]o qualify as ‘newly discovered
evidence,’ it must have been ‘in existence and hidden at the time of judgment....’” (citation
omitted)).

20
Especially here, where the new “evidence” was manufactured—post-trial and

specifically to undermine a judgment adjudicating all claims—by the very party now

seeking to reopen the record. Those machinations plainly contradict Rule 59’s

fundamental purpose—to “prevent manifest injustice.”88 Entertaining such relief

here would create manifest injustice.

Defendants make no attempt to satisfy Rule 59(a)’s required showing that “the

introduction of additional evidence…will serve the interests of fairness and

substantial justice.”89 That determination involves, among other factors: (i) the

moving party’s ability to have introduced the evidence at trial; (ii) the elapsed time

between trial and the request to reopen the record; (iii) the need for judicial

efficiency; and (iv) prejudice to the opposing party.90 Defendants completely

ignore91—and cannot satisfy—those factors.92

88Zutrau v. Jansing, 2014 WL 6901461, at *2 (Del. Ch. Dec. 8, 2014), aff’d, 123 A.3d 938
(Del. 2015).
89Lola Cars Int’l Ltd. v. Krohn Racing LLC, 2010 WL 1818907, at *1 (Del. Ch. Apr. 23,
2010); see also IDOB 13 (citation omitted).
90 Lola Cars, 2010 WL 1818907, at *1.
91Defendants’ failure to satisfy the Rule 59(a) factors independently dooms their requested
relief. See Emerald Partners v. Berlin, 726 A.2d 1215, 1224 (Del. 1999).
92 Indeed, Defendants’ “ratification” arguments falsely suggest Rule 59(a) relief has
already been granted, the record reopened, and briefing on this Motion constitutes a new
trial on the papers. See IDOB, Arg. §§I-V. Even if the Court reopened the record to
consider this new “ratification” (which it should not), Plaintiff would be permitted
additional discovery and further trial proceedings to resolve the many contested facts. See,
e.g., Fitzgerald v. Cantor, 2000 WL 128851, at *2 (Del. Ch. Jan. 10, 2000) (noting further
trial proceedings are necessary to reconcile disputed evidence).

21
Regarding factor (i), nothing prevented Defendants from seeking

“ratification” before trial, which Plaintiff then could have subjected to discovery and

the Court could have considered with the other trial evidence. Defendants’ tactical

decision to wait until months after the Opinion was a “litigation strateg[y]” that did

not “pa[y] off,” and they “now must live with their strategic decisions.”93

Regarding factor (ii), Defendants cannot plausibly claim their Rule 59(a)

motion—filed over 19 months after trial—is timely.94

Regarding factors (iii) and (iv), permitting Rule 59(a) relief where Defendants

manufactured the evidence they wish to inject into the record would undermine

judicial efficiency, prejudice Plaintiff, establish perverse incentives, and set a

dangerous precedent.95

93 Vianix Del. LLC v. Nuance Commc’ns, Inc., 2011 WL 487588, at *11 (Del. Ch. Feb. 9,
2011); see also Manichaean Cap., LLC v. SourceHOV Holdings, Inc, 2020 WL 3097678,
at *3 (Del. Ch. June 11, 2020) (“Even where a party claims, post-trial, that it has discovered
‘practically conclusive evidence’ that would contradict a final judgment of this court, that
discovery will not entitle the party to relief under Rule 59 if the new evidence ‘concededly
could have been presented earlier had the moving party been [more] diligent.’” (citation
omitted)).
94See, e.g., Carlson v. Hallinan, 925 A.2d 506, 521 (Del. Ch. 2006), clarified on other
grounds, 2006 WL 1510759 (Del. Ch. May 22, 2006) (denying Rule 59 motion brought “a
year after the trial”); Daniel D. Rappa, Inc. v. Hanson, 209 A.2d 163, 166 (Del.
1965) (affirming refusal to reopen record when motion was made 17 months after hearing).
95 See, e.g., Fitzgerald, 2000 WL 128851, at *1 (denying Rule 59(a) relief “[a]fter
balancing…the unfair prejudice caused to plaintiff by [the] need for further development
of the record in order to meet defendants’ interpretation of the [new] evidence and the
necessary additional commitment of judicial resources”); Vianix, 2011 WL 487588, at *7

22
Indeed, Defendants’ scheme to “fix” the Court’s post-trial ruling severely

prejudices Plaintiff’s already-adjudicated claims. Plaintiff litigated this Action for

almost six-and-a-half years, achieving complete trial victory five-and-a-half months

ago. Defendants now seek to “vacate”96 that judgment through a second

“ratification” attempt, relying on an entirely new, self-serving record regarding

which Plaintiff has not been afforded even basic discovery.97 “Thus, Defendants’

motion creates the possibility of a mini-trial over the meaning of their proffered facts

over a year after the trial ended. Such a proceeding would waste judicial resources.

The Court already has presided over a lengthy trial of this case and reviewed

extensive pre- and post-trial briefing….As such, the Court will not countenance such

late, improper supplementation of the record.”98

Defendants’ meager citations fail. In Lola Cars, the Court permitted a

Rule 59(a) motion to reopen the trial record to consider evidence existing before—

but discovered after—trial. Moreover, the plaintiff had “a reasonable excuse for

(“[R]eopening the record at this late stage of the proceedings would disserve the interests
of judicial economy and cause undue prejudice to…the nonmoving party.”).
96 IDOB 13.
97See, e.g., id. 1 (declaring Committee “independent”), 15-16 (denying Musk controlled
Tesla or the “ratification”), 17 (declaring Committee process “robust” and stockholder vote
“fully informed”).
98Carlson, 925 A.2d at 521-22; see also Fitzgerald, 2000 WL 128851, at *1 (denying Rule
59 motion and refusing “to engage in a post-trial ‘mini-trial’”).

23
why the information could not be presented at trial….[T]he entire issue of

counterfeiting arose late in [an expedited] discovery process….”99 In In re

Mobilactive Media, LLC, the Court denied motions for reargument and to

supplement the record, holding evidence in existence five years before trial “would

not have changed the outcome of [the Court’s] prior decision.”100 Mobilactive does

not reject well-settled law that newly-discovered evidence is required to reopen a

trial record under Rule 59(a).

Defendants’ reliance on Rule 54(b) likewise fails, and even if applicable

would not permit Defendants to reopen the record.

Rule 54(b), titled “Judgment upon multiple claims,” permits a party to seek a

final judgment on fewer than all claims so that those claims can be directly

appealed.101 Thus, Rule 54(b) applies to decisions where an “order or other form of

decision…adjudicates fewer than all the claims or the rights and liabilities of fewer

99 2010 WL 1818907, at *3.

100 2013 WL 1900997, at *1, *3 (Del. Ch. May 8, 2013).
101See In re Tri-Star Pictures, Inc., Litig., 1989 WL 112740, at *1 (Del. Ch. Sept. 26, 1989)
(“[The Court] must find that: (1) the action involves multiple claims or parties, (2) at least
one claim or the rights and liabilities of at least one party has been finally decided,
and (3) that there is no just reason for delaying an appeal.”).

24
than all the parties”—i.e., a partial adjudication.102 The post-trial Opinion fully

adjudicated all merits claims.

Granting the Motion under Rule 54(b) would render its limitations

meaningless, inviting motions for any reason after full merits adjudication but before

a fee decision. It would also render Rule 59(e) and (f) superfluous. As in Modlin v.

Iselin, Defendants’ Motion “is a poorly disguised effort by new counsel to get a

‘second bite’ out of the litigation apple….The gambit is not well taken, and if

countenanced, would defeat the very purpose of Rule 54(b).”103

Moreover, even if, arguendo, the Motion were proper under Rule 54(b), there

is no “good reason” to grant it.104 Defendants seek to vacate the judgment with self-

serving evidence manufactured 19 months after trial to circumvent the

five-month-old Opinion. Here, “justice requires” the Court to exercise its discretion

to deny Defendants’ Motion.105 And even if the Court were to permit the Motion

102 See also Bell v. Kirby Lumber Corp., 413 A.2d 137, 149 (Del. 1980) (“Rule 54(b)
provides that any order adjudicating fewer than all the claims of all the parties in an action
is subject to revision at any time prior to the entry of judgment adjudicating all such
claims.”).
103 1986 WL 202, at *5 (Del. Ch. June 5, 1986).
104Totta v. CCSB Fin. Corp., 2022 WL 4087800, at *2 (Del. Ch. Sept. 7, 2022) (“The fact
that the court may grant Rule 54(b) relief…does not require it to do so.”); Modlin, 1986
WL 202, at *1 (same).
105Modlin, 1986 WL 202, at *1; see also Zirn v. VLI Corp., 1994 WL 548938, at *2
(Del. Ch. Sept. 23, 1994) (Court should not disturb its decisions “unless compelling reason
to do so appears.”); Siegman v. Columbia Pictures Ent., Inc., 1993 WL 10969, at *3 (Del.

25
under Rule 54(b), it would first need to reopen the record regarding this new

“ratification”—the only theoretical mechanism for that is Rule 59(a), which is

unavailable.

Defendants cite no case permitting a Rule 54(b) motion where the underlying

decision adjudicated all the action’s merits. None exists. In Southpaw, the Court

correctly noted that Rule 60(b) was inapplicable while the Court retained jurisdiction

to decide fees, then confirmed that under Rule 54(b), the Court will only revise “an

order…that does not dispose of all of the claims and the rights and liabilities of all

of the parties,” and even then, only for “good cause.”106 There, the Court had “not

[yet] decide[d] the validity of the Roma 2016 Long Term Incentive Plan (‘LTIP’)”

because defendants disclaimed the LTIP, which was an issue in the case from the

outset.107 Those same defendants then “relied on the validity of the LTIP” in a new

action—in this Court—following the Court’s decision.108 Acknowledging the

unfairness of defendants’ shifting positions, the Court vacated its judgment under

Ch. Jan. 15, 1993) (Court’s decision at “one stage of a case becomes a binding precedent
to be followed in successive stages” and “[a] judge should hesitate to undo his own work”)
(citations omitted).
106Southpaw Credit Opportunity Master Fund, L.P. v. Roma Restaurant Holdings, Inc.,
2017 WL 3701232, at *1 (Del. Ch. Aug. 22, 2017) (emphasis added).
107 Id.
108 Id.

26
Rule 54(b) and granted a new trial because the LTIP’s validity was an issue that the

Court’s order had not “disposed [of].”109

The “good cause” in Southpaw is inapplicable here, where the Court fully

adjudicated all the Action’s merits, and Defendants subsequently took self-

interested, post-decision actions to circumvent that decision.110, 111

* * *

Defendants lack a procedural basis under this Court’s Rules to inject

“ratification” into this record post-trial. The Court need go no further.

II. THE LAW OF THE CASE PRECLUDES RATIFICATION

The Individual Defendants’ Brief opens with a provocative question: whether

Delaware permits “fully informed and disinterested stockholders [to] collectively

109Id. The Southpaw Court also permitted the Rule 54(b) motion because “determining
the validity of the LTIP in this litigation…will conserve both the parties’ and the Court’s
resources.” Id. The opposite is true here.
110 Unlike here, Rule 54(b) was proper in Southpaw because the Court did not need to
reopen or supplement the record—the LTIP’s validity was part of the case from the outset.
Id. (allowing the parties to “stipulate to trial on a paper record regarding the validity of the
LTIP”).
111Any suggestion the Court could rely on “judicial[] notice[]” (IDOB 32-33) fails because
the Ratification’s underlying facts are disputed, see Lebanon, 311 A.3d 773, 797, and
Defendants would still need Rule 59(a) to reopen the record, which is inapplicable because
the Ratification is “new evidence” that did not exist at trial. See In re U.S. Robotics Corp.
S’holders Litig., 1999 WL 160154, at *2 (Del. Ch. Mar. 15, 1999) (refusing to reopen
judgment to take judicial notice of underlying facts that existed before trial); Fitzgerald,
2000 WL 128851, at *1 (same).

27
exercise their business judgment and ratify an outcome they believe to be in their

company’s best interests….”112

Defendants omit that six years ago, they posed that same question to this same

Court in this same Action.113 This Court answered the question.114 It is now the law

of this case, as the Opinion acknowledges.115 That doctrine—which Tesla endorses

in its Joinder116—“requires that issues already decided by the same court should be

adopted without relitigation, and ‘once a matter has been addressed in a procedurally

appropriate way…, it is generally held to be the law of that case and will not be

disturbed…unless compelling reason to do so appears.’”117

Plaintiff already raised this issue,118 yet Defendants ignore the doctrine, never

mentioning this Court’s prior ratification ruling.

112 IDOB 1.
113See, e.g. Defs.’ Opening Brief in Support of their Motion to Dismiss (“IDMTB”)
(Dkt. 10), 3 (lead argument: “Tesla’s disinterested stockholders approved the
[Grant]…[which] constituted a ratification of the [Grant].”).
114 Dkt. 32.
115 Op. 98 (“Defendants argued that the stockholder vote approving the Grant qualified as
a ratifying vote justifying business judgment deference….[The Court] rejected this
argument, concluding that a fully informed stockholder vote was insufficient to restore
business judgment deference in a conflicted-controller transaction like the Grant.”
(citations omitted)).
116Tesla, Inc.’s Joinder to Individual Defs.’ Motion to Revise Post-Trial Op. (“TOB”)
(Dkt. 397), 4.
117 Taylor v. Jones, 2006 WL 1510437, at *5 (Del. Ch. May 25, 2006) (citation omitted).
118 Dkt. 388, 3.

28
As Defendants ironically state, “[h]istory cannot be rewritten.”119 The

centerpiece of their dismissal motion was the very argument they now repackage—

Tesla stockholders ratified the Grant, triggering business judgment deference.120

Defendants’ principal authorities remain unchanged.121 Following full briefing and

argument,122 this Court held that ratification “does not justify business judgment

deference because the [Grant] benefits a conflicted controller,”123 and MFW

provides the roadmap for business judgment in such situations.124

Numerous reasons confirm the continued force of that holding.

First, the Court’s reasoning—that “the Award benefits a conflicted

controller”—still applies.125

119 IDOB 24.

120 TOB 8.
See, e.g., IDMTB & IDOB (quoting extensively from Kerbs v. Cal. E. Airways, 90 A.2d
121

652 (Del. 1952), Michelson v. Duncan, 407 A.2d 211 (Del. 1979), Lewis v. Vogelstein,
699 A.2d 327 (Del. Ch. 1997), and Corwin v. KKR Fin. Holdings, 125 A.3d 304
(Del. 2015)).
122 Dkts. 10, 12, 17, 27.
123 Dkt. 32, 25 (emphasis added).
124 Id. 30-32.
125See Taylor, 2006 WL 1510437, at *5 (“[T]he Court [previously] considered facts that
are essentially the same as those compelling the Court’s decision, now. This implicates
the ‘law of the case’ doctrine”). See also infra VII.B.1.

29
Second, the Court’s ratification ruling assumed a fully informed vote,126

rendering Defendants’ false claim that the recent vote was “one of the most well-

informed…in Delaware history”127 irrelevant.

Third, the Court premised its prior ruling on the inherent risk of controller

coercion,128 quoting the Supreme Court’s observation that such coercion “could

never be fully eliminated.”129 Defendants’ dismissal brief conceded control.130 This

Court found Musk was a controller.131

Fourth, Defendants pressed ratification at least through summary judgment.132

Yet in the Opinion, this Court declined to revisit its earlier ratification ruling, instead

126Dkt. 32, 22 n.89; see also Op. 98 (“Vice Chancellor [Slights] rejected this argument,
concluding that a fully informed stockholder vote was insufficient to restore business
judgment deference in a conflicted-controller transaction.”).
127 IDOB 1.
128 Dkt. 32, 27-28.
129Id. 27 (“[E]ven minority shareholders who have ratified a merger need procedural
protections beyond full disclosure of all material facts.”) (alterations omitted) (quoting
Kahn v. Lynch Commc’n Sys., Inc., 638 A.2d 1110, 1116 (Del. 1994)).
130 Id. 3 n.5.
131Op. 103-46; see also id. 112 (“Musk wielded the maximum influence that a manager
can wield over a company.”).
132 Op. 100 (“The remaining Defendants sought summary judgment on
November 19, 2021, advancing a ratification theory.”).

30
adhering to its prior holding that MFW—which Defendants could not meet—

determined the review standard.133

Importantly, the prior ratification ruling was rendered by a different jurist,

raising “additional considerations of courtesy and comity.”134 In that situation, the

law of the case has “greater force,”135 and overruling the prior judge is “strongly

disfavored.”136 The Supreme Court has explained that “the second judge to take

action ordinarily should not, or perhaps may not, do that which the first might with

perfect propriety do, or even that which the law would obligate him to do.”137

No exception applies here.138 This Court’s prior ratification ruling is

correct—Defendants do not argue otherwise, instead asserting circumstances

changed. The timing of the new vote is a distinction without a difference because

the Court (i) assumed a fully informed vote and (ii) found Musk is a controller who

133Op. 98; Emerald, 787 A.2d at 97 (“The Court of Chancery did not make a determination
that the burden had shifted, either before or during the course of the trial…, and that is now
the law of this case.”).
134 Frank G.W. v. Carol M.W., 457 A.2d 715, 719 (Del. 1983).
135 Columbia Pictures, 1993 WL 10969, at *3.
136New Castle Cnty. v. Pike Creek Recreational Servs., LLC, 82 A.3d 731, 744
(Del. Ch. 2013), aff’d, 105 A.3d 990 (Del. 2014).
137 Frank G.W., 457 A.2d at 719 (citation omitted).
138See Encite LLC v. Soni, 2011 WL 6225270, at *2 (Del. Ch. Dec. 13, 2011) (finding the
doctrine inapplicable only “where (1) the prior ruling was clearly wrong; (2) there has been
an important change of circumstances; or (3) equitable concerns render application of
the…doctrine inappropriate”).

31
(iii) benefited from the Grant. Defendants’ only theoretical path to business

judgment (MFW) has been categorically foreclosed.139 The last exception (equitable

concerns) strongly supports applying the doctrine.140

III. DEFENDANTS HAVE WAIVED RATIFICATION141

Defendants’ “ratification” argument fails due to waiver. Waiver requires:

“(1) that there is a requirement or condition capable of being waived, (2) that the

waiving party knows of that requirement or condition, and (3) that the waiving party

intends to waive that requirement or condition.”142 Plaintiff satisfies each element.

Regarding the first factor, in the six years since this Action’s filing—and

nearly five years since this Court rejected Defendants’ first “ratification” attempt—

Defendants could have sought a second “ratification.”143 By electing not to do so

139 Infra VII.A.

140 Supra Section I & infra Section V.
141 The Individual Defendants’ baseless claim that “ratification” is justified because
“Plaintiff himself sought [it] in his…Amended Complaint” (IDOB 40) contradicts Tesla’s
claim that “Plaintiff only seeks rescission” and had “‘abandoned’ all other remedies before
trial.” TOB 8.
142Amirsaleh v. Bd. of Trade of City of N.Y., Inc., 27 A.3d 522, 530 (Del. 2011), supports
the failure of Defendants’ Ratification for reasons analogous to those under the laches
doctrine. Defendants “unreasonably delayed” asserting an affirmative defense “with
knowledge thereof,” and permitting “ratification” would “prejudice [] the [Plaintiff].”
Levey v. Brownstone Asset Mgmt., L.P., 76 A.3d 764, 769 (Del. 2013).
143In Andra v. Blount, 772 A.2d 183, 190 (Del. Ch. 2000), the Court dismissed a plaintiff-
stockholder’s disclosure claims because she lacked standing, having opted for appraisal
instead of tendering her shares, which the Court viewed as a missed opportunity “to serve
her fellow stockholders.” Defendants now seek “ratification” of a conflicted controller
transaction years after it was voted on.

32
until after post-trial adjudication, Defendants waived that affirmative defense.144

Prior to their April 17, 2024 letter (“April 17 Letter”), Defendants did not raise this

post-judgment “ratification” theory.145 Defendants fail to cite a single case where

“post[-trial, let alone post-judgment] ratification cured those defects, reanimating

that defense.”146

Neither Michelson v. Duncan147 nor Kerbs v. California Eastern Airways148

supports the persistence of an affirmative “ratification” defense post-trial. Neither

case involved defendants who, like Defendants here, sought “ratification” to vacate

a court’s post-trial decision and findings of loyalty breaches.149 Furthermore,

neither case dealt with a conflicted-controller transaction subject to entire fairness,

where a fully informed, uncoerced stockholder vote merely shifts the burden at

trial.150 That distinction is fatal.

144 See, e.g., Emerald, 726 A.2d at 1224.

145 See Dkt. 306.
146 IDOB 41.
147 407 A.2d 211, 222 (Del. Ch. Oct. 2, 1979).
148 90 A.2d 652, 659 (Del. 1952).
149In Michelson, ratification was sought in response to the initiation of that suit and raised
during summary judgment. 407 A.2d at 214. In Kerbs, ratification of the option plan
preceded the action’s commencement and ratification of the profit-sharing plan was
submitted to stockholders “pursuant to an order of the Chancellor” after the injunction
hearing but before a decision had been issued or an appeal had been filed. 90 A.2d at 659.
Kahn v. M & F Worldwide Corp., 88 A.3d 635, 645-46 (Del. 2014) (“A controller that
150

employs and/or establishes only one of these dual procedural protections [i.e., “a fully

33
Moreover, the second and third factors—knowing the 2018 vote had no legal

effect yet delaying action—are also satisfied. Defendants’ claim that ratification

was not waived because it was unavailable is incorrect.151 Defendants were on

notice since the Court’s opinion denying the motion to dismiss that a stockholder

vote, even if fully informed and uncoerced (which this vote was not), would not

“alone” ratify their actions.152

Defendants’ citations support waiver. In Tuckman, the Court denied a

dismissal motion as “not timely,” finding the “failure to assert the defenses promptly

resulted in a waiver.”153 In Enstar, objections to a stockholder information form

were waived by the company that already knew the underlying facts at the form’s

inception.154 The same principle applies here. Defendants waited years after their

first ratification attempt’s rejection, years after trial, and months after post-trial

informed, uncoerced majority of the minority stockholder[] vote[]”] would continue to

receive burden-shifting [under]…entire fairness….”); see In re Pure Res., Inc. S’holders
Litig., 808 A.2d 421, 441 (Del. Ch. 2002) (because controllers “have the ability to take
retributive action in the wake of rejection by…minority shareholders…the usual cleansing
devices that obviate fairness review of interested transactions cannot be trusted.”);
see also New Proxy.
151 IDOB 42.
152Dkt. 32, 8 (“Because the conflicted controller, as the ‘800-pound gorilla,’ is able to exert
coercive influence over the board and unaffiliated stockholders…stockholder approval of
the conflicted controller transaction, alone, will not justify business judgment deference.”
(emphasis added)).
153 Tuckman v. Aerosonic Corp., 394 A.2d 226, 233 (Del. Ch. 1978); IDOB 42.
In the Matter of the Appraisal of Enstar Corp., 513 A.2d 206, 209-10 (Del. Ch.1986);
154

IDOB 42.

34
adjudication to resurrect the defense. And like in Enstar, Defendants’ “ratification”

defense is “based on facts which it did…know and could…have learned with

reasonable diligence” prior to trial.155

IV. THE GRANT CANNOT BE RATIFIED UNDER SECTION 204

Because the Court found loyalty breaches regarding the unfair Grant, it cannot

be ratified through 8 Del. C. § 204 (“Section 204”).

Section 204 can only ratify corporate acts that are defective “solely as a result

of a failure of authorization.”156 That failure is distinct from any equitable scrutiny

of a defective corporate act. The General Assembly confirmed: “Ratification of a

defective corporate act under § 204 is designed to remedy the technical validity of

the act or transaction; it is not intended to modify the fiduciary duties applicable to

either the approval or effectuation of a defective corporate act or transaction or any

ratification of such act or transaction.”157 As distilled by Tesla’s counsel, Richards,

Layton & Finger: “An act that is properly ratified under section 204…would not be

insulated from an equitable challenge.”158

155 Enstar, 513 A.2d at 210.

156 8 Del. C. § 204(a).
157 H.B. 127 syn., 147th Gen. Assem. (2013) (“Synopsis”).
158 C. Stephen Bigler & John Mark Zeberkiewicz, Restoring Equity: Delaware’s
Legislative Cure for Defects in Stock Issuances and Other Corporate Acts,
69 BUS. LAWYER 393, 414 (2014); see John W. Noble, Fixing Lawyers’ Mistakes: The
Court’s Role in Administering Delaware’s Corporate Statute, 18 U. PA. J. BUS. L. 293,

35
Applied Energetics, Inc. v. Farley159 forecloses any possibility the Grant could

be ratified through Section 204. There, the Court addressed company allegations

that its lone director “could not have validly caused the Company to agree to pay

him $150,000.”160 The Court found ratification could not enforce the contract

because ratification would “only remove[] the taint of voidness or voidability that

stems from the ‘failure of authorization.’ Defective corporate acts, even if ratified

or validated, ‘are subject to traditional fiduciary and equitable review.”161 The Court

held: “[A]ssuming [the director] prevails on his claim to validate his authorization

of his salary and proves that the self-interested compensation was entirely fair, then

he can pursue his claim for non-payment.”162

Defendants grossly distort this black-letter case law and legislative history.

Citing In re Numoda Corporation, Defendants state that “failure of authorization” is

“read broadly,” but Numoda actually states that term is “read broadly to allow the

Court…to address any technical defect that would compromise the validity of a

corporate action.”163 Citing Harrison Metal Capital III, L.P. v. Mathé, Defendants

303 (2016) (“[T]he §§ 204-205 processes do not eliminate or immunize any breach of
fiduciary duty that may accompany the defective corporate act.”).
159 239 A.3d 409, 449 (Del. Ch. 2020).
160 Id.
161 Id. (citation omitted) (quoting Synopsis).
162 Id. (emphasis added).
163 IDOB 48-49; 128 A.3d 991 (Table) (emphasis added).

36
argue “Section 204 applies, and has been applied, to cure defects arising from

equitable challenges.”164 But there, the Court noted plaintiff’s “Amended Complaint

abandons the Section 205 claim and instead asserts derivative claims against Mathé

and Vogel for breaches of their fiduciary duties,” never mentioning Section 204.165

In other words, Mathé shows plaintiff recognized fiduciary breaches could not be

addressed by Section 205 and thus amended its complaint—the opposite of what

Defendants claim.

Similarly, Defendants cite the General Assembly Synopsis as stating “ratified

acts ‘are subject to traditional fiduciary duty review’ under the business judgment

standard of review,” but neither “business judgment” nor “standard of review”

appears anywhere in the synopsis.166 Defendants also claim “the General Assembly

did not preclude Section 204 ratification from modifying ‘the level of judicial

scrutiny that will apply’ (as it did in the same Bill with regarding Section 251(h)

amendments).” False. The Synopsis states: “Defective corporate acts, even if

164 IDOB 30.

165Id.; 2024 WL 1299579, at *6 (Del. Ch. Mar. 27, 2024); see also IDOB 32 (citing
defendant’s opening brief in Mellado v. McDowell, 2023 WL 621134431, at 36 (Del. Ch.
Sept. 20, 2023) as evidence “alleged self-dealing was cured when ‘equity plan’s adoption
was ratified under 8 Del. C. § 204” where the briefing actually states “Procedural
Deficiencies Were Cured By Ratification”).
166 IDOB 32.

37
ratified under this section, are subject to traditional fiduciary and equitable

review.”167 The Grant cannot be ratified under Section 204.

V. RATIFICATION CANNOT OVERRIDE A POST-TRIAL BREACH

OF LOYALTY JUDGMENT

A. A Post-Trial Stockholder Vote Cannot Supplant The Court

This Court has rendered judgment: Defendants breached their loyalty duties.

That is not a matter for stockholder say—either pursuant to statute or common law.

Musk may be beloved on X, but vox populi is no license for stockholders to overrule

or affirm trial court judgments.168 That is the Supreme Court’s role.

And a system delegating review of trial court judgments to stockholders is

unlikely to drive a coherent or sensible body of law. “The people” are (generally)

not law-trained and certainly not specialists in nuanced Delaware law. A Delaware

legal regime that cedes the courts’ role is unsustainable.

167 Synopsis (emphasis added).

168In re Wheelabrator Techs., Inc. S’holders Litig., 663 A.2d 1194, 1203-04 (Del. Ch.
1995) (“[N]o Supreme Court case has held that shareholder ratification operates
automatically to extinguish a…loyalty claim.”); Lewis v. Austen, 1999 WL 378125, at *6
n.24 (Del. Ch. June 2, 1999) (“Ratification does not…extinguish a…loyalty claim.”); In re
Santa Fe Pac. Corp. S’holder Litig., 1995 WL 334258, at *8 (Del. Ch. May 31, 1995)
(“[A]n informed shareholder vote does not operate to extinguish a claim for breach
of…loyalty.”).

38
Not even Tesla could tell stockholders the “ratification” vote would be

effective.169 To argue that a vote designed to “fix” this Court’s opinion (Denholm’s

characterization)—and with admittedly uncertain legal effect—can displace the

Court’s role, which has been part of our social and legal structure since the earliest

days of our Republic, distorts Delaware’s franchise cases.

Delaware corporate law is not an Athenian democracy. It is a regime that

carefully articulates when stockholders must vote and both protects and gives those

votes effect. But post-trial votes, Twitter polls or letter writing campaigns do not

have legal effect simply because they come from stockholders. Defendants have

recourse. The doors of the Supreme Court stand open to their challenges. But such

challenges are the province of the Supreme Court; post-trial votes cannot overturn

carefully crafted trial opinions.

B. No Delaware Court Has Ever Held—or Should Hold—that a

Stockholder Vote Trumps a Post-Trial Judgment

Ten law firms170 collectively employing significantly more than 5,000 lawyers

and (presumably) unlimited funding failed to identify a single case—anywhere—

allowing “ratification” to overturn a fully litigated post-trial judgment of fiduciary

breaches. Their closest attempt—Kerbs—allowed ratification after an injunction

169See New Proxy 95/296 (stating Committee could not “predict with certainty how a
stockholder vote to ratify the [Grant] would be treated under Delaware law”).
170 Five for Tesla; three for the Individual Defendants; and two for the Committee.

39
proceeding, and makes clear that even such ratification is not necessarily binding

but instead allows the Court significant flexibility regarding whether to give the vote

any credence.

For starters, Defendants’ choice of terms (ex post and ex ante) is unhelpful.

Ex post ratification describes a vote after-the-fact, which necessarily describes all

ratification.171 Defendants’ use of that term obscures the key distinction here: before

or after a Court’s trial judgment. Defendants blur the distinction precisely because

it matters.

Ratification is unavailable for corporate actions contrary to public policy

(i.e., ultra vires, fraud, illegality)—whether before or after judgment.172 Likewise,

ratification—unless unanimous—cannot cure a waste claim.173 Ratification only

cures a “voidable defect.”174 The reason no case has ever held ratification effective

in this context of adjudicated fiduciary breach is because an adjudicated breach is

not a “voidable defect” or “voidable act” of directors—it is an adjudicated wrong.

171 Calma v. Templeton, 114 A.3d 563, 579 (Del. Ch. 2015) (“The principle of
‘ratification’…contemplates the ex post conferring upon or confirming of the legal
authority of an agent in circumstances in which the agent had no authority or arguably had
no authority.” (citation omitted)).
172 See Kerbs, 90 A.2d at 655; Keenan v. Eshleman, 2 A.2d 904, 909 (Del. 1938);
Solomon v. Armstrong, 747 A.2d 1098, 1114 (Del. Ch. 1999). As explained infra at V.B.3,
the ratification of loyalty breaches is precluded by Delaware public policy.
173 Kerbs, 90 A.2d at 656.
174 Id. at 655.

40
An adjudicated breach is worse than mere allegations of illegality or other

misconduct: it has earned judicial condemnation in the crucible of a full merits trial.

It follows that an adjudicated fiduciary breach—a predicate to obtaining an order

barring directors from serving as directors175—is exactly the type of conduct that

should not be subject to ratification.

1. The Court Can Disregard Ratification of a Defectively

Designed Plan: Kerbs

Remarkably, Defendants rely on Kerbs176 but avoid the Supreme Court’s

directly on-point—but inconvenient—holding.

In Kerbs, a stockholder sought to enjoin a stock option plan and separate

director-adopted profit-sharing plan.177 The option plan was voted on and approved,

and before the trial court’s decision on the injunction (but following the injunction

hearing), the board sought stockholder approval of the profit-sharing plan.178

Chancellor Seitz denied injunction of the option plan, in part because

stockholders ratified it.179 The Court separately analyzed—and declined to enjoin—

the profit-sharing plan.

175 See 8 Del. C. §225(c).

176 90 A.2d 652 & 94 A.2d 217 (Del. Ch. 1953) (on remand); IDOB 25, 41.
177 83 A.2d 473 (Del. Ch. 1951) (Seitz, C).
178 94 A.2d at 218.
179 83 A.2d at 476.

41
On appeal, the Supreme Court first addressed the option plan. Despite finding

that the plan was ratified by stockholders, the Supreme Court reviewed the plan’s

substance and—notwithstanding ratification—voided the plan. The Court based its

ruling on a finding that the option plan was not structured to assure that the company

received appropriate value for issuing the options.180 Thus, the Supreme Court

voided the plan even though stockholders had “ratified” the terms deemed

defective.181

Having voided the stockholder-ratified option plan, the Court turned to the

profit-sharing plan. Noting that stockholders had ratified that plan too, the Supreme

Court remanded to determine whether the ratification was effective.182 On remand,

this Court determined it was.183

Thus, the option plan approved by the lower court and ratified by stockholders

was voided on appeal; only the profit-sharing plan was upheld. Startlingly,

Defendants rely on Kerbs’s profit-sharing plan holding but omit its other holding—

i.e., that even a properly ratified option plan can be voided.

18090 A.2d at 656 (“We think that the stock option plan as adopted by the directors and as
ratified by the majority of the stock, is deficient because it is not reasonably calculated to
insure [sic] that the defendant will receive the contemplated benefits.” (emphasis added)).
181 Id.
182 90 A. 2d at 660.
183 94 A.2d at 217.

42
Fairly read, Kerbs teaches that even where ratification might otherwise

apply—i.e., before post-trial findings of fiduciary breaches—ratification’s reach is

limited. A plan not properly designed to meet its objective is subject to rescission,

regardless of ratification.

2. Ratification, even if Applicable, is not Absolute

In addition to barring ratification on equitable grounds (Kerbs), Delaware has

always recognized ratification carve-outs for breaches of the fundamental premise

of stockholder investment (ultra vires conduct or waste), or a “bad act” (fraud or

illegality).184

Adjudicated loyalty breaches, as here, are also “bad act[s]”—malum

prohibitum—recognized as torts.185 Directors have fiduciary obligations to

stockholders derived from—but non-identical to—the duties trustees owe their

beneficiaries,186 and Tesla stockholders were entitled to rely on their directors’ good

faith, diligence, and independence. Breach of that trust undermines the contract

between managers and those whose assets they manage. It exceeds by far the

culpability of an ultra vires act, for example, which may be done negligently or

without knowledge that it was beyond the corporation’s power. Here, the Board

184 See supra n.172.

185 See Houseman v. Sagerman, 2015 WL 7307323, at *8 (Del. Ch. Nov. 19, 2015).
186 See In re USACafes, L.P. Litig., 600 A.2d 43, 48 (Del. Ch. 1991).

43
clearly acted with knowledge. Consider, for example, Tom Brown’s trial testimony

that the Compensation Committee was “informed…what a benchmarking study

would result in”187 and thus avoided one.

In short, the commonly accepted ratification carve-outs either already

encompass adjudicated breaches under “illegality” or should be so read.

Even assuming (incorrectly) an uncoerced and fully informed stockholder

majority approved “ratification” here, that should not change the outcome. For

example, consider waste, a recognized carve-out only ratified by the unanimous

stockholder choice to forfeit corporate assets for no consideration. Doctrinally, there

is no reason adjudicated loyalty breaches should not likewise require unanimous

stockholder approval.

3. Ratification of a Loyalty Breach is Irreconcilable with

8 Del. C. § 102(b)(7)(i) and Delaware Public Policy

The Ratification also fails because it violates Delaware public policy.

Ratification here is irreconcilable with 8 Del. C. § 102(b)(7)(i), which expressly

prohibits the retroactive elimination or limitation of a director’s or officer’s loyalty

duty. That prohibition is “a mandatory feature of Delaware corporation law,”188

187 Trial Tr. 1478:18-20.

188 CCSB Fin. Corp. v. Totta, 302 A.3d 387, 402 n.72 (Del. 2023) (emphasis added).

44
resting “upon a broader foundation of wise public policy.”189 The Ratification,

therefore, is precluded.

Section 102(b)(7)(i) provides: “A provision eliminating or limiting the

personal liability of a director or officer to the corporation or its stockholders for

monetary damages for breach of fiduciary duty…shall not eliminate or limit the[ir]

liability…for any [loyalty] breach….” Moreover, Section 102(b)(7) states: “No such

provision shall eliminate or limit the liability of a director or officer for any act or

omission occurring prior to the date when such provision becomes effective.”190 In

short, Delaware law prohibits charters from retroactively cleansing—i.e.,

ratifying—loyalty breaches. That prohibition reflects Delaware’s public policy.191

If Musk, his beholden directors, and fans wanted to eliminate, limit, waive, or

ratify loyalty breaches, they could have organized Tesla as an LLC or LP.192 They

chose a corporation, and should not be permitted to undercut Delaware corporate

law to satisfy Musk’s whims.

189 Id.
190 Emphasis added.
191Totta, 302 A.3d at 401 (“Exculpation is…inconsistent with the public policy of this
State to hold fiduciaries accountable for breaches of the duty of loyalty.”).
192 Manti Holdings, LLC v. Authenti Acquisition Co., 261 A.3d 1199, 1222 (Del. 2021)
(“It is important to preserve the fundamental characteristics of the corporate form. Parties
wishing to deviate from those characteristics can choose to form an alternative entity”); see
also Totta, 302 A.3d at 402 (same).

45
Defendants propose radical new corporate law that would make it easier to

“fix” a fully adjudicated trial loss than avoid trial by complying with MFW ab initio.

That irony should not be lost on the Court, especially since both this Court and the

Supreme Court called out many of these same Defendants in SolarCity for

eschewing MFW’s protections.193

* * *

Defendants have manufactured an unprecedented parody of ratification.

Notwithstanding the stridency of their arguments—or their attempts to invoke the

stockholder franchise—ratification has no place following a tort judgment, and if

permitted, would turn Delaware law on its head. The Court should hold that the

Ratification had no legal effect as a matter of law.

193See In re Tesla Motors, Inc, S’holder Litig., 2022 WL 1237185, at *28 (Del. Ch. Apr.
27, 2022); In re Tesla Motors, Inc. S’holder Litig., 298 A.3d 667, 708-09 (Del. 2023).
Defendants argue the Ratification process was itself MFW-compliant. It was not, and
cannot “fix” the Grant’s adjudicated process failures, including because “ab initio” cannot
mean “six years after the fact.”

46
VI. EVEN IF, ARGUENDO, RATIFICATION COULD HAVE ANY
LEGAL EFFECT, IMPROPER APPROVAL, COERCION,
ILLEGALITY, AND MATERIAL DISCLOSURE FAILURES
VITIATED THIS VOTE

As Defendants acknowledge,194 a stockholder vote only has legal effect if

valid, uncoerced, and fully informed. The Ratification was none of those.

A. The Ratification Is Invalid Because It Was Not Validly Approved

Defendants acknowledge Section 204 requires proper board approval of a

ratification vote before submission to stockholders.195 Board approval is invalid if

“at least half of the directors who approved the transaction were not disinterested or

independent.”196 The Court found Denholm, Ehrenpreis, and Murdoch—i.e., half of

the directors who approved the Ratification—conflicted regarding the very Grant

they purported to ratify.197 Thus, as with the Grant’s initial approval, the Board’s

“ratification” approval is invalid as a matter of law (and the law of this case).198

Those undisputed facts alone preclude statutory ratification.

194 IDOB 2, 15, 21, 22, 43.

195 Id. 31; see also New Proxy 59/296; 8 Del. C. § 204(b)(1).
196See, e.g., Salladay v. Lev, 2020 WL 954032, at *8 (Del. Ch. Feb. 27, 2020); In re KKR
Fin. Holdings LLC S’holder Litig., 101 A.3d 980, 990 (Del. Ch. 2014).
197Op. 112, 125-127. As discussed supra at SOF II.D, the remaining three Ratification
directors—Wilson-Thompson, Gebbia, and Straubel—also lacked independence from
Musk.
198Op. 104 (“[T]he factual findings that render Musk a controller…support a finding that
the majority of the Board lacked independence.”).

47
Board conflicts also sink Defendants’ primary common-law ratification

argument—i.e., ratification succeeds because the Ratification itself was not a

conflicted transaction. That ignores (inter alia) the Court’s post-trial ruling

establishing that half the Ratification Board was conflicted as to the Grant. Thus,

the Ratification is a conflicted transaction, subject to entire fairness and invalid.199

B. “Ratification” Is Invalid Because the Vote Was Coerced

“[A] stockholder vote may be invalidated ‘by a showing that the structure or

circumstances of the vote were impermissibly coercive.’”200 “The court will

find…coercion where stockholders are induced to vote ‘in favor of the proposed

transaction for some reason other than the economic merits….’”201 For example, a

vote may be “fatally flawed,” as here, due to a controller’s coercive threats.202

Coercion also exists “where a vote may be said to be in avoidance of…the

transaction the fiduciaries have created, rather than a free choice to accept or reject

the proposition voted on.”203

199 Salladay, 2020 WL 954032, at *8; KKR, 101 A.3d at 990.

200 In re Saba Software, Inc. S’holder Litig., 2017 WL 1201108, at *14
(Del. Ch. Mar. 31, 2017) (quoting Williams v. Geier, 671 A.2d 1368, 1382 (Del. 1996)).
201 Id.
202 Lacos Land Co. v. Arden Grp., Inc., 517 A.2d 271, 278-79 (Del. Ch. 1986).
203Sciabacucchi v. Liberty Broadband Corp., 2017 WL 2352152, at *2 (Del. Ch. May 31,
2017). See also, e.g., id. *21 (“[T]he board must have structured the vote in a way that
gives stockholders the ‘free choice between maintaining their current status [or] taking
advantage of the new status offered by’ the transaction.” (citation omitted)).

48
Here, the Ratification was coerced in two ways, each fatal.

1. Musk’s Explicit Threats

After selling stockholders on Tesla’s future as an AI and robotics (rather than

automotive) company204—and taking steps to ensure that pivot205—Musk openly

threatened to divert AI and robotics opportunities away from Tesla unless given 25%

of the Company.206 After the Court rescinded Musk’s Grant207—and as Tesla’s

performance tanked208—Musk doubled-down on AI and robotics as Tesla’s future in

Tesla’s April 2024 earnings call.209

In a May 18 X post, Musk reaffirmed his threat to divert AI and robotics and

directly connected that threat to the Ratification.210 The filing of that threat as proxy

materials ensured public awareness of the renewed threat.211

Any doubt regarding Musk’s willingness to execute on his threats was

eliminated by revelations that: (i) Musk diverted $500M worth of scarce Nvidia AI

204 Supra, SOF II.A.

205 Id.
206 Supra, SOF II.B.
207 Supra, SOF II.C.
208 Supra, SOF II.G.
209 Id.
210 Supra, SOF II.H.
211 Id.

49
processors from Tesla to X and xAI, 212 and (ii) Musk’s xAI poached at least four

Tesla AI/robotics engineers within a year.213 As the Ratification vote approached,

the press repeatedly reported that rejecting the Ratification would cause Musk to

execute his threats to divert critical corporate opportunities from Tesla.214

These circumstances rendered the Ratification vote coercive—and thus

invalid—by making it impossible for stockholders “to exercise their franchise free

of undue external pressure created by [Musk] that distract[ed] them from the merits

of the decision under consideration,”215 and “forc[ing] [stockholders] into a choice

between a new position and a compromised position for reasons other than those

related to the economic merits of the decision.”216 Indeed, these circumstances echo

the Court’s rulings regarding Musk’s retributive conduct toward a stockholder that

dared to oppose the Grant,217 and Tesla’s recent retributive conduct against Professor

Elson.

212 Supra, SOF II.K.

213 [Link]
interest/.
214 See supra at SOF II.K.
215 Saba, 2017 WL 1201108, at *15.
216 Gradient OC Master, Ltd. v. NBC Univ., Inc., 930 A.2d 104, 119 (Del. Ch. 2007)
(citation and internal quotation marks omitted); see also, e.g., In re Dell Techs. Inc. Class
V S’holders Litig., 2020 WL 3096748, at *32 (Del. Ch. June 11, 2020) (coercion exists
when stockholders approve a transaction “for reasons other than the merits”).
217 Op. 88.

50
Defendants claim Musk’s threat “cannot be coercive” because the first such

threat pre-dated the Opinion and the Ratification proposal.218 But that initial threat

persisted until the Ratification vote, as widely reported and discussed by the

market.219 Further, Defendants ignore: (i) when asked during Tesla’s April 23

earnings call how he could obtain his demanded 25% voting control, Musk expressly

identified the Ratification;220 (ii) Tesla filed that Q&A as additional proxy materials

for the Ratification;221 (iii) Musk’s May 18 X post reaffirmed the initial threat in

direct connection to the Ratification vote;222 (iv) Tesla filed that post as additional

proxy materials for the Ratification vote;223 and (v) the market—including

stockholders—plainly understood that inextricable connection.224

Defendants’ argument that Musk’s threats “cannot be coercive” because

“Musk’s ownership w[ould] still fall far short of the 25% threshold”225 upon the

218 IDOB 38.

219 See supra at SOF II.H, K.
[Link]
220

d20_defa14a.htm.
221 Id.
222 Elon Musk (@elonmusk), X (May 18, 2024 7:14pm), [Link]
Teslaconomics/status/1791970668466315708.
[Link]
223

d9_defa14a.htm.
224 See supra SOF II.H, K.
225 IDOB 38.

51
Ratification fails for the same reasons. Additionally, the “far short” assertion ignores

(i) Glass Lewis’s calculation that “ratification” would dramatically increase Musk’s

ownership from 12.9% to 22.4%226 and (ii) that Musk can bridge the gap via stock

buybacks (as he expressly stated)227 or the new going-forward compensation plan

Musk deferred while awaiting “a decision in my Delaware compensation case.”228

2. The Threat of a $25B+ Financial Consequence

As detailed supra, the Board warned stockholders that failing to ratify the

Grant would subject them to a new plan that “would potentially result in an

accounting charge in excess of $25 billion.”229 Even using the conservative $25B

number, the charge would eliminate Tesla’s net income for the prior two years.230

Juxtaposed against that potential financial calamity, the proxy materials

assured stockholders: “Ratification…would avoid any new compensation

expense….”231 And despite extensive disclaimers expressing uncertainty regarding

Glass Lewis May 25, 2024 Proxy Paper, 31. Tesla disclosed the post-“ratification”
226

number as 20.5% (id.), which still would not leave Musk “far short” of 25%.
[Link]
227

d20_defa14a.htm
228 Elon Musk (@elonmusk), X (Jan. 15, 2024 6:16pm), [Link]
status/1747035106257023362.
229 Supra, SOF II.E.
230Tesla Form 10-K (Jan. 26, 2024), 50 (reflecting 2023 and 2022 net income of ~$14.9B
and $12.6B, respectively).
231 New Proxy E-5.

52
the Ratification’s potential legal effect232 and the sole Committee member’s

independence,233 the New Proxy never suggested any doubt that “ratification” would

spare stockholders the $25B+ accounting charge (and would not trigger any new

accounting charge).234 Indeed, Denholm—whose “significant…accounting

expertise” Tesla touts in the New Proxy235—subsequently reaffirmed that

“ratification saves stockholders from a new charge for a new compensation plan.”236

Thus, Tesla stockholders were deprived of “a free choice to accept or reject

the proposition voted on,” and their “vote may be said to be in avoidance of…the

transaction the fiduciaries have created”237—i.e., a “new compensation plan…of a

similar magnitude”238 and “an accounting charge in excess of $25 billion.”239 Those

232 Id. 99/296.

233 Id.
234By contrast, the New Proxy cautions that attempting “Ratification may result in further
legal expenses, delay and resource consumption….” Id.
235 Id. 21/296.
236 [Link]
4ee6b38e.
237 Sciabacucchi, 2017 WL 2352152, at *2. See also supra n.203 (quoting id. at *21).
238 New Proxy 98/296.
239Id. (emphasis added). See also id. 100/296 (“[I]f Tesla were to issue new stock option
awards to purchase approximately 303.96 million shares of common stock…the
accounting implication would be an incremental compensation expense in excess of
$25[B]….”).

53
coercive circumstances improperly “forced [stockholders] into a choice between a

new position and a compromised position,”240 invalidating the “ratification” vote.

Defendants do not—and cannot—dispute that Tesla’s Board threatened

stockholders with the $25B+ charge against earnings unless they approved

“ratification.”241 Instead, Defendants claim, absent “ratification”, “even Plaintiff

concedes [it] would be appropriate” to provide Musk a “comparable compensation

plan” to the Grant.242 Wrong. No rational person could assume any replacement

plan awarded through a process consistent with the Court’s Opinion would remotely

approach the Grant’s “unfair price.”243

3. Defendants’ Remaining Coercion Arguments Fail

Defendants cite Dell for the proposition that “if stockholders can reject the

transaction and maintain the status quo, then the transaction is not coercive,”244 and

claim Tesla stockholders had the “clear alternative[]” of “maintain[ing] the status

240Gradient, 930 A.2d at 119 (citation and quotations omitted); see also Dell, 2020 WL
3096748, at *32.
241IDOB 39 (citing Plaintiff’s Reply in Further Support of Fee Application (Dkt. 387), 49)
(“The ratification was also coerced because Tesla’s directors were threatening stockholders
with a $25[B] charge against earnings if they vote against ratification.” (internal quotations
omitted)).
242 IDOB 39.
243 Op. 7.
244 IDOB 24-25 (citing Dell, 2020 WL 3096748, at *25).

54
quo set by the Court’s decision ordering rescission of the [Grant].”245 False.

Stockholders knew rejecting “ratification” would: (i) cause Musk to deprive Tesla

of vital corporate opportunities, and (ii) subject stockholders to a calamitous $25B+

accounting charge. Each consequence independently precluded an acceptable status

quo.

Despite acknowledging Delaware courts’ “concern[s] about inherent coercion

from majority stockholders,” Defendants declare “this post-trial hindsight

ratification is fundamentally different: inherent coercion concerns are mooted and

the stockholders hold all the power.”246 That baseless declaration is irreconcilable

with the coercion Musk actually exerted here. Recognizing this, Defendants urge

the Court to ignore what matters—i.e., the actual coercion existing as of the

Ratification vote—and instead find that “[t]he retroactive nature of the

ratification…precludes inherent coercion [because] Musk cannot take any

retributive action over the relevant time period because the period passed….”247

Respectfully, Defendants’ suggestion that the Court’s coercion analysis should

ignore the circumstances existing as of the vote—and instead exclusively focus on a

time period that ended years ago—is frivolous.

245 Id. 25.

246 Id. 24.
247 Id. (emphasis added).

55
Finally, Defendants proclaim “there can be no coercion” in “ratifying” the

Grant because Musk already “performed his end of the bargain,”248 and thus is

fundamentally entitled to the Grant. That assertion (i) rests on the false premise that

the purported “bargain” (i.e., Grant) was fair, defying the Court’s extensive post-

trial findings, including that the Grant was unnecessary; and (ii) ignores that

Defendants “made no effort to prove causation” at trial.249

C. “Ratification” Is Invalid Because It Was Not Fully Informed

The New Proxy contained myriad material disclosure failures, and it is

axiomatic that an uninformed vote cannot ratify defective corporate acts (let alone

fiduciary breaches).250

First, the New Proxy repeatedly described the single-member Committee as

independent.251 In reality, Wilson-Thompson “has realized a pre-tax total of

approximately $62[M] from the exercise of [Tesla] equity awards.”252 Her Tesla

shares received through grants were worth ~$150M upon her Committee

248 Id. 39.

249 Op. 7.
250 Gantler v. Stephens, 965 A.2d 695, 714 (Del. 2009).
251See, e.g., New Proxy 4/296 (describing “analysis by an independent Special
Committee…comprised of…Wilson-Thompson”), 26/296, 101/296.
252 Id. 247/296, E-28.

56
appointment, which she admits “is a meaningful portion of her net worth.”253 The

New Proxy also failed to disclose that Wilson-Thompson adopted a Rule 10b-5

trading plan to sell 36% of her shares (worth ~$56M) five days before her Committee

appointment.254

Delaware decisions have found significantly lower compensation rendered

directors conflicted,255 but the Court need look no further than the Opinion’s finding

that Denholm’s similarly “life-changing” compensation was the “most significant,

potentially comprising factor” rendering her non-independent.256 Wilson-

Thompson is conflicted just like Denholm.257, 258

253Id. In January 2021, Wilson-Thompson retired as EVP of Walgreens, where she was
never a named executive officer. Since retiring, her only non-Tesla compensation is from
two directorships, which combined provide ~$400,000 annually. Wilson-Thompson
admits the wealth she obtained as a Tesla director render her no longer “financially
dependent” on any job. Id.
254 Tesla, Form 10-Q (Apr. 4, 2024) [Link]
/data/1318605/000162828024017503/[Link].
255See, e.g., Kahn v. Tremont Corp., 694 A.2d 422, 430 (Del. 1997) (director beholden to
controller based on less than $500,000 in consulting fees and bonuses three years pre-
transaction); Del. Cnty. Emps. Ret. Fund v. Sanchez, 124 A.3d 1017, 1020 (Del. 2015)
(director lacked independence where his “wealth [wa]s largely attributable to business
interests over which [a controller] ha[d] substantial influence”).
256 Op. 125.
257Tesla’s self-serving declaration disclaiming ties between Wilson-Thompson and Musk
(IDOB 7) is both untested and irrelevant. The Court found Denholm conflicted as to the
Grant even though she “d[id] not appear to have had any personal relationship with Musk.”
Op. 24.
258 Wilson-Thompson’s potential conflicts also required disclosure. See Op. 149.

57
Second, as discussed supra, the New Proxy declared that, unlike

“ratification,” a comparably-sized replacement plan “would potentially result in an

accounting charge in excess of $25 billion.”259 That constitutes coercion as

discussed supra. However, Tesla is likely wrong: assuming “ratification” restores

the Grant (it does not), Tesla may well incur an accounting charge of at least $25

billion.260 This accounting charge disclosure is material because it directly impacts

the Ratification’s costs to Tesla,261 and if false, renders the New Proxy materially

deficient.262 At minimum, the New Proxy is materially deficient because it failed to

disclose (i) the possibility that the Ratification would trigger a $25B+ accounting

charge; and (ii) that, remarkably, Tesla received no independent accounting advice

on this issue.263

259 New Proxy 98/296.

260 [Link]
might-lead-large-earnings-hit-tesla; [Link]
directors
-took-a-big-accounting-bet-with-no-independent-accounting-advice/.
261 See Eisenberg v. Chi. Milwaukee Corp., 537 A.2d 1051, 1059 (Del. Ch. 1987)
(“Shareholders are entitled to be informed of information in the fiduciaries’ possession that
is material to the fairness of the price.”); see also Gilmartin v. Adobe Res. Corp., 1992 WL
71510, at *10 (Del. Ch. Apr. 6, 1992) (same).
262 Id.
263 [Link]
with-no-independent-accounting-advice/.

58
Third, despite Defendants’ claim that “the Board sought to incorporate the

Court’s guidance” in the New Proxy,264 the Board actually spun a false narrative

regarding the Grant process that the Opinion expressly rejected.

Contradicting the Opinion’s description of the Grant process, the Board

claimed that “the 2018 Proxy process disclosure is a true and correct statement of

the facts leading up to [Grant] approval,” then repeated—and told stockholders to

“take into account”—the 2018 Proxy’s deficient process description265 (which, inter

alia, “described all Compensation Committee members as ‘independent,’” stated the

Grant discussions “first took place among…Compensation Committee [members],”

failed to explain Musk’s control over the process, etc.).266 Thus, the Board repeated

the same process-related disclosure failures that invalidated the first vote.

Fourth, the Proxy misled stockholders regarding the effects of common-law

ratification, stating: “Common law ratification can also extinguish claims for breach

of fiduciary duty by authorizing an act that otherwise would constitute a breach,”

including Plaintiff’s claims.267 In fact, the Court has adjudicated loyalty breaches,

264 IDOB 6.
265 New Proxy 85/296.
266 E.g., Op. 82-83, 149-56.
267 New Proxy 84/296.

59
and as explained supra in Section V and infra in Section VII.A.1, Delaware law is

clear that “ratification” cannot extinguish loyalty breaches.268

Defendants’ claim that Plaintiff waived arguments regarding the validity of

the (legally ineffective) Ratification vote they conjured—19 months after trial and

five months after the Court’s Opinion—by not seeking to enjoin it is absurd.

Defendants first sought to reopen the trial record and inject their improper

“ratification” two weeks ago. Every argument regarding why that ploy fails is

timely. Further, Defendants’ knowing failures to disclose material information are

fresh loyalty breaches,269 and this Court routinely permits disclosure challenges filed

after a stockholder vote,270 which Defendants concede.271

268The New Proxy included myriad other deficiencies including unqualified statements
contradicting the Opinion (e.g., repeatedly describing all Grant milestones as
“challenging”) and misleading declarations that Musk was “not...paid.”
269 In re PLX Tech. S’holders Litig., C.A. 9880-VCL, at 52 (Del. Ch. Sept. 3, 2015)
(TRANSCRIPT) (“[I]f the disclosure claim goes forward, that’s a knowing violation…not
a care violation….”).
270 See, e.g., Chester Cnty. Emps.’ Ret. Fund v. KCG Holdings, Inc., 2019 WL 2564093, at
*14 (Del. Ch. June 21, 2019); J.P. Crown Tr. v. BitNile Holdings, C.A. No. 2022-0904-
LWW, at 42-43 (Del. Ch. Oct. 22, 2022) (TRANSCRIPT) (“[E]ven if stockholders
nevertheless approve the grants…plaintiff could press fiduciary duty claims post-
vote….If…the vote isn’t fully informed, then the defendants wouldn’t get the benefit of
ratification in any event if the vote goes forward.”).
271 IDOB 37.

60
D. “Ratification” Was Invalid because It Was Illegal

Musk’s—and the Board’s—premature claim of Ratification victory violated

securities laws.

“Section 14(a) and Rule 14a-9 [of the Securities Exchange Act of 1934] make

it ‘unlawful for any person…to solicit any proxy’ by way of a materially misleading

proxy statement.”272 Rule 14a-9’s Notes expressly identify “[c]laims made prior to

a meeting regarding the results of a solicitation” as an “example of what…may be

misleading [under] this section.”273

As discussed supra, on June 12—the day before the Ratification vote—Musk

posted on X a chart claiming the Ratification vote was a “Guaranteed win.”274 That

same night, Tesla embedded that post into an SEC filing.275

Declaring the Ratification vote a “Guaranteed win” the day before the meeting

was false—stockholders were still entitled to cast, revoke, or change their votes.

Tesla and the Board’s premature victory declaration influenced that live vote and

thus violated securities laws.

272 Arnold v. Soc’y for Sav. Bancorp., Inc., 678 A.2d 533, 539 (Del. 1996) (citation and
internal quotation marks omitted).
273 17 CFR § 240.14a-9 - False or misleading statements, Cornell Law School,
[Link]
274 Elon Musk (@elonmusk), X (June 12, 2024 10:50pm), [Link]
status/1801084780035154058/photo/1.
275Tesla SEC Form 14A (June 13, 2024) [Link]
1318605/000110465924070994/tm2413800d27_defa14a.htm.

61
The practical implications of Musk’s conduct underscore the legal

impropriety. As Professor Elson explained, posting proxy vote totals before

balloting ends is both “highly unusual” and problematic because “[a]nytime you tell

people you’re winning, you’re encouraging others to join you and those who oppose

you to pull back.”276

For this additional reason, the Ratification vote is invalid.

VII. EVEN IF, ARGUENDO, THE RATIFICATION VOTE COULD BE

INJECTED INTO THE LONG-CLOSED TRIAL RECORD AND HAD
ANY LEGAL EFFECT, IT WOULD NOT CHANGE THE
JUDGMENT

Even if the Court were to reopen the trial record, consider the Ratification,

ignore the many reasons why it cannot have legal effect, and disregard the reasons

why this Ratification vote was further invalid, none of that would change the

outcome that the Grant is unfair and rescinded.

The Court has already held the Grant was a “controller-conflicted transaction”

for which Defendants did not satisfy MFW.277 Thus, even disregarding the law of

this case, under black-letter Delaware law, a valid, uncoerced, fully-informed

stockholder ratification (which the Ratification was not) would, at most, shift the

burden under entire fairness. That burden shift would not change the judgment here.

[Link] (internal quotations

276

omitted).
277 Op. 102-03.

62
And even if the Court adopted Defendants’ incorrect argument that it should

treat the Ratification itself (not the Grant) as the relevant transaction for determining

the Grant’s review standard, Defendants cannot meet their burden to de-escalate the

standard to business judgment under MFW. Specifically, even without the benefit

of the discovery and further trial proceedings to which Plaintiff is entitled if the

Court considers the Ratification at all, (i) the vote was clearly invalid, coerced, and

not fully informed (see supra); and (ii) the Committee failed to undertake an

independent and well-functioning process.

A. An Entire Fairness Burden Shift Is Unavailable and Improper,

But Regardless, Would Not Change the Judgment

1. If, Arguendo, “Ratification” Could Have Any Legal Effect,

It Would Merely Shift the Entire Fairness Burden

The Court found it “undeniable that, with respect to the Grant, Musk

controlled Tesla.”278 As such, only strict MFW compliance could have de-escalated

the review standard. Because that control finding—and resulting entire fairness

application—is the law of this case, even if, arguendo, the Ratification vote could

have any legal effect, it would at most shift the entire fairness burden.

278 Op. 112.

63
2. A Burden Shift Under Entire Fairness Would not Change
the Outcome.

“The practical effect of [an entire fairness] burden shift is slight….[S]hifting

the burden of persuasion under a preponderance standard is not a major move, if one

assumes, as I do, that the outcome of very few cases hinges on what happens if the

evidence is in equipoise.”279 The Court’s 200-page Opinion decided numerous

factual issues relating to process and price, none of which were found to be in

equipoise.280 Thus, burden shifting would not impact the Court’s ruling.

Defendants misleadingly quote the Opinion for the purported proposition that

“[t]he [Ratification] is ‘compelling evidence’ of fair price.”281 The Opinion actually

states: “Defendants argue that disinterested stockholder approval is ‘compelling

evidence’ that the price was fair….Generally, a stockholder vote is only ‘compelling

evidence’ of fairness absent a disclosure violation….Weinberger held that an

uninformed stockholder vote is totally ‘meaningless.’ Under Weinberger…the

stockholder vote is a meaningless indicator as to fair price.”282

279 In re Cysive, Inc. S’holders Litig., 836 A.2d 531, 548 (Del. Ch. 2003); see also, e.g.,
Ams. Mining Corp. v. Theriault, 51 A.3d 1213, 1243 (Del. 2012) (confirming “the only
‘modest’ effect of the burden shift” and affirming trial court’s ruling that burden shift was
irrelevant because the “evidence…[was not] in equipoise”).
280 See infra Section VII.B.
281IDOB 50 (“The [Ratification] is ‘compelling evidence’ of fair price.” (quoting Op.
190)).
282Op. 190 (emphasis added) (quoting Weinberger v. UOP, Inc., 457 A.2d 701, 712
(Del. 1983)).

64
Here, as discussed supra, even the limited pre-discovery facts available to

Plaintiff demonstrate that the Ratification vote was materially uninformed, invalid,

coerced, and illegal. As such, it is “totally ‘meaningless’”283 to the Grant’s fair price

inquiry.

Defendants also claim the Ratification process somehow “buttressed” the

Grant’s “fair process inquiry”—which concerns a process that occurred roughly

seven years ago.284 But even the limited information available to Plaintiff

demonstrates that the Ratification process was launched by a majority-conflicted

Board to appease Musk, and involved a conflicted “committee of one,”285 that

concededly “did not substantively re-evaluate the amount or terms of the [Grant] and

did not engage a compensation consultant,” and “did not negotiate with Mr.

Musk.”286 As such, it has no bearing on the Court’s post-trial unfairness finding.

Thus, even based on the limited information available to Plaintiff, an entire

fairness burden shift would not change the outcome.

283 Id.
284 IDOB 50.
285 New Proxy 30/296.
286 Id. 97/296.

65
B. De-Escalation of the Review Standard Is Unavailable and
Improper, But Would Not Change the Judgment

1. MFW Applies to Any Attempt to De-Escalate the Review

Standard

For all the reasons set forth herein, the Court should reject Defendants’

unprecedented attempt to make the Ratification—rather than the Grant—the relevant

transaction for purposes of determining the Grant’s review standard.

But even if the Ratification were the relevant transaction for purposes of

determining the Grant’s review standard—and even without the discovery to which

Plaintiff is entitled if the Ratification is considered at all—Defendants would still

need to establish MFW compliance to de-escalate the standard because the

Ratification itself is a conflicted controller transaction. Defendants cannot meet that

exacting standard.

Numerous control indicia identified in the Opinion apply to both Musk’s

general control of Tesla287 and the Ratification specifically. For example, (i) Musk’s

significant stock ownership288 still renders him Tesla’s largest stockholder289—

“giv[ing] him a sizeable leg-up for stockholder votes,” “great influence in the

287Op. 110 (“[T]he sources of influence identified by Plaintiff in support of a finding of

general control factor into the transaction-specific analysis.”).
288 Id. 112-115.
289 Id. 115

66
boardroom,” and “undoubtedly contributes to his clout and sway”;290 (ii) Musk’s

“considerable power in the boardroom by virtue of his high-status roles and

managerial supremacy,”291 and exercise of “managerial authority over all aspects of

Tesla and often without regard to Board authority, rendering Tesla highly dependent

on him”;292 and (iii) Musk’s relationships with the Board,293 which includes three

directors whom the Court already ruled conflicted and is otherwise pervaded by

Musk conflicts.294

Events subsequent to the Opinion strengthened the case for Musk’s control,

including: (i) Musk’s unchecked X posts attacking the Court and its Opinion; (ii)

Musk’s unilateral public declaration—made within hours of the Opinion’s

issuance—that “Tesla will move immediately to a shareholder vote to

transfer…incorporation to Texas”; (iii) the Board convening—and forming the

Committee—to deliver on Musk’s demands within five days of the Opinion’s

issuance; (iv) the Board’s unprecedented campaign to secure stockholder approval

of Musk’s demands; (v) Musk joining meetings with key Tesla investors to solicit

290 Id. 115.

291 Id. 115-22.
292 Id. 115-17.
293 Id. 123-27.
294 Supra, SOF II.D.

67
votes; and (vi) Tesla’s continual statements linking Tesla’s very success to Musk’s

ongoing role and satisfaction at Tesla (and thus Ratification approval).295

2. Defendants Did Not—and Cannot—Meet their MFW

Burden

As noted supra, it is the law of the case that Defendants failed to meet their

burden to show the Grant complied with MFW.

For the reasons set forth supra at Section VII.A.2, even if the Court were to

apply MFW to the Ratification—and even based on the limited information presently

available to Plaintiff—Defendants still cannot establish MFW compliance.

3. Even De-Escalation of the Review Standard to Business

Judgment Cannot Change the Outcome

The business judgment rule can be rebutted at trial if, like here, the plaintiff

proves that directors acted with gross negligence or bad faith.296

The Opinion itself establishes that Plaintiff proved Defendants acted with

gross negligence and/or bad faith in many ways. For example, the Compensation

Committee intentionally avoided benchmarking data for the purpose of delivering

Musk his unfathomably massive—and unnecessary—Grant297 and refused to

295 See, e.g., New Proxy Denholm Letter; supra, SOF II.C-F, H, K.
296 In re Walt Disney Co. Deriv. Litig., 906 A.2d 27, 52 (Del. 2006).
297See, e.g., Op. 4 (“[T]he committee avoided using objective benchmarking data that
would have revealed the [Grant’s] unprecedented nature[.]”); 167 (the Committee “knew
benchmarking would expose the Grant as many multiples larger than any conceivable
comparison.”).

68
negotiate on behalf of stockholders against Musk.298 Additionally, the Board

deliberately failed to disclose material facts, including regarding the process and

their own (non-)independence.299

* * *

Even if the Court reopened the record to consider the Ratification and found

it legally permissible, Plaintiff would still prevail.

CONCLUSION

The Court should deny Defendants’ Motion.

298See, e.g., id. 112 (“[The Committee] w[as] there to cooperate with Musk, not negotiate
against him”); 146 (“The testimony from the key witnesses is perhaps as close to an
admission of a controlled mindset as a stockholder-plaintiff will ever get.”).
299 See, e.g., id. 155 (stating April 9 Musk/Ehrenpreis conversation “was withheld under
circumstances amounting to a [fiduciary] breach” (citation and quotations omitted)); 151
(“The description of the Compensation Committee members as ‘independent’ was
decidedly untrue….”).

69
BERNSTEIN LITOWITZ BERGER
& GROSSMANN LLP

Of Counsel: /s/ Gregory V. Varallo

Gregory V. Varallo (Bar No. 2242)
Jeroen van Kwawegen Glenn R. McGillivray (Bar No. 6057)
Margaret Sanborn-Lowing 500 Delaware Avenue, Suite 901
BERNSTEIN LITOWITZ BERGER Wilmington, DE 19801
& GROSSMANN LLP (302) 364-3061
1251 Avenue of the Americas ANDREWS & SPRINGER LLC
New York, NY 10020 Peter B. Andrews (Bar No. 4623)
(212) 554-1400 Craig J. Springer (Bar No. 5529)
Jeremy S. Friedman David M. Sborz (Bar No. 6203)
Spencer M. Oster Andrew J. Peach (Bar No. 5789)
David F.E. Tejtel Jackson E. Warren (Bar No. 6957)
FRIEDMAN OSTER 4001 Kennett Pike, Suite 250
& TEJTEL PLLC Wilmington, DE 19807
493 Bedford Center Road, Suite 2D (302) 504-4957
Bedford Hills, NY 10507 Counsel for Plaintiff
(888) 529-1108
WORDS: 13,973 of 14,000 Word
Limit (Dkt. 393)
Dated: July 12, 2024

70