IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

RICHARD J. TORNETTA, Individually 

and on Behalf of All Others Similarly 

Situated and Derivatively on Behalf of 

Nominal Defendant TESLA, INC.,

Plaintiff,

v.

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.

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C.A. No. 2018-0408-KSJM

POST-TRIAL OPINION

Date Submitted: April 25, 2023

Date Decided: January 30, 2024

Gregory V. Varallo, Glenn R. McGillivray, BERNSTEIN LITOWITZ BERGER & 

GROSSMANN LLP, Wilmington, Delaware; Jeroen van Kwawegen, Margaret 

Sanborn-Lowing, BERNSTEIN LITOWITZ BERGER & GROSSMANN LLP, New 

York, New York; Peter B. Andrews, Craig J. Springer, David M. Sborz, Andrew J. 

Peach, Jackson E. Warren, ANDREWS & SPRINGER LLC, Wilmington, Delaware; 

Jeremy S. Friedman, Spencer M. Oster, David F.E. Tejtel, FRIEDMAN OSTER & 

TEJTEL PLLC; Bedford Hills, New York; Counsel for Plaintiff Richard J. Tornetta.

David E. Ross, Garrett B. Moritz, Thomas C. Mandracchia, ROSS ARONSTAM & 

MORITZ LLP, Wilmington, Delaware; Evan R. Chesler, Daniel Slifkin, Vanessa A. 

Lavely, CRAVATH, SWAINE & MOORE LLP, New York, New York; Counsel for 

Defendants Elon Musk, Robyn M. Denholm, Antonio J. Gracias, James Murdoch, 

Linda Johnson Rice, Brad W. Buss, and Ira Ehrenpreis.

Catherine A. Gaul, Randall J. Teti, ASHBY & GEDDES, P.A., Wilmington, Delaware; 

Counsel for Nominal Defendant Tesla, Inc.

McCORMICK, C.
Was the richest person in the world overpaid? The stockholder plaintiff in this 

derivative lawsuit says so. He claims that Tesla, Inc.’s directors breached their 

fiduciary duties by awarding Elon Musk a performance-based equity-compensation 

plan. The plan offers Musk the opportunity to secure 12 total tranches of options, 

each representing 1% of Tesla’s total outstanding shares as of January 21, 2018. For 

a tranche to vest, Tesla’s market capitalization must increase by $50 billion and Tesla 

must achieve either an adjusted EBITDA target or a revenue target in four 

consecutive fiscal quarters. With a $55.8 billion maximum value and $2.6 billion 

grant date fair value, the plan is the largest potential compensation opportunity ever 

observed in public markets by multiple orders of magnitude—250 times larger than 

the contemporaneous median peer compensation plan and over 33 times larger than 

the plan’s closest comparison, which was Musk’s prior compensation plan. This posttrial decision enters judgment for the plaintiff, finding that the compensation plan is 

subject to review under the entire fairness standard, the defendants bore the burden 

of proving that the compensation plan was fair, and they failed to meet their burden. 

A board of director’s decision on how much to pay a company’s chief executive 

officer is the quintessential business determination subject to great judicial 

deference. But Delaware law recognizes unique risks inherent in a corporation’s

transactions with its controlling stockholder. Given those risks, under Delaware law,

the presumptive standard of review for conflicted-controller transactions is entire 

fairness. To invoke the entire fairness standard, the plaintiff argues that Musk’s 
2

compensation plan was a conflicted-controller transaction. The plaintiff thus forces

the question: Does Musk control Tesla? 

Delaware courts have been presented with this question thrice before, when 

more adroit judges found ways to avoid definitively resolving it.1 This decision dares

to “boldly go where no man has gone before,”2 or at least where no Delaware court 

has tread. The collection of features characterizing Musk’s relationship with Tesla 

and its directors gave him enormous influence over Tesla. In addition to his 21.9% 

equity stake, Musk was the paradigmatic “Superstar CEO,”3 who held some of the 

most influential corporate positions (CEO, Chair, and founder), enjoyed thick ties 

with the directors tasked with negotiating on behalf of Tesla, and dominated the 

process that led to board approval of his compensation plan. At least as to this 

transaction, Musk controlled Tesla.

The primary consequence of this finding is that the defendants bore the burden 

of proving at trial that the compensation plan was entirely fair. Delaware law allows 

defendants to shift the burden of proof under the entire fairness standard where the 

transaction was approved by a fully informed vote of the majority of the minority 

stockholders. And here, Tesla conditioned the compensation plan on a majority-of1 In re Tesla Motors, Inc. S’holder Litig., 2018 WL 1560293 (Del. Ch. Mar. 28, 2018) 

[hereinafter “SolarCity I”]; In re Tesla Motors, Inc. S’holder Litig., 2022 WL 1237185 

(Del. Ch. Apr. 27, 2022) [hereinafter “SolarCity II”], aff’d, 298 A.3d 667 (Del. 2023)

[hereinafter “SolarCity III”]. 

2 Star Trek: The Original Series (Paramount Pictures 1968).

3 Assaf Hamdani & Kobi Kastiel, Superstar CEOs and Corporate Law, 100 Wash. U. 

L. Rev. 1353 (2023) [hereinafter “Superstar CEOs”].
3

the-minority vote. But the defendants were unable to prove that the stockholder vote 

was fully informed because the proxy statement inaccurately described key directors 

as independent and misleadingly omitted details about the process.

The defendants were thus left with the unenviable task of proving the fairness 

of the largest potential compensation plan in the history of public markets. If any set 

of attorneys could have achieved victory in these unlikely circumstances, it was the 

talented defense attorneys here. But the task proved too tall an order. 

The concept of fairness calls for a holistic analysis that takes into consideration 

two basic issues: process and price. The process leading to the approval of Musk’s 

compensation plan was deeply flawed. Musk had extensive ties with the persons 

tasked with negotiating on Tesla’s behalf. He had a 15-year relationship with the 

compensation committee chair, Ira Ehrenpreis. The other compensation committee 

member placed on the working group, Antonio Gracias, had business relationships 

with Musk dating back over 20 years, as well as the sort of personal relationship that 

had him vacationing with Musk’s family on a regular basis. The working group 

included management members who were beholden to Musk, such as General 

Counsel Todd Maron who was Musk’s former divorce attorney and whose admiration 

for Musk moved him to tears during his deposition. In fact, Maron was a primary gobetween Musk and the committee, and it is unclear on whose side Maron viewed 

himself. Yet many of the documents cited by the defendants as proof of a fair process 

were drafted by Maron. 
4

Given the collection of people tasked with negotiating on Tesla’s behalf, it is 

unsurprising that there was no meaningful negotiation over any of the terms of the 

plan. Ehrenpreis testified that he did not view the negotiation as an adversarial 

process. He said: “We were not on different sides of things.” Maron explained that 

he viewed the process as “cooperative” with Musk. Gracias admitted that there was 

no “positional negotiation.” This testimony came as close to admitting a controlled 

mindset as it gets. And consistent with this specific-to-Musk approach, the committee 

avoided using objective benchmarking data that would have revealed the

unprecedented nature of the compensation plan. 

In credit to these witnesses, their testimony was truthful. They did not take a 

position “on the other side” of Musk. It was a cooperative venture. There were no 

positional negotiations. Musk proposed a grant size and structure, and that proposal

supplied the terms considered by the compensation committee and the board until 

Musk unilaterally lowered his ask six months later. Musk did not seem to care much 

about the other details. They got ironed out.

In this litigation, the defendants touted as concessions certain features of the 

compensation plan—a five-year holding period, an M&A adjustment, and a 12-

tranche structure that required Tesla to increase market capitalization by $100 

billion more than Musk had initially proposed to maximize compensation under the 

plan. But the holding period was adopted in part to increase the discount on the 

publicly disclosed grant price, the M&A adjustment was industry standard, and the 

12-tranche structure was reached in an effort to translate Musk’s fully-diluted-share 
5

proposal to the board’s preferred total-outstanding-shares metric. It is not accurate 

to refer to these terms as concessions.

The defendants also point to the duration of the process (nine months) and the 

number of board and committee meetings (ten) as evidence that the process was 

thorough and extensive. The defendants’ statistics, however, elide the lack of 

substantive work. Time spent only matters when well spent. Plus, most of the work 

on the compensation plan occurred during small segments of those nine months and 

under significant time pressure imposed by Musk. Musk dictated the timing of the 

process, making last-minute changes to the timeline or altering substantive terms 

immediately prior to six out of the ten board or compensation committee meetings 

during which the plan was discussed. 

And that is just the process. The price was no better. In defense of the 

historically unprecedented compensation plan, the defendants urged the court to 

compare what Tesla “gave” against what Tesla “got.” This structure set up the 

defendants’ argument that the compensation plan was “all upside” for the 

stockholders. The defendants asserted that the board’s primary objective with the 

compensation plan was to position Tesla to achieve transformative growth, and that 

Tesla accomplished this by securing Musk’s continued leadership. The defendants

offered Musk an opportunity to increase his Tesla ownership by about 6% (from about 

21.9% to at most 28.3%) if, and only if, he increased Tesla’s market capitalization 

from approximately $50 billion to $650 billion, while also hitting the operational 

milestones tied to Tesla’s top-line (revenue) or bottom-line (adjusted EBITDA) 
6

growth. According to the defendants, the deal was “6% for $600 billion of growth in 

stockholder value.” 

At a high level, the “6% for $600 billion” argument has a lot of appeal. But 

that appeal quickly fades when one remembers that Musk owned 21.9% of Tesla when 

the board approved his compensation plan. This ownership stake gave him every 

incentive to push Tesla to levels of transformative growth—Musk stood to gain over 

$10 billion for every $50 billion in market capitalization increase. Musk had no 

intention of leaving Tesla, and he made that clear at the outset of the process and 

throughout this litigation. Moreover, the compensation plan was not conditioned on 

Musk devoting any set amount of time to Tesla because the board never proposed 

such a term. Swept up by the rhetoric of “all upside,” or perhaps starry eyed by 

Musk’s superstar appeal, the board never asked the $55.8 billion question: Was the 

plan even necessary for Tesla to retain Musk and achieve its goals? 

This question looms large in the price analysis, making each of the defendants’ 

efforts to prove fair price seem trivial. The defendants proved that Musk was 

uniquely motivated by ambitious goals and that Tesla desperately needed Musk to 

succeed in its next stage of development, but these facts do not justify the largest 

compensation plan in the history of public markets. The defendants argued the 

milestones that Musk had to meet to receive equity under the package were ambitious 

and difficult to achieve, but they failed to prove this point. The defendants 

maintained that the plan is an exceptional deal when compared to private equity 

compensation plans, but they did not explain why anyone would compare a public 
7

company’s compensation plan with a private-equity compensation plan. The 

defendants insisted that the plan worked in that it delivered to stockholders all that 

was promised, but they made no effort to prove causation. They also made no effort 

to explain the rationale behind giving Musk 1% per tranche, as opposed to some lesser 

portion of the increased value. None of these arguments add up to a fair price.

In the final analysis, Musk launched a self-driving process, recalibrating the 

speed and direction along the way as he saw fit. The process arrived at an unfair 

price. And through this litigation, the plaintiff requests a recall.

The plaintiff asks the court to rescind Musk’s compensation plan. The 

plaintiff’s lead argument is that the court must rescind the compensation plan due to 

disclosure deficiencies because the plan was conditioned on stockholder approval. 

This argument, although elegant in its simplicity, is overly rigid and wrong. The 

plaintiff offers no legal authority for why rescission must automatically follow from 

an uninformed vote. Generally, a court of equity enjoys broad discretion in fashioning 

remedies for fiduciary breach, and that general principle applies here.

Although rescission does not automatically result from the disclosure 

deficiencies, it is nevertheless an available remedy. The Delaware Supreme Court 

has referred to recission as the “preferrable” (but not the exclusive)4 remedy for 

breaches of fiduciary duty when rescission can restore the parties to the position they 

4 Lynch v. Vickers Energy Corp., 429 A.2d 497, 501 (Del. 1981) (describing rescission 

as the “preferrable” remedy), overruled in part by Weinberger v. UOP, Inc., 457 A.2d 

701, 703–04 (Del. 1983) (“We therefore overrule [Vickers] to the extent that it 

purports to limit a stockholder’s monetary relief to a specific damage formula.”).
8

occupied before the challenged transaction. Rescission can achieve that result in this 

case, where no third-party interests are implicated, and the entire compensation plan

sits unexercised and undisturbed. In these circumstances, the preferred remedy is 

the best one. The plaintiff is entitled to rescission.

I. FACTUAL BACKGROUND

Trial took place over five days. The record comprises 1,704 trial exhibits, live 

testimony from nine fact and four expert witnesses, video testimony from three fact 

witnesses, deposition testimony from 23 fact and five expert witnesses, and 255 

stipulations of fact. These are the facts as the court finds them after trial.5

A. Tesla And Its Visionary Leader

Tesla is a vertically integrated clean-energy company.6 Tesla and its 

employees “design, develop, manufacture, sell and lease high-performance fully 

electric vehicles and energy generation and storage systems.”7 As of December 31, 

5 This decision cites to: C.A. No. 2018-0408-KSJM docket entries (by docket “Dkt.” 

number); trial exhibits (by “JX” number); trial demonstratives (by “PDX” and “DDX” 

number); the trial transcript, Dkts. 245–49 (“Trial Tr.”); and stipulated facts set forth 

in the Parties’ Stipulation and Pre-Trial Order, Dkt. 243 (“PTO”). The witnesses in 

order of appearance were: Ira Ehrenpreis, Todd Maron, Robyn M. Denholm 

(remotely), Deepak Ahuja, Phoung Phillips (through deposition clips), Elon Musk, 

Antonio J. Gracias, James Murdoch, Andrew Restaino, Brian Dunn, Jon Burg

(through deposition clips), Kimbal Musk (through deposition clips), Jonathan Chang 

(through deposition clips), Paul Gompers, Kevin Murphy, Brad W. Buss, and Thomas 

Brown. The transcripts of the witnesses’ respective depositions are cited using the 

witnesses’ last names and “Dep. Tr.”

6 PTO ¶ 26. 

7 JX-1440 at 5; PTO ¶ 29. 
9

2021, Tesla and its subsidiaries had nearly 100,000 full-time employees worldwide,8

and its market capitalization was over $1 trillion.9

Tesla’s success came relatively recently and, by all accounts, was made possible 

by Musk. In 2004, Musk led Tesla’s Series A financing round, investing $6.5 

million.10 He would invest considerably more before the company went public, take 

on the role of chairman of Tesla’s Board of Directors (the “Board”) (from April 2004 

to November 2018), and, ultimately, become Tesla’s CEO (since October 2008).11 

Musk possesses the ability to “dr[aw] others into his vision of the possible” and 

“inspir[e] . . . his workers to achieve the improbable.”12 And although Musk was not 

at the helm of Tesla at its inception, he became the driving visionary responsible for 

Tesla’s growth. He earned the title “founder.”13 

1. The Master Plan 

At the time of Musk’s initial investment, Tesla was a small-scale startup 

producing small quantities of a single vehicle: the Tesla “Roadster,” a high-end, 

8 JX-1440 at 14.

9 JX-1510 at 5. As of the start of trial in November 2022, it was $618 billion. JX1510 at 1. After trial, Tesla’s market capitalization dropped to approximately $380 

billion. See Dkt. 263 (“Defs.’ Post-Trial Opening Br.”) at 9–10. 

10 JX-1386 (“Murphy Opening Expert Rep.”) at 11 (giving background on Tesla’s early 

years).

11 Id. at 11–12; PTO ¶¶ 44–45.

12 Richard Waters, Elon Musk, billionaire tech idealist and space entrepreneur, Fin.

Times (Sept. 30, 2016), https://www.ft.com/content/8ca82034-86d0-11e6-bcfcdebbef66f80e.

13 See, e.g., Trial Tr. at 729:19–730:3 (Gracias) (describing Musk as a “founder CEO” 

and the “strategic visionary” of Tesla). 
10

battery-powered sports car.14 By 2006, however, Tesla had broadened its goals. That 

year, then-chairman Musk published on Tesla’s blog “The Secret Tesla Motors Master 

Plan”15 (a.k.a., the “Master Plan”), which provided a roadmap for Tesla’s future. 

Distilled, Musk’s vision was to start by building the Roadster sports car, to use “that 

money to build an affordable car,” to use “that money to build an even more affordable 

car,” and to “provide zero emission electric power generation options” while 

accomplishing these production milestones.16 The plan advanced what Musk 

described as Tesla’s “overarching purpose”—to move toward a sustainable energy 

economy, or, as he wrote at the time, to “expedite the move from a mine-and-burn 

hydrocarbon economy towards a solar electric economy.”17 

The Master Plan was bold. Although it might seem difficult to believe now, 

back then, the market for electric vehicles was unproven. Electric-vehicle technology 

was “described as impossible.”18 Even traditional automotive startups faced an 

“incredibly challenging” environment in which many failed.19 In fact, no new 

domestic car company since Chrysler in the 1920s had achieved financial success.20 

14 Murphy Opening Expert Rep. at 11–12.

15 JX-48. Musk wrote this document. PTO ¶ 47.

16 JX-48 at 4 (emphasis omitted).

17 Id. at 1.

18 Trial Tr. at 15:21–16:18 (Ehrenpreis).

19 Id.

20 Id.
11

Given the risks, Musk himself viewed the probability of Tesla completing the Master 

Plan as “extremely unlikely.”21 

To even Musk’s surprise, the Master Plan came to fruition. In abbreviated 

form, the events played out like this: In 2006, Tesla announced that it would begin 

to sell the Signature 100 Roadster for approximately $100,000.22 By August 2007, 

Tesla had pre-sold 570 Roadsters,23 which became available in 2008,24 the same year 

that Musk became Tesla’s CEO.25 Tesla went public in January 2010, raising $226.1 

million.26 In June 2012, Tesla launched the Model S, delivering 2,650 vehicles by 

year’s end.27 Model S sales increased to approximately 22,000 in 2013, 32,000 in 

2014, and 50,000 in 2015.28 Over this period, Tesla developed stationary energy 

storage products for commercial and residential use, which it began selling in 2013.29 

In 2014, Tesla announced its intent to build its first battery “Gigafactory” and work 

21 Id. at 567:20–23 (Musk).

22 See Murphy Opening Expert Rep. at 12 (citing Google, Paypal founders fund 

battery-electric sports car, The Globe and Mail (July 21, 2006), 

https://www.theglobeandmail.com/report-on-business/google-paypal-founders-fundbattery-electric-sports-car/article18168182/).

23 Id. (citing Tesla all-electric Roadster to hit road by year end, Reuters News (August 

7, 2007)). 

24 PTO ¶ 31; Murphy Opening Expert Rep. at 12.

25 PTO ¶ 45.

26 Murphy Opening Expert Rep. at 13.

27 Id. at 14. 

28 Id.

29 JX-178 at 8 (2/26/14 Form 10-K).
12

with suppliers to integrate battery precursor material.30 The factory went live in 

2015.31 In September 2015, Tesla launched the Model X, a midsize SUV crossover.32 

2. The Master Plan, Part Deux

By 2016, Tesla had reached the final phase of the Master Plan,33 and Musk 

began contemplating the next chapter of Tesla’s development. In July 2016, he 

published a new strategic document: “Master Plan, Part Deux” (a.k.a., “Part Deux”).34 

That year, Tesla unveiled a long-range, compact sedan called the “Model 3.”35 

Tesla projected that it would begin mass production of the Model 3 in 2017. That 

endeavor proved the crucible for Tesla. As the company disclosed on March 1, 2017: 

“Future business depends in large part on our ability to execute on our plans to 

develop, manufacture, market and sell the Model 3 vehicle . . . .”36 Tesla announced 

another ambitious deadline, stating that its goal was “to achieve volume production 

and deliveries of this vehicle in the second half of 2017.”37

30 Id. at 13–14.

31 JX-248 at 5 (2/24/16 Form 10-K).

32 PTO ¶ 35; see also JX-248 at 4.

33 See JX-335 at 4–5 (3/1/17 Form 10-K).

34 JX-274.

35 JX-335 at 4.

36 Id. at 17.

37 Id.
13

No one thought Tesla could mass produce the Model 3.38 Musk stated in Part 

Deux that, “[a]s of 2016, the number of American car companies that haven’t gone 

bankrupt is a grand total of two: Ford and Tesla.”39 Tesla had come close to 

bankruptcy in its early years.40 And as of March 2017, approximately 20% of Tesla’s 

total outstanding shares were sold short, making it the most shorted company in U.S. 

capital markets at that time.41 Everyone was betting against Tesla and the man at 

its helm. 

3. Musk’s Backstory And Motivations

Musk is no stranger to a challenge, having led the life of a serial 

entrepreneur.42 He and his brother, Kimbal Musk,43 launched Musk’s first start-up 

in 1995.44 Musk later co-founded an electronic payment system called X.com, which 

would be acquired and renamed PayPal.45 He also founded: in 2002, a rocket 

development and launch company, Space Exploration Technologies Corporation 

38 Trial Tr. at 450:17–21 (Ahuja); see, e.g., JX-329 at 1 (2/23/17 Morgan Stanley report 

dated February 23, 2017, expecting “no more than a small/modest amount of 

customer deliveries” in 2018).

39 JX-274 at 1. 

40 Trial Tr. at 17:2–6 (Ehrenpreis).

41 See JX-995.

42 See Murphy Opening Expert Rep. at 10–11, 112; see also Trial Tr. at 495:23–496:11 

(Ahuja) (“Elon is a unique individual who is extremely motivated by super-difficult 

challenges. . . . [V]ery few people in this world can accept . . . the risk level[] that Elon 

can.”).

43 This decision refers to Kimbal Musk as “Kimbal” solely to distinguish him from his 

brother. No disrespect is intended.

44 PTO ¶ 49.

45 Id. ¶¶ 50–52.
14

(“SpaceX”);46 in 2015, an artificial intelligence research organization, OpenAI Inc.;47

in 2016, a neurotechnology company, Neuralink Corp.;48 and, in 2017, a private 

tunnel-boring company, The Boring Company.49 

In 2017 through 2018, in addition to his positions at Tesla, Musk was the CEO, 

CTO, and board chairman of SpaceX and the board co-chair of OpenAI.50 Musk 

divided most of his time between SpaceX and Tesla as of June 2017,51 but he 

increased the amount of time he spent at Tesla by the end of 2017.52 

Musk is motivated by ambitious goals, the loftiest of which is to save humanity. 

Musk fears that artificial intelligence could either reduce humanity to “the equivalent 

of a house cat”53 or wipe out the human race entirely.54 Musk views space 

46 Id. ¶¶ 53–55, 62.

47 Id. ¶ 61; Trial Tr. at 21:2–5 (Ehrenpreis). 

48 PTO ¶ 59; JX-350; Trial Tr. at 21:6–7 (Ehrenpreis). 

49 PTO ¶ 57; Trial Tr. at 21:8–10 (Ehrenpreis).

50 PTO ¶ 62.

51 Trial Tr. at 568:16–569:9, 661:7–15 (Musk); JX-408 at 13. In 2017, Musk typically

spent Monday and Thursday at SpaceX, and Tuesday, Wednesday, and Friday at 

Tesla, with additional work for Tesla interspersed throughout the week. Trial Tr. at 

661:7–15 (Musk); JX-1256 at 34 (“Mr. Musk estimates he split the bulk (at least 90%) 

of his work hours, approximately 80 to 90 hours per week, between Tesla and SpaceX, 

with an allocation of 60% to Tesla and 40% to SpaceX. He allocated his remaining 

work hours (8–9 hours per week) between Neuralink, The Boring Company and Open 

AI.”).

52 Trial Tr. at 569:10–18 (Musk) (testifying that “later in 2017, when things got very 

difficult for Tesla, [his] time was almost 100 percent Tesla”).

53 Musk Dep. Tr. at 110:5–111:3.

54 Id. at 108:20–110:4.
15

colonization as a means to save humanity from this existential threat.55 Musk seeks 

to make life “multiplanetary” by colonizing Mars.56 Reasonable minds can debate the 

virtues and consequences of longtermist beliefs like those held by Musk, but they are 

not on trial.57 What is relevant here is that Musk genuinely holds those beliefs.

Colonizing Mars is an expensive endeavor.58 Musk believes he has a moral 

obligation to direct his wealth toward that goal,59 and Musk views his compensation 

from Tesla as a means of bankrolling that mission.60 Musk sees working at Tesla as 

55 See id. at 117:10–16 (stating the mission of SpaceX is “[t]o extend the light of 

consciousness beyond Earth in a sustained, permanent manner” by “becoming 

multiplanetary”); Trial Tr. at 647:10–20 (Musk) (confirming SpaceX’s mission).

56 Trial Tr. at 647:10–20 (Musk).

57 Compare William MacAskill, What We Owe The Future (2022), with The Good It 

Promises, the Harm It Does: Critical Essays on Effective Altruism (Carol J. Adams, 

Alice Crary, and Lori Gruen eds., 2023).

58 The court takes judicial notice of this fact.

59 Musk does not dally in the conventional amenities of ordinary billionaires. For 

example, he owns only one home. Musk Dep. Tr. at 118:14–21 (“I tried to put it on 

Airbnb, but they banned Airbnb in Hillsborough. They’re so uptight.”).

60 Trial Tr. at 77:9–15 (Ehrenpreis) (“Q. Fair for me to understand that your 

takeaway from speaking with Mr. Musk about this compensation plan was that he 

never wavered on his love for Tesla, that he was trying to determine whether he could 

achieve his big aspirations to colonize Mars through Tesla; right? A. Correct.”); id.

at 367:9–18 (Denholm) (“Q. And I think you testified, and I just want to make sure 

it’s clear, that one of the things that Mr. Musk told you was that he had a quest to 

put a mission on Mars and where he spent his time and energy needed to help him 

generate capital to fulfill that quest to put a mission on Mars; right? A. Yes. I mean, 

something like that is what I said before. I was talking about -- I mentioned 

interplanetary travel, but in the conversation he did mention Mars.”); id. at 420:8–12 

(Maron) (affirming that “Elon wanted this new stock grant to make humans an 

interplanetary species and to colonize Mars”); id. at 666:22–667:10 (Musk) (“Q. What 

you did was you told Robyn and Ira that the benefit you saw in working hard at Tesla 

to achieve the plan was that you would have money to go to Mars. Fair to say? A. 

Well, not me. To get humanity to Mars. Q. That there would be funds available to 
16

worthy of his time only if that work generates “additional economic resources . . . that 

could . . . be applied to making life multi-planetary.”61 

B. Musk’s Prior Compensation Plans

Prior to the challenged transaction, Musk received two compensation plans 

from Tesla—one in 2009 and one in 2012. Both were equity linked. The first included 

a performance-based component. The second was entirely performance based. 

1. The 2009 Grant

On December 4, 2009, the Board approved Musk’s first compensation plan (the 

“2009 Grant”).62 The 2009 Grant comprised two parts, each of which offered Musk 

stock options to purchase 4% of Tesla’s fully diluted shares as measured at the grant 

date.63 

The first part of the 2009 Grant vested automatically in tranches, with 1/4th 

vesting immediately and 1/48th vesting each month over the following three years, 

assuming that Musk continued to work at Tesla.64 

The second part of the 2009 Grant was performance based, offering Musk an 

additional 4% of Tesla’s fully diluted shares prior to the grant date for achieving each 

of the following: “successful completion of the Model S Engineering Prototype”;

pursue your long-term goal of making life interplanetary? A. Yes. Q. Saving the 

world? A. Well, saving civili -- consciousness, yes.”).

61 Id. at 665:2–667:10 (Musk); see also Musk Dep. Tr. at 115:24–117:16, 163:14–165:5 

(discussing space colonization plans and tradeoffs of spending time on Tesla).

62 JX-68 at 2–3 (1/29/10 Form S-1 (Excerpt)).

63 Id.

64 Id. (stating “1/48th of the shares [are] scheduled to vest each month over the 

subsequent three years”).
17

“successful completion of the Model S Vehicle Prototype”; “completion of the first 

Model S Production Vehicle”; and “completion of the 10,000th Model S Production 

Vehicle.”65 The 2009 Grant required that Musk meet these milestones within four 

years; otherwise, he forfeited his right to the unvested portions.66

Tesla began delivering its next electric car model, the Model S, in June 2012 

and Musk achieved all the 2009 Grant’s performance milestones by December 31, 

2013.67 

2. The 2012 Grant

Before the 2009 Grant milestones had been achieved, on August 1, 2012, the 

Board approved a second compensation plan for Musk (the “2012 Grant”).68 The 2012 

Grant involved ten tranches, each offering options representing 0.5% of Tesla’s

outstanding common stock as of August 2012.69 

For a tranche to vest, Tesla would have to achieve both a market capitalization 

milestone and an operational milestone.70 Each tranche required Musk to increase 

Tesla’s market capitalization by $4 billion—an increment greater than Tesla’s $3.2 

billion market capitalization 18 trading days before the Board approved the 2012 

Grant.71 The operational milestones required Tesla to accomplish specified product65 Id. at 3.

66 Id.

67 PTO ¶¶ 32, 191; JX-178 at 114.

68 PTO ¶ 192; JX-135 at 77 (8/2/12 Form 10-Q for Q2).

69 JX-135 at 77.

70 Id.

71 Id.; JX-154 at 26 (4/17/13 Tesla Schedule 14A Proxy).
18

related goals, such as developing and launching the Model X and the Model 3, and 

reaching aggregate production of 300,000 vehicles.72 The milestones worked in 

tandem. For example, one tranche would vest if Tesla achieved one of the operational 

milestones and a market capitalization increase of $4 billion, while two tranches 

would vest if Tesla achieved two of its operational milestones and a market 

capitalization increase of $8 billion.73 The 2012 Grant had a ten-year term.74

By the end of 2016, Tesla had achieved seven of the market capitalization 

milestones and five of the operational milestones of the 2012 Grant, with another four 

operational milestones “considered probable of achievement.”75 By March 2017, 

seven of the 2012 Grant’s ten tranches had vested.76 

From the Board’s perspective, the 2012 Grant was successful. In only five 

years, Tesla’s market capitalization grew by over 15x from $3.2 billion to $53 billion.77 

Tesla saw significant operational growth as well, designing and launching the Model 

S, Model X, and Model 3, and increasing its total annual vehicle production from 

72 JX-135 at 77; JX-154 at 26.

73 JX-135 at 77; JX-154 at 26.

74 JX-137 at 1 (stating the 2012 Grant expired on August 13, 2022); JX-68 at 3.

75 JX-335 at 45.

76 PTO ¶ 206.

77 Tesla’s market capitalization was approximately $59 billion as of the proxy 

statement’s publication (February 2018) and $53 billion as of the stockholder 

approval (March 2018). JX-154 at 26; JX-878 at 24 (2/8/18 Schedule 14A Proxy 

Statement); JX-1510 at 26.
19

approximately 3,000 total vehicles in 201278 to more than 250,000 vehicles in 2017.79 

Musk worked hard toward these goals. And he was paid extremely well. In the end, 

the value of Musk’s holdings increased from approximately $981 million to $13 

billion, meaning that Musk ultimately received approximately 52x the 2012 Grant’s 

grant date fair value.80 

C. The Compensation Process Takes Off.

In 2017, Tesla was already nearing completion of the 2012 Grant milestones, 

even though the 2012 Grant had a ten-year term. This prompted a discussion that 

led to the compensation plan at issue in this litigation (the “2018 Grant” or the 

“Grant”). By this time, Musk had accumulated beneficial ownership of 21.9% of the 

outstanding shares of Tesla common stock through his early investments and the two 

prior grants.81

78 JX-147 at 4 (3/7/13 Form 10-K). 

79 JX-1105 at 45 (2/19/19 Form 10-K). 

80 JX-1384 (“Dunn Opening Expert Rep.”) at 103. This is the measure of the 

compensation expense for all stock-based compensation awards under the Financial 

Accounting Standards Board (FASB) Accounting Standards Codification Topic (ASC) 

718. Murphy Opening Expert Rep. at 94–96 “ASC 718 allows companies to use a 

variety of methodologies to measure the company’s cost of granting employee stock 

options, including Black-Scholes, binomial and lattice models, and Monte Carlo 

simulations. . . [T]he value of options can be estimated by computing the expected 

value of the option upon exercise assuming that the expected return on the stock is 

equal to the risk-free rate, and then discounting the expected value to the grant using 

the risk-free grant.” Id.

81 PTO ¶ 64.
20

1. Meet The Decision Makers.

At all relevant times, Tesla had a nine-person Board comprising Musk, Kimbal, 

Brad W. Buss, Robyn M. Denholm, Ira Ehrenpreis, Antonio J. Gracias, Steve 

Jurvetson, James Murdoch, and Linda Johnson Rice.82 The Board had a standing 

compensation committee (the “Compensation Committee”), which was responsible for 

negotiating Musk’s compensation plan.83 Ehrenpreis, Buss, Denholm, and Gracias 

served on the Compensation Committee, with Ehrenpreis as chair.84 Musk and 

Kimbal recused themselves from most of the meetings and all of the votes on the 2018 

Grant, and Jurvetson had prolonged leaves of absence during the relevant period.85 

The fiduciaries responsible for Tesla in connection with the 2018 Grant, therefore, 

were the Compensation Committee members plus Murdoch and Johnson Rice. 

a. The Compensation Committee Members

i. Ehrenpreis

Ehrenpreis is a founder and managing partner of DBL Partners, an impactinvesting venture-capital firm that focuses on driving environmental change through 

82 Id. ¶¶ 44, 73, 82, 87, 98, 122, 127, 132, 143.

83 Id. ¶¶ 155, 214, 218, 220, 222, 224, 226, 228, 229.

84 Id. ¶¶ 74, 84, 88, 106.

85 Id. ¶¶ 133, 232; JX-631 at 1; JX-791 at 1; Trial Tr. at 48:5–10 (Ehrenpreis); id. at

837:1–5 (Murdoch); id. at 1438:3–8, 1463:19–22 (Brown).
21

investments.86 Ehrenpreis and DBL have invested tens of millions of dollars in 

Musk-controlled companies.87 

Ehrenpreis had been a member of the Board since 2007 and chair of both the 

Compensation Committee and the Nominating and Corporate Governance 

Committee since 2009.88 Between 2011 and 2015, Ehrenpreis was granted 865,790 

Tesla options.89 He exercised less than a quarter of those options in 2021, netting 

over $200 million.90 Being a Tesla director had “been a real benefit in fundraising” 

for Ehrenpreis’s funds.91 

Ehrenpreis and the Musk brothers have known each other for over 15 years.92 

As Ehrenpreis acknowledged, his personal and professional relationship with the 

Musk brothers has had a “significant influence on his professional career[.]”93 

To argue that Ehrenpreis’s relationship with Musk was weighty in other ways, 

the plaintiff points to a July 2017 tweet in which Ehrenpreis professed his love for 

86 PTO ¶ 91; Trial Tr. at 11:8–15 (Ehrenpreis). 

87 PTO ¶¶ 92–95. These investments included roughly $40 million in SpaceX, $10 

million in The Boring Company, and approximately $1 million in Neuralink. Id; 

Ehrenpreis Dep. Tr. at 392:24–393:16.

88 PTO ¶¶ 87–89.

89 JX-1701 at 1; Trial Tr. at 202:23–204:1 (Ehrenpreis). He sold only enough of these 

shares to cover the exercise price and taxes. Trial Tr. at 207:8–17 (Ehrenpreis).

90 JX-1701 at 1; Trial Tr. at 204:2–207:19 (Ehrenpreis).

91 Trial Tr. at 192:15–18 (Ehrenpreis).

92 Kimbal Dep. Tr. at 59:17–66:4.

93 Trial Tr. at 192:6–10 (Ehrenpreis). 
22

Musk.94 But the exchange does not reveal the deep relationship that the plaintiff

described. It was an irrelevant joke.95 

Ehrenpreis is a close friend to Kimbal. They had known each other since at 

least 1999, and Ehrenpreis attended Kimbal’s wedding in Spain.96 Ehrenpreis also 

invested in Kimbal’s company, The Kitchen Group—a family of restaurants based in 

Colorado and Chicago.97

ii. Buss

Buss joined the Board and the Compensation Committee in 2009.98 He worked 

as an accountant and in the semiconductor field until his retirement in 2014, and 

94 JX-518 at 1.

95 To dive into the minutia of the tweet, Ehrenpreis had the right to purchase the first 

Model 3, but he gifted that right to Musk, tweeting, “[Musk] you deserve it!!! Much 

love and respect for everything you do for [Tesla].” JX-518 at 1 (7/8/17 Musk tweet, 

https://www.twitter.com/elonmusk/status/883848060119527424); JX-1586 at 1

(7/8/17 Ira Ehrenpreis tweet). Also in that tweet thread, Ehrenpreis jokingly 

proposed a “romantic dinner” with Musk on the tenth anniversary of the start of Tesla 

Roadster production. JX-967 at 1 (3/17/18 Ehrenpreis tweet). Ehrenpreis testified at 

trial that he was not “being literal” and that he “did not have a romantic dinner with 

[Musk] or anybody.” Trial Tr. at 199:7–13 (Ehrenpreis). He remarked that “clearly 

humor doesn’t translate” and that he and Musk had a “collaborative working 

relationship” instead. Id. at 66:11–17, 199:7–13 (Ehrenpreis). In the end, the tweet 

was just a bad joke; it does not inform the control analysis. See generally Kimbal Dep 

Tr. at 59:9–66:4; Trial Tr. at 193:19–21 (Ehrenpreis). 

96 Kimbal Dep. Tr. at 59:9–10; Trial Tr. at 193:19–21 (Ehrenpreis).

97 Trial Tr. at 193:13–15 (Ehrenpreis); Kimbal Dep. Tr at 48:11–18.

98 PTO ¶¶ 73–75. Buss also served on the Nominating and Corporate Governance 

Committee and the Audit Committee. Id.
23

then served as CFO of SolarCity Corp.99 until February 2016.100 Buss had no 

personal relationship with Musk or other members of the Board and has never 

invested in any of Musk’s other businesses.101 

From 2014 through 2016, Buss’s held assets valued at between $30 and $60 

million, not including his Tesla and SolarCity holdings.102 He earned about $2 million 

in total compensation from his work with SolarCity.103 Between 2011 and 2018, Buss 

reported that compensation as a Tesla director was approximately $17 million.104 He 

realized about $24 million for sales of Tesla shares that he received as compensation 

prior to January 21, 2018.105 

99 SolarCity is a solar technology company that Tesla acquired in November 2016. 

PTO ¶ 56. Musk served as SolarCity’s board chair from July 2006 until November 

2016. Id.

100 Trial Tr. at 1375:7–22, 1377:7–10, 1377:17–1378:15 (Buss); PTO ¶¶ 77–78.

101 Trial Tr. at 1381:6–17 (Buss).

102 Compare JX-1167 ¶ 26 (9/24/19 Declaration of Brad W. Buss in Connection with 

the Director Defendants’ Brief in Opposition to Plaintiff’s Motion for Partial 

Summary Judgment, filed in In re Tesla Motors, Inc. S’holder Litig., Consol. C.A. No. 

12711-VCS) (“during 2014-2016, I had net assets, exclusive of all Tesla and SolarCity 

holdings, conservatively estimated at in excess of $30 million”), with, Trial Tr. at 

1426:15–1427:13 (Buss) (“my number was bigger than [$30 million]. . . . It wasn’t 

double or triple that, but it was substantially higher and has done very well by 

itself.”).

103 Trial Tr. at 1384:6–9 (Buss). Buss stepped down from his committee assignments 

while working for SolarCity but returned to these positions in mid-2017, in time to 

participate in the development of the 2018 Grant. PTO ¶¶ 74–76; Trial Tr. at 

1386:12–18 (Buss). Although the exact date on which Buss rejoined the 

Compensation Committee is unclear, he attended the first meeting at which the 2018 

Grant was discussed. JX-439 (6/23/17 Compensation Committee meeting minutes

listing Buss as “present”).

104 Trial Tr. at 1409:13–21 (Buss).

105 JX-1587 (Brad Buss Form 4s from June 25, 2010 to May 20, 2019); Trial Tr. at 

1410:13–1411:12 (Buss). Buss left the Board in June 2019. PTO ¶ 81. 
24

Buss owed roughly 44% of his net worth to Musk entities.106 Buss lacked any 

other personal or business connections to Tesla and left the Board soon after the 

Board approved the 2018 Grant.107

iii. Denholm

Denholm joined the Board and the Compensation Committee in 2014.108 Her 

background is in accounting and telecommunications.109 She was recruited to the 

Board by Buss, who she knew professionally.110 Musk asked Denholm to be Board 

chair in 2018 following a settlement with the SEC (the “SEC Settlement”) that 

required Musk to relinquish his chairmanship.111 

Denholm does not appear to have had any personal relationship with Musk 

outside of her service on the Board. Denholm derived the vast majority of her wealth 

from her compensation as a Tesla director. Denholm’s compensation from Tesla 

between 2014 and 2017 was valued at about $17 million when it was issued, an 

amount she acknowledged was material to her at the time.112 Denholm ultimately 

received $280 million through sales in 2021 and 2022 of just some of the Tesla options 

106 JX-1167 ¶ 26; Trial Tr. at 1409:13–14:11:12, 1413:15–1416:8, 1426:15–1427:13 

(Buss); see also SolarCity II, 2022 WL 1237185, at *4 & n.26. Buss was somewhat 

evasive when estimating this number at trial, testifying that his net assets exclusive 

of all Tesla and SolarCity holdings were higher than a certain amount but not “double 

or triple that.” Trial Tr. at 1426:15–1427:13 (Buss).

107 PTO ¶ 81.

108 Id. ¶¶ 82, 84. She is also chair of the Audit Committee. See id. ¶ 85. 

109 Trial Tr. at 313:14–314:14 (Denholm).

110 Id. at 312:3–15 (Denholm).

111 Denholm Dep. Tr. at 93:8–95:18; PTO ¶ 83.

112 Trial Tr. at 395:8–23 (Denholm).
25

she received as part of her director compensation.113 She described this transaction 

as “life-changing.”114 Denholm testified that between 2017 and 2019, she received 

approximately $3 million per year in her non-Tesla position.115 Even assuming 

Denholm valued her Tesla compensation at a fraction of its Black-Scholes value, her 

Tesla compensation far exceeded the compensation she received from other sources. 

iv. Gracias

Gracias joined the Board in 2007 and the Compensation Committee in 2009.116 

He founded and continues to manage Valor Equity Partners (“Valor”), a privateequity firm with approximately $16 billion under management.117 For years, Valor 

has also been “deeply operationally engaged in” Tesla.118 Valor actively assisted 

management in trying to drive sales for and lower the cost of production of Tesla’s 

Roadster model.119 

Gracias has amassed “dynastic or generational wealth” from investing in 

Musk’s companies.120 Gracias invested in PayPal in the 1990s, returning “roughly 3x 

to 4x.”121 Valor began investing in Tesla at Musk’s invitation in 2005. By 2007, Valor

113 Id. at 396:8–397:12 (Denholm).

114 Id. at 397:6–12 (Denholm). 

115 Id. at 397:17–398:11 (Denholm); Denholm Dep. Tr. at 10:4–12.

116 PTO ¶¶ 98, 106. He is also on the Nominating and Governance Committee. Id. at

¶ 107. 

117 Id. ¶ 100; Trial Tr. at 698:16–699:8 (Gracias).

118 Trial Tr. at 707:16–24 (Gracias). 

119 Id. at 708:1–710:2 (Gracias). 

120 Id. at 774:22–24 (Gracias).

121 Id. at 767:14–15 (Gracias).
26

had invested $15 million.122 Valor ultimately distributed some of its Tesla shares to 

its investors, including Gracias.123 As of 2017, Gracias was the third-largest 

individual investor in Tesla, with virtually all of his Tesla shares held in trust for his 

children.124 As of 2021, that Tesla stock was worth approximately $1 billion.125 Valor 

and Gracias have invested hundreds of millions of dollars in SpaceX, SolarCity, The 

Boring Company, and Neuralink, all of which significantly increased in value.126

All told, Gracias and his fund have netted billions of dollars by investing in 

Musk’s companies, many of which were made only with Musk’s personal invitation.127 

Gracias has touted endorsements from Musk in marketing his own fund.128 

Musk and Kimbal have invested in Gracias’s ventures. At Gracias’s request, 

Musk invested $2 million in Valor no later than 2003 and an additional $2 million in 

122 Id. at 705:18–707:24, 767:17–768:21 (Gracias); Gracias Dep. Tr. at 38:4–14. At 

one point during his trial testimony, Gracias stated that this investment was $50 

million. Trial Tr. at 707:16–24 (Gracias). Given the phonological similarity between 

“15” and “50” and the more detailed testimony supporting a $15 million total 

investment, it is likely that Gracias’s statement that the investment was $50 million 

was in error.

123 Trial Tr. at 711:17–712:9 (Gracias).

124 Id. at 712:15–713:7 (Gracias); PTO ¶ 109.

125 Trial Tr. at 769:6–9 (Gracias); PTO ¶ 110.

126 Valor invested between $400 million and $500 million in SpaceX, a stake valued 

between $2 billion and $3 billion as of May 2021. Trial Tr. at 769:14–770:19, 771:20–

772:4 (Gracias); PTO ¶ 115. Valor invested approximately $24 million in SolarCity 

in 2012, yielding proceeds of approximately $136 million. Trial Tr. at 772:6–11 

(Gracias); PTO ¶ 111. Valor invested between approximately $15 million and $20 

million in The Boring Company as of May 2021. Trial Tr. at 772:12–16 (Gracias); 

PTO ¶ 119. Valor invested between approximately $15 and $20 million in Neuralink

as of May 2021. Trial Tr. at 773:22–774:7 (Gracias); PTO ¶ 118.

127 Trial Tr. at 711:17–712:9, 767:17–774:24 (Gracias).

128 JX-1472 at 2.
27

2007.129 Musk planned to invest in another Valor fund in 2013, but he ultimately did 

not because Gracias was concerned about conflicting fiduciary duties.130 Kimbal also 

invested $1 million to $2 million in Valor, and Valor invested a total of between $15 

million and $20 million in two of Kimbal’s ventures.131 Gracias personally donated 

up to $500,000 to Kimbal’s charity and served on its board.132

Gracias and Musk are “close friends.”133 Gracias once personally loaned $1 

million to Musk and could not recall if he charged Musk interest.134 They meet 

outside of work as frequently as once a month.135 They have spent the night at each 

other’s homes.136 They have vacationed together with their respective families, 

including a trip to illusionist David Copperfield’s Bahamian island, a trip to Africa, 

and a ski trip.137 They have spent Christmas together.138 They have a long-standing 

tradition of spending Presidents’ Day weekend together with their families at 

Gracias’s home in Jackson Hole.139 Gracias attended Musk’s second wedding and was 

129 Trial Tr. at 713:11–24, 775:7–22 (Gracias).

130 Id. at 714:1–21 (Gracias).

131 Trial Tr. at 776:5–17 (Gracias); PTO ¶¶ 103–04, 149.

132 Trial Tr. at 776:18–777:2 (Gracias); PTO ¶¶ 101–02.

133 Trial Tr. at 715:2–6 (Gracias).

134 Id. at 755:3–756:17 (Gracias). 

135 Id. at 715:16–22 (Gracias).

136 Id. at 757:14–16 (Gracias).

137 Id. at 757:20–759:1 (Gracias); id. at 1080:13–21 (Kimbal).

138 Id. at 760:17–761:3 (Gracias).

139 Id. at 759:2–17 (Gracias).
28

a groomsman at Kimbal’s wedding in 2018.140 Gracias has attended birthday parties 

for both Musk brothers and their children.141 Gracias is friends with two of Musk’s 

cousins and has taken numerous vacations with them.142 Gracias is also friendly 

with Musk’s mother and sister.143 

b. The Other Directors

i. Murdoch

Murdoch’s professional background is in media and entertainment.144 At the 

time he joined the Tesla Board, he was the CEO of 21st Century Fox.145 Murdoch 

met Musk in the late 1990s, but they lost touch until Murdoch purchased a Tesla 

Roadster in 2006 or 2007.146 The two became friends thereafter, meeting when they 

happened to be in the same city.147 Before he joined the Board, Murdoch, and Musk 

took family vacations together to Israel, Mexico, and the Bahamas.148 During one of 

these trips, which Gracias and Kimbal also attended,149 Musk asked Kimbal to help 

him decide whether to add Murdoch to the Board.150 After the trip, Gracias and Musk 

140 Id. at 757:17–19, 761:10–20 (Gracias).

141 Id. at 759:18–760:10 (Gracias).

142 Id. at 760:11–16 (Gracias).

143 Id. at 762:15–17 (Gracias). Gracias left the Board in October 2021. PTO ¶ 98.

144 Trial Tr. at 815:1–24 (Murdoch).

145 Id. at 816:4–8 (Murdoch).

146 Id. at 817:21–818:19 (Murdoch).

147 Id. at 819:2–16 (Murdoch).

148 Id. at 820:20–821:2, 847:5–849:15 (Murdoch).

149 Id. at 821:3–13 (Murdoch).

150 Id. at 1080:13–21 (Kimbal). 
29

invited Murdoch to join the Board, and he agreed.151 Murdoch and Kimbal are also 

friendly, and Murdoch attended Kimbal’s wedding in 2018.152

As of December 31, 2017, Murdoch owned 10,485 Tesla shares through a family 

trust.153 He bought these shares on the market before anyone approached him to 

become a director.154 Murdoch now runs a private-investment company, which 

invested approximately $50 million in SpaceX in 2019 and 2020.155 Murdoch also 

personally invested approximately $20 million in SpaceX in 2019.156

151 Id. at 821:21–822:21 (Murdoch). There are some minor conflicting details in the 

story of Murdoch’s addition to the Board. Gracias testified that he was the first to 

suggest adding Murdoch to the Board during a dinner with Murdoch in New York. 

Id. at 780:23–781:1 (Gracias); Gracias Dep. Tr. at 109:25–110:11. Gracias further 

testified that he did not speak to Musk about Murdoch joining the Board prior to this 

dinner. Gracias Dep. Tr. at 109:25–110:11. It is not clear from Gracias’s testimony 

whether this dinner with Murdoch occurred before or after the Bahamas trip. 

Murdoch testified that Gracias suggested him joining the Board during a lunch (not 

a dinner) in New York that occurred after the Bahamas trip. Trial Tr. at 821:21–

822:17 (Murdoch). Murdoch’s lunch and Gracias’s dinner are presumably the same 

event (they ate), which took place after the Bahamas trip. But Kimbal testified that 

Musk asked him to help decide whether Murdoch should join the Board while they 

were on the Bahamas trip, before the New York meal. Id. at 1080:13–21 (Kimbal). 

This suggests two possibilities: one of these three witnesses has confused or 

misunderstood a detail, or Musk and Gracias independently decided to consider 

adding Murdoch as a Board member (Musk did not testify about this). In either case, 

it appears more likely than not that Musk supported Murdoch being added to the 

Board early in the process.

152 Id. at 850:19–24 (Murdoch).

153 PTO ¶ 123.

154 Trial Tr. at 827:12–828:17 (Murdoch). 

155 PTO ¶¶ 124–25.

156 Id. ¶ 126.
30

Murdoch received total compensation of approximately $35,000 in cash for his 

service as a Tesla director in 2017 and 2018.157

ii. Johnson Rice

Johnson Rice joined the Board on Gracias’s recommendation.158 She and 

Gracias were friends and ran in the same social circle in Chicago.159 Johnson Rice’s 

sole employer before and during her time at Tesla was a family business, Johnson 

Publishing Company, which published the magazines Ebony and Jet.160 She has also 

served on a number of other boards.161 Johnson Rice declined to stand for re-election 

in 2019.162 Although she received Tesla options as compensation for her work as a 

director, they expired without being exercised.163

2. Musk Proposes Terms Of A Compensation Plan.

The first mention in the record of what would become the 2018 Grant is a text 

from Ehrenpreis to Musk sent on April 8, 2017—one day after Tesla’s Compensation 

Committee certified vesting of the 2012 Grant’s sixth tranche.164 Ehrenpreis asked 

157 JX-1210 at 20 (3/2/20 James Murdoch’s Responses and Objections to Interrogatory 

Nos. 2, 3, 4, 8, and 11–39 from Plaintiff’s First Set of Interrogatories).

158 Gracias Dep. Tr. at 123:24–124:3.

159 Id. at 122:23–123:21.

160 Johnson Rice Dep. Tr. at 10:11–20.

161 Id. at 12:4–18.

162 Id. at 45:1–46:5.

163 Id. at 41:14–24.

164 JX-362 at 2; Trial Tr. at 99:3–101:7 (Ehrenpreis); JX-361 at 75.
31

Musk to discuss “a few comp related issues.”165 They spoke by phone on April 9.166 

Ehrenpreis testified that he had reached out to Musk to see if he was “ready to 

recommit”167 and “to figure out . . . was his head in a place that he wanted to recommit 

over a longer duration to Tesla[?]”168

Musk put forward terms of a new compensation plan during the April 9 call.169 

He envisioned a purely performance-based compensation plan, structured like the 

2012 Grant but with more challenging market capitalization milestones170 and 

proposed 15 milestones of $50 billion in market capitalization—a total possible award 

of 15% of Tesla’s outstanding shares.171 

To put Musk’s proposal in perspective, each market capitalization milestone 

increase of $50 billion required Tesla to grow in size roughly equal to the market 

capitalizations of each of Tesla, Ford, and GM as of early 2018.172 So, Tesla would 

165 JX-362 at 2. 

166 See Trial Tr. at 98:11–105:24 (Ehrenpreis); see also JX-362 at 2 (4/8/17 text from 

Ehrenpreis to Musk asking to “pls chat for a few minutes this weekend re a few comp 

related issues”); JX-1598 (1/7/18 email from Maron containing draft proxy language 

describing April 9, 2017 call).

167 Trial Tr. at 24:5–19 (Ehrenpreis).

168 Id.

169 See JX-1700 at 12 (1/12/18 Draft Schedule 14A Proxy).

170 Id.

171 Id.; see also Trial Tr. at 269:17–270:8 (Maron) (testifying that “at the beginning of 

the process . . . the conception of the plan at a high level was to have $50 billion 

market cap increments”).

172 JX-1700 at 12; JX-1510 at 27 (cumulative market capitalization of Tesla was 

approximately $56 billion as of January 10, 2018); JX-757 at 2 (12/31/17 Ford Form 

10-K) (aggregate market value of common stock was approximately $42.8 billion as 

of December 31, 2017); JX-1104 at 1 (2/6/19 GM Form 10-K) (aggregate market value 
32

have to grow an amount in market capitalization equal to that of the most significant 

domestic car manufacturers for Musk to earn a single tranche of compensation.173 

Musk viewed this proposal as “really crazy.”174 

Musk’s initial proposal is reflected in a draft of the proxy statement issued in 

connection with the 2018 Grant. The draft states:

On April 9, 2017, . . . Ira Ehrenpreis, the Chairman of the 

Compensation Committee, and Mr. Musk discussed the 

possibility of a new performance award that would have an 

incentive structure similar to the 2012 Performance Award 

but with even more challenging performance hurdles. 

Mr. Musk expressed interest in such an arrangement and 

suggested a compensation structure that would incentivize 

management to grow Tesla into one of the most valuable 

companies in the world. 

During this meeting, Mr. Musk suggesting performance 

milestones that would trigger stock option awards of 1 % of 

the Company’s current total outstanding shares based on 

incremental $50 billion increases in market capitalization, 

such that if Tesla grew by $750 billion, a maximum 

of voting stock was approximately $55.5 billion as of June 30, 2018); see Trial Tr. at 

1268:2–20 (Murphy) (“You know, with the 2012 plan everybody liked basically we 

started off by saying we got to double the market cap for you to get anything. Well, 

now the market cap had grown to 50 billion and it was up to 59 billion by the time 

they actually approved the plan. But this idea, 50 billion, that’s a nice round number. 

I think at the end of 2017, Ford was worth about 49 billion. I think that GM was 

worth about 58 billion. So this is: Every time we’ll get another Ford or a GM. I think 

that just kind of resonated.”); Trial Tr. at 231:11–16 (Ehrenpreis) (“Q. . . . So these 

options, by the way, are worth roughly the value, the market cap of Ford; right? A. 

That’s true.”); id. at 1397:1–5 (Buss) (“I mean, again, those market cap goals, you 

know, were totally insane. I mean, you literally had to create a Ford, GM, or FedEx 

every ten months. Every ten months. And maintain it, right? So, okay, wow, that’s 

pretty nuts.”).

173 JX-1700 at 12; JX-1510 at 27; JX-757 at 2; JX-1104 at 1; see Trial Tr. at 1268:2–

20 (Murphy); id. at 231:11–16 (Ehrenpreis); id. at 1397:1–5 (Buss).

174 JX-398.
33

possible award would amount to 15% of the Company’s 

current total outstanding shares. 

Mr. Musk indicated that such an award structure would 

align his incentives with those of stockholders and 

incentivize him to continue leading the management of the 

Company over the long-term. 

Mr. Ehrenpreis indicated that the Compensation 

Committee would consider Mr. Musk’s perspectives as part 

of its analysis.175

Language like the above appears in other drafts but not in the final proxy

statement.176 

The draft proxy statement is the most reliable (indeed, the only) evidence of

the substance of the April 9 discussion. Neither Musk nor Ehrenpreis took 

contemporaneous notes or otherwise memorialized their April 9 discussion. By the 

175 JX-1700 at 12.

176 See JX-1597 at 9 (1/8/17 Draft Schedule 14A Proxy); JX-1598 at 3 (1/7/18 draft 

language for Schedule 14A Proxy); JX-1599 at 14 (1/10/18 Draft Schedule 14A Proxy); 

see also JX-878 at 9–12 (2/8/18 Schedule 14A Proxy Statement) (background section 

of the final proxy omitting any mention of the April 9 conversation). There were 

minor changes in language between the proxy drafts. Compare, e.g., JX-1598 at 3 

(“Mr. Musk indicated an interest in such a structure, and mentioned the possibility of 

setting 15 milestones in which each would require a market capitalization increase 

of $50 billion[.]” (emphasis added)), with, JX-1700 at 12 (“Mr. Musk expressed interest

in such an arrangement and suggested a compensation structure that would 

incentivize management to grow Tesla into one of the most valuable companies in the 

world. During this meeting, Mr. Musk suggesting [sic] performance milestones that 

would trigger stock option awards of 1% of the Company’s current total outstanding 

shares based on incremental $50 billion increases in market capitalization[.]”

(emphasis added)).
34

time of discovery and then trial in this action, Musk had only vague memories of the 

discussion, and Ehrenpreis had no memory of it at all.177 

It is unclear who prepared the draft proxy statement, but Maron, Tesla’s 

General Counsel, was responsible for it. Maron testified he spoke to Ehrenpreis 

within hours of the April 9 call and reviewed the draft.178 

177 See Trial Tr. at 70:6–72:18, 79:13–20, 97:20–102:7 (Ehrenpreis); id. at 631:3–

632:6, 633:24–635:7, 694:6–695:9 (Musk). Ehrenpreis did not remember the 

substance of their April 9, 2017 conversation prior to reviewing documents in 

preparation for his deposition. Id. at 70:13–71:13 (Ehrenpreis). Despite his vague 

recollection, Musk offered an alternative account of the April 9 discussion during his 

deposition and at trial. When asked about the April 9 call, Musk testified that he 

might have instead proposed a grant of “10 percent of the company, incrementally 

taking into account dilution of [his] own shares.” Musk Dep. Tr. at 144:13–150:3; see 

also Trial Tr. at 632:18–633:2 (Musk). Ultimately, when pressed, neither Musk nor 

Ehrenpreis disputed the draft proxy statement’s account. Trial Tr. at 633:15–635:7 

(Musk) (not disputing the relevant language in JX-1597); id. at 91:2–97:24 

(Ehrenpreis) (not disputing “Mr. Musk asked for a 15 percent plan” based in part on 

the proxy statement drafts). Musk stated in an interrogatory answer that he did not 

“specifically recall the dates or substance” of any discussions of a new stock option 

award before June 23, 2017. JX-1256 at 9–10 (8/3/2020 Musk’s Amended Responses 

and Objections to Plaintiff’s First Set of Interrogatories Directed to All Defendants 

and Nominal Defendant Tesla, Inc.). Musk reaffirmed his interrogatory answer at

trial. Trial Tr. at 631:3–632:6 (Musk). When offering his alternative account, he was 

equivocal, stating that the proposal “might have happened[.]” Id. at 632:18–633:2 

(Musk) (emphasis added). He also stated, “I think I proposed . . . 10 percent[.]” Musk 

Dep. Tr. at 144:13–146:6 (emphasis added). 

178 See Trial Tr. at 100:22–102:7 (Ehrenpreis); id. at 239:12–15 (Maron); Maron Dep. 

Tr. at 127:13–128:12; JX-1700 at 2 (“Todd will review all of our comments on these 

sections of the proxy and press release and give WSGR the final draft. . . . Todd/Phil[ip 

Rothenberg] [w]ill work to provide an updated draft Background section”); Trial Tr. 

at 239:9–15 (Maron) (stating that he heard about the possibility of a new 

compensation plan for Musk from Ehrenpreis in April 2017); see also JX-369 at 2–3 

(email thread between Maron and Ahuja dated April 9, 2017 discussing the new 

compensation plan for Musk); Trial Tr. at 105:18–24 (Ehrenpreis) (stating that Maron 

was cued into discussions of Musk’s new compensation plan on April 9 and 10). 
35

Maron was totally beholden to Musk, lending credibility to the accuracy of the 

draft proxy statement. But his relationship with Musk raises concerns as to other 

aspects of the process during which Maron advised the Board and Compensation 

Committee. Maron joined Tesla as Deputy General Counsel in September 2013, and 

was promoted to General Counsel in September 2014, reporting directly to Musk.179 

Before joining Tesla, Maron was Musk’s divorce attorney.180 Maron neither socialized

with Musk nor considered himself a friend of Musk when he worked at Tesla, but he 

owed his career to and had genuine affection for Musk.181 Both in his deposition and 

at trial, Maron held back tears when asked about his departure from Tesla in January 

2019, describing it as “the most difficult decision[]” he had made to date.182

179 PTO ¶¶170–71; Maron Dep. Tr. at 23:21–24. 

180 Maron Dep. Tr. at 19:23–20:8.

181 Id. at 20:9–18 (stating that he and Musk did not socialize and that he never met 

Musk’s family); id. at 199:7–200:5 (Maron) (stating that, although he and Musk were 

not “friends,” he “cared about [Musk] a tremendous amount . . . [he’s] always cared 

about him and wanted him to have . . . success in life. . . . [he] just want him to be 

happy as you would with anyone that you care about”).

182 Id. at 74:10–17 (becoming “emotional” about the decision to leave Tesla); id. at

200:9–15 (“Unfortunately I lost my cool earlier and cried because I love the company 

so much, and I loved my teammates and my colleagues and the people on the 

executive team.”); Trial Tr. at 275:10–24 (Maron) (confirming he “choked up” at his 

deposition about his “incredible experience[]” at Tesla and the “very emotional 

decision” to leave Tesla).
36

After speaking to Ehrenpreis on April 9, Maron enlisted other Tesla employees 

to help him model Musk’s proposal. All told, 13 in-house Tesla executives worked on 

the 2018 Grant.183 The key executive in addition to Maron was Ahuja, Tesla’s CFO.184

At the outset of his involvement, Ahuja recommended one substantive change 

to the structure—pairing the market capitalization milestones with operational 

milestones.185 He recommended this change for accounting purposes. Maron relayed 

the change to Ehrenpreis, who questioned whether operational milestones were 

necessary.186 Maron explained that “there’s an important account[ing] reason” for 

having operational milestones.187

183 Trial Tr. at 110:8–112:14 (Ehrenpreis).

184 Ahuja was Tesla’s CFO from August 2008 to November 2015 and from March 2017

to March 2019. PTO ¶¶ 180–81. 

185 JX-369 at 3 (Ahuja explaining that “[i]f the award only has a market condition, 

the SBC expense will start on the date of the grant,” but “[i]f the award has both a 

market and performance condition, the expense is first recorded when probability of 

achievement exceeds 70%[.]”).

186 JX-367 at 1 (Maron explaining to Ehrenpreis the need for operational milestones); 

Trial Tr. at 105:5–24 (Ehrenpreis) (confirming that Maron contacted him in response 

to Musk asking for market cap milestones and his request that Maron and Ahuja

address the issue); JX-418 at 2 (“[O]ne thing Ira wanted to pressure test is whether 

we really do need the operational milestones[.]”).

187 JX-367 at 1. Despite this explanation, Ehrenpreis later advocated for removing 

the operational milestones, directing the Tesla team to “pressure test” the feasibility 

of that structure in mid-June 2017. Trial Tr. at 112:15 –113:17 (Ehrenpreis); id. at

285:18–286:20 (Maron). He was again informed that operational milestones were 

necessary for accounting purposes. JX-423 at 1 (Maron emailing Ehrenpreis that he 

“wanted to pressure test . . . whether we really do need operational milestones in 

addition to the market cap milestones. If we could only do the latter, that’s what he 

would prefer, but I remember you telling me that there were accounting reasons for 

why we needed both.”).
37

Maron’s team began analyzing Musk’s initial proposal on April 10, roping in 

Tesla’s legal counsel at Wilson Sonsini Goodrich & Rosati (“Wilson Sonsini”)188 and 

lining up compensation consultants. Maron proposed retaining Compensia, Inc., a 

compensation consulting firm that Tesla had engaged in connection with the 2009 

and 2012 Grants,189 but he also provided four other options for Ehrenpreis to 

consider.190

3. Musk States That He Is Committed To Tesla For Life.

Little progress was made on Musk’s new compensation plan through May 

2017. During a May 3 earnings call, an analyst asked about Musk’s “view of staying 

actively in place with Tesla longer into the future[.]”191 Musk responded that he 

should not be “CEO forever.”192 He further indicated that he was going to reevaluate 

his position after Tesla achieved volume production of the Model 3.193 

The plaintiff argues that Musk’s statement about not being “CEO forever” was 

intended to pressure Tesla in negotiations over Musk’s compensation plan, but the 

188 JX-371. 

189 JX-368; PTO ¶¶ 153, 155–56.

190 JX-374 (proposing FW Cook, Pearl Meyer, Semler Brossy, and Radford as 

alternative compensation consultants).

191 JX-390 at 20.

192 Id. at 20–21. 

193 JX-185 at 12 (“I think I was -- yes, certainly be CEO for like, say, 4 or 5 years and 

then it’s sort of TBD after that. Yes, but that’s the commitment I made to people at 

Tesla and also to investors is that I’m going to make sure that we execute through 

the high-volume, affordable car at a minimum and then we’ll evaluate it at that 

point.”); Trial Tr. at 574:14–18 (Musk) (testifying that the “high-volume, affordable 

car” Musk was referring to in JX-185 was the Model 3).
38

record does not support that conclusion. Musk clarified his statement later in the 

May 3 earnings call, saying:

Well, maybe I wasn’t clear. I intend to be actively involved 

with Tesla for the rest of my life. Hopefully, stopping before 

I get too old—or too crazy, I don’t know. But essentially for 

as long as I can positively contribute to Tesla, I intend to 

be—to have a significant involvement with Tesla.194

In other words, Musk had every intention of remaining “significant[ly] 

involved” in some leadership role at Tesla, even though he did not envision himself 

being “CEO forever.” Musk repeated this assertion at trial, stating unequivocally 

that he would have remained at Tesla even if stockholders had rejected a new 

compensation plan because he was “heavily invested in Tesla, both financially and 

emotionally, and viewed Tesla as part of his family.”195 Trial witnesses similarly 

testified that they never heard Musk say he had any plans to quit Tesla.196 And even 

though Musk did not intend to stay CEO forever, he had no immediate plans to resign 

194 JX-390 at 20.

195 Trial Tr. at 643:24–644:15 (Musk); see also JX-912 at 75 (2/26/18 draft CEO 

performance award investor presentation) (“Elon is heavily invested in Tesla, both 

financially and emotionally, and views Tesla as part of his family.”). 

196 Trial Tr. at 278:3–9 (Maron) (“Q. Now, during the 2017, 2018 time frame, Elon 

never really told you that he was planning to leave Tesla, right? A. He never said 

that to me. Q. Never expressed to you that he was no longer interested in an 

executive role at Tesla? A. No, never said that.”); id. at 526:14–19 (Ahuja) (“Q. And 

thinking about Elon, during your time as CFO, Elon never told you that he was 

planning to stop his involvement with Tesla? A. He did not, though I would not 

expect any CEO to tell that to the CFO or the management team.”); id. at 784:16–18 

(Gracias) (“Q. And you never heard Elon Musk say he was going to quit Tesla; 

correct? A. I did not.”); id. at 785:8–11 (Gracias) (“Q. And Elon Musk certainly never 

said he would quit Tesla if he felt he was inadequately compensated; correct? A. 

Correct.”). 
39

from that position. Corroborating that fact is lack of any succession plans during the 

relevant period. That is, before 2021, neither Musk nor Tesla had identified a 

potential successor for the role of Tesla CEO.197 

4. The First (And Forgettable) Board Discussion 

By June 5, 2017, Tesla had met all ten CEO market capitalization milestones 

for the 2012 Grant and had only three tranches of operational milestones left to 

achieve.198 The Board first discussed the prospect of a new compensation plan for 

Musk during a June 6, 2017 Board meeting. Musk chaired the meeting.199

The Board’s conversation during the June 6 meeting concerning Musk’s 

compensation was brief and, apparently, forgettable. During that meeting, 

Ehrenpreis updated the Board on the near fulfillment of the 2012 Grant milestones 

and stated that “plans were underway to design the next compensation program” for 

Musk.200 The minutes of that meeting are three pages long, and the discussion of a 

new compensation plan was limited to a sentence.201 At least one director who served 

on the Compensation Committee, Denholm, did not recall the June 6 Board 

197 Id. at 1421:9–13 (Buss) (“Q. Shifting gears, during your board tenure, the Tesla 

board had no formal documented succession plan to replace Mr. Musk; correct? A. 

Formally documented, no. We had various discussions. But correct, nothing 

documented.”); id. at 857:9–858:10 (Murdoch) (confirming Musk had not identified a 

successor until the months after his 2021 deposition). 

198 JX-404.

199 PTO ¶ 211; JX-407 at 1 (6/6/17 Board meeting minutes).

200 JX-407 at 2.

201 Id.
40

discussion at all.202 She testified at trial that any discussion of a new compensation 

plan during the June 6 Board meeting must not have been substantive.203

5. Musk Accelerates The Process.

On June 18, 2017, Maron emailed the Compensation Committee stating: “We 

would like to . . . discuss Elon’s next stock grant.”204 This sort of outreach from Maron 

was common during the process. Although he was counsel to Tesla, he would reach 

out and prompt action by the Compensation Committee to benefit Musk (the “we” in 

the prior quote). 

A few days prior, on June 15, 2017, Maron’s team had prepared an aggressive 

timeline for approving a compensation plan. The timeline scheduled the 

Compensation Committee and Board to approve the plan by July 17 or by July 24 at 

the latest.205 The initial June 15 plan contemplated only two Compensation 

Committee meetings prior to final approval and allotted the committee just over a 

month to do its job.206 A later June 26 version of the timeline was even more rushed, 

proposing only one Compensation Committee meeting (with an additional meeting if 

202 Denholm Dep. Tr. at 214:14–19 (“Q. Just so we’re clear, focus on June 18th, the 

Todd Maron email, was that the first time you heard or learned about a potential new 

compensation plan for Mr. Musk? A. Yes. I believe so, yes.”).

203 Trial Tr. at 357:19–359:14 (Denholm) (stating that the first substantive 

discussions regarding the 2018 Plan took place on June 23, 2017).

204 JX-420 at 1.

205 JX-423 (6/19/17 email from Matt Tolland to Maron re “Re: Privileged - Comp 

Comm Process”).

206 Id.
41

necessary) and giving the committee less than three weeks to complete its task.207 

That timeline envisioned that on July 7, the Compensation Committee would “[g]ain 

agreement on proposed approach, award size and metrics/goals” and “[g]ain 

preliminary approval of grant agreement[.]”208 

The timeline reflected a reckless approach to a fiduciary process, given that 

the Compensation Committee had not yet discussed any substantive terms nor met 

concerning the Grant. Despite the break-neck speed contemplated by the timeline, 

Maron reported to counsel on June 18 that Ehrenpreis was “aligned on the plan and 

timing.”209

After Musk asked to discuss his compensation plan, the Maron-led team was 

supercharged. They conducted initial calls with five potential compensation 

consultants and selected three for Maron and Ehrenpreis to interview.210 During the 

initial calls, the consultants were informed of Musk’s initial proposal and the 

207 JX-456 at 2 (6/26/17 email from Phoung Phillips to Ira Ehrenpreis and Todd Maron 

re: “Tesla | Executive Compensation Timeline”).

208 Id.

209 JX-423 at 1.

210 JX-424 at 1 (6/19/17 email from Phillips to Maron stating, “[w]e are just doing prep 

calls with these other folks (so they are slightly prepared when speaking to Ira). Also, 

Yun and I are hoping to take 5 down to 3 teams so we don’t waste Ira’s time. Do you 

want to be included in the preliminary meetings - we realized it takes about 30 

minutes to explain what we want and we want to see if they even understand what 

we are asking before we present them in front of you and Ira.”); see also JX-432 at 1 

(noting the three calls with the compensation consultants). 
42

aggressive timeline leading to a late-July approval.211 Maron and Ehrenpreis 

updated Musk about the process on June 20, 2017.212 

6. The First Compensation Committee Discussion

The Compensation Committee discussed Musk’s compensation plan for the 

first time on June 23, 2017.213 The committee formally resolved to retain Wilson 

Sonsini and Compensia as legal advisor and compensation consultant, 

respectively.214 A few days later, Tesla retained Jon Burg at Aon Hewitt Radford 

(“Radford”) to value the 2018 Grant in light of the market-based milestones and to 

advise on the accounting treatment of the 2018 Grant in light of the performancebased milestones.215 

During the meeting, Ehrenpreis stated that the Compensation Committee’s 

aim was to create a new compensation plan similar to the 2012 Grant. The committee 

211 See, e.g., JX-434 at 4 (Brown’s handwritten notes of June 19 and 20 calls stating 

under the heading “Goals . . . Timing . . . 2-3 wks”); Trial Tr. at 1434:7–16 (Brown) 

(noting what was to be discussed in the calls).

212 JX-428 (6/20/17 email from Maron to Ahuja stating, “I’m going to be meeting with 

Elon in part to update him on this plan, and that meeting is currently scheduled for 

4pm[.]”); JX-425 at 2 (6/20/17 Ehrenpreis text message asking, “[c]an we chat about 

board and comp. . . . Calling in 5 to 10.”); Maron Dep. Tr. at 183:19–184:20 (confirming 

he kept Musk “abreast at a high level” of the process); Ehrenpreis Dep. Tr. at 155:3–

156:18 (confirming “check-ins” with Musk).

213 The topic did not come up during their meeting held on June 5, although that was 

the day before the Board was informed that “plans are underway.” JX-405 (6/5/17 

Compensation Committee meeting minutes) (no mention of Musk’s package); JX-407 

6/6/17 Board meeting minutes) (first mention of plans for the 2018 Grant); see also 

JX-420 (6/18/17 email from Maron to Compensation Committee proposing June 23 

meeting to discuss Musk compensation).

214 See JX-439 at 2; PTO ¶ 214.

215 PTO ¶151; JX-455 (6/26/17 Radford engagement authorization form).
43

then set out the goals for the compensation plan in broad strokes. The minutes of the 

meeting describe that discussion as follows: 

The Committee discussed how Mr. Musk had been and 

would likely remain a key drive of the Company success 

and its prospects for growth, and that, accordingly, it would 

be in Tesla’s interest, and in the interest of its stockholders, 

to structure a compensation package that would keep Mr. 

Musk as the Company’s fully engaged CEO. The 

Committee also discussed the fact that unlike most other 

Chief Executive Officers Mr. Musk manages multiple 

successful large companies. The Committee discussed the 

importance of keeping Mr. Musk focused and deeply 

involved in the Company’s business, and the corresponding 

need to formulate a compensation package that would best 

ensure that Mr. Musk focuses his innovation, strategy and 

leadership on the Company and its mission.216 

The minutes do not reflect any discussion by the committee concerning the 

effect of Musk’s pre-existing 21.9% equity stake on these goals.

The committee was not presented with any proposed terms for a compensation 

plan, and it did not consider any. This was the case even though, behind the scenes, 

Ehrenpreis and Musk had discussed Musk’s initial proposal, which Musk’s team had 

already modeled.217

216 JX-439 at 1.

217 Specifically, on June 23, Tesla’s Deputy General Counsel Phil Rothenberg sent an 

Excel spreadsheet titled “Elon Grant 2017” to Kenneth Moore, another Tesla 

employee. JX-445 at 3–4. The spreadsheet models a 15-tranche structure with 

operational milestones. The model also includes a “Performance Milestone” column 

with each row marked “tbd.” There are some quirks with the terms reflected in the 

June 23 spreadsheet, which make it clear that the spreadsheet was an early model 

that needed to be refined, but to mention them briefly: Each tranche triggers as 

Tesla’s stock price rises from $300 to $4,800 at $300 increments per tranche over 15 

tranches, each of which gives Musk the right to purchase 1.6 million shares at $300 

per share. The grant value of each tranche is calculated by multiplying 1.6 million 
44

Although the committee had no idea what the terms of the plan might be, they 

were told to be prepared to approve it in July.218 Brown thought the timeline was 

unwise.219 Brown called Ehrenpreis to ask for more time to work on the matter,220

but Ehrenpreis responded that “this is the timeline we are working with.”221 A 

member of Maron’s team would later repeat that message, telling both Brown and 

Burg that “we are running up against a short deadline and we have to make sure this 

keep [sic] moving.”222 The message was clear—move at full tilt. Other than Brown, 

there is no evidence that anyone questioned the timeline. 

by the differential between the market price of Tesla stock and the $300 exercise 

price. The result is $480 million for tranche one (at a market price of $600 per share), 

$980 million for tranche two (at a market price of $900 per share), and so on. Adding 

up all 15 tranches this way yields $57.6 billion. The $57.6 billion figure, however, is 

not the total possible award that Musk could reach under this proposal. Triggering 

all 15 tranches would result in a total grant value of $108 billion. 

218 JX-1592 at 9 (6/23/17 email from Chang to Ehrenpreis) (listing approval date in 

July); JX-437 at 7 (same). Trial Tr. at 130:7–13 (Ehrenpreis) (“Q. It’s also true, 

though, isn’t it, that at the June 23rd compensation committee meeting, the 

committee wasn’t shown any of the specific metrics that had been working -- that the 

group had been working on, like 1 percent tranches or $50 billion market caps? A. 

No, that was -- no.”); see also JX-439 (7/23/17 Compensation Committee meeting 

minutes making no mention of these features or the discussion with Musk); Trial Tr. 

at 557:9–559:13 (Phillips) (affirming that the minutes are a fair summary of the 

meeting and that they do not reflect discussion of the grant features or the discussion 

with Musk, but disclaiming any recollection of the substance of the meeting); Trial 

Tr. at 359:15–360:19 (Denholm) (stating that she had no recollection of whether 

Ehrenpreis mentioned his conversation with Musk when Ehrenpreis and Denholm 

first discussed the 2018 Grant). 

219 Trial Tr. at 1487:21–23, 1488:3–21 (Brown).

220 Id. 

221 Id. at 1487:21–1488:17 (Brown).

222 JX-472 at 1–2 (6/30/17 email from Phillips to Burg, Brown, and Chang); see also 

JX-418 at 2 (Matt Tolland, a Tesla Employee, stating in an internal email to Maron 
45

7. The First Working Group Meeting

After the June 23 Compensation Committee meeting, Ehrenpreis formed a 

“Working Group.” The group consisted of Maron and at least two in-house attorneys 

who reported to him (Phillip Chang and Phuong Phillips), Ahuja, Brown, Burg, and 

attorneys from Wilson Sonsini.223 Ehrenpreis and Gracias were in the Working 

Group, but the Compensation Committee decided that the two members with less 

extensive ties to Musk—Denholm and Buss—were “optional” attendees.224 

The Working Group first met on June 30. Phillips proposed the agenda,225 and 

Brown prepared a slide deck with a high-level overview of the suggested terms of 

Musk’s new equity plan.226 In relevant part, the presentation included: a few slides 

summarizing the 2012 Grant;227 a slide titled “Preliminary Concept,” reflecting the 

15-tranche combined market and operational goals structure;228 and three slides 

titled “Key Program Terms: Alternatives and Considerations,” which identified terms 

of the compensation plan under the title “Preliminary Alternatives” and 

that the proposed timeline “may be a bit accelerated, and may require pushing the 

Comp Consultant to keep up”).

223 JX-475 (6/30/17 email invite to Working Group members); Trial Tr. at 33:4–13 

(Ehrenpreis); Burg Dep. Tr. at 141:3–142:7, 174:14–177:1, 179:17–181:7 (Burg 

testifying that he attended at the Working Group meetings after he was retained).

224 JX-474 (6/30/17 email from Chang to Denholm and Buss).

225 JX-473.

226 JX-475.

227 Id. at 3, 10. 

228 Id. at 4.
46

considerations relevant to each term under the title “Considerations/Decision 

Points.”229 

The presentation identified the following question for discussion: “Will both 

operational and company valuation goals be used?”230 By framing the structure as a 

question, the presentation suggests that it was an open issue. Brown’s notes on a 

June 26 draft version of this presentation, however, reflect that the issue had in fact 

been resolved.231 He wrote that: “there will be 15 goals of each type[,]” referring to 

both market capitalization and operational goals, and “the market cap goals are 

increments of $50B, for a total of $750B of incremental market cap growth for all 15 

tranches (yes, there [sic] numbers are what they are thinking!)[.]”232 In part, 

therefore, the presentation was a vehicle for getting the Compensation Committee 

members up to speed on the work done behind the scenes prior to that time.

After the June 30 meeting, the Working Group stood poised to move forward. 

Chang emailed members of the group about developing operational milestones, 

including a structure in which each market capitalization milestone would also 

require an increase of $15 billion in GAAP revenue.233 Chang stated that Tesla

229 Id. at 5–7.

230 JX-464 at 7. An earlier June 26 draft version of this presentation included a note 

from Brown: “Their starting place is 15 goals of each type.” JX-1703 at 5.

231 JX-1703.

232 Id. at 6.

233 JX-480.
47

should “expect to achieve a milestone roughly once every 12 to 15 months over the 

next 3 years.”234 

8. Musk Decelerates The Process.

The Working Group met again on July 6, the day before the next Compensation 

Committee meeting. After this meeting, Maron informed Chang, Ahuja, and others 

that “we’re now going on a slower track with the CEO grant. We’re now looking to 

issue it in August or September instead of within the next couple of weeks.”235 

Maron professed ignorance as to why the timeline decelerated.236 Chang and 

Phillips too lacked any recollection.237 Ehrenpreis testified that “it was way too 

complex to do under what was originally described as a preliminary timeline” but did 

not recall additional details.238 Brown testified that he received pushback when he 

asked to extend the timeline, so he was not the impetus for the delay.239 Maron would 

not have made the determination to extend the timeline to August or September 

unilaterally. The reality is that Maron answered to and spoke for Musk in this 

234 Id. 

235 JX-503 at 1.

236 Maron Dep. Tr. at 190:4–192:22.

237 Chang Dep. Tr. at 373:23–375:13; Phillips Dep. Tr. at 237:23–239:7; see also JX502 at 1 (7/6/17 email from Chang to Tesla employees saying: “I haven’t gotten the 

full details as to why the postponement[.]”).

238 Trial Tr. at 123:21–124:10 (Ehrenpreis).

239 Id. at 1488:3–21 (Brown).
48

context. It was Musk who either asked to slow things down or stopped pushing to get 

them done so quickly.240 

Phillips circulated “the proposed new timeline for Elon’s equity grant” to the 

Working Group on the evening of July 6.241 The initial timeline contemplated 

preliminary approval by the Compensation Committee on July 7 and final approval 

by the committee and Board approval by July 24. The revised timeline pushed final 

approval by the committee and Board out to September 8 and September 19, 

respectively.242

9. The First Compensation Committee Discussion Of The

Substantive Terms

The July 7 Compensation Committee went forward as scheduled, but the 

agenda was revised given the new timeline. The revised agenda included “a short 

presentation re the CEO grant” from Brown.243 This was the first meeting where the 

committee would be presented with terms of a compensation plan. 

In addition to the $50 billion market capitalization milestones that Musk had 

proposed, Brown’s presentation covered alternatives—a flat $25 billion increase or 

graduated milestones beginning at $10 billion and increasing to $50 billion.244 These 

240 Musk denied aspects of this finding. See Musk Dep. Tr. at 172:19–174:1 (denying 

that he was “pushing for” the grant to “happen quickly” in early July 2017, and 

stating that he was “generally erring on the side of . . . [going] slowly[,]” and did not 

“recall the exact reason” why the process slowed down in early July). But his 

recollection of relevant events was generally spotty.

241 JX-495.

242 JX-423 at 2–3; JX-456 at 2; JX-495 at 6–7. 

243 JX-503 at 1.

244 JX-510 at 1, 12.
49

different market capitalization approaches corresponded to different award sizes, 

ranging from 7.5% of total outstanding shares to Musk’s proposed 15%.245

Although the presentation identified alternatives to Musk’s proposal, the 

presentation included a valuation only for Musk’s proposal.246 The presentation was 

therefore biased toward Musk’s proposal, although this was the first meeting at 

which the committee had considered any terms.

In addition to the market capitalization and operational milestones, the 

presentation identified other potential grant features, including the following:

• A “Clawback Provision.”247 Around April 2015, the Board adopted new 

Corporate Governance Guidelines (the “Guidelines”) providing that 

Tesla’s “executive officers [are] subject to a clawback policy relating to 

the repayment of certain incentives if there is a restatement of our 

financial statements.’”248 The presentation contained the following 

question: “Is the current clawback provision sufficient protection for the 

Company?”249 There is no evidence that the committee discussed this 

question or ever demanded a more protective Clawback Provision. The 

final version of the Grant included a Clawback Provision based on the 

Guidelines.250

245 Id. at 13.

246 Id. at 24. 

247 JX-475 at 7. The Clawback Provision was also discussed at the June 30 Working 

Group meeting. JX-464 at 1, 8 (6/27/17 email from Brown to Ehrenpreis attaching 

draft slides with Clawback Provision questions for Tesla Working Group meeting on 

June 30, 2017). 

248 PTO ¶ 252.

249 JX-464 at 8. 

250 JX-878 at 64–65 (appendix to the proxy statement attaching performance stock 

option agreement) (stating that the Clawback Provision was consistent with Tesla’s

internal guidelines).
50

• An “M&A Adjustment,” which is a provision that accounts for the impact 

of financing or acquisitions on the market capitalization milestones 

(“M&A Adjustment”).251 These provisions are standard.252 

• A “Hold Period,” which was a period post-exercise during which Musk 

would be prohibited from selling his stock. The presentation noted that 

“post-exercise hold periods decrease the grant/accounting value” of the 

stock as follows: “2 year = -15%; 3 years = -18%; and 5 years = -22%.”253 

Benchmarking analyses were on the advisors’ minds. Prior to the first 

Working Group meeting, Phuong suggested an agenda item addressing “[b]enchmark 

companies – risks associated with such grant.”254 And Brown’s presentation for the 

July 7 Compensation Committee meeting contained an appendix listing the “Largest 

CEO Pay Packages in 2016”; summaries of other executive compensation plans at 

SolarCity, Nike, Avago Technologies, and Apple; Radford’s $3.1 billion valuation of a 

grant featuring $50 billion market capitalization milestones and awarding 15% of 

total outstanding shares; and Radford’s additional preliminary models based on 

different market capitalization approaches.255 But the appendix data does not 

constitute a traditional benchmarking study,256 and it is unclear whether the 

251 JX-464 at 7 (“If market cap/enterprise value used, how to account for the impact 

of financing or acquisition activities, where market cap increases may not translate 

to stock price increases? Will the use of enterprise value encourage debt financings?”).

252 Trial Tr. at 1010:22–24 (Dunn) (testifying that the M&A adjustment provision was 

both “smart” and “pretty standard[]” for the Board to include).

253 JX-510 at 10.

254 JX-473.

255 JX-510 at 18, 19–22, 24–29.

256 Trial Tr. at 1475:20–24 (Brown) (describing traditional benchmarking).
51

committee discussed this information or the “risks associated with such grant” in any 

event.

10. Stockholder Outreach

During the July 7 meeting, the Compensation Committee tasked Ehrenpreis 

and Maron with contacting Tesla’s largest institutional stockholders to discuss 

Musk’s new compensation plan.257 Maron’s team worked with outside counsel to 

prepare talking points to use during the calls.258 They ultimately spoke to 15 

stockholders between July 7, 2017, and August 1, 2017.259 Maron’s subordinates 

joined these calls and took notes.260

As scripted, Ehrenpreis was to: introduce himself and Maron and identify his 

objectives as Compensation Committee chair (to “keep executives engaged and 

performing their best”); sing Musk’s praises (“I think we can all agree that he’s an 

extraordinary leader and continues to accomplish incredible things for Tesla and its 

stockholders”); remind the stockholders of the “[i]ncredible success of the 2012 

Grant”; and explain that they are considering a new compensation structure for Musk 

257 Id. at 252:23–254:1 (Maron); JX-509 at 2 (7/7/17 Compensation Committee 

meeting minutes) (“Ehrenpreis and Maron then reviewed upcoming plans to discuss 

CEO compensation generally with the Company’s largest shareholders, and solicit

their feedback and input for any new program.”).

258 See, e.g., JX-517 (7/8/17 email with comments from outside counsel re: SH Talking 

Points).

259 JX-878 at 11 (2/8/18 Schedule 14A Proxy Statement); Trial Tr. at 252:23–253:10 

(Maron) (verifying accuracy of 2019 proxy).

260 See, e.g., JX-522 (7/11/17 Maron notes from call with Jennison Associates); JX-546 

(7/21/17 Maron notes from call with Fidelity); JX-551 at 1(7/24/17 Maron notes from 

call with Baillie Gifford).
52

and that “[o]bviously, the goals of the new program will be similar to the 2012 

grant[.]”261

In this litigation, the defendants report that the stockholders to whom 

Ehrenpreis and Maron spoke “were pleased with the 2012 Plan’s results and 

supported a similar approach for a new compensation plan,”262 and that stockholders 

also provided suggestions for the new compensation plan that the Board ultimately 

adopted.263 It is difficult to credit the defendants’ narrative for two reasons. First, 

the script reads like a loaded questionnaire intended to solicit positive stockholder 

feedback and not a method for gaining objective stockholder perspectives on a 

potential new plan. There is nothing inherently wrong with the script; it simply 

undermines the evidentiary weight of the resulting communications. Second, what 

the stockholders said in response to these inquiries is hearsay and untested by the 

adversarial process, including cross examination.264 

11. The Working Group Develops Operational Milestones.

The Working Group next met on July 17.265 One of the objectives for the 

meeting was to establish a metric for operational milestones. Brown prepared a 

261 JX-517 at 5.

262 Defs.’ Post-Trial Opening Br. at 29.

263 Id. at 30. 

264 See JX-522 at (notes on Jennison call); JX-546 at 1 (notes on Fidelity call); JX-551 

at 1 (notes on Baillie Gifford call); JX-552 at 1 (notes on Baron call); JX-531 at 5 (slide 

featuring comments from T. Rowe, PrimeCap, and Jennison); Trial Tr. at 38:9–39:10 

(Ehrenpreis) (the plaintiff’s hearsay objection to JX-551 and the court’s overruling of 

that objection for the limited purpose of what Ehrenpreis was told); id. at 40:3–10 

(Ehrenpreis) (the defendants’ acknowledgement of same limited purpose for JX-546).

265 JX-527 at 3.
53

presentation for the meeting that listed the following potential operational metrics: 

“EBITDA; operating income; free cash flow; gross margin; strategic/execution goals” 

(such as introducing a new model or producing a certain number of units, as in the 

2012 Grant); and “Return Metrics (ROA, ROIC, ROE),” with each option paired with 

a handful of “advantages” and “disadvantages.”266

Ahuja had developed the strategic milestones for the 2012 Grant, and he took 

responsibility for developing the operational milestones for the 2018 Grant.267 On 

July 19, Burg sent Ahuja and other members of the Working Group an analysis of the 

historical market capitalization-to-revenue ratio of large U.S. companies.268 Ahuja 

used this data to propose starting with a 6.5x revenue-to-market-capitalizationmilestone ratio, which could be used to determine the initial revenue milestones—

$7.5 billion additional revenue for each $50 billion in market capitalization. The 

266 Id. at 6; JX-530 at 6. Of these options, Ahuja and Maron preliminarily expressed 

in advance of the meeting that they favored revenue. JX-526 at 1–3 (7/10/17 emails 

between Ahuja, Maron, and Chang re: Operational Metrics). Consistent with this 

preference, the presentation makes a case for revenue, describing it as “the most 

objective financial metric” and noting that the only listed downsides could be 

mitigated with other, already-discussed plan features. JX-530 at 5 (“Disadvantages 

. . . [1.] Requires adjustments for acquisition activities (e.g., goal increases for 

acquired companies)[;] [2.] Ignores profitability and may incentivize price 

cutting/lower margins; however, this concern mitigated if paired with long-term 

market cap goals[.]”). All of the other metrics are accompanied by multiple 

downsides, and none of the downsides for the non-revenue metrics included 

explanations of how those downsides could be mitigated or obviated by other plan 

features. Id. at 5–6.

267 Trial Tr. at 451:3–5 (Ahuja) (“My role was to provide information to the Board and 

Compensation Committee about potential operations milestones that could be 

used.”); see generally JX-622 (collection of Ahuja’s emails concerning milestone 

development).

268 JX-538.
54

revenue milestones then declined to 4x for the final tranches at increments of $12.5 

billion for each $50 billion market capitalization increment.269

On July 23, Ahuja suggested four EBITDA milestones in addition to the 15 

revenue-based milestones: $4 billion, $8 billion, $12 billion, and $16 billion.270 Ahuja 

projected that Tesla “should be able to get to $12B EBITDA in the next 4–5 years 

depending on volumes . . . and margin assumptions[.]”271 

The agenda for the July 17 Working Group Meeting included discussion of an 

M&A Adjustment and a Hold Period.272 Brown prepared a detailed slide on the M&A 

Adjustment, but there are no contemporaneous communications reflecting discussion 

of the adjustment beyond that slide.273 

As to the Hold Period, the presentation noted that the Guidelines required a 

six-month post-vesting Hold Period.274 The next day, Phillips emailed Burg and 

Brown a question from Ehrenpreis about “creative options” they could employ to 

“solve for getting a bigger discount” on the publicly reported grant date fair value,275

269 JX-622 at 3 (7/19/17 email from Ahuja to Compensia, Radford, and Tesla in-house 

attorneys).

270 JX-549.

271 Id. In this litigation, Ahuja testified that by the end of 2017 it became clear that 

these assumptions were no longer reasonable. Ahuja Dep. Tr. at 308:8–312:12. As 

discussed infra, however, there is a lot of competing testimony on the reliability of 

Tesla’s projections.

272 JX-530 at 3 (7/17/17 Working Group discussion document).

273 Id. at 10.

274 Id. at 8.

275 JX-535 at 1–2 (7/18/17 email from Phillips to Radford and Compensia asking them 

to compute what the discount would be if “Elon had to hold all exercised shares for 5 

years?”).
55

such as extending the Hold Period to five years (the “Five-Year Hold Period”).276 Burg 

provided holding periods ranging from one to ten years and types of options with 

corresponding discounts.277

After the July 17 meeting, the Working Group began planning for an August 

1, 2017 Compensation Committee meeting.278 The agenda for the meeting included 

an update for the full Board (excluding Musk and Kimbal) on the structure under 

discussion for the compensation plan and on stockholder feedback on the structure.279 

Maron sent an email to the full Board on July 27, summarizing the process to date 

and asking everyone to attend upcoming Compensation Committee meetings.280

12. Musk Hits The Brakes.

Late July 2017 proved a busy time for Tesla, which delivered the first Model 3 

on July 29. This triggered the eighth milestone in Musk’s 2012 Grant.281 It also 

prompted Musk to, once again, reset the Compensation Committee’s timeline. In 

Maron’s view, given the struggles with the Model 3 launch, Musk’s desired to extend

the timeline either because he was unsure whether to commit to Tesla (which Musk 

denied) or simply did not want to focus on compensation during a busy time.282

276 Id. 

277 JX-544 at 1–2 (7/21/17 email from Burg to Compensia, Chang, Ahuja, and other 

Tesla team members re: “Update to Slide Per Ira’s Request”).

278 JX-554 at 1.

279 Id.

280 JX-559 (7/27/17 email from Maron to Gracias, et al. re “CEO Comp planning”).

281 JX-563 (7/30/17 email from Gracias to Maron re: “Tesla UWC - Milestone 

Achievement”).

282 Maron Dep. Tr. at 197:1–199:6; Trial Tr. at 249:16–250:12 (Maron).
56

Whatever the reason, Musk hit the brakes on the process. On June 30, two 

days before the planned Compensation Committee meeting, Musk sent Maron a brief 

email asking to put the discussion of his compensation “on hold for a few weeks[.]”283 

Maron replied that he would “rather keep cranking on it . . . because there’s a fair 

amount to it that we’ve been working on with the board and there’s lead time 

involved.”284 Musk agreed to let Maron proceed, stating that he “[j]ust want[ed] to 

make sure Tesla interests come first.”285 Musk reminded Maron that “[t]he added 

comp is just so that I can put as much as possible towards minimizing existential risk 

by putting the money towards Mars if I am successful in leading Tesla to be one of 

the world’s most valuable companies. This is kinda crazy, but it is true.”286 

D. The Process Goes Off Course.

By August 2017, Musk remained hyper-focused on Model 3 production, which 

was proving slow and painful.287 As Musk described at trial, “[t]he sheer amount of 

pain required to achieve that goal, there are no words to express.”288 This aspect of 

Musk’s testimony was totally credible. 

283 JX-564 (7/30/17 email from E. Musk to T. Maron re “Re: My comp stuff”).

284 Id. 

285 Id. 

286 Id. 

287 JX-615 at 4 (9/5/17 email from Musk describing “[t]he slow progress” as “extremely 

alarming,” demanding production of 1,000 Model 3 vehicles in the final week of 

September, stating “[c]ome hell or high water that 1000 unit number is going to 

f***ing happen if I have to help build them myself. . . . I’m going to be draconian 

because I have to be[,]” and warning that “Tesla’s life is at stake” (asterisks added)).

288 Trial Tr. at 673:13–17 (Musk).
57

Although Musk agreed to allow Maron to “keep cranking,” progress on Musk’s 

compensation plan had slowed to a halt.289 From August through September, there 

was some discussion of Musk’s compensation plan but no action, and there were no 

meaningful discussions of the 2018 Grant in October.290 The highlights of this 

interregnum are discussed in brief below.

The Compensation Committee held a telephonic meeting on August 1, and 

Compensia made a presentation during that meeting that summarized the 

committee’s progress to date.291 The most notable aspect of this meeting concerned 

the following “key question” that went undiscussed: “Is additional compensation for 

the CEO required given his current ownership and its potential appreciation with 

Company performance?”292 Musk had made his initial proposal in April 2017, and 

the original timeline had the process wrapping up by July 2017, but this was the first 

time that this “key question” had been posed—did Musk require additional 

289 See, e.g., JX-596 at 1 (8/12/17 email from Brown telling another Compensia 

employee that there was “no need to spend time on [a presentation relating to the 

2018 Grant] for now” and noting that “Elon and the Board are negotiating a little bit, 

which may impact where they land on some of the key program points[,]” although 

the record does not reflect any such negotiations at that time); JX-599 (8/17/17 email 

from Phillips tacitly noting the pause by stating that “[w]e would like to proceed with 

Elon’s grant. I am hoping we can get on a call tomorrow with this small group to 

discuss next steps, proposed timeline and slides,” although it does not appear that 

any call took place); JX-604 at 1 (8/27/17 email from Ahuja to Working Group 

members stating “[i]t was decided to defer [] action by a few months”).

290 Materials for the October 5 Compensation Committee meeting, for instance, make 

no mention of the 2018 Grant. See JX-650.

291 JX-566 at 10–15 (8/1/17 slide deck for Compensation Committee meeting, with a 

slide titled: “For Reference: Preliminary Work to Date”). 

292 Id. at 7–8.
58

compensation? The most curious thing about this question is that there is no evidence 

that any director deliberated over it, and it did not appear in any other Board or 

committee materials.293

The next event of interest occurred on September 8, when Ehrenpreis and 

Denholm spoke to Musk to discuss his compensation plan.294 Once again, the most 

notable aspect of this conversation concerns a question that went undiscussed. The 

agenda for the September 8 call identified the following topic for discussion: “Should 

some type of commitment be included as part of comp structure?”295 Trial testimony 

revealed that no one raised this issue with Musk.296 Ehrenpreis recalled discussing 

Musk’s dedication to Tesla generally.297 And Maron’s summary of the call reflects 

that the participants discussed the “opportunity costs” of Musk devoting time to 

293 The presentation also: reflected Musk’s proposed 15-tranche structure; described 

the operational milestones as “TBD”; and included questions about a Clawback 

Provision (“Should there be an expanded clawback provision, or is the current 

provision from the Corporate Governance Guidelines adequate?”), an M&A 

Adjustment (“How should corporate transactions and potential changes in control be 

addressed?”), and a Hold Period (“What limitations should there be on the form of 

exercise, and should extended post-exercise holding period(s) for earned shares be 

established?”). Id. at 8. 

294 PTO ¶ 223; JX-610. Although Maron was invited to the call, he did not attend and 

did not have a substantive recollection of what was discussed. Maron Dep. Tr. 221:7–

223:18.

295 JX-612 at 2.

296 JX-617 at 2 (9/8/17 Compensation Committee meeting minutes indicating that a 

call occurred but providing no substance); Trial Tr. at 140:4–141:1 (Ehrenpreis) 

(testifying that he could not recall if Musk or Denholm had discussed with him 

“anything about . . . Musk[] devoting his time and attention to Tesla” as opposed to 

his other companies).

297 Ehrenpreis Dep Tr. at 309:11–311:6.
59

Tesla.298 Although Musk didn’t “have a good recollection of [the September 8] call,”299

he was confident that they did not discuss a time or attention commitment “vis-à-vis 

[Musk’s] other interests.”300 Musk said “that would be silly.”301 

The Board met on September 19, but the meeting was not terribly interesting. 

Ehrenpreis reported on the committee’s progress302 and the September 8 

conversation with Musk.303 Brown gave a presentation covering much of the same 

ground as the August 1 presentation. Brown valued the 15% market capitalization 

option at a $2–3 billion grant date fair value.304 According to the meeting minutes, 

“[t]he Board expressed its general support for the overall structure of” the Grant, 

298 JX-629 at 2; see also Trial Tr. at 665:2–667:10 (Musk) (discussing opportunity 

costs).

299 Musk Dep Tr. at 154:12–22.

300 Id. at 160:11–18.

301 Id. 

302 PTO ¶ 225; JX-631 (9/19/17 special Board meeting minutes); JX-629 at 3 (9/18/17 

email from Maron to the Board attaching a document stating, “[d]ecisions to be made 

at this meeting: 1. With Ira’s assistance, have compensation committee determine 

the following: a. Whether to maintain basic 2012 award structure (tranches tied to 

paired operational and market cap goals) and determine approach to goals b. 

Appropriate award size (e.g., number and size of tranches)”); JX-632 at 3 (9/19/17 

email from Maron to the Board attaching a document stating, “[d]ecisions to be Made 

-Whether to maintain basic 2012 award structure (tranches tied to paired operational 

and market cap goals) - Appropriate award size (e.g., number and size of tranches)”).

303 JX-631 at 1 (9/19/17 special Board meeting minutes stating: “Mr. Ehrenpreis 

provided an update on the activity regarding the CEO Compensation Program. Mr. 

Ehrenpreis reviewed the continuing work by members of the Compensation 

Committee, Company management and outside advisors, including Compensia, 

Radford and Wilson Sonsini Goodrich & Rosati. The Compensation Committee had 

developed key points and met with Mr. Musk to discuss various aspects of the CEO 

Compensation Program. . . . Mr. Ehrenpreis and Ms. Denholm updated the Board 

regarding their last meeting with Mr. Musk.”).

304 JX-632 at 7, 21.
60

meaning the 15-tranche structure.305 The Board favored “a long-term stock option 

grant . . . with performance-based vesting, primarily keyed to the market 

capitalization of the Company[.]”306 The Board noted that “Musk was driven by large 

goals[,]” and “viewed the discussed targets as achievable given the potential of the 

Company and believed that Mr. Musk would as well.”307 

Before this period of inactivity, the only milestones that had been discussed 

were the $50 billion market capitalization milestones. Operational milestones 

remained “TBD,”308 but Ahuja gave some thought to them in August and September. 

There was a Working Group meeting on August 3,309 and after that time, discussions 

focused on adjusted EBITDA.310 It is unclear who made the decision to focus on that 

metric. 

On August 17, Ahuja asked one of his employees for “operational metrics [that] 

will line up with 15 increments of $50B in market cap.”311 Ahuja envisioned 15 

adjusted EBITDA milestones “ranging from $2B to $25B” and requested comparisons 

to historic EBITDA/market capitalization correlations for Apple, Amazon, and 

305 JX-631 at 2.

306 Id. 

307 Id.

308 JX-566 at 28.

309 JX-584 (8/3/17 email from Phillips to Maron with Working Group agenda).

310 JX-640 at 3–4 (8/17/17 email from Ahuja to a subordinate stating that “the 

thinking now is to focus more on adjusted EBITDA . . . rather than revenue metrics”).

311 Id. at 3.
61

Google.312 After pulling the data, members of Ahuja’s team responded that they 

“didn’t see immediate parallels to where we are.”313 Ahuja requested more 

information on the data they gathered concerning “% Adjusted EBITDA/Revenue and 

Market Cap to Adjusted EBITDA multiple.”314 

The day after the September 19 Board meeting, Ahuja reached out to his team 

for help developing “10 Adjusted EBITDA based metrics that end at a revenue of 

about $150B and market cap of about $800B using % and multiples which start high 

and progressively become lower.”315 He explained that “[t]he thinking is that we will 

develop EBITDA based operational metrics rather than [r]evenue based.”316 It is 

unclear who dictated that “thinking” at the time. A Tesla employee responded to 

Ahuja’s request on September 21, providing ten potential EBITDA milestones (going 

from $2 billion to $20 billion in even increments of $2 billion, similar to Ahuja’s 

range).317 The data reflected adjusted EBITDA/revenue ratios of Tesla and its peers 

(e.g., Apple (34%) and Google (42%)).318 The employee found that Ahuja’s proposed 

312 Id. 

313 Id. at 2.

314 Id. 

315 Id. at 1.

316 Id. 

317 JX-641 at 1. 

318 Id. at 4; JX-642; JX-643.
62

EBITDA milestones range would necessitate an EBITDA-to-market-capitalization 

multiple well above that of Amazon, Apple, or Google.319 

E. The Process Restarts.

By the end of October, Tesla’s production difficulties seemed to be easing. A 

“Quarterly Update Letter” signed by Musk and Ahuja for the Board’s audit committee 

(the “Audit Committee”) at its October 31, 2017 meeting was generally optimistic. It 

stated that the “production rate will soon enter the steep portion of the 

manufacturing S-curve,” which would create “non-linear production growth” in the 

following weeks.320 With Tesla’s production stabilizing, Musk turned his attention 

back to his compensation plan. 

1. Musk Lowers His Ask.

In the early hours of November 9, Musk sent Maron an email stating that he 

wanted to “move forward with [his compensation plan] now, but in a reduced manner 

from before.”321 Musk testified that by “reduced,” he meant something less than 15% 

of total outstanding shares.322 It is unclear why Musk decided to lower his ask. It is 

possible that he was just trying to single-handedly calibrate the compensation 

package to terms that were more reasonable. Later that morning, Musk told Maron 

319 JX-641 at 1; see also JX-642 (9/21/17 Spreadsheet of Milestones, Sheet Two, 

Columns F, N).

320 JX-1540 at 84 (10/31/17 Audit Committee meeting materials).

321 JX-664.

322 Trial Tr. at 676:18–677:1 (Musk).
63

that he would “like to take board action as soon as possible if they feel comfortable 

and then it would go to shareholders.”323 Musk stated:

I think the amount should be reduced to a 10% increment 

in my Tesla ownership if I can get us to a $550B valuation, 

but that should be a fully diluted 10%, factoring in that it 

dilutes me too. So if it hypothetical [sic] was awarded to 

me now and I own (probably) ~20% fully diluted, then I 

would have ~30%. Of course there will be future dilution 

due to employee grants and equity raises, so probably this 

is more like 25% or so in 10 years when it has some chance 

of being fully awarded.324

The implication of Musk’s proposal to use a 10% fully diluted figure at 1% per 

tranche is that he now sought a ten-tranche structure. 

Moments later, Musk sent Maron another email stating:

Given that this will all go to causes that at least 

aspirationally maximize the probability of a good future for 

humanity, plus all Tesla shareholders will be super happy, 

I think this will be received well. It should come across as 

an ultra bullish view of the future, given that this comp 

package is worth nothing if ‘all’ I do is almost double Tesla’s 

market cap.325

Ehrenpreis relayed Musk’s revised proposal to the Board at a special meeting 

on November 16, 2017.326 In advance of that meeting, Chang sent Ehrenpreis a list 

of talking points, stating the “[n]umbers we are talking about are now lower than 

before . . . 10 tranches to $550 billion; 1% per tranche[.]”327 

323 JX-664.

324 Id. 

325 Id. 

326 JX-669 (11/16/17 special Board meeting minutes).

327 JX-670 (11/15/17 email from Chang to Ehrenpreis in advance of a Board meeting 

the following day).
64

2. Some Turbulence

Meanwhile, on November 13, Jurvetson began a leave of absence.328 At the 

time, Jurvetson had been a managing director of Draper Fisher Jurvetson (“DFJ”), a 

venture capital firm with investments in Tesla and other Musk-related businesses.329 

Following a scandal, Jurvetson was removed from DFJ. This became a “PR problem” 

for Tesla.330 Jurvetson returned to the Board in April 2019 but left again in 

September 2020.331 On November 14, Musk emailed Maron again, asking to “pause 

for a week or two” on his compensation plan as it would be “terrible timing.”332 At 

trial, Musk did not recall the nature of the problem. He is a smart person, though, 

and it is possible that he thought it was better to avoid releasing controversial news 

on the heels of controversial news.333 

328 PTO ¶ 133. Jurvetson had joined both the Tesla Board and the SpaceX board in 

June 2009, and he joined the Audit Committee in January 2010. Id. ¶¶ 132, 134, 136. 

329 Id. ¶¶ 130, 135 (6,546,420 shares of SpaceX collectively with affiliated funds); id. 

¶¶ 138–39 (stating that DFJ was also SolarCity’s third-largest institutional 

stockholder, owning 4,827,000 SolarCity shares (worth $98,229,450.00) as of its 

acquisition by Tesla). Jurvetson has other personal and professional ties with Musk. 

For instance, he personally beneficially owned 114,576 shares of Tesla common stock 

as of December 31, 2017. Id. ¶ 135. Jurvetson is an investor in Musk’s Boring 

Company and Kimbal’s The Kitchen Restaurant Group. See id. ¶¶ 140–41.

330 Gracias Dep. Tr. at 96:12–21, 98:3–16. The details of the incident do not appear 

in the record. 

331 PTO ¶¶ 132–33.

332 JX-668. 

333 Trial Tr. at 640:8–641:4 (Musk) (“I’d asked to just pause any discussions of 

compensation given the crisis level at the company was too high to think about 

anything else.”).
65

3. Musk Further “Negotiates Against Himself.”

Musk’s November 9 proposal had the unintended consequence of raising 

Musk’s demand. According to Chang, Musk’s demand to increase his current 

percentage of fully diluted shares (approximately 18.9%) by ten percentage points (to 

approximately 28.9%) would require an award of 28,959,496 shares, which equaled 

approximately 17.23% of total outstanding shares as of November 2017.334 Musk’s 

November 9 request, therefore, turned out to be larger than his initial proposal, 

contrary to Musk’s desire for a “reduced” amount.335 

Maron sent Chang’s calculations to Musk on November 29.336 Maron 

presented to Musk both (i) the total amount of shares Musk would receive based on 

his November 9 request for an additional 10% on a fully diluted basis (28,959,456 

shares); and (ii) the total amount of shares Musk would receive based on his March 

2017 request for an award of 15% of total outstanding, non-diluted shares (25,217,325 

shares).337 

Musk responded on December 1 telling Maron: “That is more than intended. 

Let’s go with 10% of the current FDS number, so 20.915M.”338 Musk arrived at this 

number by multiplying Tesla’s FDS (fully diluted share) total as of November 2017 

by 10%, or by factoring in dilution on a pre-grant basis. 

334 JX-673.

335 JX-664.

336 JX-678.

337 Id. at 1.

338 JX-682 at 1.
66

When asked about his December 1 proposal, Musk volunteered an answer that 

the plaintiff’s counsel has gleefully emphasized at every opportunity. He said that 

the December 1 proposal “was, I guess, me negotiating against myself.”339 

4. A Surge Of Activity

The parties crammed a lot of work into a few days in December. During a fiveday period that month, the Compensation Committee met twice (on December 8 and 

10),340 and the Board met once (December 12).341 There was a renewed sense of 

urgency after the December 8 meeting, as reflected by email chatter on December 10 

and 11 among high-ranking Tesla employees enlisted to work on the Grant.342 

During the December 10 meeting, the Compensation Committee approved a 

12-tranche Grant structure and a set of operational milestones. Ehrenpreis reported 

that Musk “appeared prepared to accept” the structure, which the minutes described 

at the “lower end of the previously contemplated range of 12% of the total outstanding 

shares.”343 The December 12 meeting minutes also identify other terms under 

consideration.

339 Musk Dep Tr. at 263:2–4. 

340 JX-697 (12/8/17 Compensation Committee meeting minutes); PTO ¶ 229 (noting

the Compensation Committee met on 12/10/17).

341 JX-729 (12/12/17 special Board meeting minutes).

342 JX-717 at 1 (12/10/17 email noting the “importance and the timing on getting” an 

analysis of the stock-based compensation effects of the grant “out quickly” because of 

a valuation deadline the next day); id. (12/11/17 email marked as “high” importance 

stating, “[w]e are back on with a vengeance (apologies in advance). . . . I am just now 

digesting myself”); JX-718 at 1 (12/11/17 email stating that “[o]ur CEO grant[] is back 

and on a fast track now”).

343 JX-729 at 1.
67

a. The 12%/12-Tranche Structure

All pre-November 9 discussions had assumed 15 tranches, in line with Musk’s 

proposals.344 And on November 9, Musk proposed ten tranches measured by fully 

diluted shares. On December 10, however, the Compensation Committee approved a 

12-tranche structure, which was presented to the Board two days later. The parties 

dispute the evolution of the 12-tranche structure.

According to Ehrenpreis, the 12-tranche structure was intended to counter 

Musk’s offer for a fully diluted 10% and its corollary ten-tranche structure.345 This 

may appear counterintuitive, because 12% of total outstanding shares equals 

approximately 10% fully diluted—thus, making it seem like there was no real upside 

to using the 12% figure. The difference, however, is that adding two more tranches 

on top of Musk’s suggested ten tranches required Tesla to hit the $50 billion market 

344 See JX-1598 at 3 (15 tranches, 1% of total outstanding shares each); JX-434 at 3 

(15 tranches, 1% of total outstanding shares each); JX-445 (15 tranches, 1% of total 

outstanding shares each); JX-464 at 5–7; (15 tranches, 1% of total outstanding shares 

each); JX-486 at 1 (15 tranches, 1% of total outstanding shares each); JX-510 at 12 

(15 tranches, varying total outstanding shares awards each); JX-530 at 9, 13 (15 

tranches, varying total outstanding shares awards each); JX-566 at 11, 14 (15 

tranches, varying total outstanding shares awards each); JX-640 at 3 (15 tranches); 

JX-632 at 4 (15 tranches, varying total outstanding shares awards each). One 

Compensia presentation from September 19 provides “5 to 10” tranches as a possible 

range, but this is clearly an error as the rest of the presentation, including the slide 

where this range appears, assumes an award with 15 tranches. See JX-628 at 6. 

Ehrenpreis’s testimony that “5 to 10 . . . was the range of the number of tranches that 

was being considered at that time” is not credible, and he acknowledged on redirect 

that the rest of the presentation envisioned 15 tranches. Trial Tr. at 51:18–24, 

214:20–215:6 (Ehrenpreis).

345 Trial Tr. at 58:15–59:11 (Ehrenpreis) (“And essentially -- and getting him to agree 

to the total outstanding share framework, we added two more vesting tranches, which 

would have required, for him to achieve the equivalent in number of shares, $100 

billion market cap more.”).
68

capitalization target two more times to generate an additional $100 billion in market 

capitalization.346 So, the 12-tranche structure made it harder for Musk to achieve 

the maximum payout of the Grant. Musk testified that the shift from fully diluted to 

total outstanding shares was one of “two areas . . . where the board pushed 

significantly, which I conceded[.]”347 

This testimony, however, finds no support in the contemporaneous record. 

Although there are benefits of a 12-tranche structure to minority stockholders, the 

move to 12% and 12 tranches was driven by the Board’s preference to base the Grant 

on total outstanding shares rather than fully diluted shares. 

The issue first arose during the November 16 Board meeting. There, the Board 

discussed a move from Musk’s proposed fully diluted shares to the Board’s preferred 

total outstanding shares.348 The Board viewed total outstanding shares as a simpler 

metric and had used it when issuing the 2012 Grant.349

346 Where each tranche is 1%, and there is a $50 billion market capitalization target 

per tranche, adding two tranches increases the total market capitalization goal by 

$50 billion x 2 = $100 billion. 

347 Id. at 584:9–19 (Musk). The other area was the Five-Year Hold Period, discussed 

below.

348 JX-669 (noting the Board “expressed a general preference” for a non-diluted award

and a structure of “1% of current total outstanding shares as the award for each 

vesting tranche” accompanied by $50 billion market capitalization increases and a 

“matching operational milestone”).

349 Maron Dep. Tr. at 407:17–25 (stating that the Board used total outstanding 

shares, instead of fully diluted shares, because “it was a simpler approach”); JX-135 

at 77 (showing 2012 Grant using total outstanding shares as well). The 2009 Grant 

used a diluted approach. JX-68 at 2–3.
69

On December 10, the Compensation Committee held a special meeting to 

discuss the Grant.350 There are no minutes for the December 10 meeting. Chang 

attended and took notes, which he circulated by email later that evening.351 His notes 

state:

Todd Introduction/led discussion re review of terms

o We seem to be at the right place as far as size: 10% of 

FDS (~12% of TOS)

o #of tranches?

Simplicity of 10

10 means that the end goal is smaller

Agreed to 12 tranches of 1% each.352

Translating the above, the Board agreed to the size demanded by Musk but preferred 

to base it on total outstanding shares, consistent with their discussion during the 

November 16 meeting. With his meeting notes, Chang indicated that he would “send 

another email shortly with the grant size numbers.”353 A few minutes later, he sent 

an email to the same people attaching a spreadsheet and stating the following:

Contemplated size of grant is here. Details attached.

This is based on 12% of total outstanding shares (TOS as 

of 11/8, should update to close to grant, but this should still 

get us very close).

Grant size would be 20,173,860 shares.

350 PTO ¶ 229.

351 JX-701.

352 Id. There is some indication that the 12-tranche structure was being considered 

prior to this meeting. On December 6, Ahuja circulated a spreadsheet concerning 

operational milestones to Chang and Maron. That spreadsheet reflected a 12-tranche 

structure, suggesting that Ahuja, Chang, and Maron had discussed this possibility 

prior to that time. JX-688.

353 JX-701.
70

• 12% of TOS

• 9.8% of FDS354

On December 11, Ahuja emailed Chang and Tesla’s corporate controller to 

confirm that the 2018 Grant would award 20,173,860 shares (12% of total 

outstanding or 9.8% of fully diluted) over 12 tranches.355 

On December 12, Ehrenpreis told the Board that Musk was prepared to accept 

this Grant size.356

There is no discussion in any of the minutes or notes of the November 16, or 

December 8, 10, or 12 meetings indicating that the Board desired 12 tranches because 

it was better for the minority stockholders. To the contrary, the only explanation in 

the record for the 12-tranche structure is that the Board preferred to measure the 

Grant by total outstanding shares for simplicity’s sake.

There is also no evidence that the Board pushed for the 12%/12-tranche 

structure. Maron did not recall the Board pushing or Musk conceding anything. He 

testified that although “the size of the overall plan” was one of the features that was 

“different than I think were initially thought of by Elon . . . I don’t want to say that it 

was necessarily over his objection.”357 Reinforcing the similarity between Musk’s 10% 

354 JX-702.

355 JX-715.

356 JX-729 (12/12/17 special Board meeting minutes).

357 Maron Dep Tr. at 428:20–430:3.
71

fully diluted ask and the Board’s 12% total outstanding offer, Musk confused the two 

at trial, mistakenly testifying that the Grant awarded “10 percent.”358 

b. The Operational Milestones

During the November 16 Board meeting, the Board “discussed the structure of 

the operational milestones,” came to a consensus to use both sales and profits metrics, 

and “directed the Compensation Committee and management to develop operational 

milestones” using revenue and EBITDA.359 

Ahuja and his team took up the mantle. On December 7 and 8, Ahuja 

developed a number of alternatives using a comparatively low 10% EBITDA/revenue 

margin.360 By December 10, Ahuja had refined the model to three options for six, 

eight, or 12 of each of revenue and adjusted EBITDA milestones, all at a 10% 

EBITDA/revenue margin.361

Recall that, in September 2017, Tesla sought to develop achievable operational

milestones and analyzed information regarding the adjusted EBITDA/revenue ratios 

358 Trial Tr. at 581:13–582:6 (Musk) (“Q. You think it was half a percent for the 2018 

plan as opposed to the 2012 plan? A. Sorry. 2012 -- I think -- I think it was 12 tranches 

for normally 10 percent-ish, approximately.”). Musk also testified that during the 

first conversation about the 2018 Grant he proposed a 10% incremental increase to 

his Tesla holdings. Musk Dep Tr. at 144:13–146:6. In context, this explanation 

appears implausible. 

359 JX-669 at 2.

360 JX-691 (12/8/17 email from Ahuja to Maron laying out four alternatives for 

revenue and EBITDA as operational milestones); JX-694 (Ahuja, Chang, and Maron 

planning to discuss milestone approach on December 8); JX-698 at 1 (12/9/17 email 

from Ahuja to Maron and Chang re: Revised CEO Comp alternatives, with 

attachment).

361 JX-698 at 1. 
72

certain peers (e.g., Amazon (8%), Apple (34%), and Google (42%)).362 The 10% 

EBITDA/revenue ratio modeled by Ahuja, therefore, was comparatively low and thus 

easier to achieve.363 Tesla ultimately based the Grant’s EBITDA milestones on an 

8% EBITDA/revenue margin,364 making them even easier to achieve.365 

Ahuja explained his methodology at trial. He “started with” the $50 billion 

market capitalization milestones and backed into the revenue and EBITDA 

targets.366 Chang similarly explained that the operational and market capitalization

milestones “have to be somewhat aligned. It has to make sense to be able to be 

achieved around the same time or what you think is the same time.”367 So to establish 

the operational milestones, the Working Group asked: “at this valuation what would 

. . . revenue and EBITDA look like . . . ?”368

362 JX-641 at 4; JX-643; JX-733 at 6.

363 Trial Tr. at 893:18–894:21 (Restaino).

364 JX-733 at 6. 

365 Trial Tr. at 893:18–894:21 (Restaino).

366 Id. at 463:15–464:8 (Ahuja).

367 Id. at 1094:17–1095:14 (Chang); see also, e.g., id. at 1061:23–1064:21 (Burg) 

(“Question: And was that work in connection with looking at revenue to market cap 

ratio, was that related to some sort of correlation between market cap, on the one 

hand, and revenue, on the other, and/or how an increase in one of those inputs might 

impact the other one? Answer: Yes. Essentially, it was trying to get a feel for -- trying 

to get a feel for market cap to revenue ratios and how those change over time as 

companies grow very big.”).

368 See id. at 1093:7–12 (Chang). 
73

During the December 12 meeting, the Board also reviewed Tesla’s then-current 

operating plan and projections.369 Ahuja developed, and Musk approved, the 

projections in December prior to the meeting (the “December 2017 Projections”).370 

The one-year projections underlying the operating plan forecasted $27.4B in total 

revenue and $4.3B in adjusted EBITDA by late 2018, and thus predicted achievement 

of three milestones in 2018 alone.371 The three-year long-run projections (“LRP”) 

underlying that plan reflected that, by 2019 and 2020, Tesla would achieve seven and 

eleven operational milestones, respectively.372 The following chart reflects the 

corollaries:

Revenue Adjusted EBITDA

2017 3-Yr LRP The Grant 2017 3-Yr LRP

FY2018 $27.5B $20B $1.5B $3.8B

FY2019 $41.9B $35B $3B $8.1B

FY2020 $69.6B $55B $4.5B $14.4B

$75B $6B

$100B $8B

$125B $10B

$150B $12B

$175B $14B

369 JX-740 at 2 (email attaching 2018 operating plan 12/12/17 slide deck); Trial Tr. at 

523:12–16 (Ahuja) (confirming the full Board saw the projections before approving 

the Grant, including in December 2017). 

370 JX-728 at 1–2; JX-372 at 6 (text messages between Maron and Ahuja); Trial Tr. at 

515:18–516:7, 517:8–518:11 (Ahuja).

371 JX-749 at 20; Trial Tr. at 518:18–519:5 (Ahuja). 

372 JX-529 at 2; JX-543 at 2; JX-555 at 5; JX-573 at 408; JX-582 at 4; JX-587. 
74

F. The Last Leg

The day after the December 12 Board meeting, Chang provided Burg and 

Brown the “near final” term sheet (the “December 13 Term Sheet”), stating that Musk 

was “well aligned” on the terms and that he expected Board approval in early January 

2018.373 The key terms concerning structure and milestones had been finalized, 

which allowed Burg to complete the grant date fair value. Other terms, such as a 

Leadership Requirement (defined below), the Hold Period, and the M&A Adjustment 

would fall into place in the weeks ahead.

1. The Leadership Requirement

The December 13 Term Sheet reflected agreement on a “Leadership 

Requirement,” conditioning vesting under the Grant on Musk being “CEO or 

Executive Chairman and Chief Product Officer[.]”374 

The 2012 Grant contained a stricter Leadership Requirement, which 

conditioned vesting on Musk remaining CEO.375 The Board materials for the 

September 19 meeting reflect that the Board considered a Leadership Requirement 

similar to that in the 2012 Grant.376 At some point between September 19 and 

December 13, the Board relaxed its request to allow vesting if Musk was not CEO but 

was Executive Chairman and Chief Product Officer.377 There is no indication how or 

373 JX-743 at 1.

374 Id. at 4–5. 

375 JX-137 at 1 (2012 Grant).

376 Id.; JX-633 at 9 (“Based on the 2012 Award, should the Company continue to 

require Mr. Musk to be CEO in order to continue vesting under the new award?”).

377 JX-878 at 52 (2/8/18 Schedule 14A Proxy Statement).
75

when the decision was made, whether it was raised with Musk, or when the term was 

finalized, but it appears in the final Grant.

At trial, Gracias explained that the more lenient Leadership Requirement

reflected the Board’s belief that Musk’s “most valuable function[]” was as the “chief 

product officer,” not as the CEO.378 There is no evidence that the Board ever 

discussed or negotiated this with Musk.

2. The M&A Adjustment

The December 13 Term Sheet reflected the Board’s intent to include an M&A 

Adjustment in the Grant.379 The 2018 Grant included an M&A Adjustment, which 

had been under discussion since at least the June 23 Compensation Committee 

meeting.380 In its final form, the M&A Adjustment excluded from the market 

capitalization milestone acquisitions with a purchase price over $1 billion, and the 

revenue and adjusted EBITDA milestones excluded amounts attributable to 

acquisitions providing more than $500 million or $100 million of each, respectively.381 

At trial, Ehrenpreis described this as a negotiated term, testifying that Musk 

wanted “the M&A adjustments just to apply to a single milestone at the point of M&A, 

and we ultimately got those adjustments to apply across the entire basis of the -- of 

378 Trial Tr. at 726:4–15 (Gracias).

379 JX-743 at 4–5. 

380 JX-475 at 6.

381 JX-878 at 19 (2/8/18 Schedule 14A Proxy Statement).
76

all the milestones.”382 Ehrenpreis was referring to a January 16 demand from Musk 

to Maron that the M&A Adjustment threshold be 5% of the then-current market 

capitalization rather than a flat $5 billion.383 Musk also told Maron that adjusting 

the revenue and adjusted EBITDA milestones would be too complicated and 

unnecessary.384 

Musk, however, would eventually come around to the M&A Adjustment as 

proposed by the Board and even suggested stricter terms. After speaking to Ahuja, 

on January 16, Maron proposed a threshold that would exclude acquisition-based 

market capitalization growth amounting to the lesser of (i) 5% market capitalization 

at the time of the acquisition and (ii) a flat number between $5 and $10 billion.385 

Musk countered—again, against himself—with a threshold at the lower of 2% of then382 Trial Tr. at 227:9–13 (Ehrenpreis); see id. at 63:5–15 (Ehrenpreis) (“We further 

negotiated the idea of creating adjustments to both the revenue and EBITDA and 

market cap numbers if there was M&A that caused -- if, through acquisition, either 

the market cap or those financial metrics increased. And so there was a negotiation 

around the idea that we didn’t want the plan to have the unintended consequence of 

Elon being able to buy his way into it through M&A.”); see also JX-783 at 1–2 (1/16/18 

email from Maron to Compensation Committee stating that Musk wanted that “[a]ny 

M&A in which [Tesla] buy[s] a company for no more than 5% of [Tesla’s] then current 

market cap will have no adjustment”).

383 JX-783 at 2.

384 See id. at 1.

385 JX-781 at 2 (1/16/18 email from Maron to Musk stating, “Deepak and I were just 

talking and think we should make a slight tweak to what we discussed. Because 

setting the threshold at 5% of our then current market cap could result in pretty big 

numbers as we grow, and thus one deal that’s under 5% could still be a big chunk of 

a $50B market cap increment, we propose setting the threshold at the *lesser* of (a) 

5% of our then current market cap or (b) some number between $5B and $10B.”).
77

current market capitalization or $1 billion.386 He told Maron and Ahuja, “I don’t 

think we will be making big acquisitions[]” and “[t]here is no chance I will game the 

economics here, so I’m fine with limits that prevent that.”387 After discussing the 

issue with the Compensation Committee, all agreed to the following exclusion 

triggers for acquisition-based growth: the lower of 2% of then-current market 

capitalization or $1 billion for market capitalization milestones; revenue exceeding 

$500 million for the revenue milestones; and adjusted EBITDA exceeding $100 

million for the adjusted EBITDA milestones.388

3. The Hold Period

The December 13 Term Sheet reflected that the duration of the Hold Period 

was an open issue.389 The December 13 Term Sheet stated that the Hold Period was 

“likely to be 5 years,” but it was still uncertain.390 The 2018 Grant included the FiveYear Hold Period.

At trial, Ehrenpreis described the Five-Year Hold Period as a negotiated 

term.391 Musk similarly testified that the Board “pushed” for this term, which was 

386 JX-781 at 1.

387 Id. at 1–2.

388 JX-782 at 1.

389 JX-743 at 4–5. 

390 Id. at 5 (12/13/17 term sheet); see also JX-746 at 3 (Liu 12/13/17 email stating “[i]t 

seems we’ll likely have 5 years holding period after exercise”).

391 Trial Tr. at 63:20–64:1 (Ehrenpreis) (stating the Board “negotiated an agreement 

that [Musk] would hold for five years after both the achievement and vesting and 

exercise of the options”); id. at 210:24–211:2 (Ehrenpreis) (“It did. I mean, we didn’t 

have one in the beginning, and we ultimately were able to get five years.”); see also 

id. at 342:15–21 (Denholm) (“There were also some questions or some comments 
78

his “biggest concern, because it would mean that either [he] would need to run the 

company for another five years after the stock vested or [he] would need to find 

someone who would run the company well enough to not cause the valuation to 

subsequently decline significantly. . . . A lot can happen in five years.”392 

But there is nothing in the record reflecting any actual negotiation with Musk 

over this term. The only explanation in the record for a five-year period came in July, 

when Ehrenpreis raised the possibility as a “creative option[]” for “getting a bigger 

discount[]” on the publicly disclosed value of the Grant.393

4. The Grant Date Fair Value

On December 22, Burg provided a valuation letter based on the December 13 

Term Sheet.394 Burg used Monte Carlo simulations to estimate the probability of 

hitting the market capitalization milestones, which is a “generally accepted 

statistical technique” that “simulate[s] a range of possible future” outcomes over a 

given timeframe using constantly repeating, random potential scenarios.395 

about the retention period after, you know, assuming that the plan was achieved over 

a period of time, that he needed to hold the equity for five years. I remember that 

coming up as being a virtuous feature of the actual program, because it, again, aligned 

shareholder interest.”). 

392 Id. at 584:12–585:2 (Musk).

393 JX-535 at 1–2 (7/18/17 email from Phillips to Radford and Compensia asking them 

to compute what the discount would be if “Elon had to hold all exercised shares for 5 

years?”); see also JX-792 at 7 (1/21/18 Radford report) (stating that five year hold 

period would result in an “illiquidity discount”); Trial Tr. at 133:5–134:4 (Ehrenpreis) 

(agreeing that imposing a five-year hold period would produce the highest discount).

394 JX-752 (12/22/17 email from Burg to Radford, other Tesla employees, and 

PricewaterhouseCoopers attaching a valuation letter).

395 See id. at 5, 11 (describing the Monte Carlo simulation method and showing 

formula). 
79

Burg determined that the first market capitalization goal—described as $100 

billion, or $50 billion of growth—would occur 45.55% of the time, after which the 

likelihood of achieving subsequent milestones rapidly declined to below 10% from 

milestone six onward.396 The Monte Carlo valuation did not account for the 

probability of hitting the operational milestones, nor did it incorporate Tesla’s

internal projections.397 

Based on these estimates, Burg reached an initial grant date fair value for the 

2018 Grant of $2,656,430,639. He then applied a 10.52% illiquidity discount based 

on the Five-Year Hold Period, arriving at a final value of $2,377,077,626.398 Burg 

and Ahuja’s team continued to refine this valuation in the following weeks by 

tweaking assumptions, including the holding period and dilution rate.399

Burg provided an updated valuation letter on January 19.400 This letter 

included a slightly higher final valuation of $2,575,342,854 (again taking into account 

the holding period illiquidity discount) compared to the December 22 valuation of 

$2,377,077,626.401 Another updated letter, dated January 21, provided a still higher 

final valuation of $2,615,190,052, resulting from intervening increases in the total 

number of shares, a higher stock price, and slight changes to other assumptions.402

396 Id. at 12.

397 See id. at 4–5.

398 Id. at 6–9.

399 See JX-767 at 1–4; JX-772 at 1–2.

400 JX-785 at 1–2.

401 Compare JX-785 at 10, with, JX-752 at 6–9.

402 JX-792 at 7; JX-799 at 3.
80

G. The Board Approves The Grant.

On January 21, 2018, the Board held a special meeting to approve the 2018 

Grant.403 Musk and Kimbal recused themselves and Jurvetson was on leave.404 The 

other six directors—Ehrenpreis, Denholm, Gracias, Buss, Murdoch, and Johnson 

Rice—unanimously approved the 2018 Grant.405 

In its final form, the 2018 Grant is divided into 12 vesting tranches.406 Each 

tranche vests upon satisfaction of one market capitalization milestone and 

achievement of one operational milestone.407 The 12 market capitalization 

milestones increase in $50 billion increments, beginning at $100 billion and ending 

at $650 billion.408 The 2018 Grant has 16 operational milestones: eight based on 

revenue and eight based on adjusted EBITDA.409 For each tranche to vest, the 

403 See PTO ¶¶ 231–33.

404 JX-791 at 1 (1/21/18 special Board meeting minutes).

405 Id. at 1–2.

406 PTO ¶ 238.

407 Id. 

408 See id. ¶ 241. Market capitalization was measured by “(i) the sum of Tesla’s daily 

market capitalization for each trading day during the six (6) calendar month period 

immediately prior to and including the determination date, divided by the number of 

trading days during such period and (ii) the sum of Tesla’s daily market capitalization 

for each trading day during the thirty (30) calendar day period immediately prior to 

and including the determination date, divided by the number of trading days during 

such period.” Id. ¶ 242. 

409 Id. ¶ 244; see also id. ¶ 245 (defining revenue as “total Tesla revenues, as reported 

in Tesla’s financial statements on Forms 10-Q or 10-K filed with the SEC for the 

previous four consecutive fiscal quarters”); id. ¶ 246 (defining adjusted EBITDA “as 

(i) net income (loss) attributable to common stockholders before (ii) interest expense, 

(iii) (benefit) provision for income taxes, (iv) depreciation and amortization, and (v) 

stock-based compensation, as each such item is reported in Tesla’s financial 
81

achievement of any one of the operational milestones can be paired with achievement 

of any one of the market capitalization milestones.410 The increments of the 

operational milestones are shown in the table below.411

Revenue-Based 

Operational 

Milestones

(in billions)

Adjusted 

EBITDA-Based 

Operational 

Milestones

(in billions)

1 $20.0 $1.5

2 $35.0 $3.0

3 $55.0 $4.5

4 $75.0 $6.0

5 $100.0 $8.0

6 $125.0 $10.0

7 $150.0 $12.0

8 $175.0 $14.0

To complete each tranche, the Grant requires that Tesla achieve one market 

capitalization milestone and one operational milestone.412 Each completed tranche 

earns Musk options to purchase 1% of Tesla’s common stock outstanding as of 

January 19, 2018. Before a five-for-one stock split in 2020 and a three-for-one stock 

split in 2022, this 1% was equivalent to 1,688,670 shares.413 If fully vested, the 2018 

Grant would therefore grant Musk options to purchase 20,264,042 (pre-split) 

shares.414 The strike price of these options was $350.02, the closing price of Tesla’s 

statements on Forms 10-Q or 10-K filed with the SEC for the previous four 

consecutive fiscal quarters”). 

410 Id. ¶ 243.

411 Id. ¶ 244.

412 Id. ¶ 238.

413 Id. ¶¶ 42–43, 239.

414 Id. ¶ 236.
82

common stock on January 19, 2018.415 Adjusting for Tesla’s two stock splits, the

strike price was $23.33.416

The Grant also included the Clawback Provision, Leadership Requirement, 

M&A Adjustment, and Five-Year Hold Period. Like the 2012 Grant, the 2018 Grant 

expired after ten years.417

H. The Stockholders Approve The Grant.

Board approval was not the finish line, because the Board conditioned the 2018 

Grant on approval by a majority vote of disinterested stockholders.418 

1. The Proxy Statement

Tesla announced the 2018 Grant to the public and filed a preliminary proxy 

statement on January 23, 2018.419 Tesla filed its definitive proxy statement (the 

“Proxy”) on February 8, which notified stockholders of a vote to approve the 2018 

Grant on March 21, 2018.420

The Proxy included statements at issue in this litigation. It described all 

Compensation Committee members as “independent directors,” despite Gracias’s 

415 Id. ¶ 237.

416 Calculated as $350.02 divided by (5 x 3). 

417 JX-878 at 52 (stating that the Grant expires on January 20, 2028); JX-137 at 1.

418 PTO ¶ 233; JX-791 at 4–5.

419 PTO ¶ 234.

420 Id. ¶ 235; see also JX-878 at 29.
83

close relationship with Musk.421 The Proxy did not disclose the financial or personal 

connections between the members of the Compensation Committee and Musk. 

The Proxy did not disclose the April 9 conversation between Musk and 

Ehrenpreis, during which Musk established the key terms of the 2018 Grant. A 

discussion of this conversation appeared in at least four earlier drafts of the Proxy.422 

In its final form, the Proxy states:

With the 2012 Performance Award nearing completion, the 

Board engaged in more than six months of active and 

ongoing discussions regarding a new compensation 

program for Mr. Musk, ultimately concluding in its 

decision to grant the CEO Performance Award. These 

discussions first took place among the members of the 

Compensation Committee of the Board (the ‘Compensation 

Committee’), all of whom are independent directors, and 

then with the Board’s other independent directors, 

including its two newest independent directors, Linda 

Johnson Rice and James Murdoch.423

The Proxy stated that: “each of the requirements underlying the performance 

milestones was selected to be very difficult to achieve”;424 the Board “based this new 

award on stretch goals”;425 the Grant’s milestones were “ambitious” and 

“challenging”;426 “[l]ike the Revenue milestones described above, the Adjusted 

421 JX-878 at 10. The Proxy also describes Johnson Rice and Murdoch as independent. 

Id.

422 See JX-1597 at 9; JX-1598 at 3; JX-1599 at 14; JX-1700 at 12.

423 JX-878 at 10.

424 Id. at 41.

425 Id. at 4.

426 Id. at 22.
84

EBITDA milestones are designed to be challenging”;427 and “[t]he Board considers the 

Market Capitalization Milestones to be challenging hurdles.”428 

The Proxy disclosed that, when setting the milestones, “the Board carefully 

considered a variety of factors, including Tesla’s growth trajectory and internal 

growth plans and the historical performance of other high-growth and high-multiples 

companies in the technology space that have invested in new businesses and tangible 

assets.”429 “Internal growth plans” referred to Tesla’s projections.430

Tesla prepared three sets of projections during the process. During July 2017, 

Tesla updated its internal three-year financial projections (“July 2017 

Projections”).431 The July 2017 Projections reflected that the S-curve’s exponential 

growth phase was imminent.432 Tesla shared the July 2017 Projections, which the 

Audit Committee approved,433 with S&P and Moody’s in connection with a debt 

427 Id. at 18.

428 Id. at 17.

429 Id. at 18. 

430 Trial Tr. at 481:14–481:24 (Ahuja).

431 JX-529 at 2. JX-529 at 2. The Model 3 was Tesla’s first mass production vehicle. 

See Trial Tr. at 574:14–18 (Musk). When mass production is successful, the 

production curve resembles the letter S. Id. at 1197:9–13 (Gompers); JX-1539. Musk 

explained: “[T]he production starts off slowly and then you gradually eliminate the 

constraints and eventually it starts taking off exponentially.” JX-390 at 9; Trial Tr. 

at 667:11–16 (Musk). 

432 JX-1540 at 84 (10/31/17 Audit Committee meeting materials) (“The production 

rate will soon enter the steep portion of the manufacturing S-curve, which should 

result in non-linear production growth in the weeks ahead.”).

433 JX-580 at 1; JX-573 at 1; Trial Tr. at 521:16–522:21 (Ahuja) (testifying that he 

discussed the projections with the Audit Committee, including Denholm, Gracias, and 

Buss).
85

offering.434 The 2017 Projections showed revenue growth of $69.6B and adjusted 

EBITDA growth of $14.4B in 2020.435 Under the July 2017 Projections, Tesla would 

achieve three of the revenue milestones and all of the adjusted EBITDA milestones 

in 2020. The Proxy did not disclose this.

Ahuja developed and Musk approved a new operating plan and projections in 

December—the December 2017 Projections.436 As discussed above, the Board 

reviewed those projections on December 12.437 The one-year projections underlying 

the operating plan forecasted $27.4B in revenue and $4.3B in EBITDA by late 2018, 

and thus predicted achievement of three milestones in 2018 alone.438 The longer 

three-year projections underlying that plan reflected that by 2019 and 2020, Tesla 

would achieve seven and eleven operational milestones, respectively.439 The Proxy 

did not disclose this.

After Tesla issued the Proxy, but before the stockholder vote, Ahuja presented 

the Board with a three-year operating plan (the “March 2018 Projections”), which 

Tesla later shared with Moody’s.440 Musk reviewed and approved the March 2018

434 Trial Tr. at 466:14–469:24 (Ahuja).

435 JX-529 at 2.

436 JX-728 at 1–2; JX-372 at 6 (text messages between Maron and Ahuja); Trial Tr. at 

515:18–516:7, 517:8–518:11 (Ahuja).

437 JX-740 at 1–2; Trial Tr. at 523:12–16 (Ahuja) (confirming the full Board saw the 

projections before approving the Grant, including in December 2017).

438 JX-740 at 18; Trial Tr. at 518:18–519:5 (Ahuja).

439 JX-529 at 2; JX-543 at 2; JX-555 at 5; JX-573 at 408; JX-582 at 4; JX-587. 

440 JX-948 at 2 (3/13/18 Board meeting minutes); JX-973 at 1; JX-974 (March 13 

Projections).
86

Projections before they were presented to the Board.441 The March 2018 Projections 

were more pessimistic than previous projections but still predicted achievement of 

one revenue and two adjusted EBITDA milestones by March 31, 2019, and further 

two revenue and four adjusted EBITDA milestones by the end of 2020.442 As 

discussed below, Tesla would issue a supplemental disclosure with this information, 

but not until after the stockholder vote.

2. The Public Reaction

Tesla tracked support and opposition to the 2018 Grant among stockholders 

and engaged in outreach.443 The two largest proxy advisors, ISS and Glass Lewis, 

both recommended voting against the 2018 Grant.444 

Glass Lewis expressed concern with the size and potential dilutive effect of the 

grant, noting that “any relative comparison of the grant’s size would be akin to 

stacking nickels against dollars[]”and that “the lower tiers of the goals are relatively 

much more attainable given the time periods in question, potentially allowing for 

sizable payments without commensurately exceptional achievement.”445 

ISS described the grant value as “staggering” and concluded that even the 

“challenging” and “far-reaching performance goals do not justify the extraordinary 

441 Trial Tr. at 511:8–19 (Ahuja).

442 JX-974; JX-1023 at 6.

443 See JX-901 at 3–7.

444 JX-987 at 6 (3/21/18 ISS proxy analysis & benchmark policy voting 

recommendations); JX-931 at 7 (3/6/18 Glass Lewis proxy paper on Tesla).

445 JX-931 at 5, 7.
87

grant magnitude[.]”446 In an internal email, ISS noted that it “steered clear of getting 

too deep into this[]” because “making that argument essentially puts us in the 

situation of saying Tesla’s board is not strong enough to stand up to Musk[.]”447 

Also, both recommendations expressed concern with Musk’s non-Tesla 

interests, although Glass Lewis stated that “Musk’s extracurricular exploits 

undoubtedly contribute to his value to the Company[.]”448

Stockholders also criticized the Grant, noting that Musk’s Tesla equity 

provided sufficient motivation for Musk to perform,449 the Grant’s size and dilutive 

effects were excessive,450 the EBITDA milestones were too low,451 and that linear 

milestones were inappropriate for an “exponential company” like Tesla.452 

Five days before the stockholder vote, on March 16, Maron informed the Board 

that the outcome of the stockholder vote was “not yet clear.”453 Maron reported that 

although initial vote tallies were favorable, many big stockholders had not yet voted 

and their intentions remained unclear.454 

446 JX-987 at 3, 6. An earlier internal ISS email also described the amount as “just 

absurd.” JX-841 at 1.

447 JX-940 at 1.

448 JX-931 at 7; JX-987 at 6. 

449 JX-547.

450 JX-968 at 3; JX-1541 at 1.

451 JX-838 at 1–2; JX-899. 

452 JX-899. 

453 JX-964 at 1. 

454 Id. 
88

By March 20, Maron informed Musk that the Grant would likely receive 

approval, but that two large Tesla stockholders were voting against the Grant on the 

grounds that its size was excessive.455 In response, Musk asked Maron to tell one of 

the large stockholders that he was “very offended by their action if they choose to vote 

that way, but but [sic] by all means do so.”456 Musk also asked Maron to set up a call 

with one of the stockholders following the vote, during which Musk would “convince 

them to divest from Tesla and any of [his] companies ever. They are not welcome.”457 

It appears that a non-Musk employee at Tesla called that stockholder after the 

vote.458

3. The Stockholder Vote

The stockholders approved the Grant at a special stockholder meeting on 

March 21, 2018, with 73% of votes cast at the meeting (excluding Musk’s and Kimbal’s 

ownership) in favor.459 

I. Subsequent Events

Events relevant to evaluating the fairness of the Grant occurred after 

stockholders approved the Grant. Namely, Tesla disclosed that several Grant 

milestones were greater than 70% probable of achievement, nearly all the tranches 

455 JX-972 at 1–2 (stating Vanguard found the size was “simply too high[]” and Capital 

most likely opposed “the size”).

456 Id. at 1.

457 Id. 

458 Trial Tr. at 441:11–24 (Maron); see JX-1017 at 1 (4/11/18 email from Musk to 

Maron asking about the call with Capital). 

459 JX-979 at 3 (3/21/18 Form 8-K dated March 21, 2018).
89

vested, Musk got in trouble with the SEC, named himself Technoking, and acquired 

Twitter, Inc.

1. Tesla Discloses That Several Of The Grant’s Milestones 

Are Probable Of Achievement.

For accounting purposes, on March 27, Burg provided a final fair value letter 

arriving at a grant date fair value of $2,283,988,223.460 Ahuja and his team then had 

to determine when Tesla was likely to hit the performance milestones, which Tesla 

needed to disclose to stockholders in its March 31, 2018 Form 10-Q (the “March 31 

10-Q”).461 Tesla determined that three operational milestones were “considered 

probable of achievement,” which meant that they were greater than 70% probable of 

achievement within approximately one year of the Grant date.462

Tesla’s methodology to determine the probability of milestone achievement

was to “us[e] the operating plan of record[.]”463 Tesla’s operating plan was a set of 

internal one-year forecasts.464 Tesla developed and updated one-year and three-year 

460 JX-997 at 7. $2,562,885,538 before applying a 10.88% illiquidity discount due to 

the Five-Year Hold Period. See id. Changes from previous valuations are primarily 

due to an intervening decline in the stock price. See JX-1003 at 1.

461 See JX-990 at 1; JX-1004 at 1; JX-1019 at 2; JX-1011 (3/31/18 Form 10-Q for Q1).

462 JX-1011 at 27.

463 JX-1019 at 2; Trial Tr. at 743:11–23 (Gracias) (“[T]here’s only one plan. . . . We 

didn’t show anything else to the banks . . . or to The Street, literally one set of 

numbers. That’s it.”); Trial Tr. at 791:13–792:2 (Gracias) (confirming Tesla had one 

financial plan as of 2017 and 2018, and during that period everyone—including 

Musk—relied on that plan to run Tesla, and “Musk himself was integrally involved 

in creating Tesla’s operating plan”); see id. at 498:1–499:2 (Ahuja) (confirming Musk 

was “extremely involved” in the three-year financial plan).

464 See JX-953 (2018 operating plan slide deck). 
90

internal projections on a regular basis.465 They were not the product of bottom-up 

forecasting. They were used to drive and motivate rather than plan, and Tesla 

frequently missed its projections.466 They reflected what Tesla would need to do to 

reach aggressive goals set by Musk.467 

Tesla based the March disclosures on the March 2018 Projections. Ahuja 

described the March 2018 Projections as “extremely aggressive and challenging” 

based on “stretch goals” and “very large . . . risks[.]468 Yet Tesla disclosed that “the 

following performance milestones were considered probable of achievement: total 

revenue of $20.0 billion; adjusted EBITDA of $1.5 billion; and adjusted EBITDA of 

$3.0 billion.”469 The March 31 10-Q included the usual disclaimer, stating that “[t]he 

probability of meeting an operational milestone is based on a subjective assessment 

of our future financial projections.”470 According to Ahuja, this disclosure meant that 

465 Id. at 466:14–19, 467:18–468:2 (Ahuja).

466 Id. at 223:8–224:1 (Ehrenpreis) (testifying that the “projections . . . were mostly

used to drive the company . . . [so he] was absolutely not surprised at the number of 

misses and the frequency of new forecasts”); see id. at 746:11–20 (Gracias) (describing

these projections as “a very aggressive stretch plan[] . . . to get people motivated and 

incented[] . . . to drive the internal operations”); id. at 333:20–334:18 (Denholm) 

(testifying that the projections reflected what “we’re trying to achieve” and the Board 

did not view the projections “as being realistic and achievable plans”).

467 Id. at 466:23–467:7 (Ahuja) (testifying that Tesla set “really stretch goals, which 

reflected Elon’s general philosophy of really pushing himself and the team to deliver 

impossible things”).

468 Id. at 488:12–489:24; 504:24–505:5 (Ahuja).

469 JX-1011 at 27.

470 Id. 
91

“the three operational milestones . . . are 70 percent probable of achievement in the 

late 2018 and 2019 time frame.”471 

Ahuja characterized the probability assessment as an inherently “conservative 

approach” from an accounting perspective.472 Still, it is not clear how Tesla 

management reconciled their views that the milestones were both “risky” and a 

“stretch” yet simultaneously more than 70% likely to occur. 

Regardless, management stuck to its guns. On April 3, Ahuja told his team 

that “to be consistent in our methodology of using the operating plan of record, we 

should assume that the second EBITDA milestone has greater than 70% chance of 

vesting by 6/30/2019.”473 And an Audit Committee presentation dated April 27, 2018 

indicated that, based on the March 2018 Projections, Tesla considered the $20 billion 

revenue milestone and the $1.5 billion adjusted EBITDA milestone more than 70% 

likely by December 31, 2018, and the $3 billion adjusted EBITDA milestone more 

than 70% likely by March 31, 2019.474 On May 7, 2018, Tesla filed a Form 10-Q 

disclosing to stockholders that, as of March 31, 2018, three operational milestones 

“were considered probable of achievement[.]”475

471 Trial Tr. at 493:21–494:5 (Ahuja); id. at 503:18–22 (Ahuja). 

472 Id. at 488:1–489:24 (Ahuja). 

473 JX-1019 at 2.

474 JX-1023 at 6.

475 JX-1031 at 27 (5/7/18 Form 10-Q for Q1).
92

2. Tesla’s Performance

The Grant began vesting in 2020 as Tesla’s business took off. Although Tesla’s 

business performance between 2018 and 2020 fell short of the March 2018 

Projections, Tesla slightly exceeded its projected adjusted EBITDA for 2018.476 Four 

tranches vested by the end of 2020, and three more vested the following year.477 As 

of April 29, 2022, eleven of the Grant’s 12 tranches had vested.478 As of June 30, 

2022, all market capitalization milestones had been achieved, all adjusted EBITDA 

milestones had been achieved, and three revenue milestones had been achieved, with 

one more deemed probable of achievement.479 

3. The SEC Settlement

On September 29, 2018, the SEC announced that it had reached a settlement 

with Musk over fraud charges stemming from a tweet he sent in August 2018.480 As 

part of the settlement, Musk agreed to pay a penalty of $20 million, resign as Chair 

of the Tesla Board, submit communications relating to the company for pre-approval 

subject to procedures implemented by Tesla, and not “make . . . any public statement 

476 Trial Tr. at 479:6–21 (Ahuja).

477 PTO ¶¶ 265–71.

478 Id. ¶¶ 272–75.

479 Id. ¶ 276.

480 JX-1070 at 1 (9/29/18 SEC Press Release: Elon Musk Settles SEC Fraud Charges; 

Tesla Charged With and Resolves Securities Law Charge). On August 7, 2018, Musk 

tweeted: “Am considering taking Tesla private at $420. Funding Secured.” JX-1057 

(Aug. 7, 2018, 12:48 p.m. Musk tweet). The SEC charged that Musk’s Tweet was 

misleading because he had not “discussed specific deal terms, including price, with 

any potential financing partners.” JX-1070 at 1.
93

denying, directly or indirectly, any allegation in the complaint or creating the 

impression that the complaint is without factual basis[.]”481 

Tesla also agreed to add two new independent directors and create a 

permanent committee of independent directors charged with overseeing 

implementation of the settlement, controls regarding Tesla’s public statements, and 

the “review and resolution of human resources issues or conflict of interest issues” 

involving Tesla’s management.482

On April 30, 2019, the final judgment enshrining the SEC Settlement was 

amended to clarify that Musk must “obtain the pre-approval of an experienced 

securities lawyer employed by the company (‘Securities Counsel’) of any written 

communication that contains information regarding” a long list of topics, including 

Tesla’s finances, its non-public projections, and “events regarding the Company’s 

securities.”483

As part of the settlement, Musk stepped down as Board chair.484 Kimbal 

proposed that Denholm replace him.485 Denholm initially declined, but then Musk 

481 JX-1075 ¶ 13 (10/16/18 Consent Motion for Entry of Final Judgment, United States 

Sec. & Exch. Comm’n v. Musk, C.A. No. 1:18-cv-8865-AJN-GWG (S.D.N.Y.)).

482 JX-1076 at 2 (10/16/18 Form 8-K).

483 JX-1075 at 15–16.

484 Trial Tr. at 1081:23–1082:5 (Kimbal).

485 Id. at 1082:6–10 (Kimbal).
94

asked Denholm to reconsider.486 Denholm agreed, and the Board appointed Denholm 

chair on November 7, 2018.487

To comply with the terms of the SEC Settlement, which required the Board to 

establish a new independent committee, the Board created a “Disclosure 

Committee.”488 Denholm’s testimony revealed a lack of understanding concerning 

how this committee worked. She testified that she did not know whether the 

Disclosure Committee “received reports concerning human resource issues or 

conflicts of interest involving senior management”489 in order to fulfill its mandate.

Denholm testified that “issues of conflict are reviewed by the audit committee, which 

is a group of independent board members who are also members of the disclosure 

committee.”490

Musk testified that he complies with the SEC Settlement using the following 

process: He “decide[s] a tweet might be one that is required to be reviewed under the 

settlement . . . submit[s] it to an in-house lawyer in advance of making it, wait[s] for 

some period of time that [he] decide[s] upon, and then tweet[s] if the lawyer hasn’t 

given comments[.]”491 

486 Denholm Dep. Tr. at 95:11–18.

487 JX-1083 at 4. 

488 Trial Tr. at 372:6–373:22, 375:1–8 (Denholm).

489 Id. at 375:9–22 (Denholm).

490 Id. at 378:11–18 (Denholm).

491 Id. at 616:3–11 (Musk).
95

Denholm described this process as “self-regulat[ing]” and was “aware that 

[Musk] waits for some unspecified period of time and then just [tweets] if he doesn’t 

hear back[.]”492 After the SEC Settlement was amended, Musk made public 

statements about Tesla’s business prospects or plans without clearing them with 

anyone first.493

At trial, Musk stated that the SEC Settlement “was made under duress” 

because “lenders put a gun to [his] head.”494 He also conceded that he had previously 

given public interviews where he stated that the SEC was wrong and that he had 

actually secured funding to take Tesla private.495 He did so despite the requirement 

as part of the SEC Settlement that Musk not “make . . . any public statement denying, 

directly or indirectly, any allegation in the complaint or creating the impression that 

the complaint is without factual basis[.]”496 Musk has also publicly referred to the 

SEC’s San Francisco office as “bastards[]” and “shameless puppets of Wall Street 

short seller sharks who did nothing to protect actual shareholders[.]”497

492 Id. at 386:8–12 (Denholm); id. at 382:5–12 (Denholm) (“A. Do you mean does he 

self-regulate under the policy? Q. You bet. That’s exactly what I mean. A. So he does 

self-regulate under the policy, yes.”). 

493 See id. at 619:12–622:3 (Musk).

494 Id. at 624:3–625:21 (Musk).

495 Id. at 625:14–21 (Musk).

496 JX-1075 ¶ 13.

497 Trial Tr. at 623:4–22 (Musk).
96

4. The Technoking

On March 15, 2021, Musk changed his title to “Technoking of Tesla.”498 Musk 

testified that this role was distinguishable from a traditional chief technology officer 

role by the presence of “panache” and joked that a Technoking had “[g]reat dance 

moves and sick beats.”499 During his deposition, Musk testified that he did not 

consult with the Board about this new title, but that it was communicated to at least 

Denholm before Tesla filed the 8-K announcing the new title.500 At trial, Musk 

testified he did in fact consult with the Board before giving himself the title.501

5. Then Came Twitter

On April 25, 2022, Twitter, Inc. and Musk announced the execution of a merger 

agreement in which Musk would acquire Twitter.502 Musk subsequently sought to 

terminate the merger agreement, and Twitter sued for specific enforcement.503 

The amount of time Musk spent on the Twitter acquisition was undoubtedly a 

concern at Tesla. Also, in the Twitter litigation, Musk filed a pleading affirming that 

498 JX-1331 at 2 (3/15/21 Form 8-K).

499 Musk Dep Tr. at 24:11–25:9.

500 Id. at 25:13–22.

501 Trial Tr. at 599:4–10 (Musk); but see id. at 1085:1–7 (Kimbal) (“Question: Have 

you heard the word ‘Technoking’ before? Answer: Yes, I have. Question: When did 

you first hear that word? Answer: I heard it over Twitter, when Elon changed his 

Twitter account.”); id. at 854:21– 855:3 (Murdoch) (“Q. Now, you’re aware that Elon 

Musk has added Technoking to his Tesla title. Correct? A. Yes, I am aware of that. Q. 

And you believe you likely first learned about that development via a tweet. Is that 

correct? A. I might have. I think so. Yeah.”). 

502 JX-1457 at 2 (4/25/22 Twitter, Inc. Form 8-K).

503 Twitter, Inc. v. Elon R. Musk, et al., C.A. No. 2022-0613-KSJM.
97

no one at Tesla is authorized to view his Tesla email accounts without his consent, 

except to the extent legally required.504 Musk ultimately acquired Twitter and named 

himself “chief twit,” a role analogous to CEO.505 Musk also testified that he asked 

approximately 50 Tesla engineers to “volunteer” to help him evaluate Twitter’s 

engineering team.506 No one on the Board called Musk to tell him not to do this.507 

In the weeks prior to trial, Musk spent the “lion’s share” of his time at Twitter.508

J. This Litigation

Plaintiff Richard Tornetta (“Plaintiff”), a Tesla stockholder, filed his complaint 

on June 5, 2018.509 His original complaint asserted four counts: Count I for breach of 

fiduciary duty against Musk in his capacity as a then-controlling stockholder; 

Count II for breach of fiduciary duty against Musk, Kimbal, Gracias, Jurvetson, 

Ehrenpreis, Buss, Denholm, Murdoch, and Johnson Rice as directors (together, 

“Defendants”); Count III for unjust enrichment against Musk; and Count IV for 

waste.510 Counts I and II were asserted as both direct and derivative claims. Counts 

III and IV were asserted as derivative claims.511 

504 Trial Tr. at 602:2–10 (Musk).

505 Id. at 614:13–23 (Musk).

506 Id. at 656:6–657:20 (Musk). 

507 Id. at 657:9–658:2 (Musk).

508 Id. at 662:4–9 (Musk).

509 Dkt. 1 (“Compl.”). 

510 See Compl. ¶¶ 106–23. 

511 See id.
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Defendants moved to dismiss the complaint, and the court denied the motion 

as to Counts I through III, dismissing only the waste claim.512 For purposes of the 

motion to dismiss, Defendants conceded that Musk controlled Tesla.513 Defendants

argued that the stockholder vote approving the Grant qualified as a ratifying vote 

justifying business judgment deference under Section 216 of the Delaware General 

Corporation Law (“DGCL”).514 Vice Chancellor Joseph R. Slights III 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.515 The Vice Chancellor held that MFW provides the “roadmap” for a controller 

seeking to avoid review under the entire fairness standard, even outside of the 

squeeze-out context.516 The Vice Chancellor also rejected Defendants’ alternative 

dismissal argument—that the complaint lacked well-pled allegations that the Grant 

was unfair.517 

The case proceeded to discovery. On January 25, 2021, the court entered a 

stipulated order granting class certification.518 

512 See Dkt. 10. 

513 See Tornetta v. Musk, 250 A.3d 793, 805 (Del. Ch. 2019) (“Defendants acknowledge 

(for purposes of this motion only) that Musk is a controlling shareholder and that he 

dominated the Board and the Compensation Committee during the time the Award 

was negotiated and approved.”). 

514 Tornetta, 250 A.3d at 806–07 (Del. Ch. 2019).

515 Id. at 807–09.

516 Id. at 810–12.

517 Id. at 812–13.

518 Dkt. 94. 
99

On September 20, 2021, the Delaware Supreme Court issued Brookfield Asset 

Management, Inc. v. Rosson, which overturned Gentile v. Rossette519 and thus 

eliminated the legal basis for the dual-natured Counts I and II.520 Brookfield

determined that fiduciary duty claims alleging overpayment or dilution of voting 

power are categorically derivative, rather than dual-natured, even when asserted 

against a controlling stockholder.521 As a result of Brookfield, Plaintiff filed a motion 

for leave to amend his complaint on September 30, 2021.522 The proposed amended 

complaint asserted the same claims as the original complaint, but asserted Counts I 

and II as entirely derivative rather than dual-natured.523

The next day, Plaintiff and Defendants Kimbal and Jurvetson cross-moved for 

summary judgment.524 Plaintiff argued that the 2018 Grant was invalid because it 

was conditioned on stockholder approval, but that the Proxy failed to disclose 

material information. For instance, Plaintiff argued that Tesla failed to disclose how 

achievable Tesla management thought the milestones were, or to fully appraise 

stockholders of the close professional and personal relationships Ehrenpreis and 

Gracias each had with Musk.525 Kimbal and Jurvetson moved for summary judgment 

519 906 A.2d 91 (Del. 2006).

520 261 A.3d 1251. 

521 Id. at 1275. 

522 Dkt. 161. 

523 Dkt. 161, Ex. A ¶¶ 284–93. 

524 Dkts. 162, 163. 

525 See Dkt. 163 at 20–26.
100

on all Counts on the grounds that they had minimal or non-existent roles in the 2018 

Grant process.526

While these motions were pending, on October 27, 2021, the parties stipulated 

to decertify the class, dismiss the direct claim components of Counts I and II, and to 

voluntarily dismiss all claims against Kimbal and Jurvetson with prejudice.527 The 

stipulation preserved Plaintiff’s motion for leave to file the amended complaint to 

change the action from a direct to a derivative action under Court of Chancery Rule 

23.1.528 Collectively, those moves averted the Gentile issue at the heart of the original 

complaint. 

The court granted the stipulation on October 27, 2021.529 The remaining 

Defendants sought summary judgment on November 19, 2021, advancing a 

ratification theory on the basis that Tesla stockholders received all material 

information ahead of the vote.530 

The court substituted jurists on January 12, 2022, in light of Vice Chancellor

Slights’ retirement from the bench.531 This court held a status conference on 

February 7, 2022,532 and resolved the pending motions to amend and for summary 

526 See Dkt. 162 at 6–12.

527 Dkt. 173. 

528 See Dkt. 173 ¶ 1; Dkt. 174. 

529 Dkt. 175. 

530 See Dkt. 184 at 64–65; Dkt. 188. 

531 Dkt. 199. 

532 Dkt. 206.
101

judgment in a letter decision dated February 24, 2022.533 The court granted 

Plaintiff’s motion for leave to amend but denied the cross-motions for summary 

judgment, voicing “skeptic[ism] that this litigation can be resolved based on the 

undisputed facts.”534 

Plaintiff filed his amended complaint on March 2, 2022.535 The court entered 

a revised case schedule on August 12, 2022.536 The parties tried their case from 

November 14 through 18, 2022.537 The court heard post-trial oral argument on 

February 21, 2023.538 

533 Dkt. 207.

534 See id. at 2. 

535 Dkt. 209. 

536 Dkt. 219. There were earlier case schedules that this one amended. But that 

fuller history is irrelevant.

537 Dkt. 244. 

538 Dkt. 281. See Defs.’ Post-Trial Opening Br.; Dkt. 264 (“Pl.’s Post-Trial Opening 

Br.”); Dkt. 274 (“Pl.’s Post-Trial Answering Br.”); Dkt. 275 (“Defs.’ Post-Trial 

Answering Br.”); Dkt. 284 (“Post-Trial Oral Arg. Tr.”).
102

Post-trial oral argument revealed several topics that warranted further 

development. The court requested supplemental briefing in a letter to counsel dated 

February 22.539 The parties completed supplemental briefing on April 11.540 

II. LEGAL ANALYSIS

Plaintiff claims that awarding the Grant constituted a breach of fiduciary 

duty.541 He argues that the entire fairness standard governs for two independent 

reasons—because the Grant was a conflicted-controller transaction and, separately, 

because the Grant was approved by a majority conflicted Board. He further argues 

that Defendants failed to demonstrate that the Grant was fair, and that the court 

should invalidate and rescind the Grant either in its entirety or in part. Defendants 

539 Dkt. 280. The letter specified the following topics for supplemental briefing: (i) 

whether a material omission in the Proxy invalidates the Grant; (ii) whether focusing 

on the give-get exchange within an entire fairness fair price analysis is an accurate 

framing of the inquiry, as Defendants asserted; (iii) whether disclosures about the 

Grant development process are unlikely to be material here because the key economic

terms were fully disclosed; and (iv) any responses to the amicus brief filed by 

Professor Charles M. Elson to aid the court in understanding the origin and purpose 

of equity-linked compensation and how it relates to the Grant here. See Dkt. 266 

(“Elson Amicus Br.”). 

540 See Dkt. 285 (“Defs.’ Post-Trial Suppl. Opening Br.”); Dkt. 288 (“Pl.’s Post-Trial 

Suppl. Answering Br.”); Dkt. 289 (“Defs.’ Post-Trial Suppl. Reply. Br.”).

541 Plaintiff asserts a derivative claim and, typically, litigation of a derivative claim 

would begin with an assessment of whether the plaintiff met the demand 

requirement. Demand futility is a gating issue that must be raised (and, in this 

jurist’s view, should only be raised) at the pleading stage. See generally In re

McDonald’s Corp. S’holder Deriv. Litig., 291 A.3d 652, 699–700 (Del. Ch. 2023) (“The 

defendants generally should expect one bite at the demand-futility apple.”). In this 

case, however, Defendants did not argue demand futility at the pleading stage due to 

this court’s decision in another action involving Tesla. See SolarCity I, 2018 WL 

1560293, at *17–19 (holding that the plaintiffs had adequately alleged that demand 

was excused with respect to a majority of the Tesla Board).
103

dispute that the entire fairness standard applies and argue that, if entire fairness 

applies, Plaintiff bears the burden of proof because the stockholder vote was fully 

informed. 

This analysis proceeds in four parts. The court first addresses the gating 

issue—the standard of review—and concludes that entire fairness applies because 

Musk exercised control over the Grant. The court next addresses Defendants’ 

argument that the stockholder vote shifted the burden under the entire fairness 

standard to Plaintiff, concluding that Defendants retain the burden because the 

stockholder vote was not fully informed. The court then evaluates the Grant under 

the entire fairness standard, concluding that Defendants failed to prove that the 

Grant was entirely fair. The court last turns to the remedy, concluding that Plaintiff 

is entitled to rescission of the Grant in its entirety.

A. The Entire Fairness Standard Applies Because Musk Is A 

Controller.

When determining whether corporate fiduciaries have breached their duties, a 

court applying Delaware law evaluates the fiduciaries’ conduct through a standard of 

review.542 Delaware law has three levels of transactional standards of review: 

business judgment, enhanced scrutiny, and entire fairness.543

542 See Chen v. Howard-Anderson, 87 A.3d 648, 666 (Del. Ch. 2014); In re Trados Inc. 

S’holder Litig., 73 A.3d 17, 35–36 (Del. Ch. 2013).

543 Chen, 87 A.3d at 666 (quoting Reis v. Hazelett Strip-Casting Corp., 28 A.3d 442, 

457 (Del. Ch. 2011)).
104

Plaintiff argues that Delaware’s most onerous standard of review, entire 

fairness, applies because the Grant was a conflicted-controller transaction.544 

Alternatively, Plaintiff argues that entire fairness applies because half of the 

directors who approved the Grant lacked independence from Musk.545 Plaintiff wins 

on the first argument—Musk is a controller. Because Plaintiff wins on the first 

argument, the court does not address the second argument.546

Delaware law imposes fiduciary duties on those who control a corporation.547 

Why? Because fiduciary duties exist in part to minimize agency costs caused by the 

divide between economic ownership and legal control.548 Delaware law vests control 

over a corporation in a board of directors and imposes attendant fiduciary obligations 

544 Pl.’s Post-Trial Opening Br. at 82.

545 Id.

546 The factual findings that render Musk a controller, however, support a finding 

that the majority of the Board lacked independence.

547 Kahn v. Lynch Commc’n Sys., Inc., 638 A.2d 1110, 1113 (Del. 1994) (“This Court 

has held that a shareholder owes a fiduciary duty only if it owns a majority interest 

in or exercises control over the business affairs of the corporation.” (cleaned up));

Citron v. Fairchild Camera & Instrument Corp., 569 A.2d 53, 70 (Del. 1989) (holding 

that a stockholder who dominates and has actual control of the corporation’s activities

has fiduciary status); Ivanhoe P’rs v. Newmont Mining Corp., 535 A.2d 1334, 1344 

(Del. 1987) (“A shareholder owes a fiduciary duty . . . if it . . . exercises control over 

the business affairs of the corporation.”).

548 See generally Adolf Berle & Gardiner Means, The Modern Corporation and Private 

Property (2d ed. 1991).
105

on the board as a consequence.549 When a controller displaces or neutralizes a board’s 

power to direct corporate action, then the controller assumes fiduciary obligations.550

The most straightforward way for a plaintiff to demonstrate control is to show 

that a defendant holds a mathematical majority of the corporation’s voting power.551 

This is so because the DGCL requires stockholder approval of transformational 

transactions.552 The DGCL also permits stockholder action by written consent, 

through which a majority stockholder can remove directors and fill vacancies.553 “A 

stockholder who owns a mathematical majority of the corporation’s voting power,” 

therefore, “has the ability to exercise affirmative control” by directing the outcome of 

549 8 Del. C. § 141(a).

550 See, e.g., Harris v. Carter, 582 A.2d 222, 234 (Del. Ch. 1990) (“[W]hen a shareholder 

presumes to exercise control over a corporation, to direct its actions, that shareholder 

assumes a fiduciary duty of the same kind as that owed by a director to the 

corporation.” (citing Sterling v. Mayflower Hotel Corp., 93 A.2d 107, 109–10 (Del. 

1952)).

551 Lynch, 638 A.2d at 1113 (noting that a stockholder becomes a fiduciary if he or she 

“owns a majority interest in . . . the corporation” (quoting Newmont, 535 A.2d at 1344); 

In re PNB Hldg. Co. S’holders Litig., 2006 WL 2403999, at *9 (Del. Ch. Aug. 18, 2006) 

(“Under our law, a controlling stockholder exists when a stockholder . . . owns more 

than 50% of the voting power of a corporation[.]” (citation omitted)); Williamson v. 

Cox Commc’ns, Inc., 2006 WL 1586375, at *4 (Del. Ch. June 5, 2006) (“A shareholder 

is a ‘controlling’ one if she owns more than 50% of the voting power in a corporation[.]” 

(citation omitted))).

552 Voigt v. Metcalf, 2020 WL 614999, at *17 (Del. Ch. Feb. 10, 2020) (citing 8 Del. C.

§§ 242(b)(1), 251(c), 275(b)).

553 Id. (citing 8 Del. C. §§ 141(k), 211(b), 216(2)).
106

a stockholder vote or acting by written consent.554 Musk controlled only 21.9% of 

Tesla’s voting power, so he lacked mathematical voting control.

Mathematical voting control, however, is only one method of establishing 

controller status.555 “[C]ontrol of the ballot box is not always dispositive of the 

controlling stockholder inquiry[.]”556 A plaintiff can establish controller status by 

554 Id. at *17; see also Paramount Commc’ns Inc. v. QVC Network Inc., 637 A.2d 34, 

42 (Del. 1994) (“In the absence of devices protecting the minority stockholders, 

stockholder votes are likely to become mere formalities where there is a majority 

stockholder.”).

555 In re Crimson Exploration Inc. S’holder Litig., 2014 WL 5449419, at *10 (Del. Ch. 

Oct. 24, 2014).

556 SolarCity I, 2018 WL 1560293, at *14 (citing cases); see, e.g., In re Pattern Energy 

Gp. Inc. S’holders Litig., 2021 WL 1812674, at *41–46 (Del. Ch. May 6, 2021) (finding 

it reasonably conceivable on a motion to dismiss that a stockholder owning “slightly 

more than 10%” was a controller who had consent rights and threatened to use it in 

order to control decisions); Skye Mineral Invs., LLC v. DXS Cap. (U.S.) Ltd., 2020 WL 

881544, at *24–29 (Del. Ch. Feb. 24, 2020) (finding it reasonably conceivable on a 

motion to dismiss that a group of investors collectively owning 28.07% of the 

company’s equity was a control group because it had contractual blocking rights that 

could restrict capital raises and drive the company into bankruptcy); Reith v. 

Lichtenstein, 2019 WL 2714065, at *7–10 (Del. Ch. June 28, 2019) (finding it 

reasonably conceivable on a motion to dismiss that a stockholder owning 35.6% of the 

company’s stock was a controller where the controller’s affiliates and former 

executives took on senior leadership roles, provided key investment banking services, 

and significantly “influenced management”); FrontFour Cap. Gp. LLC v. Taube, 2019 

WL 1313408, at *21–24 (Del. Ch. Mar. 11, 2019) (finding post-trial that stockholders 

who collectively owned “less than 15%” of the company’s stock were controllers where 

the stockholders were the founders and officers of the company, managed the day-today operations, and had control of deal structures and information flow); SolarCity I, 

2018 WL 1560293, at *19 (finding it reasonably conceivable on a motion to dismiss 

that Musk, who owned 22% of company’s common stock, was a controller based on 

well-pled allegations related to “Musk’s voting influence, his domination of the Board 

during the process leading up to the [challenged acquisition] against the backdrop of 

his extraordinary influence within the Company generally, the Board level conflicts 

that diminished the Board’s resistance to Musk’s influence, and the Company’s and 

Musk’s own acknowledgements of his outsized influence”); Calesa Assocs. v. Am. Cap., 

Ltd., 2016 WL 770251, at *10–12 (Del. Ch. Feb. 29, 2016) (finding it reasonably 
107

demonstrating that the defendant “exercises control over the business affairs of the 

corporation.”557 For this purpose, a plaintiff need not argue that the defendant 

conceivable on a motion to dismiss that a stockholder owning 26% of the company’s 

stock exercised actual control where the plaintiff alleged instances of actual control 

beyond the fact that the stockholder “exercised duly obtained contractual rights to its 

benefit and to the detriment of the company” (emphasis in original)); In re Zhongpin 

Inc. S’holders Litig., 2014 WL 6735457, at *7–8 (Del. Ch. Nov. 26, 2014) (finding it 

reasonably conceivable on a motion to dismiss that a stockholder owning 17.3% of the 

company’s stock was a controller because the stockholder was CEO and the company’s 

10-K stated that the stockholder effectively controlled the company), rev’d on other 

grounds sub nom. In re Cornerstone Therapeutics Inc. S’holder Litig., 115 A.3d 1173 

(Del. 2015); In re Loral Space & Commc’ns Inc., 2008 WL 4293781, at *21–22 (Del. 

Ch. Sept. 19, 2008) (finding post-trial that a stockholder owning 35.9% of the 

company’s stock was a controller where the controller had rights to block important 

strategic initiatives, was a significant creditor that could unilaterally force 

redemption of notes, and maintained publicly that it controlled the board); Cox 

Commc’ns, 2006 WL 1586375, at *4–5 (finding it reasonably conceivable on a motion 

to dismiss that two stockholders, owning collectively 17.1% of the company’s stock, 

jointly controlled the company based on their ability to nominate two of the five 

directors, their ability to influence the flow of revenue into the corporation, and their 

potential “veto” power over certain corporate decisions); In re Cysive, Inc. S’holders 

Litig., 836 A.2d 531, 535, 551–52 (Del. Ch. 2003) (finding post-trial that a stockholder 

owning 35% of the company’s stock controlled the company because he was a “handson” “Chairman and CEO of [the company],” and because he had the ability to “elect a 

new slate [of independent directors] more to his liking without having to attract 

much, if any, support from public stockholders[,]” through his familial ties with the 

company’s other stockholders); O’Reilly v. Transworld Healthcare, Inc., 745 A.2d 902, 

912–13, 915–16 (Del. Ch. 1999) (finding it reasonably conceivable on a motion to 

dismiss that a stockholder owning 49% of the company’s stock exercised actual control 

where the plaintiff alleged that the stockholder forced the board to comply with its 

terms on the merger through threats). See also Voigt, 2020 WL 61499 at *19 n.20 

(noting “that ‘[t]his Court and others have recognized that substantial minority 

interests ranging from 20% to 40% often provide the holder with working control’” 

(quoting Robbins & Co. v. A.C. Israel Enters., Inc., 1985 WL 149627, at *5 (Del. Ch. 

Oct. 2, 1985) (alteration in original))); 8 Del. C. § 203(c)(4) (“[a] person who is the 

owner of 20% or more of the outstanding voting stock of any corporation, partnership, 

unincorporated association or other entity shall be presumed to have control of such 

entity, in the absence of proof by a preponderance of the evidence to the contrary”);

Rosenthal v. Burry Biscuit Corp., 60 A.2d 106, 110–11 (Del. 1948) (finding ten percent 

ownership of the outstanding common stock sufficient to infer control).

557 Newmont, 535 A.2d at 1344 (citations omitted).
108

exercised general control over the business and affairs of the corporation. Although 

a showing of “general control” is sufficient to establish fiduciary status, a plaintiff can 

establish fiduciary status by demonstrating that the defendant controlled the 

particular transaction at issue, referred to as “transaction-specific” control.558 

To establish general control, a plaintiff must show “that a defendant or group 

of defendants exercised sufficient influence ‘that they, as a practical matter, are no 

differently situated than if they had majority voting control.’”559 “One means of doing 

so is to show that the defendant, ‘as a practical matter, possesses a combination of 

stock voting power and managerial authority that enables him to control the 

corporation, if he so wishes.’”560 The analysis of effective control looks to a 

stockholders’ ability to exert influence as a stockholder, in the boardroom, and outside 

of the boardroom through managerial roles. Breaking these categories down to 

“indicia of effective control,” the factors include:

• “ownership of a significant equity stake (albeit less than a majority),” 

• “the right to designate directors (albeit less than a majority),” 

• “decisional rules in governing documents that enhance the power of a 

minority stockholder or board-level position,” and 

558 Voigt, 2020 WL 614999, at *11–12; Basho Techs. Holdco B, LLC v. Georgetown 

Basho Invs., LLC, 2018 WL 3326693, at *25 (Del. Ch. July 6, 2018) (“The requisite 

degree of control can be shown to exist generally or with regard to the particular 

transaction that is being challenged.” (quoting Carsanaro v. Bloodhound Techs., Inc., 

65 A.3d 618, 659 (Del. Ch. 2013)), aff’d sub nom. Davenport v. Basho Techs. Holdco 

B, LLC, 221 A.3d 100 (Del. 2019) (TABLE). 

559 Basho, 2018 WL 3326693, at *25 (quoting PNB, 2006 WL 2403999, at *9).

560 Id. (quoting Cysive, 836 A.2d at 553).
109

• “the ability to exercise outsized influence in the board room, such as 

through high-status roles like CEO, Chairman, or founder.”561 

To establish transaction-specific control, a plaintiff must show that the 

stockholder “exercise[d] actual control over the board of directors during the course 

of a particular transaction[.]”562 This analysis often focuses on relationships “with 

key managers or advisors who play a critical role in presenting options, providing 

information, and making recommendations[.]”563 It can also address “the exercise of 

contractual rights to channel the corporation into a particular outcome by blocking or 

restricting other paths,” and “commercial relationships,” although those factors are 

less relevant here.564 Ultimately, “[i]t is impossible to identify or foresee all of the 

possible sources of influence that could contribute to a finding of actual control over 

a particular decision.”565 

Both general control and transaction-specific control call for a holistic 

evaluation of sources of influence. “Rarely (if ever) will any one source of influence 

or indication of control, standing alone, be sufficient to make the necessary 

561 Id. at *27 (citations omitted).

562 In re W. Nat’l Corp. S’holders Litig., 2000 WL 710192, at *20 (Del. Ch. May 22, 

2000) (citation omitted). 

563 Basho, 2018 WL 3326693, at *26 (concluding on a motion to dismiss that the 

defendant’s relationship with management, including tips received by defendant from 

company’s officers that provided negotiating leverage, supported an inference of 

control (citing OTK Assocs., LLC v. Friedman, 85 A.3d 696, 704, 706–07, 715, n.1 (Del. 

Ch. 2014)).

564 Basho, 2018 WL 3326693, at *26 (citations omitted); see also Skye Mineral, 2020 

WL 881544, at *26–27; Cox Commc’ns, 2006 WL 1586375, at *4.

565 Basho, 2018 WL 3326693, at *26.
110

showing.”566 “Different sources of influence that would not support an inference of 

control if held in isolation may, in the aggregate, support an inference of control.”567 

“Sources of influence and authority must be evaluated holistically, because they can 

be additive.”568 “Invariably, the facts and circumstances surrounding the particular 

transaction will loom large.”569

Here, Plaintiff advances theories of both general and transaction-specific 

control. To streamline the sprawling set of issues presented, this analysis addresses 

whether Musk held transaction-specific control with respect to the Grant. Because 

“[b]roader indicia of effective control also play a role in evaluating whether a 

defendant exercised actual control over a decision[,]”570 the sources of influence

identified by Plaintiff in support of a finding of general control factor into the 

transaction-specific analysis. 

Plaintiff’s argument that Musk controls Tesla might conjure a sense of déjà vu. 

That is because Delaware courts have confronted this precise issue before in a prior 

lawsuit challenging Tesla’s 2016 acquisition of SolarCity when Musk was SolarCity’s 

largest stockholder and board chair. Although the SolarCity case resulted in three 

opinions, none of them included a finding concerning Musk’s status as a controller. 

In the first, Vice Chancellor Slights denied the defendants’ motion to dismiss where 

566 Id. at *28 (citations omitted).

567 Voigt, 2020 WL 614999, at *13.

568 Id.

569 Basho, 2018 WL 3326693, at *28.

570 Id. at *27.
111

it was reasonably conceivable that Musk controlled Tesla.571 On a motion to dismiss, 

however, a court must assume the truth of the plaintiff’s factual allegations. 

Accordingly, the Vice Chancellor’s dismissal decision did not constitute a finding that 

Musk was a controller. Post-trial, the Vice Chancellor held that even if Musk were a 

controller so as to trigger entire fairness, the transaction was entirely fair.572 For 

this reason, it was unnecessary to make a post-trial finding on whether Musk 

controlled Tesla. The Vice Chancellor’s approach dexterously relieved the Delaware 

Supreme Court from the burden of resolving the issue when affirming the post-trial 

decision.573 

571 SolarCity I, 2018 WL 1560293, at *13 (finding it reasonably conceivable that Musk 

controlled Tesla due to allegations concerning: Musk’s ability to influence the 

stockholder vote through his 21.9% ownership; Musk’s influence over the board as 

Tesla’s visionary, CEO, and chairman; Musk’s strong connections with members of 

the board and the fact that a majority of the board was interested in the transaction; 

and Tesla’s acknowledgment of Musk’s control in public filings).

572 SolarCity II, 2022 WL 1237185, at *2. Although the Vice Chancellor found that 

there were significant flaws in the process that led to the SolarCity acquisition, the 

court held that “any control [Musk] may have attempted to wield in connection with 

the Acquisition was effectively neutralized by a board focused on the bona fides of the 

Acquisition, with an indisputably independent director leading the way.” Id. at *33 

(citation omitted). In reaching this conclusion, the Vice Chancellor emphasized that 

the board rebuffed multiple of Musk’s demands during the process, that Denholm 

“emerged as an independent, powerful and positive force during the deal process who 

doggedly viewed the Acquisition solely through the lens of Tesla and its stockholders,” 

and was an “effective buffer between” Musk and the conflicted board. Id. at *37–38. 

The Vice Chancellor then credited as evidence of a fair price the fully informed 

stockholder vote, SolarCity’s unaffected trading price, SolarCity’s cash flows, the 

financial advisor’s fairness opinion, and potential synergies. 

573 SolarCity III, 298 A.3d at 699. 
112

This question of whether Musk controls Tesla has thus proven evasive. It is 

as good a time as any to run it to ground. And so, “[o]nce more unto the breach, dear 

friends, once more.”574

The analysis begins by discussing Musk’s stock ownership, which is a 

significant but not dispositive indicium of control. The analysis then turns to the 

factors that play a bigger role in the court’s conclusion, which are Musk’s influence 

over managerial decisions, decision makers, and the process. Musk wielded the 

maximum influence that a manager can wield over a company. His ties to three of 

the eight directors (Kimbal, Gracias, and Murdoch) rendered those directors beholden 

to him; with Musk, they comprised half of the Board (given Jurvetson’s departure). 

The rest of the fiduciaries acted beholden to Musk in the process leading to the Grant, 

allowing Musk to dictate the timing of the process and the terms of the Grant. 

Ultimately, the key witnesses said it all—they were there to cooperate with Musk, 

not negotiate against him. This unique suite of allegations makes it undeniable that, 

with respect to the Grant, Musk controlled Tesla.

1. Stock Ownership

“All else equal, a relatively larger block size should make an inference of actual 

control more likely[]” for a few reasons discussed at length by Vice Chancellor J. 

Travis Laster in Voigt.575 This is due in part to quorum requirements and stockholder 

turnout, which give a 40% block holder the same effective power in most 

574 William Shakespeare, Henry V act 3 sc. 1, lns. 1–2.

575 Voigt, 2020 WL 614999, at *17–19 (emphasis omitted).
113

circumstances as the holder of a mathematical majority.576 Meanwhile, “stockholders 

who oppose the blockholder’s position can only prevail by polling votes at 

supermajority rates.”577 Relatedly, compared to a small blockholder, a large 

blockholder needs the support of fewer other investors to carry a vote.578 

Musk wields significant influence over Tesla by virtue of his stock holdings. 

Just prior to the Board’s approval of the Grant, Musk owned approximately 21.9% of 

Tesla’s outstanding common stock.579 Applying the assumptions used in Voigt, if the 

holder of a 21.9% block favors a particular outcome, then the holder will win as long 

as holders of approximately one-in-three shares vote the same way.580 By contrast, 

an opponent must garner approximately 71% of the unaffiliated shares to win. 

It is thus no surprise that this court has found that holders of similar or lesser 

percentages of stock are controlling stockholders.581 It is also no surprise that under 

576 Id. at *18 (“[O]nce a quorum is present, the general standard for taking action is 

the affirmative vote of a majority of the shares present and entitled to vote. For the 

election of directors, the general standard is a plurality of the shares present and 

entitled to vote. Meetings typically attract participation from just under 80% of the 

outstanding shares. At that level, the holder of a 40% block can deliver the vote 

needed to prevail at a meeting.” (citations omitted)). 

577 Id. at *18 (citation omitted). For example, “assuming a meeting where holders 

with 80% of the voting power turn out, and the standard is a majority of the shares 

present and entitled to vote . . . if the holder of a 35% block favors a particular outcome 

at a meeting, then the blockholder will win as long as holders of 1-in-7 shares vote 

the same way. The opponents must garner over 90% of the unaffiliated shares to 

win.” Id.

578 See generally id. at *18–19 (discussing the mathematics behind this principle in 

detail).

579 PTO ¶ 64.

580 Voigt, 2020 WL 614999, at *18.

581 See supra note 556.
114

Section 203 of the DGCL, “[a] person who is the owner of 20% or more of the 

outstanding voting stock of any corporation . . . shall be presumed to have control of 

such entity, in the absence of proof by a preponderance of the evidence to the 

contrary.”582 Nor is it any surprise that the original stockholder rights plan triggered 

at 20% ownership, or that rights plans now routinely cap ownership at 15% or less, 

thereby forcing a stockholder to stop short of the 20% figure.583 At a minimum, a 

21.9% holding supplies a powerful “rhetorical card[] to play in the boardroom.”584

For Musk, his significant block operated in conjunction with a supermajority 

voting requirement for any amendment to Tesla’s bylaws governing stockholder 

meetings, directors, indemnification rights, and the supermajority voting 

requirement itself.585 Assuming an 80% turn-out, Musk needed the support of less 

than 10% of the minority stockholders to block a bylaw amendment at a stockholder 

meeting. By contrast, a proponent would have to garner over 93% of the unaffiliated 

shares to win. This means that, with the support of insiders or directors, Musk can 

582 8 Del. C. § 203(c)(4). 

583 See Williams Cos. S’holder Litig., 2021 WL 754593, at *1 (Del. Ch. Feb. 26, 2021) 

(citing Marcel Kahan & Edward Rock, Anti-Activist Poison Pills, 99 B.U. L. Rev. 915, 

922 (2019)).

584 Voigt, 2020 WL 614999 at *19.

585 JX-323 at 33 (2/1/17 Form 8-K) (stating that Article X requires a supermajority of 

outstanding shares vote to amend Articles II, VIII, and X, and certain provisions of 

Article III).
115

easily block bylaw amendments that require a supermajority vote. Indeed, Musk has 

been able to do so two separate times.586 

Musk’s 21.9% block, therefore, gives him a sizable leg-up for stockholder votes 

generally and the ability to block specific categories of bylaw amendments. The block 

also gives him great influence in the boardroom. This undoubtedly contributes to his 

clout and sway. 

If this case involved a failed bylaw amendment subject to a supermajority vote, 

then Musk’s stock holdings would likely prove dispositive to the control analysis. But 

that is not the situation, so Musk’s stock holdings must be considered in connection 

with the other indicia of control.

2. Boardroom And Managerial Supremacy

“[T]he ability to exercise outsized influence in the board room[]”can contribute 

to a finding of control.587 Boardroom influence can come in a variety of forms. An 

individual might hold “high-status roles like CEO, Chairman, or founder.”588 Or an 

586 JX-1234 at 25–26 (5/28/20 Schedule 14A) (noting Tesla’s successful opposition to 

the 2014 and 2016 proposals to move to simple majority voting).

587 Basho, 2018 WL 3326693, at *27, n.322 (“[T]he explicit or implicit threat of 

retaliation will carry much more weight if it comes from a . . . defendant who controls 

25% of the voting power of the company, . . . and serves as Chairman of the Board 

with the power to call board meetings and set the agenda.”); see also Cysive, 836 A.2d 

at 551–53 (incorporating defendants’ status as CEO and chairman into the control 

analysis).

588 Basho, 2018 WL 3326683, at *27 (citations omitted); SolarCity I, 2018 WL 

1560293, at *13 (considering for purposes of the control analysis “Musk’s influence 

over the Board as Tesla’s visionary, CEO and Chairman of the Board”); Zhongpin, 

2014 WL 6735457, at *9 (denying a motion to dismiss where it was reasonably 

conceivable that the defendant was a controller, in part because “[t]he Company 

relied so heavily on him to manage its business and operations that his departure 
116

individual might have other key executive or managerial roles. An individual can 

wield influence if he can interfere with or kibosh management decisions.589 An 

individual will have substantial influence if he can replace management.590

Musk wields considerable power in the boardroom by virtue of his high-status 

roles and managerial supremacy. Indeed, describing Musk’s role at Tesla as “highstatus”591 would be a dramatic understatement. At relevant times, Musk occupied 

the most powerful trifecta of roles within a corporation—CEO, chair, and founder. 

He also exercised managerial authority over all aspects of Tesla and often without 

from [the Company] would have had a material adverse impact on the Company”), 

rev’d on other grounds sub nom., Cornerstone, 115 A.3d 1173; Cysive, 836 A.2d at 551–

53 (finding post-trial that a minority stockholder had controller status where the 

stockholder was the chairman and CEO “and a hands-on one, to boot[,]” was “by 

admission, involved in all aspects of the company’s business, was the company’s 

creator” and “inspirational force”). Although this court has held that high-status 

roles contribute to a finding of control, this court has declined to find that a defendant 

held controller status based solely on those roles. See In re GGP, Inc. S’holder Litig., 

2021 WL 2102326, at *23–24 (Del. Ch. May 25, 2021) (granting motion to dismiss 

where the alleged controller was the chairman and no other factors were present), 

aff’d in part, rev’d in part and remanded, 282 A.3d 37 (Del. 2022); In re Rouse Props., 

Inc., 2018 WL 1226015, at *19–20 (Del. Ch. Mar. 9, 2018) (same, where no facts of 

actual control alleged); Larkin v. Shah, 2016 WL 4485447, at *13–15 (Del. Ch. Aug. 

25, 2016) (same); In re Morton’s Rest. Gp., Inc. S’holders Litig., 74 A.3d 656, 664 (Del. 

Ch. 2013) (same, where alleged controller previously owned the company but did not 

exert actual control).

589 See, e.g., Basho, 2018 WL 3326693, at *32 (finding post-trial that a minority 

stockholder had controller status, in part because the stockholder “exerted control 

over management” who would “subvert . . . , threaten . . . or get rid of” any “member 

of management [who] did not support” the stockholder’s interests).

590 See, e.g., Reith, 2019 WL 2714065, at *8 (denying a motion to dismiss where it was 

reasonably conceivable that the defendant was a controller, in part because the 

defendant had “replaced the company’s management with alleged affiliates . . . and 

the Company paid an affiliated entity significant funds every month under the 

Management Services Agreement”).

591 Voigt, 2020 WL 614999, at *12.
117

regard to Board authority, rendering Tesla highly dependent on him. Truly, the 

avalanche of evidence on this point is so overwhelming that it is burdensome to set 

out in prose, hence these blunt bullet points: 

• Tesla and Musk are intertwined, almost in a Mary Shelley (“You are my 

creator . . .”) sort of way.592 As Kimbal explained, “Tesla created Elon 

Musk’s persona and Elon Musk’s persona is attached to Tesla.”593 Musk 

is Tesla’s public face, and he describes Tesla as “my company.”594 

• Tesla’s entire corporate strategy is Musk’s brainchild—he conceived 

both the “Master Plan” and “Master Plan, Part Deux.”595 

• Tesla is highly dependent on Musk, as it has made clear in public 

disclosures.596 Musk did not dispute this characterization or that his 

departure would “likely” cause such disruptions.597 

• Musk has admitted that he has “the power to direct operational 

decisions at Tesla[.]”598

592 See generally Mary Shelley, Frankenstein; or, The Modern Prometheus 

(Lackington, Hughes, Harding, Mavor & Jones, 1st ed. 1818).

593 Trial Tr. at 1085:11–24 (Kimbal); see also id. at 644:11–15 (Musk) (Musk agreeing 

that, as of May 2017, he was “heavily invested in Tesla, both financially and 

emotionally and . . . viewed Tesla as part of [his] family”).

594 Id. at 625:22–626:21 (Musk); see also JX-1031 at 52 (Tesla disclosing that “[w]e 

are highly dependent on the services of Elon Musk, our Chief Executive Officer, 

Chairman of our Board of Directors and largest stockholder.”).

595 Trial Tr. at 566:11–18, 610:24–611:2 (Musk) (Musk agreeing at trial that Part 

Deux is “still guiding Tesla’s strategy”); PTO ¶¶ 47–48.

596 JX-335 at 25–26 (“The loss of the services of any of our key employees could disrupt 

our operations, delay the development and introduction of our vehicles and services, 

and negatively impact our business, prospects and operating results. In particular, 

we are highly dependent on the services of Elon Musk, our Chief Executive Officer, 

and Jeffrey B. Straubel, our Chief Technical Officer.”); JX-1031 at 52 (“We are highly 

dependent on the services of Elon Musk, our Chief Executive Officer, Chairman of 

our Board of Directors and largest stockholder.”).

597 Trial Tr. at 603:12–20 (Musk).

598 Id. at 601:6–10 (Musk).
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• Gracias testified that Musk “could have sold the entire company if he 

wanted to.”599

• Musk is extremely involved in financial planning and supplies inputs 

for models and plans.600 All financial plans must be approved by 

Musk.601 

• Musk makes the hiring, compensation, and firing decisions for highlevel positions.602 Tesla employees described Musk as having a 

reputation among employees as a “tyrant” who fires people “on a 

whim.”603

• Musk operates under his own set of rules at Tesla. For example, due to 

his “special position of trust” at Tesla, no one at Tesla could review his 

email account without permission except when legally required.604 

• Musk has made up positions and titles for himself. In 2021, without 

first consulting with the Board,605 Musk appointed himself 

“Technoking”—a position he compared to being a monarch.606 

599 Id. at 782:5–22 (Gracias). 

600 Id. at 498:22–499:7 (Ahuja).

601 Id. at 511:8–19 (Ahuja). 

602 Id. at 851:6–852:5 (Murdoch); id. at 612:23–613:6 (Musk).

603 JX-924 at 6 (Tesla employee survey); see also JX-857 at 1 (Tesla’s former chief 

people officer, in a January 2018 email, stating: “Elon will fire me Tuesday anyway 

for sending market rate compensation to him”).

604 Trial Tr. at 601:11–602:10 (Musk).

605 Id. at 1085:1–7 (Kimbal) (“Question: Have you heard the word ‘Technoking’ before? 

Answer: Yes, I have. Question: When did you first hear that word? Answer: I heard 

it over Twitter, when Elon changed his Twitter account.”); id. at 854:21–855:3 

(Murdoch) (“Q. Now, you’re aware that Elon Musk has added Technoking to his Tesla 

title. Correct? A. Yes, I am aware of that. Q. And you believe you likely first learned 

about that development via a tweet. Is that correct? A. I might have. I think so. 

Yeah.”); Musk Dep. Tr. at 25:13–25 (“Q . . . Did you consult with the board about the 

new title before -- before filing it on 8-K? A. No, but it was communicated to the 

board.”); but see Trial Tr. at 599:4–10 (Musk) (stating that he was “wrong” in his 

deposition when he stated he did not consult the Board before giving himself the title 

of Technoking); see also JX-1331 at 2 (3/15/21 Form 8-K announcing the name 

change).

606 Musk Dep. Tr. at 22:24–23:1.
119

Ehrenpreis described that decision as “Elon being Elon[,]”607 which 

suggests that the behavior is not unusual for Musk. Musk testified that 

the title was intended as a joke,608 but that is a problem in itself.

Organizational structures, including titles, promote accountability by 

clarifying responsibilities. They are not a joke. 

• Musk operates as if free of Board oversight, as shown by his treatment 

of the SEC Settlement.609 Musk’s “self-regulat[ory]610 process for 

compliance and the Board’s desultory enforcement paint a vivid picture 

of their inability or unwillingness to rein in Musk.611 Even after the 

settlement, the Disclosure Committee did not review his tweets.612 At 

trial, Denholm was not sure whether the Disclosure Committee was 

fulfilling its obligations under the SEC Settlement.613 

• Musk has ignored specific Board directives, such as unilaterally pausing 

Tesla’s acceptance of Bitcoin after the Board approved it.614 Other 

surprise announcements include Musk discussing the idea of Tesla 

repurchasing billions of dollars of stock during an earnings call and 

without Board knowledge.615

• Musk regularly uses Tesla resources to address projects at other 

companies he owns. For example, after Musk acquired Twitter, he

asked approximately 50 Tesla engineers to “volunteer” to help him 

evaluate Twitter’s engineering team.616 No one on the Board challenged 

607 Trial Tr. at 189:19–24 (Ehrenpreis). 

608 See id. at 599:16–22 (Musk).

609 See JX-1070 at 1 (9/29/18 SEC Press Release: Elon Musk Settles SEC Fraud 

Charges; Tesla Charged With and Resolves Securities Law Charge). 

610 Trial Tr. at 382:5–12 (Denholm).

611 See id. at 616:3–11, 619:12–622:3 (Musk); id. at 382:5–12, 386:8–12 (Denholm).

612 Id. at 615:8–616:2 (Musk); JX-1550 at 3–4 (12/9/18 60 Minutes interview 

transcript). 

613 Trial Tr. at 379:7–380:7 (Denholm).

614 Id. at 613:19–614:10 (Musk). 

615 Id. at 619:13–24 (Musk). Musk’s general aversion to oversight extends to the SEC. 

See generally id. at 623:4–22, 624:3–625:21 (Musk); JX-1555 (7/2/20 tweet from Musk 

stating: “SEC, three letter acronym, middle word is Elon’s”).

616 Trial Tr. at 656:6–657:20 (Musk).
120

this decision.617 Murdoch testified that this was “being monitored by 

the [Audit Committee] and being paid for.”618 But Murdoch was not able 

to even “ballpark” the number of Tesla engineers involved, even though 

the monitoring he described had taken place at most “a few weeks” prior 

to his testimony.619 Murdoch’s testimony also showed that any 

monitoring by the Audit Committee, such as it was, took place after the 

fact.620 Similarly, in 2020, Musk directed Tesla management to send 

Tesla’s “smartest micro grid designer [] with a bunch of Powerpacks to 

[SpaceX][.]”621

This evidence, though not exhaustive, demonstrates the scope of Musk’s 

influence as a member of management and in the Boardroom. Based on this list 

alone, it could be said that Musk wields unusually expansive managerial authority, 

equaling or even exceeding the imperial CEOs of the 1960s.622 

One set of scholars have created a term for this sort of person—a “Superstar 

CEO,” defined as an “individual[] who directors, investors, and markets believe make 

a unique contribution to company value.”623 As the authors explain, the reasons for 

believing that a CEO is uniquely valuable to the corporation might vary, and those 

617 Id. at 657:9–658:2 (Musk).

618 Id. at 870:18–871:2 (Murdoch).

619 Id. at 869:14–870:17 (Murdoch).

620 Id. at 870:18–871:2 (Murdoch).

621 JX-1195 at 1.

622 See generally Myles L. Mace, Directors: Myth and Reality 77–85 (1971).

623 Superstar CEOs at 1367.
121

beliefs could be wrongly held.624 But the reasons and their accuracy are irrelevant.625 

“[W]hat matters is only that such a belief does exist.”626 

CEO superstardom is relevant to controller status because the belief in the 

CEO’s singular importance shifts the balance of power between management, the 

board, and the stockholders. When directors believe a CEO is uniquely critical to the 

corporation’s mission, even independent actors are likely to be unduly deferential. 

They believe that “letting the CEO go would be harmful to the company and that 

alienating the CEO might have a similar effect.”627 They “doubt their own judgment 

and hesitate to question the decisions of their superstar CEO.”628 They view CEO 

self-dealing as the trade-off for the CEO’s value.629 In essence, Superstar CEO status 

624 Id. at 1367–68 (“Markets may believe, for example, that only the CEO possesses 

the idiosyncratic vision that is essential to make the company outperform the 

competition. Or that only she possesses exceptional skills or other rare qualities that 

are crucial for implementing the company’s strategy. Another explanation is that the 

CEO possesses the charisma and ability to sell their vision that is crucial for 

attracting investors, employees, or other constituencies. . . . [T]hese are CEOs who 

directors, investors, and markets believe have charismatic power or other 

extraordinary qualities that set them apart from other ordinary CEOs . . . .” (emphasis 

in original)); id. at 1368 (“Moreover, the perception that a CEO is uniquely valuable 

could be wrong as a matter of principle or in the case of certain individuals.”).

625 Id. 

626 Id. (emphasis omitted).

627 Id. at 1379.

628 Id. 

629 See, e.g., id. at 1392 (“As long as the CEO is perceived as a star and the company 

depends on her vision and leadership, investors are less likely to challenge the CEO. 

Regardless of their financial savvy, investors might even approve self-dealing and 

other value reducing transactions. They will not rush to discipline CEOs with star 

qualities even when they engage in misconduct. They will challenge the CEO only 

when they believe that [s]he has lost h[er] magic touch or that the harm from h[er]

misconduct exceeds her singular contribution to company value.”). 
122

creates a “distortion field”630 that interferes with board oversight. As discussed later 

in this analysis, the distortion field can weaken mechanisms by which stockholders 

hold fiduciaries accountable, a risk that becomes more severe when the Superstar 

CEO owns a large block of shares.631

Faith in a Superstar CEO changes the dynamics of corporate decision making. 

That is true for all corporate decisions, but the risk becomes more acute for issues 

where the Superstar CEO’s interests are directly concerned. Nowhere is that truer

than the Superstar CEO’s compensation. In the face of a Superstar CEO, it is even 

more imperative than usual for a company to employ robust protections for minority 

stockholders, such as staunchly independent directors. In this case, Tesla’s 

fiduciaries were not staunchly independent—quite the opposite, as discussed next.632 

630 This phrase, first used to describe Steve Jobs, applies here. See Elson Amicus Br.

at 1 (citing Waters supra note 12).

631 Superstar CEOs at 1400–02.

632 To be sure, the Superstar CEO designation lacks definitional precision. It is hard 

to distinguish between an executive who is valuable to a corporation and a Superstar 

who is singularly or uniquely valuable to a corporation. As the scholars have 

acknowledged, this definitional imprecision could lead to “vague standards” that 

“create uncertainty and encourage litigation[,]” thus diminishing the utility of the 

Superstar CEO label. Id. at 1400–02; see also Lawrence Hamermesh, Jack B. Jacobs,

and Leo E. Strine, Jr., Optimizing the World’s Leading Corporate Law: A TwentyYear Retrospective And Look Ahead, 77 Bus. Law. 321, 346 (2022) (raising concerns 

with the theory, noting that a CEO’s value to a company standing alone does not 

make the CEO a controlling stockholder). For that reason, the concept should not be 

deployed far and wide. When deployed, doubtless there will be close cases. But not 

here. Musk is a dead ringer. See generally Superstar CEOs at 1354–56 (identifying 

Musk as the paradigmatic Superstar CEO). If nothing else, the Superstar CEO 

concept is valuable for its descriptive power, because it explains what took place in 

this case.
123

3. Relationships With The Board

A director lacks independence if he or she is “so beholden to an interested 

director that his or her discretion would be sterilized.”633 Both past and future 

rewards are relevant to this analysis.634 The inquiry is “highly fact specific” and there 

is “no magic formula to find control.”635 

Nine directors served on the Board at relevant times. Jurvetson can be 

excluded given his early departure. Of the remaining eight, Musk was one and his 

brother another.636 That is one fourth of the relevant directors. The other six had 

varying degrees of ties to Musk. The analysis begins with the four Compensation 

Committee members (Ehrenpreis, Buss, Denholm, and Gracias) and then turns to 

Murdoch and Johnson Rice.

Gracias had the most extensive business and personal dealings with Musk and 

Kimbal. Prior to approving the Grant, Gracias held interests worth over $1 billion in 

Musk-controlled entities, which Gracias admitted provided him “dynastic or 

generational wealth.”637 Gracias and Musk had a decades-long relationship, which 

included joint family vacations and attendance at family birthday parties. Gracias 

633 Highland Legacy Ltd. v. Singer, 2006 WL 741939, at *5 (Del. Ch. Mar. 17, 2006) 

(citing cases).

634 See generally Da Lin, Beyond Beholden, 44 J. Corp. L. 515, 550 (2019). Prospective

rewards might be more difficult to prove than past relationships, but that does not 

mean they do not exist.

635 Calesa, 2016 WL 770251, at *11 (citing Crimson, 2014 WL 5449419, at *10).

636 Defendants do not dispute this; nor could they. Kimbal is Musk’s brother and 

business partner, and he recused himself from discussion of or voting on the 2018 

Grant due to this conflict. PTO ¶ 232; see JX-791 at 1.

637 Trial Tr. at 774:22–24 (Gracias).
124

had a 20-year friendship with Kimbal and was an investor in Kimbal’s business 

ventures. Gracias also received millions in Valor investments from Musk and 

Kimbal, and was a director of SpaceX and SolarCity, the latter until its acquisition 

by Tesla. 

Gracias’s business ties to Musk, standing alone, support a finding that Gracias 

lacked independence from Musk.638 Similarly, Gracias’s personal relationship with 

Musk, standing alone, support a finding that Gracias lacked independence from 

Musk.639 The combination of business and personal ties make it undeniable that 

Gracias lacked independence from Musk.

638 See generally Sandys v. Pincus, 152 A.3d 124, 134 (Del. 2016) (finding it reasonably 

conceivable on appeal from a dismissal decision that two directors were not 

independent of a controller for purposes of Rule 23.1 where they had “a mutually 

beneficial network of ongoing business relations” based on past investments and 

service on company boards); SolarCity I, 2018 WL 1560293, at *18 (finding it 

reasonably conceivable on a motion to dismiss that a director lacked independence 

where the controller was a “frequent investing partner” in the director’s venture); 

Cumming v. Edens, 2018 WL 992877, at *15 (Del. Ch. Feb. 20, 2018) (finding it 

reasonably conceivable on a motion to dismiss that a director was not independent 

for demand futility purposes because the director and the controller owned a 

professional sports team together and worked together to build a new stadium); 

Trados, 73 A.3d at 54–55 (finding post-trial that a director lacked independence

where, among other allegations, the director “had a long history with” the controller, 

had served previously as an executive at one of the controller’s portfolio companies, 

was asked “to work with [the controller] on other companies,” and invested “about 

$300,000 in three [controller] funds”); In re New Valley Corp. Deriv. Litig., 2001 WL 

50212, at *7 (Del. Ch. Jan. 11, 2001) (finding it reasonably conceivable on a motion to 

dismiss that directors were not disinterested and independent based on intertwined, 

long-standing business relationships such as being paid to be a director nominee in a 

separate proxy bid); Loral, 2008 WL 5293781, at *20–22 (finding post-trial that a 

director lacked independence where, among other things, the director had 

successfully solicited investments from the controller’s companies).

639 See generally Marchand v. Barnhill, 212 A.3d 805, 819 (Del. 2019) (finding it 

reasonably conceivable on appeal that a director’s long-standing personal ties to the 
125

Ehrenpreis also had extensive business and personal relationships with Musk. 

Prior to the Grant, Ehrenpreis held interests worth at least $75 million in Muskcontrolled companies other than Tesla and had invested in Kimbal’s business 

ventures. Ehrenpreis also had longstanding personal and professional relationships

with Musk and Kimbal that Ehrenpreis admitted had a “significant influence” on his 

professional career.640 Although Ehrenpreis’s relationship with Musk was not as 

thick as that enjoyed by Gracias, it was weighty. Given the critical role he played as 

chair of the Compensation Committee, it was too weighty. Even if one could debate 

whether these ties rendered Ehrenpreis beholden to Musk in general, his actions in 

connection with the Grant demonstrate that he was beholden for that purpose. 

The same is true of Denholm and Buss. Their most significant, potentially 

comprising factor is the compensation each received as a Tesla director. For 

Denholm, it was “life-changing.”641 For Buss, it was a large portion of his wealth.642 

Ordinary, market-rate compensation does not compromise a director’s 

controller compromised independence); Del. Cty. Emps. Ret. Fund v. Sanchez, 124 

A.3d 1017, 1022 (Del. 2015) (finding it reasonably conceivable on appeal from a 

dismissal decision that a director lacked independence because the director had a 

friendship of over 50 years with an interested party); Sandys, 152 A.3d at 130 (finding

it reasonably conceivable on appeal from a dismissal decision that co-owning a private 

plane with a close friend indicates a lack of independence because it is unusual and 

would require close cooperation in use and a continuing, close personal friendship); 

In re BGC P’rs, Inc. Deriv. Litig., 2019 WL 4745121, at *11–12 (Del. Ch. Sept. 30, 

2019) (finding it reasonably conceivable on a motion to dismiss that a director lacked 

independence where the director and the controller attended exclusive events 

together and had a close relationship for 20 years).

640 Trial Tr. at 192:6–10 (Ehrenpreis). 

641 Id. at 397:6–12 (Denholm).

642 See supra § I.C.1.a.ii.
126

independence.643 Outsized director compensation can.644 But Plaintiff does not argue

that Musk established Buss and Denholm’s compensation so as to render them 

beholden.645 Instead, it is a factor that must be considered when evaluating how 

Denholm and Buss acted when negotiating the Grant.

The remaining directors present clearer calls. Murdoch lacked independence 

due to personal connection with Musk. He was a long-time friend of Musk before he 

joined the Board and they repeatedly vacationed together with their respective 

643 See generally In re Kraft Heinz Co. Deriv. Litig., 2021 WL 6012632, at *11 (Del. 

Ch. Dec. 15, 2021) (finding standard director compensation “alone cannot create a 

reasonable basis to doubt a director’s impartiality[]” (quoting Robotti & Co., LLC v. 

Liddell, 2010 WL 157474, at *15 (Del. Ch. Jan. 14, 2010))).

644 See, e.g., Kahn v. Tremont Corp., 694 A.2d 422, 430 (Del. 1997) (finding that a 

director was beholden to majority stockholder where, three years previously, the 

company had retained his consulting services for $10,000 per month and awarded 

more than $325,000 in bonuses); Kahn v. Portnoy, 2008 WL 5197164, at *8–9 (Del. 

Ch. Dec. 11, 2008) (finding it reasonably conceivable that directors’ fees derived from 

controller’s companies, which exceeded compensation from other employment, 

rendered the director beholden to the controller); see also Cumming, 2018 WL 992877, 

at *17 (finding it reasonably conceivable on a motion to dismiss that a director lacked 

independence from a controller where the director was alleged to have derived 60% 

of his publicly reported income from service on a board to which the controller 

appointed him).

645 As to Denholm, this court previously held that Denholm was “an independent, 

powerful and positive force during the deal process” that led to the SolarCity 

acquisition. SolarCity II, 2022 WL 1237185, at *37–38. And that was surely true at 

the time. But it was not a factual finding that carries forward for all time. Moreover, 

Denholm’s approach to enforcement of the SEC Settlement, including unawareness 

of one of its key requirements, suggests a new lackadaisical approach to her oversight 

obligations. See supra § I.I.3.
127

families.646 It was during one such trip that Musk, Kimbal, and Gracias recruited 

Murdoch to the Board.647 

Johnson Rice, by contrast, had no compromising personal or business ties to 

Musk. Plaintiff concedes as much. 

Summing it up, it is easy to conclude based on the nature of their relationships 

with Musk that Kimbal, Gracias, and Murdoch lacked independence from Musk. 

After Jurvetson’s departure, and along with Musk, that was half the Board. The rest 

of the Director Defendants fall along a spectrum ranging from Ehrenpreis’s extensive 

relationships with Musk to Johnson Rice’s lack thereof. 

4. The Process

When assessing independence, Delaware courts consider not only the directors’ 

relationships with the party to whom they are allegedly beholden, but also how they 

acted with respect to that party.648 Directors with strong ties to a controller may 

demonstrate their independence.649 And directors without strong individual ties to a 

646 Trial Tr. at 819:2–16, 820:20–821:2, 847:5–849:15 (Murdoch).

647 Id. at 780:23–781:2 (Gracias); id. at 821:3–822:21 (Murdoch); id. at 1080:13–21 

(Kimbal).

648 In re Viacom Inc. S’holders Litig., 2020 WL 7711128, at *24 (noting that analysis 

of controller’s influence on special committee focuses on how the committee actually 

negotiated the deal rather than just how the committee was set up); In re S. Peru 

Copper Corp. S’holder Deriv. Litig., 52 A.3d 761, 789 (Del. Ch. 2011) (same) (citations 

omitted), aff’d sub nom., Ams. Mining Corp. v. Theriault, 51 A.3d 1213 (Del. 2012). 

649 See In re Dole Food Co., Inc., S’holder Litig., 2015 WL 5052214, at *16 (Del. Ch. 

Aug. 27, 2015) (“Before trial, Conrad’s role as Chair was not a reassuring fact. It was 

reasonable to infer from Conrad’s ties to Murdock, the events surrounding Weinberg’s 

resignation, and the insiders’ desire to have Conrad as Chair that Conrad would be 

cooperative, if not malleable, when facing Murdock. But after hearing Conrad testify 
128

controller may fall victim to a “controlled mindset.”650 A controlled mindset can be 

evidenced by the directors approaching negotiations seeming “less intent on 

negotiating with [the controller] and more interested in achieving the result that [the 

controller] wanted[.]”651 

When evaluating control allegations in the context of a challenge to a merger,

Chief Justice (then-Vice Chancellor) Strine once observed:

[T]he question of whether the large block holder has 

“control” may be relevant, and intertwined with, the 

question of whether the merger was approved by 

uncoerced, independent directors seeking solely to advance 

the interests of the corporation and its disinterested 

stockholders rather than by supine servants of an 

overweening master.652

The references to “supine servants” and “an overweening master” is hyperbolic, and 

no doubt deliberately so to give emphasis to the difficulty of the standard. But it hits 

home here. There is no greater evidence of Musk’s status as a transaction-specific 

controller than the Board’s posture toward Musk during the process that led to the 

Grant. Put simply, neither the Compensation Committee nor the Board acted in the 

best interests of the Company when negotiating Musk’s compensation plan. In fact, 

there is barely any evidence of negotiations at all. Rather than negotiate against 

and interacting with him in person at trial, I am convinced that he was independent 

in fact.”).

650 S. Peru, 52 A.3d at 798 (finding that, “from inception, the Special Committee fell 

victim to a controlled mindset and allowed [the controlling stockholder] to dictate the 

terms and structure of the Merger”).

651 Frederick Hsu Living Tr. v. Oak Hill Cap. P’rs III, L.P., 2020 WL 2111476, at *35 

(Del. Ch. May 4, 2020).

652 Cysive, 836 A.2d at 550–51.
129

Musk with the mindset of a third party, the Compensation Committee worked 

alongside him, almost as an advisory body. 

Multiple aspects of the process reveal Musk’s control over it, including the 

timeline, the absence of negotiations over the magnitude of the Grant or its other 

terms, and the committee’s failure to conduct a benchmarking analysis. In the end, 

the key witnesses said it all by effectively admitting that they did not view the process 

as an arm’s length negotiation.

a. Musk Controlled The Timing.

Defendants emphasize that nine months passed after the initial April 9 call 

between Musk and Ehrenpreis until the Board approved the Grant. In reality, 

however, most of the work on the Grant occurred during small segments of that ninemonth timeline and under significant time pressure imposed by Musk. 

Before the Board or Compensation Committee had any substantive discussion 

concerning the Grant, Musk’s team proposed a highly accelerated schedule that 

contemplated approval of the Grant within less than two months.653 A later version 

of the timeline was even more rushed, proposing only one Compensation Committee 

meeting (with an additional meeting if necessary) and giving the committee less than 

three weeks to complete its task.654 This was a recklessly fast approach, yet 

653 JX-423 at 2–3 (6/19/17 email from Matt Tolland to Maron re “Re: Privileged - Comp 

Comm Process”).

654 JX-456 at 2 (6/26/17 email from Phillips to Ehrenpreis and Maron re: “Tesla | 

Executive Compensation Timeline”). This timeline envisioned that on July 7, the 

Compensation Committee would “[g]ain agreement on proposed approach, award size 

and metrics/goals” and “[g]ain preliminary approval of grant agreement.” JX-456 

at 2.
130

Ehrenpreis did not question it.655 In fact, not one but Brown questioned it. And 

Brown’s concerns were ignored.

The process decelerated to a reasonable pace only because Musk made it so. 

On July 6, a day before the first Compensation Committee meeting, Maron 

announced that the new goal was to issue a grant in August or September.656 On 

July 30, a day before another Compensation Committee meeting, Musk emailed 

Maron to put the process on hold.657 Although Musk agreed by email to let Maron 

“keep cranking[,]”658 the wheels ground to a halt for several months. By August 12, 

Brown was telling his team there was “no need to spend any time” on a presentation 

relating to the 2018 Grant due to negotiations between Musk and the Board.659 

Similarly, on August 27, Ahuja told members of his team “[i]t was decided to defer 

this action by a few months.”660 And Ahuja’s statement on September 17 that “[w]e 

are back on track to finalize a CEO comp package[]” turned out to be a false start.661 

There was no meaningful activity through the end of October. 

655 Trial Tr. at 124:11–125:11 (Ehrenpreis). 

656 JX-503 at 1.

657 JX-564 at 1.

658 Id. at 1.

659 JX-596 at 1.

660 JX-604 at 1.

661 JX-640 at 3; id. at 1 (Ahuja stating on September 20 that “the priority on this effort 

has again been lowered[,] [s]o not critical at this point”).
131

Defendants exaggerate how much work occurred in August and September.662 

Although the Compensation Committee did meet on August 14, there is no indication 

that this meeting involved a substantive discussion of the Grant.663 The committee 

also met on September 8, but the minutes of that meeting describe the discussion of 

the Grant as featuring only a “brief update” and an agreement to “provide additional 

details to the broader Board group at the next Committee meeting.”664 

Musk restarted discussions on the Grant on the morning of November 9, just 

before a scheduled Compensation Committee meeting, telling Maron that he would 

“like to take board action as soon as possible if they feel comfortable and then it would 

go to shareholders.”665 This message was not relayed during the November 9 

meeting.666 But Maron conveyed the urgency three days later, emailing the full 

Board and members of the Working Group with a request for “another meeting on 

the issue of CEO compensation at everyone’s first available opportunity.”667 

662 See Defs.’ Post-Trial Answering Br. at 17 (“[I]n August and September 2017, there 

were three Compensation Committee meetings, a Working Group call, and a Board 

meeting discussing the Plan.” (citing DDX-1 at 2)).

663 JX-597 at 2 (“Mr. Ehrenpreis updated the Committee regarding the continuing 

efforts to develop Elon Musk’s next compensation package. Questions were asked and 

discussion ensued.”).

664 JX-617 at 2.

665 JX-664 at 1.

666 See JX-663 at 3 (“Ehrenpreis provided an update regarding continued development 

of Elon Musk’s next compensation package. Questions were asked and discussion 

ensued.”).

667 JX-667 at 1.
132

Musk tried to pause the process again on November 14 with another email to 

Maron, stating: “Given recent developments, let’s pause for a week or two. This would 

be terrible timing[.]”668 The Board held a special meeting to discuss the Grant on 

November 16, during which Ehrenpreis and Maron proposed approving the plan in 

December 2017 and seeking stockholder approval in early 2018.669 The final timeline, 

however, included the delay Musk requested and extended into January 2018. 

Although Musk’s November 14 attempt to pause work on the 2018 Grant did not stop 

a Board meeting in the following days, it had enough of an effect that those working 

on the Grant did not consider the process “back on” until well until December, which 

is when another period of urgency commenced.670

To sum it up, Musk unilaterally set the timeline or made last-minute proposals 

to the Board prior to six out of the ten Board or Compensation Committee meetings 

during which the Grant was discussed.671 Musk dictated when the game clock started 

668 JX-668 at 1.

669 JX-669 at 2.

670 JX-717 at 1 (12/10/17 email noting the “importance and the timing on getting” an 

analysis of the stock-based compensation effects of the Grant “out quickly” because of 

a valuation deadline the next day); JX-717 at 1 (12/11/17 email marked as “high” 

importance stating, “[w]e are back on with a vengeance (apologies in advance). . . . I 

am just now digesting myself”); JX-718 at 1 (12/11/17 email stating that “[o]ur CEO 

grant[] is back and on a fast track now”).

671 JX-423 (6/19/17 email circulating, four days before the first Compensation 

Committee meeting, an accelerated timeline); JX-503 at 1 (7/6/17 email from Maron 

stating, a day before the Compensation Committee was supposed to give preliminary 

approval to the Grant, that “we’re now going on a slower track with the CEO grant”); 

JX-564 at 1 (7/30/17 email from Musk stating, a day before the first Compensation 

Committee meeting, to “put [it] on hold for a few weeks”); JX-596 at 1 (8/12/17 email 

from Brown stating, two days before a Compensation Committee meeting, “no need 
133

and stopped, thereby artificially compressing the work into short bursts that took 

place when he wished to move forward. Musk’s habit of shaking things up just before 

meetings also made it tough for the committee and its advisors to be prepared. 

Musk’s persistent pattern cannot be chalked up to coincidence. Musk controlled the 

timing.

b. There Was No Negotiation Over The Size Of The 

Grant.

The most striking omission from the process is the absence of any evidence of 

adversarial negotiations between the Board and Musk concerning the size of the 

Grant. Musk made an initial proposal, and that proposal was the only one seriously 

considered until Musk unilaterally changed it six months later.

Defendants did their best to paint a different picture, but the contemporaneous 

evidence betrayed them. They cannot meaningfully deny that Musk made the initial 

to spend any time on this for now. Sounds like Elon and the Board are negotiating a 

little bit, which may impact where they land on some of the key program points”); JX640 at 3 (9/17/17 email from Ahuja stating, two days before the Board meeting, that 

“[w]e are back on track to finalize a CEO comp package”); id. at 1 (9/20/17 email from 

Ahuja stating, the day after the Board meeting, that “the priority on [the CEO grant] 

has again been lowered”); JX-664 at 1 (11/9/17 email from Musk proposing a “reduced” 

award only hours before a Compensation Committee meeting); JX-668 (11/14/17 

email from Musk stating, two days before another Board meeting at which the Grant 

was to be discussed, “let’s pause for a week or two”); JX-717 at 1 (12/11/17 email from 

Tesla employee stating, a day before the December 12 special meeting of the Board 

to discuss the 2018 Grant, that “[w]e are back on with a vengeance”); JX-718 (12/11/17 

email stating that “[o]ur CEO grant[] is back and on a fast track now”). The substance 

of the Compensation Committee’s September 8 and December 8 meetings seemed to

escape Musk’s meddling, but neither were particularly substantial. See JX-697 at 3. 

The other untouched meetings were the very first meeting on June 6 (where the 

Board’s discussion was forgettable) and the last on January 21 where the Board 

approve the 2018 Grant. See JX-407; JX-743 at 1; JX-773 at 4.
134

proposal. Although Ehrenpreis initiated the April 9 discussion,672 Musk proposed the 

terms during that call.673 Musk told Ehrenpreis that he wanted a grant with 15 

tranches awarding 1% of Tesla’s total outstanding shares for each market 

capitalization increase of $50 billion.674 This proposal set the size and structure for 

the Grant until November 9.675 

Defendants cannot deny that, on November 9, Musk unilaterally lowered his 

ask. He proposed what he believed was a “reduced” compensation plan, which would 

award him a fully diluted 10% increment in his Tesla ownership if he reached a $550 

billion market capitalization.676 After Musk learned that this proposal would result 

in greater compensation than his initial proposal, he changed it again. On December 

1, he stated: “That is more than intended. Let’s go with 10% of the current [fully 

diluted share] number[.]”677 Defendants tout the reduced proposal of December 1 as 

a “negotiated price,”678 but Musk was more honest. Unprompted, he described his 

“proposal on December 1” as “me negotiating against myself.”679 

672 JX-362 at 2.

673 See JX-1700 at 12 (1/12/18 Draft Schedule 14A Proxy).

674 See id.; see also Trial Tr. at 269:17–270:8 (Maron) (testifying that “at the beginning 

of the process . . . the conception of the plan at a high level was to have $50 billion 

market cap increments”).

675 See JX-445 at 3–4; JX-464 at 5–7; JX-490 at 5–7; JX-640 at 3.

676 JX-664 at 1.

677 JX-682 at 1.

678 Defs.’ Post-Trial Opening Br. at 64–65; see also Trial Tr. at 584:9–19 (Musk).

679 Trial Tr. at 696:7–697:7 (Musk).
135

To blunt the blow of Musk’s candor, Defendants vigorously argue secondary 

points. For example, they contend that the Compensation Committee considered a 

variety of award sizes prior to Musk’s new proposal on November 9.680 They cite to 

the August 1 Compensia presentation, which identifies alternative market 

capitalization increments and corresponding award sizes of 7.5% and 10%.681 But the 

presentation valued the 15% award only, and there is no record of any actual 

discussions concerning the alternative award sizes.682 The minutes for the November 

16, 2017 Board meeting suggest that there was no actual discussion concerning 

alternatives.683 And when Maron received Musk’s new offer, he compared it to 

Musk’s original proposal and not any alternatives.684 By July 2017, Musk’s 15-

tranche was locked-in as the operating assumption. The Compensation Committee 

did not consider alternatives.

680 Defs.’ Post-Trial Opening Br. at 60–61 (citing JX-566 at 14–16); id. at 33 (citing 

JX-566 at 14–16); Trial Tr. at 213:14–23 (Ehrenpreis).

681 Defs.’ Post-Trial Opening Br. at 60–61 (citing JX-566 at 14–16); id. at 33 (citing 

JX-566 at 14–16).

682 JX-566 at 13–16, 23–24; see JX-633 at 17–21 (9/19/17 slide deck assuming 15% of 

total outstanding shares and providing 7.5% and 10% chart for comparison). The 

August 1 presentation included other possibilities and key questions that were never 

discussed. See JX-566 at 8 (8/1/17 slide deck) (asking “Should a new award be stock 

option-based? Should it be multi-year and highly performance-based or structured 

as a more traditional annual award?”).

683 JX-669 at 2 (“As discussed in previous meetings and again at this meeting, the 

Board continued to consider 1% of current total outstanding shares as the award for 

each vesting tranche, achievement of which required both an increase of $50 billion 

in the Company’s market capitalization and a matching operational milestone.”).

684 JX-678 at 1.
136

As another example, Defendants emphasize that the Grant ultimately 

included 12 tranches, each awarding 1% of total outstanding shares and requiring 

$50 billion in market capitalization growth.685 According to Defendants, this 

represented “an appreciation in market capitalization that was $100 billion more 

than what Musk had proposed in exchange for the same percentage of options.”686 

Although Defendants are correct that, all else equal, requiring more market 

capitalization growth for the same number of shares means a better deal for 

stockholders, there is simply no credible evidence that the shift from ten tranches to 

12 was the result of any actual negotiation with Musk. To the contrary, the record 

reflects that the Board preferred the simplicity of total outstanding shares.687 

Toward this end, they backed into 12 tranches when translating Musk’s demand of 

10% of fully diluted shares into a round percentage of total outstanding shares while 

maintaining the $50 billion/1% per tranche approach that Musk proposed in April.688 

685 Defs.’ Post-Trial Opening Br. at 64–65.

686 Id. at 65 (citing Trial Tr. at 225:21–227:18 (Ehrenpreis)).

687 See JX-669 at 2 (11/16/17 Board meeting minutes) (“the directors expressed a 

general preference to measure the size of the grant as a percentage of total 

outstanding shares, and not allow for known dilution protection for Mr. Musk”); 

Maron Dep. Tr. at 407:17–25 (stating he believed the Board used TOS, instead of 

FDS, because “it was a simpler approach”).

688 JX-743 at 4–5; see JX-701 at 1 (12/10/17 email from Chang providing 

contemporaneous notes of the 12/10/17 special Compensation Committee meeting) 

(“We seem to be at the right place as far as size: 10% of FDS (~12% of TOS)”).
137

The testimony from Ehrenpreis that Defendants cite does not support a finding 

that negotiations over the 12%/12-tranches occurred.689 Ehrenpreis simply confirmed 

that he generally recalled “negotiations in the late part of 2017 about the terms of 

the” Grant.690 When asked “[w]hat, if anything happened to the total amount of 

market capitalization that would accrue to the shareholders if Mr. Musk hit all of the 

targets in the plan as between the time of the negotiation and then the final plan,”

Ehrenpreis responded “[d]uring that period of time, the market cap milestones 

increased by $100 billion.”691 Although this describes what happened, it does not 

establish the existence of a negotiation. In a follow-up question, Ehrenpreis avoided 

saying that he or anyone else negotiated with Musk about the market capitalization

increase, again merely describing the changes that took place.692 

Maron also stopped short of describing this aspect of the process as a 

negotiation. He testified that although the final terms included the “size of the 

overall plan . . . were all different than I think were initially thought of by Elon. . . . 

I don’t want to say that it was necessarily over his objection. They weren’t things he 

thought of. They were things that the Board thought of and that he ultimately agreed 

689 See Defs.’ Post-Trial Opening Br. at 65 (citing Trial Tr. at 225:21–227:18 

(Ehrenpreis)).

690 Trial Tr. at 225:21–24 (Ehrenpreis).

691 Id. at 225:21–226:7 (Ehrenpreis).

692 See id. at 226:17–227:18 (Ehrenpreis). 
138

to.”693 Aspects of this testimony ring true—Musk’s various proposals lacked the 

detail necessary to implement them.

In short, the Compensation Committee and the Board failed to negotiate the 

overall size or difficulty of the Grant with Musk.

c. There Was No Meaningful Negotiation Over The 

Other Terms Of The Grant.

The other key terms of the Grant were: the Clawback Provision, the 

Leadership Requirement, the Five-Year Hold Period, and the M&A Adjustment. As 

to these terms, the only back-and-forth in the record concerned the M&A Adjustment, 

but Musk himself conceded that this was at most a minor feature of his compensation 

plan that he did not care about. He stated, at the end of negotiations on this point, 

“I don’t think we will be making big acquisitions[]” and “[t]here is no chance I will 

game the economics here, so I’m fine with limits that prevent that.”694 He then 

proceeded to propose a stricter M&A Adjustment than was on the table.695

Defendants argue that the Five-Year Hold Period was a negotiated point and 

a major concession.696 But neither the documentary record nor the witness testimony 

corroborates Musk’s recollection of vigorous negotiation. The closest testimony on 

point is to the contrary, where Maron stated “[w]hen you talk about holding periods 

and the M&A adjustments and the size of the overall plan, these were all different 

693 Maron Dep. Tr. at 428:20–430:3. 

694 JX-781 at 1–2.

695 JX-874 at 2.

696 Trial Tr. at 584:9–585:2 (Musk) (testifying that the Board “pushed significantly” 

on this point).
139

than I think were initially thought of by Elon. But I don’t want to say that it was 

necessarily over his objection. They weren’t things that he thought of.”697 

Meanwhile, one of the biggest purported concerns expressed by the Board was 

their desire to keep Musk engaged in Tesla despite his significant time commitments 

at his other companies, which included SpaceX, The Boring Company, Neuralink, and 

later, Twitter.698 The Grant could have addressed this issue. The most obvious way 

would have been a requirement that Musk devote substantially all of his professional 

time and attention to Tesla-related matters. Another option could have been a 

restriction on the amount of time and attention he could devote to companies other 

than Tesla.699 Still other possibilities might include a forfeiture or clawback provision 

if Musk failed to provide the requisite level of time and attention.700 Yet no one 

proposed anything like that to Musk. 

697 Maron Dep. Tr. at 429:7–13; see also id. 428:20–430:3.

698 Trial Tr. at 328:9–24 (Denholm) (“Elon had other business interests that competed 

for his time.”); JX-612 at 2 (“How can the comp comm/board/shareholders be assured 

that [Musk] will devote adequate time to Tesla given his other 

commitments/businesses/. Should some type of commitment be included as part of 

comp structure?”); Murdoch Dep. Tr. at 292:1–293:20 (“But obviously as [SpaceX] 

grew and depending on ... where Elon thinks his time is going to be most useful in 

terms of both ... his own incentives as an executive, apropos of this plan, and also ... 

where he can make the biggest impact, ... we wanted to make sure that ... Tesla was 

top of mind.”); Ehrenpreis Dep. Tr. at 51:6–13 (“And so my thinking and the goal was 

how do we find a way to make sure that Elon still stays in this seat, number one.”).

699 See Dunn Opening Expert Rep. at 14–15.

700 See, e.g., id.
140

Delaware law recognizes that “asking the controlling stockholder to consider 

alternative options can change the negotiating dynamic.”701 Whether Musk should 

commit a level of time to Tesla was a planned topic of discussion for a September 8 

call with Denholm, Ehrenpreis, and Musk.702 During the September 8 call, however, 

none of the participants raised the issue.703 According to Musk, the issue “was not 

raised in this compensation structure” because the idea was “silly.”704 Maron testified 

that the Board did not ask for such a requirement because “[t]hat would have been 

like saying goodbye to Elon[.]”705 Defendants claim Musk would have rejected such 

restrictions, but the court will “never know because the . . . Committee and its 

advisors never had the gumption to give it even the weakest of tries.”706

d. There Was No Benchmarking Analysis.

The Grant process lacked a traditional benchmarking analysis, which 

compares a proposed compensation plan to plans at comparable firms.707 

701 S. Peru, 52 A.3d at 800 (“[A]sking the controlling stockholder to consider 

alternative options can change the negotiating dynamic . . . . [T]he Special Committee 

might discover certain weaknesses of the controlling stockholder, thus creating an 

opportunity for the committee to use this new-found negotiating leverage to extract 

benefits for the minority.”).

702 JX-612 at 1–2.

703 See JX-629 at 2–3 (summary of call omitting the issue); Trial Tr. at 139:17–141:1 

(Ehrenpreis); Denholm Dep. Tr. at 389:15–390:20 (“I don’t recall the specifics of that 

other than in general terms we talked mainly about energy, focus, and commitment 

as opposed to time.”); Musk Dep. Tr. at 154:12–21, 160:11–161:4.

704 Musk Dep. Tr. at 160:11–161:4.

705 Trial Tr. at 263:11–264:1 (Maron).

706 Loral, 2008 WL 4293781, at *25.

707 Trial Tr. at 1461:10–1462:6 (Brown) (“Q. So did Compensia’s work on the 2018 

plan include such traditional benchmarking? A. It did not for a few reasons.”).
141

Benchmarking “provides the compensation committee with a frame of reference with 

respect to what other companies are doing with respect to compensation[.]”708 

Benchmarking is the foundation of a compensation advisor’s analysis.709 

The witnesses agreed that benchmarking is typical and critical. Defendants’ 

expert, Professor Kevin Murphy, previously opined that “the market for similarly 

situated executives provides a critical benchmark” the “board must consider in 

deciding whether to pursue” an executive and “how much to offer.”710 Plaintiff’s 

expert, Professor Brian D. Dunn, opined that benchmarking is a “critical aspect and 

requirement of an effective compensation plan process.”711 Brown confirmed that 

Compensia typically provides benchmarking consisting of an identified peer group 

708 Id. at 1475:20–24 (Brown).

709 Id. at 1058:7–1059:18 (Burg) (testifying that compensation advisors provide 

benchmarking data to “fulfill their responsibilities”); id. at 1312:8–12 (Murphy) 

(agreeing that benchmarking studies are “customary” when setting CEO 

compensation), 1313:10–13 (confirming that competitive pay analysis is “industry 

standard” in advising clients on executive compensation), 1315:2–16 (prior testimony 

stating benchmarking is “absolutely routine” and “what every compensation 

consultant will do”), 1317:10–1319:3 (prior testimony that “the market for similarly 

situated executives provides a critical benchmark that [the] board must consider in 

deciding whether to pursue [the CEO candidate] and in deciding how much to offer”

(emphasis added)); id. at 786:12–21 (Gracias) (confirming it is “wise” for the 

Compensation Committee to have benchmarking information); id. at 347:3–10, 

350:7–11, 351:2–7 (Denholm) (acknowledging prior use of benchmarking data for 

other executives). 

710 Trial Tr. at 1317:10–1319:3 (Murphy); see, e.g., id. at 1312:8–12 (Murphy) 

(agreeing that benchmarking studies are “customary”), 1313:10–13 (confirming that 

competitive pay analysis is “industry standard”), 1315:2–16 (prior testimony stating

benchmarking is “what every compensation consultant will do”).

711 Dunn Opening Expert Rep. at 83; see also Trial Tr. at 983:3–22 (Dunn).
142

and comparable positions at peer companies.712 Burg too recognized that providing 

such information is necessary for the Compensation Committee’s advisors to “fulfill 

their responsibilities.”713 Nevertheless, no traditional benchmarking study was 

conducted in connection with the Grant.714 

Defendants proffered reasons for not performing a traditional benchmarking 

study, but each rang hollow. For starters, Defendants argued that the Board 

considered “a lot of data that all fit within the overall bucket of benchmarking” 

throughout the process.715 The primary evidence is the Compensia presentation from 

the July 7, 2017 meeting, which included information about other CEOs.716 For 

example, one of the slides lists the largest CEO pay packages in 2016. But no one 

contends that this market data constituted a benchmarking analysis. And none of 

the slides involved direct comparisons to the Grant.717

Brown also testified that it would have been difficult to find comparable 

companies for a benchmarking study.718 At trial, Brown conceded that he could have 

developed a peer group after using “some judgment” in a timeframe “similar to 

712 Trial Tr. at 1461:10–1462:4 (Brown); id. at 1475:16–1476:24 (Brown).

713 Id. at 1058:7–1059:18 (Burg).

714 Id. at 1477:1–5 (Brown) (affirming that Compensia did not conduct a 

benchmarking study for the Grant); id. at 786:12–21, 787:5–10 (Gracias) (same); id. 

at 1059:19–1060:5 (Burg) (stating that he had no memory of benchmarks being 

presented in connection with the 2018 Grant).

715 Id. at 1293:10–1294:9 (Murphy). 

716 JX-512 at 16–20.

717 Id.

718 Trial Tr. at 1462:5–1463:7 (Brown).
143

[developing] any peer group.”719 Dunn created a benchmarking analysis, 

demonstrating it was possible.720 

More telling, Brown took the position that benchmarking was unnecessary 

because the award would be too large for useful comparison. Brown testified that he 

had a “really good idea” of what would happen if Compensia performed a traditional 

benchmarking study, and that “it wasn’t going to be useful information for the 

committee” because the Grant was so divorced from the market for comparable 

executives.721 In a similar vein, Defendants argue that benchmarking was not needed 

because the 2018 Plan was “unprecedented” in that “no other CEO had been willing 

to condition his compensation on such audacious milestones,” especially at a time 

when a company was struggling.722 They contend: “Traditional benchmarking is 

inapt if the companies, executives, and plans are not comparable.”723

That is a hard sell. As CEO, Musk’s job was the same as every other public 

company CEO: improve earnings and create value. A benchmarking study would 

have shown the committee what other companies paid for executives to perform that 

same task. Moreover, the extraordinary nature of the Grant should have made 

719 Id. at 1477:19–1478:6 (Brown).

720 Id. at 983:3–985:1, 990:3–992:7 (Dunn); id. at 1477:14–1478:12 (Brown) 

(confirming Compensia could have—but did not—benchmark); PDX-2 at 5–6.

721 Trial Tr. at 1462:5–1463:1 (Brown); see also id. at 786:12–21, 787:5–10 (Gracias); 

id. at 347:3–10, 350:7–11, 351:2–7, 362:10–13 (Denholm); Denholm Dep. Tr. at 

287:12–21 (“[I]t was very difficult to find comparables in terms of the ambitious 

nature of this plan.”).

722 Defs.’ Post-Trial Suppl. Reply Br. at 10–11.

723 Id. at 10 n.44. 
144

benchmarking more critical, not less. Benchmarking would have informed the 

decision makers of the magnitude of difference between the Grant and market 

comparables.724

e. The Key Negotiators Said It All.

In the end, the defense witnesses said it all. Ehrenpreis and Gracias took the 

lead on the Grant for the Compensation Committee (recall that attendance at 

Working Group meetings was “optional” for Denholm and Buss).725 Maron was one 

of the primary go-betweens.726 When asked to describe the process, none viewed the 

process as an arm’s length negotiation. Each viewed it is as a form of collaboration 

with Musk.

724 See Julian v. E. States Const. Serv., Inc., 2008 WL 2673300, at *19 (Del. Ch. July 

8, 2008) (holding that the lack of historical precedent does not mean the size of the 

compensation plan can just be plucked out of thin air); Trial Tr. 1320:18–1321:16 

(Murphy) (confirming that in a prior trial he testified that there should have been 

benchmarking for an executive if even he was the only person in the United States 

who was believed to be qualified and available to take that position).

725 JX-474 (6/30/17 email from Chang to Denholm and Buss).

726 See, e.g., JX-783 at 1–2 (1/16/18 email from Maron to the Compensation 

Committee) (stating Musk wanted that “[a]ny M&A in which [Tesla] buy[s] a 

company for no more than 5% of [Tesla’s] current market cap will have no 

adjustment”); see JX-664 at 1 (11/9/17 email from Musk to Maron stating Musk would 

“like to take board action as soon as possible” on his compensation plan); JX-667 at 1 

(11/12/17 email from Maron to Board stating: “We’d like to have another meeting on 

the issue of CEO compensation[.]”); JX-668 (11/14/17 email from Musk telling Maron 

to “pause for a week or two[,]” his compensation plan discussions); JX-718 (12/11/17 

email stating the CEO compensation plan discussions are “back and on a fast track 

now”). 
145

Ehrenpreis testified that “during the entire process, there were check-ins with 

Elon. We were not on different sides of things. We were trying to make sure if we 

were going to go through this exercise that he was on board.”727 

Gracias explained his understanding of “fairness” in this context and his 

approach to the process as follows:

[W]hat is important is that [CEOs] feel like they’re treated 

fairly. These plans are about incenting behavior. Behavior 

is a feeling. It comes from inside the mind. And so we focus 

on what’s fair and what feels fair to people and what’s fair 

to the shareholders, what’s fair to us as investors, what’s 

fair to the executives. That’s how we think about it. We 

never engage in these positional negotiations, I want 10, you 

want 3, let’s yell about it. That’s not how we do things, not 

how anyone does things.728

That is, in lieu of objective market data and arm’s length negotiation, the 

Compensation Committee opted for subjective feelings—“what feels fair.” The 

committee did not take “positional negotiations” against Musk.729

727 Ehrenpreis Dep. Tr. at 139:18–140:3 (emphasis added).

728 Trial Tr. at 808:16–809:14 (Gracias) (emphasis added).

729 Id.; see also Gracias Dep Tr. at 244:25–245:20 (“I did not have a positional

negotiation with [Musk] about, hey, we want to give you one [tranche], and you want 

two and let’s go negotiate back and forth. . . . I did not have a negotiation starting 

lower and going higher with him about the tranches or the size of the award.”); id. at

255:22–256:9 (“Q. Okay. As a Tesla director and compensation committee member, 

do you think you have a duty to the company and the stockholders to try to negotiate 

for the smallest compensation package for Mr. Musk that would adequately 

incentivize him? A. That is not how I think about it, no. Q. Can you explain to me 

how you think about it? A. I think about compensation packages generally as what 

is fair to the executive and what is fair to the company. I don’t think about it as 

trying to get the very smallest thing possible ever. That’s just not my modus operandi 

with any company I deal with. I think about fairness.”).
146

Maron described the process similarly: “It was a cooperative, collaborative 

process. It wasn’t acrimonious. So when I say there wasn’t a conflict of interest, I 

think I’m thinking in my own mind was there an actual active conflict between the 

two parties; and I don’t think that there was. I think it was a cooperative 

collaborative process.”730 To deal with a conflict, one must first recognize a conflict. 

“Conflict blindness and its lesser cousin, conflict denial, have long afflicted the 

financially sophisticated.”731 Maron could not perceive the conflict, much less help 

deal with it. 

The testimony from the key witnesses is perhaps as close to an admission of a 

controlled mindset as a stockholder-plaintiff will ever get.732 The Compensation 

Committee and Musk were not on different sides. They did not acknowledge the 

existence of a conflict. It was a cooperative and collaborative process.733

730 Maron Dep. Tr. at 100:2–102:11.

731 Trados, 73 A.3d at 64.

732 See S. Peru, 52 A.3d at 798 (“[F]rom inception, the Special Committee fell victim 

to a controlled mindset and allowed [the controller] to dictate the terms and structure 

of the [transaction].”).

733 Defendants concede that “[t]he Directors worked with Musk ‘in a collaborative, 

cooperative way to get to the end point.’” Defs.’ Post-Trial Opening Br. at 66 (quoting 

Trial Tr. at 243:15–244:3 (Maron)). They justify that soft approach by reasoning that 

“the board has to have an ongoing relationship with the CEO,” and “it would be 

atypical for compensation negotiations between a board and a CEO to be adversarial.” 

Id. In essence, they argue that, because the Grant was for a sitting CEO, the Board 

was justified in conducting a process short of “an effective proxy for arms-length 

bargaining, such that a fair outcome equivalent to a market-tested deal resulted.”

Loral, 2008 WL 4293781, at *22 (citations omitted). The court recognizes that 

negotiations over CEO compensation give rise to strange dynamics because the 

parties need to work collaboratively after the negotiations have ceased, but that is 

true in many negotiations and in virtually every salary negotiation. There is a huge 
147

B. Defendants Bore The Burden Of Proving That The Grant Was

Entirely Fair.

Because Musk exercised transaction-specific control over the Grant, entire 

fairness is the standard of review, and Defendants presumptively bear the burden of 

proof.734 In Kahn v. Lynch Communication Systems, Inc.,735 the Delaware Supreme 

Court “held that when the entire fairness standard applies, the defendants may shift 

the burden of persuasion by one of two means: first, they may show that the 

transaction was approved by a well-functioning committee of independent directors; 

or second, they may show that the transaction was approved by an informed vote of 

a majority of the minority shareholders.”736 There was no well-functioning committee 

of independent directors here for the reasons discussed above. Thus, Defendants’ 

only hope for burden shifting is to show that the stockholder vote was fully informed. 

For this purpose, Defendants bear the burden of proving that the vote was fully 

informed.737

gap between being respectful and civil versus cooperating with the CEO to give him 

exactly what he wants. Even assuming that some level of cooperation and 

collaboration is called for, what took place here went beyond it. And this was also not 

the place for it. When considering the largest compensation plan in the history of the 

public markets, the directors needed to do more than accommodate the CEO.

734 Ams. Mining Corp., 51 A.3d at 1239 (“When a transaction involving self-dealing 

by a controlling shareholder is challenged, the applicable standard of judicial review 

is entire fairness, with the defendants having the burden of persuasion.”).

735 638 A.2d 1110 (Del. 1994).

736 Ams. Mining, 51 A.3d at 1240 (citing Lynch, 638 A.2d at 1117).

737 Solomon v. Armstrong, 747 A.2d 1098, 1128 (Del. Ch. Mar. 25, 1999) (“[W]hen it 

comes to claiming the sufficiency of disclosure and the concomitant legal effect of 

shareholder ratification after full disclosure (e.g., . . . shift of the burden of proof of 

entire fairness from the defendant to the plaintiff) it is the defendant who bears the 

burden.”), aff’d, 746 A.2d 277 (Del. 2000) (TABLE).
148

To show that the stockholder vote was fully informed, Defendants must 

establish that “stockholders were apprised of ‘all material information’ related to that 

transaction.”738 An omitted fact is material only where “there is a substantial 

likelihood that a reasonable shareholder would consider it important in deciding how 

to vote.”739 In other words, to be material, an omitted fact must have “significantly 

altered the ‘total mix’ of information made available.”740 Further, “once defendants 

travel[] down the road of partial disclosure of the history leading up to the 

[transaction] and use[d] the vague language described, they ha[ve] an obligation to 

provide the stockholders with an accurate, full, and fair characterization of those 

historic events.”741 In assessing materiality, courts must balance “the benefits of 

additional disclosures against the risk that insignificant information may dilute 

potentially valuable information.”742

Plaintiff advanced many arguments for why the stockholder vote was not fully 

informed.743 Two are clear winners. The record establishes that the Proxy failed to 

738 In re Volcano Corp. S’holder Litig., 143 A.3d 727, 748 (Del. Ch. June 30, 2016) 

(quoting Solomon, 747 A.2d at 1127–28).

739 Rosenblatt v. Getty Oil Co., 493 A.2d 929, 944 (Del. 1985) (quoting TSC Indus., 

Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976)). 

740 Arnold v. Soc’y for Sav. Bancorp, Inc., 650 A.2d 1270, 1277 (Del. 1994) (quoting 

TSC Indus., Inc., 426 U.S. at 449).

741 Id. at 1280 (citations omitted). 

742 Volcano, 143 A.3d at 749 (citations omitted); see also Solomon, 747 A.2d at 1128 

(“The theory goes that there is a risk of information overload such that shareholders’

interests are best served by an economy of words rather than an overflow of adjectives 

and adverbs in solicitation statements.”).

743 See Pl.’s Post-Trial Opening Br. at 68–81.
149

disclose the Compensation Committee members’ potential conflicts and omitted 

material information concerning the process. Defendants sought to prove otherwise, 

and they generally contend that the stockholder vote was fully informed because the 

most important facts about the Grant—the economic terms—were disclosed.744 But 

Defendants failed to carry their burden.

1. The Conflict Disclosures

A director’s conflict with a transactional counterparty is material information 

that should be disclosed.745 In fact, a director’s potential conflict with a transactional 

counterparty is material information that should be disclosed.746 

744 Defs.’ Post-Trial Opening Br. at 95–105.

745 See, e.g., In re Orchard Enters., Inc. S’holder Litig., 88 A.3d 1, 22 (Del. Ch. 2014)

(“This court has held that special committee members’ ‘prior . . . relationships’ with a

controller ‘should have been disclosed’ because of the committee’s ‘role as negotiators

on behalf of the minority stockholders.’” (quoting cases)); In re Emerging Commc’ns, 

Inc. S’holders Litig., 2004 WL 1305745, at *37 (Del. Ch. May 3, 2004) (“[T]he 

disclosure documents misled minority stockholders . . . [because] there was no 

disclosure of [two committee members’] long-standing financial relationships with 

[the transaction counterparty] . . . . The disclosure documents misleadingly 

suggested that the Special Committee, and perhaps a majority of the entire board, 

were independent.”); Millenco L.P. v. meVC Draper Fisher Jurvetson Fund I, Inc., 824 

A.2d 11, 15–19 (Del. Ch. 2002) (finding the disclosures misleading when they failed 

to disclose supposedly independent directors’ relationships with the CEO).

746 Millenco, 824 A.2d at 15 (“[W]here, as here, the omitted information goes to the 

independence or disinterest of directors who are identified as the company’s 

‘independent’ or ‘not interested’ directors, the ‘relevant inquiry is not whether an 

actual conflict of interest exists, but rather whether full disclosure of potential

conflicts of interest has been made’” (quoting Wilson v. Great Am. Indus., Inc., 855 

F.2d 987, 994 (2d Cir. 1988))); see also Eisenberg v. Chi. Milwaukee Corp., 537 A.2d 

1051, 1061 (Del. Ch. 1987) (“The only point made here is that . . . the potential conflict 

of half of [the company’s] Board of Directors was a fact that should have been 

disclosed. . . . [S]hareholders were entitled to know that certain of their fiduciaries 

had a self-interest that was arguably in conflict with their own, and the omission of 

the fact was material.” (citation omitted)).
150

The Proxy failed to disclose any of the Compensation Committee members’ 

actual or potential conflicts with respect to Musk.747 In fact, the Proxy repeatedly 

described the members of the Compensation Committee as independent, stating: 

“The[] [Grant] discussions first took place among the members of the Compensation 

Committee . . . all of whom are independent directors;”748 and “[t]he independent 

members of the Board, led by the members of the Compensation Committee, spent 

more than six months designing [the Grant].”749 The Proxy’s introductory letter is 

“[f]rom the Independent Members of Tesla’s Board of Directors,” and the first four 

signatories are Compensation Committee members Gracias, Ehrenpreis, Denholm, 

and Buss.750 Notably, Gracias signed as “Lead Independent Director.”751

The description of the Compensation Committee members as “independent” 

was decidedly untrue as to Gracias and proved untrue as to the remaining committee 

members. At a minimum, Musk’s relationships with Ehrenpreis and Gracias gave 

rise to potential conflicts that should have been disclosed.752 Ultimately, all of the 

directors acted under a controlled mindset, calling into question the disclosure as to 

each of them. 

747 See Pl.’s Post-Trial Opening Br. at 69–73.

748 JX-878 at 10 (emphasis added) (2/8/18 Schedule 14A Proxy Statement).

749 Id. at 21 (emphasis added).

750 Id. at 3–4 (emphasis added).

751 Id. at 4.

752 See supra §§ I.C.1.a.i, iv.
151

Defendants sought to prove that they disclosed the information at issue, both 

in the Proxy and elsewhere.753 The Proxy disclosed the Tesla director compensation 

policy, which is one potential source of conflict.754 Defendants also showed that they 

disclosed some potential sources of conflict in other public filings, such as Buss’s 

tenure at SolarCity and Ehrenpreis’s and Gracias’s investments in SpaceX.755 But 

those disclosures make no mention of important factors affecting independence, 

including Gracias’s and Ehrenpreis’s personal and other business relationships with 

Musk.756 And even assuming such disclosures were comprehensive, “our law does not 

impose a duty on stockholders to rummage through a company’s prior public filings 

to obtain information that might be material to a request for stockholder action.”757 

Defendants also sought to prove that disclosure of the potential conflicts was 

unnecessary because it would wrongly “oblige them to characterize their conduct in 

such a way as to admit wrongdoing.”758 That argument is strongest on the controlledmindset point. But the Proxy could have discussed the relevant relationships while 

stating that the Board did not view them as serious impediments to independence, 

thereby allowing stockholders to make their own assessment. This is precisely what 

753 Defs.’ Post-Trial Opening Br. at 100–01; Defs.’ Post-Trial Answering Br. at 70–72.

754 JX-878 at 46–47.

755 JX-379 at 24–26.

756 See JX-878 (2/8/18 Schedule 14A Proxy Statement); JX-379.

757 Zalmanoff v. Hardy, 2018 WL 5994762, at *5 (Del. Ch. Nov. 13, 2018) (citation 

omitted), aff’d, 211 A.3d 137 (Del. 2019) (TABLE).

758 Loudon v. Archer-Daniels-Midland Co., 700 A.2d 135, 143 (Del. 1997); Defs.’ PostTrial Answering Br. at 71.
152

Tesla did in the other disclosure document that Defendants pointed to when seeking 

to prove that the total mix of information included information about Musk’s financial 

connections with Gracias and Ehrenpreis.759 “What defendants were not free to do 

was to take the position that the stockholders had no right to know this information 

because they, the defendants, had determined it was not important.”760

Overall, Defendants failed to prove that the information about conflicts was 

adequately disclosed. The Proxy was materially deficient on this point.

2. The Process Disclosures

When asked to approve a transaction, stockholders are entitled to a full and 

accurate description of the material steps in the board or committee process that

resulted in the transaction.761 The components and effectiveness of a board or 

committee’s process, including the parties’ bargaining positions, are of “obvious 

importance” to stockholders.762 

759 See JX-379 at 24–26.

760 Millenco, 824 A.2d at 18–19.

761 Bancorp, 650 A.2d at 1280 (“[O]nce defendants traveled down the road of partial 

disclosure of the history leading up to the [transaction] and used the vague language 

described, they had an obligation to provide the stockholders with an accurate, full, 

and fair characterization of those historic events.” (citations omitted)).

762 Clements v. Rogers, 790 A.2d 1222, 1242 (Del. Ch. 2001); accord Morrison v. Berry, 

191 A.3d 268, 283–84 (Del. 2018) (holding that information on process is material if 

it helps a reasonable stockholder reach a “more accurate assessment of the probative 

value of the [transaction’s] process”); In re Trans World Airlines, Inc. S’holders Litig.,

1988 WL 111271, at *12 (Del. Ch. Oct. 21, 1988) (“No disclosure in a case such as this 

is presumably of greater importance to a shareholder than a disclosure that 

independent directors have actively negotiated on his behalf and have concluded, as 

here, that acceptance of the proposal is in his best interests.”), abrogated on other 

grounds by Lynch, 638 A.2d 1110; Weinberger, 457 A.2d at 703 (“Material 
153

Consequently, “a fiduciary’s duty is best discharged through a broad rather 

than a restrictive approach to disclosure.”763 A board or committee may not create a 

false narrative as to the process for how a transaction was completed; partial 

disclosures that sterilize the actual events are insufficient.764 Although a disclosure 

document need not give a “play-by-play[,]”765 “when fiduciaries choose to provide the 

history of a transaction, they have an obligation to provide shareholders with ‘an 

accurate, full, and fair characterization of those historic events.’”766 “Even if [] 

additional information independently would fall short of the traditional materiality 

standard, it must be disclosed if necessary to prevent other disclosed information 

information, necessary to acquaint those shareholders with the bargaining positions 

of [the parties], was withheld under circumstances amounting to a breach of fiduciary 

duty.”); see, e.g., McMullin v. Beran, 765 A.2d 910, 925–26 (Del. 2000) (reversing 

dismissal where the defendants failed to disclose information regarding the handling 

of potential offers).

763 Zirn v. VLI Corp., 621 A.2d 773, 779–80 (Del. 1993). 

764 In re Mindbody, Inc. S’holder Litig., 2023 WL 2518149, at *41 (Del. Ch. Mar. 15, 

2023); see also FrontFour, 2019 WL 1313408, at *29 (holding that the proxy

statement’s failure to disclose that the special committee did not learn of “enormous 

pressure” facing controllers until after the merger agreement was executed was 

material).

765 David P. Simonetti Rollover IRA v. Margolis, 2008 WL 5048692, at *12 (Del. Ch. 

June 27, 2008) (internal quotation marks and citation omitted).

766 Id. (quoting Globis P’rs, L.P. v. Plumtree Software, Inc., 2007 WL 4292024, at *14 

(Del. Ch. Nov. 30, 2007)); In re Tele-Commc’ns, Inc. S’holders Litig., 2005 WL 

3642727, at *5–6 (Del. Ch. Dec. 21, 2005) (holding that language in proxy that the 

board gave “careful consideration” to premium to be paid to shareholders would be 

material if false); Clements, 790 A.2d at 1242–43 (“When a Proxy Statement details 

the functioning of [the committee’s] process, it must do so in a fair and balanced 

manner that does not create a materially misleading impression of how the 

Committee actually operated in fact.” (citation omitted)).
154

from being misleading.”767 Even an assertion that a committee “carefully considered” 

a transaction, when inaccurate, could be falsely “reassuring” to stockholders and 

constitute a disclosure violation.768 

Generally, when a plaintiff proves process defects as significant as those in this 

case, the defendants will find it difficult to prove that the stockholder vote was fully 

informed.769 That is true here. The Proxy does not disclose the level of control that 

Musk exercised over the process—e.g., his control over the timing, the fact that he 

made the initial offer, the fact that his initial offer set the terms until he changed 

them six months later, the lack of negotiations, and the failure to benchmark, among 

other things.

The parties focus on one specific omission. The Proxy does not disclose the 

April 9 conversation between Musk and Ehrenpreis during which Musk established 

the key terms of the 2018 Grant. A discussion of this conversation appeared in at 

least four earlier drafts of the Proxy.770 The final Proxy instead opens its discussion 

of the development of the 2018 Grant with the following passage:

With the 2012 Performance Award nearing completion, the 

Board engaged in more than six months of active and 

ongoing discussions regarding a new compensation 

program for Mr. Musk, ultimately concluding in its 

decision to grant the CEO Performance Award. These 

767 Chen, 87 A.3d at 689 (citing Johnson v. Shapiro, 2002 WL 31438477, at *4 (Del. 

Ch. Oct. 18, 2002)).

768 Gantler v. Stephens, 965 A.2d 695, 711 (Del. 2009) (internal quotation marks 

omitted).

769 Cf. In re Mindbody, Inc. S’holder Litig., 2020 WL 5870084, at *27 (Del. Ch. Oct. 2, 

2020) (making a similar point as to a well-pled Revlon claim).

770 See JX-1597 at 9; JX-1598 at 3; JX-1599 at 14; JX-1700 at 12.
155

discussions first took place among the members of the 

Compensation Committee of the Board (the “Compensation 

Committee”), all of whom are independent directors, and 

then with the Board’s other independent directors, 

including its two newest independent directors, Linda 

Johnson Rice and James Murdoch.771

Plaintiff contends that, in addition to describing the Compensation Committee 

members and Murdoch as “independent,” the statement is inaccurate because the 

“discussion[] first took place” between Ehrenpreis and Musk, not among the members 

of the Compensation Committee.772 Defendants claim that Plaintiff is misreading 

the sentence, which they say means only that discussions among the Compensation 

Committee were “first” as compared to subsequent discussions with the full Board, 

not the “first” discussions in the process as a whole.773 

Even accepting Defendants’ borderline reading, the April 9 conversation 

between Ehrenpreis and Musk was material and should have been disclosed.774 

Musk’s April 9 proposal to Ehrenpreis set the terms of discussion for the first six or 

771 JX-878 at 10 (2/8/18 Schedule 14A Proxy Statement).

772 Pl.’s Post-Trial Opening Br. at 73, 78–79 (quoting JX-878 at 10).

773 Defs.’ Post-Trial Opening Br. at 102–03 (quoting JX-878 at 10).

774 Weinberger, 457 A.2d at 703 (“Material information, necessary to acquaint those 

shareholders with the bargaining positions of [the parties], was withheld under 

circumstances amounting to a breach of fiduciary duty.”); see Plumtree, 2007 WL 

4292024, at *14) (“Once defendants travel down the road of partial disclosure of the 

history leading up to a merger, they have an obligation to provide the stockholders 

with an accurate, full, and fair characterization of those historic events.” (citing 

Bancorp, 650 A.2d at 1280)).
156

so months of the Grant’s development, and many of its features persisted in the final 

structure.775 The Proxy was materially deficient on this point.

3. The Key-Terms Argument

During post-trial argument, Defendants argued that the stockholder vote was 

fully informed because the most important details of the Grant—the economic 

terms—were disclosed. Implicitly, Defendants argue that stockholders only need to 

know the economics of a transaction to cast an informed vote. 

Defendants’ position finds no support in Delaware law. No case has held that 

a corporation needs to disclose only the economic terms of a transaction when 

securing a stockholder vote. In fact, then-Vice Chancellor Strine rejected as 

“frivolous” the argument that “the only material facts necessary to be disclosed” 

regarding a stock incentive plan are the “exact” economic terms of the plan.776 This 

775 See JX-445 at 3–4; JX-464 at 5–7; JX-479; JX-490 at 5–7; JX-640 at 3; JX-631 at 

2; see also JX-664 (Musk asking to “move forward” with the 2018 Grant “in a reduced 

manner from before”); Trial Tr. at 676:18–677:1 (Musk) (“Q. And the only number 

we’ve seen from you so far is 15 percent of total outstanding shares, so I assume that 

means something less than 15 percent of total outstanding shares. Right? A. Yes.”); 

JX-678 at 1–2 (email from Maron comparing Musk’s “reduced” request with the 

original request). Defendants do not appear to deny the materiality of this 

information. Instead, they take the factually inaccurate contention that “Ehrenpreis 

originated the initial proposal for the 2018 Plan.” Defs.’ Post-Trial Opening Br. at 

102 (citation omitted). Plaintiff argues that the Proxy also suffered from disclosure 

issues relating to the ability to meet the milestones and Musk’s commitments outside 

Tesla. Although likely material, the court defers making a factual finding on this

purported disclosure violation having found Plaintiff already proved the transaction 

was not entirely fair. 

776 Sample v. Morgan, 914 A.2d 647, 652, 663–67 (Del. Ch. Jan. 23, 2007) (rejecting 

the “frivolous” argument because stockholders would also want to know where the 

plan originated, the self-interested purpose of the plan by those who conjured it up, 

and information regarding the comparative size of the plan to other corporate equity 

plans). 
157

holding recognizes that materiality extends beyond economics to information 

regarding process, conflicts, incentives, and more.777 Defendants’ authorities do not 

support the new rule that they advance.778 

Moreover, “once defendants travel[] down the road of partial disclosure of the 

history leading up to the [transaction] . . . , they ha[ve] an obligation to provide the 

stockholders with an accurate, full, and fair characterization of those historic 

events.”779 Here, Defendants chose to disclose aspects of the process. Having done

777 See, e.g., Mindbody, 2023 WL 2518149, at *43–44 (finding a disclosure violation 

where a party was tipped off as to the timing of a sales process); Atheros Commc’ns, 

Inc., 2011 WL 864928, at *11 (Del. Ch. Mar. 4, 2011) (holding that the terms of the 

incoming CEO’s employment after a merger were material where the proxy did not 

fully describe the negotiating process); van der Fluit v. Yates, 2017 WL 5953514, at 

*8–13 (Del. Ch. Nov. 30, 2017) (stating that “vague language regarding the identities 

of the negotiators” who received post-transaction employment constituted a material 

disclosure that prevented dismissal under Corwin); Lear Corp. S’holder Litig., 926 

A.2d 94, 114 (Del. Ch. 2007) (“[A] reasonable stockholder would want to know an 

important economic motivation of the negotiator singularly employed by the board to 

obtain the best price for the stockholders, when that motivation could rationally lead 

that negotiator to favor a deal at a less than optimal price[.]”); see also Maric Cap.

Master Fund, Ltd. v. Plato Learning, Inc., 11 A.3d 1175, 1179 (Del. Ch. 2010) 

(imposing an injunction because the proxy failed to disclose a future CEO’s stock 

options and future management makeup and other accompanying incentives).

778 Defendants cite to Cambridge Retirement System v. Bosnjak, where the court held 

that the “absence of benchmarking information” was not a material omission 

“because the proxy statements disclosed all material terms of the precise equity 

awards that the stockholders were being asked to approve.” 2014 WL 2930869, at *9 

(Del. Ch. June 26, 2014). But no one claims here that the absence of disclosed 

benchmarking information rendered the stockholder vote uninformed. Defendants 

further cite In re 3COM Corp. for the proposition that Delaware courts do not require 

the disclosure of a projected options’ value, and thus Tesla went above and beyond by 

disclosing the approximately $55.8 billion maximum theoretical value of the Grant. 

1999 WL 1009210, at *6–8 (Del. Ch. Oct. 25, 1999); JX-878 at 24–25 (2/8/18 Schedule 

14A Proxy Statement). But the fact that Tesla disclosed some information does not 

excuse the Company’s other disclosure deficiencies.

779 Bancorp, 650 A.2d at 1280 (citations omitted).
158

so, they had an obligation to provide accurate, full, and fair information about that 

process, which they failed to do. At a minimum, a corporation cannot disclose false 

information, such as describing key negotiators as independent. That is what 

happened here. 

C. Defendants Failed To Prove That The Grant Was Entirely Fair.

Because Defendants failed to show that the stockholder vote was fully 

informed, they bore the burden of proving entire fairness. “The requirement of 

fairness is unflinching in its demand that where one stands on both sides of a 

transaction, he has the burden of establishing its entire fairness, sufficient to pass 

the test of careful scrutiny by the courts.”780

The Delaware Supreme Court provided guidance on the entire fairness review 

in SolarCity III.781 Quoting Weinberger v. UOP, Inc., the high court described the 

entire fairness review as follows:

The concept of fairness has two basic aspects: fair dealing 

and fair price. The former embraces questions of when the 

transaction was timed, how it was initiated, structured, 

negotiated, disclosed to the directors, and how the 

approvals of the directors and the stockholders were 

obtained. The latter aspect of fairness relates to the 

economic and financial considerations of the proposed 

merger, including all relevant factors: assets, market 

value, earnings, future prospects, and any other elements 

that affect the intrinsic or inherent value of a company’s 

stock. However, the test for fairness is not a bifurcated one 

as between fair dealing and price. All aspects of the issue 

780 SolarCity III, 298 A.3d at 700 (emphasis omitted) (quoting Weinberger, 457 A.2d 

at 710).

781 Id. at 698–734.
159

must be examined as a whole since the question is one of 

entire fairness.782

Entire fairness review calls upon the court to “carefully analyze the factual 

circumstances, apply a disciplined balancing test to its findings, and articulate the 

bases upon which it decides the ultimate question of entire fairness.”783 “Given the 

unitary nature of the test, findings in one area may seep into the findings of the other. 

As a result, ‘a fair process usually results in a fair price.’ The opposite is also true: 

‘an unfair process can infect the price.’”784 

Here, Defendants failed to prove that the Grant was the product of fair dealing 

or at a fair price.

a. Fair Dealing

“The element of ‘fair dealing’ focuses upon the conduct of the corporate 

fiduciaries in effectuating the transaction.”785 When discussing fair process in 

SolarCity III, the Delaware Supreme Court encouraged this court to focus on what it 

refers to as the “Weinberger factors.”786 Those factors are “how the deal was initiated 

782 Id. at 700 (quoting Weinberger, 457 A.2d at 711).

783 Id. (quoting Cinerama, Inc. v. Technicolor, Inc., 663 A.2d 1156, 1179 (Del. 1995)

[hereinafter “Cinerama II”]).

784 Id. at 702 (first quoting Ams. Mining, 51 A.3d at 1244, then quoting Trados, 73 

A.3d at 78).

785 Id. at 701 (quoting Tremont, 694 A.2d at 430).

786 Id. at 702.
160

and timed, how it was structured and negotiated, and how it was approved[.]”787 

Those factors “form the core of a court’s fair dealing analysis.”788

This decision already addressed most of the facts pertinent to the fair dealing 

inquiry when discussing how Musk controlled the process and the disclosure 

deficiencies. This section largely restates those findings while mapping them onto 

the Weinberger factors. They fare no better in their repackaged form. Defendants 

have failed to demonstrate that the process leading to the Grant was fair.

i. Initiation And Timing

The first Weinberger factor “examines how the decision under challenge was 

initiated.”789 “The scope of this factor is not limited to the controller’s formal act of 

making the proposal; it encompasses actions taken by the controller in the period 

leading up to the formal proposal.”790 The goal of the analysis is to determine whether 

the controller timed the proposal opportunistically to take advantage of the minority 

stockholders.791 In SolarCity II, for example, the court asked whether Musk timed 

the transaction to “exploit any inherent coercion[.]”792 

787 Id. (citing Weinberger, 457 A.2d at 711).

788 Id.

789 Frederick Hsu, 2020 WL 2111476, at *36. 

790 Dole, 2015 WL 5052214, at *26.

791 In re BGC P’rs, Inc. Deriv. Litig., 2022 WL 3581641, at *18 (Del. Ch. Aug. 19, 2022) 

(“The . . . initiation of a transaction can evidence a lack of fair dealing where it favors 

the controller to the minority’s detriment.”), aff’d, 303 A.3d 337 (Del. 2023) (TABLE). 

792 SolarCity III, 298 A.3d at 703–04; see also Dole, 2015 WL 5052214, at *27–28 

(finding unfair dealing where the controller planned on taking target private for 

eighteen months prior to the formal process, during which time the controller 

engaged in a calculated effort to depress the market price of the target’s stock); Sealy 
161

As to this factor, Defendants have a handful of facts in their favor. The timing 

of the first discussion was dictated by Ehrenpreis, not Musk. Ehrenpreis credibly 

testified that he initiated this discussion because Tesla had reached nearly all of the 

milestones of Musk’s prior compensation plan. There is no evidence that Musk was 

secretly behind the start of negotiations, or that a starting negotiation in April 2017

gave Musk any significant advantage at the expense of the minority stockholders. 

Nor is there any evidence that Musk set the table for the negotiations by acting 

in a manipulative or duplicitous manner. To show manipulative conduct, Plaintiff 

points to Musk’s May 2018 public statement that he would not remain CEO forever. 

Plaintiff argues that this statement was intended to pressure the Board. That is not 

a far-fetched theory, but it is not supported by the record. The more likely 

explanation is that Musk was considering stepping down from CEO to become Chief 

Products Officer. Another likely explanation is that Musk lacks a filter, so his public 

statement easily could have been a momentary thought that immediately found 

expression. In all events, he clarified his intentions at the time and at trial: Musk is 

committed, Tesla forever.

Mattress Co. of New Jersey, Inc. v. Sealy, Inc., 532 A.2d 1324, 1336 (Del. Ch. 1987) 

(finding unfair dealing in light of “a calculated effort to depress the [market] price” of 

a stock “until the minority stockholders [are] eliminated by merger or some other 

form of acquisition”); Jedwab v. MGM Grand Hotels, Inc., 509 A.2d 584, 599 (Del. Ch. 

1986) (observing that “[t]he prototyp[ical] instance in which the timing of a merger 

would itself likely constitute a breach of a controlling shareholder’s duty is when it 

could be shown both (1) that the minority was financially injured by the timing (i.e., 

from their point of view it was an especially poor time to be required to liquidate their 

investment) and (2) that the controlling shareholder gained from the timing of the 

transaction what the minority lost”); Weinberger, 457 A.2d at 711 (citing the “serious 

time constraints” as a negative factor in the discussion of process).
162

Although Musk did not manipulate the initial timing of the process, he 

repeatedly and unilaterally manipulated the timeline of the process. To summarize 

the facts discussed above, before the Board or Compensation Committee had a 

substantive discussion concerning the Grant, Musk’s team proposed a highly 

accelerated schedule that contemplated approval of the Grant within less than two 

months. The committee’s independent advisors asked for more time and were told 

no. It was Musk who unilaterally extended the July deadline to August or September. 

Musk then unilaterally put the process on hold again at the end of July, causing work 

to slow and then stop entirely. Musk restarted discussions on the morning of 

November 9. Musk asked to pause the process again on November 14 and was 

ultimately successful in delaying work until December. Musk instigated another 

period of urgency on December 11, placing the Grant “on a fast track,”793 and 

resetting the target date for Board approval to January. The Board eventually 

approved the 2018 Grant on January 21.

As Weinberger teaches, time constraints standing alone are “not necessarily 

indicative of any lack of fairness by a majority shareholder. It [is] what occurred, or 

more properly did not occur,” that matters.794 Put differently, one must look to how 

the time constraints affected the process. 

Here, Musk’s “red light, green light” approach negatively affected the process 

in two ways. First, although the process spanned nine months, most of the work 

793 JX-718.

794 457 A.2d at 711.
163

occurred during small bursts and under Musk-imposed time pressure. Second, Musk 

made determinations at the last minute, compressing the timeline, adjusting the 

timeline, or proposing new terms prior to six out of the ten Board or Compensation 

Committee meetings during which the Grant was discussed. Musk’s habit of shaking 

up the timeline or changing his proposal just before a meeting made it tough for the 

directors and their advisors to meaningfully evaluate the Grant and respond. The 

time constraints and last-minute adjustments impaired the process.

ii. Negotiations

The next Weinberger factor examines how the transaction was negotiated and 

structured. This factor proves pivotal, because arm’s-length negotiations can make 
164

up for other flaws.795 But the opposite is also true. The lack of arm’s-length 

negotiations can overshadow positive aspects of a process.796

Perhaps for this reason, Defendants rely heavily on the negotiations to 

demonstrate fair process. They emphasize the number of Board, Compensation 

Committee, and Working Group meetings. They tally months spent (both the total 

795 See, e.g., SolarCity III, 298 A.3d at 710 (agreeing with the trial court that although 

the process had flaws, the process included several “redeeming features that 

emulated arms-length bargaining” (citing SolarCity II, 2022 WL 1237185, at *36));

BGC P’rs, 2022 WL 3581641, at *42 (finding that although “[t]here were certainly 

flaws,” “[t]he record demonstrates that the Special Committee undertook good faith, 

arm’s length negotiations . . . that resulted in a deal with a favorable structure and a 

fair price”); S. Muoio & Co. LLC v. Hallmark Ent. Invs. Co., 2011 WL 863007, at *9–

10 & n.73 (Del. Ch. Mar. 9, 2011) (finding process was entirely fair where, among 

other things, “the Special Committee was independent, fully informed, and . . . 

negotiated . . . at arm’s length”), aff’d, 35 A.3d 419 (Del. 2011) (TABLE); Cinerama II, 

663 A.2d at 1144 (concluding that despite the process being “flawed,” the transaction 

was fair where “the board was insufficiently informed to make a judgment worthy of 

presumptive deference, nevertheless considering the whole course of events, 

including the process that was followed, the price that was achieved, and the honest 

motivation of the board to achieve the most financially beneficial transaction 

available[]”), aff’d, 663 A.2d 1156 (Del. 1995); Van de Walle v. Unimation, Inc., 1991 

WL 29303, at *17 (Del. Ch. Mar. 6, 1991) (“The most persuasive evidence of the 

fairness of the $21 per share merger price is that it was the result of arm’s-length 

negotiations between two independent parties, where the seller . . . was motivated to 

seek the highest available price, and a diligent and extensive canvass of the market 

had confirmed that no better price was available.”); Rosenblatt, 493 A.2d at 937–38 

(observing that controller established separate negotiating terms to recreate arm’s

length bargaining, that negotiations were adversarial, and that the result was “more 

than the theoretical concept of what an independent board might do under the 

circumstances[]” and “[i]nstead . . . it [was] clear that these contending parties to the 

merger in fact exerted their bargaining power against one another at arm’s length” 

(citations omitted)).

796 See, e.g., FrontFour, 2019 WL 1313408, at *26 (finding that because the special 

committee “was not truly independent and did not negotiate at arm’s length[]” that 

the defendants did not prove the proposed transactions were the product of fair 

dealing). 
165

and those involving “active deliberation”) and even estimate total hours worked.797 

Defendants also tout their advisors’ qualifications and integrity.798 

Although Defendants cast the negotiations as the strongest aspect of the 

process, they are actually the most dramatic failure. Defendants elevate form over 

substance, proffering what Plaintiff’s counsel aptly described as “a false equivalency 

between length of the process and fairness.”799 Defendants’ tallies of time spent are 

merely “superficial indicia”—total hours spent is meaningless if the time was not 

used to benefit stockholders.800

One important dimension of arm’s-length bargaining is the existence of an 

independent bargaining agent. As this decision has found, the Compensation 

Committee was compromised by conflicts. They could not negotiate at arm’s length 

against Musk.

Not surprisingly, there is no evidence of any adversarial negotiation with Musk 

concerning the size of the Grant. Rather, Musk made an initial proposal, and that 

proposal was the only one seriously considered until Musk unilaterally changed it six 

months later. Defendants are correct that, in the final stretch of the process, the 

Grant went from a 10%/10-tranche FDS structure to a 12%/12-tranche TOS structure. 

797 Defs.’ Post-Trial Opening Br. at 58–59.

798 Id.

799 Pl.’s Post-Trial Answering Br. at 39.

800 Valeant Pharms. Int’l v. Jerney, 921 A.2d 732, 746 (Del. Ch. 2007); see also 

Loral, 2008 WL 4293781, at *23 (finding “troubling” that advisors “seemed intent on 

making the [transaction] appear more fair rather than providing an objective opinion 

to the Special Committee and helping the Special Committee use any leverage it had 

to strike a better deal”).
166

Defendants are correct that, all else equal, requiring more growth in market 

capitalization for the same number of shares means a better deal for stockholders. 

But there is no credible evidence that the shift from ten tranches to 12 and the 

associated increase in the difficulty of the market capitalization targets resulted from 

any actual negotiation with Musk. To the contrary, as discussed above, the Board 

backed into 12 tranches when translating Musk’s demand of 10% of fully diluted 

shares into a round percentage of total outstanding shares while maintaining the $50 

billion/1% per tranche approach that Musk proposed back in April.

As to the other terms, the purported concessions secured by the Compensation 

Committee did not result from negotiations either. The Clawback Provision was the 

bare minimum necessary to comport with existing Tesla policy and did not address 

other key Board goals, such as the Board’s desire to retain Musk. The Leadership 

Requirement was less restrictive than in the prior Grant and not tailored to fit the 

retention goal either. The Five-Year Hold Period resulted from Ehrenpreis’s directive 

to find “creative options” for reducing the grant date fair value. It does not protect 

stockholders because Musk is not restricted from selling or pledging his nearly 21.9% 

stake.801 The industry-standard M&A Adjustment—which merely prohibited Musk 

from gaming the Grant’s milestones through inorganic growth—were a non-issue for 

801 JX-530 at 8. 
167

Musk.802 And his acknowledgement that Tesla would not “be making any big 

acquisitions” rendered that provision functionally irrelevant.803

The Compensation Committee’s independent advisors cannot help the analysis 

because they played no role in any negotiations and were not tasked with challenging 

the committee’s thinking or presenting alternatives to the Grant.804 Defendants 

agree that benchmarking is standard and essential. They knew benchmarking would 

expose the Grant as many multiples larger than any conceivable comparison. But 

the Compensation Committee did not ask its advisors to provide a benchmarking 

analysis, which would have given them some perspective on how (in Musk’s words) 

“really crazy” the Grant was.805 

The Compensation Committee relied more on conflicted management members 

than on its outside advisors. Illustrating this point, many of the documents 

Defendants cited as proof of a fair process were drafted, pushed out, or endorsed by 

802 Trial Tr. at 255:6–13 (Maron).

803 JX-781 at 1–2 (Musk emailing Maron concerning the M&A provision that “I don’t 

think we will be making big acquisitions” and “[o]ur only acquisitions have been 

relatively small automation companies”). 

804 See Trial Tr. at 1481:8–14, 1466:21–1469:4 (Brown) (testifying that “[Compensia

consultants] weren’t retained necessarily to challenge what they were doing,” but 

instead “to help them think really carefully about how to do it”).

805 JX-398.
168

Musk’s divorce-attorney-turned-general-counsel Maron,806 whose admiration for 

Musk moved Maron to tears during his deposition.807 

Suffice it to say, the Compensation Committee operated under a “controlled 

mindset.”808 Rather than negotiating against Musk, the committee engaged in a 

“cooperative [and] collaborative” process809 antithetical to arm’s-length bargaining.810 

Worse, the committee seemed to actively advance Musk’s interests—doing “what feels 

fair” for Musk811—including by devising ways to understate the Grant’s value on the 

806 See Defs.’ Post-Trial Opening Br. at 58–68 (citing JX-878 (Proxy prepared by 

Maron); JX-1592 (6/23/17 Compensation Committee Presentation prepared by Maron 

and his team); JX-628 (9/18/17 Presentation for CEO compensation discussion sent 

out by Maron); JX-566 (7/31/17 Slide Decks for Special Compensation Committee 

meeting circulated by Maron); JX-699 (11/16/17 Board minutes drafted by Maron 

(secretary)); JX-729 (12/12/17 special Board meeting minutes drafted by Maron 

(secretary)); JX-783 (1/17/18 emails from Maron to team); JX-784 (1/17/18 email from 

Maron to Musk); JX-678 (11/29/17 email from Maron to Musk on the steps for his 

proposal); JX-509 (7/7/17 Compensation Committee meeting minutes drafted by 

Maron (secretary)).

807 Maron Dep. Tr. at 74:10–17 (becoming “emotional” about the decision to leave 

Tesla); id. at 200:9–15 (“Unfortunately I lost my cool earlier and cried because I love 

the company so much, and I loved my teammates and my colleagues and the people 

on the executive team.”); Trial Tr. at 275:10–24 (Maron) (confirming he “choked up” 

at his deposition about his “incredible experience[]” at Tesla and the “very emotional 

decision” to leave).

808 See S. Peru, 52 A.3d at 798 (“[F]rom inception, the Special Committee fell victim 

to a controlled mindset and allowed [the controller] to dictate the terms and structure 

of the [transaction].”).

809 Trial Tr. at 243:7–244:13 (Maron).

810 See S. Peru, 52 A.3d at 798 (finding the special committee “accepted that only one 

type of transaction was on the table . . . [that] took off the table other options that 

would have generated a real market check and also deprived the Special Committee 

of negotiating leverage to extract better terms”).

811 See Trial Tr. at 809:8–14 (Maron); see also Gracias Dep Tr. at 244:25–245:20 (“I 

did not have a positional negotiation with [Musk] about, hey, we want to give you one 
169

grant date and make the milestones easier to achieve. Those were “exercise[s] in 

rationalization.”812 In the end, Musk dictated the Grant’s terms, and the committee 

effected those wishes.813 

iii. Structure And Approval

The last Weinberger factor examines how the transaction was structured and 

approved. “Whether a transaction was structured to include procedural protections—

such as requiring the approval of an independent board negotiating committee or a 

majority of the minority vote—is another important indicium of fairness.”814 The 

[tranche], and you want two and let’s go negotiate back and forth . . . . I did not have 

a negotiation starting lower and going higher with him about the tranches or the size 

of the award.”); id. at 255:22–256:9 (“Q. Okay. As a Tesla director and compensation 

committee member, do you think you have a duty to the company and the 

stockholders to try to negotiate for the smallest compensation package for Mr. Musk 

that would adequately incentivize him? A. That is not how I think about it, no. Q. 

Can you explain to me how you think about it? A. I think about compensation 

packages generally as what is fair to the executive and what is fair to the company. 

I don’t think about it as trying to get the very smallest thing possible ever. That’s 

just not my modus operandi with any company I deal with. I think about fairness.”).

812 See S. Peru, 52 A.3d at 801; see also id. (“Throughout the negotiation process, the 

Special Committee’s and Goldman’s focus was on finding a way to get the [controller’s 

proposed] terms to make sense[.]”); Valeant, 921 A.2d at 746 (“[The process was], from 

the outset, undertaken to justify a bonus on the order of $30 million to Panic, rather 

than determine if bonuses—and in what amounts—might be appropriate.”).

813 See Loral, 2008 WL 4293781, at *26 (“Loral’s CEO, Targoff, was a more aggressive 

negotiator than the Special Committee itself or the Committee’s financial advisor, 

North Point. By that stage, Harkey, Simon, and North Point seemed willing to sign 

off on terms that were more advantageous to MHR than Targoff himself wanted to 

accept.”).

814 BGC P’rs, 2022 WL 3581641, at *19 (citing Gesoff v. IIC Indus., Inc., 902 A.2d 

1130, 1145 (Del. Ch. 2006) (“The Supreme Court observed as early as Weinberger that 

the establishment of an independent special committee can serve as powerful 

evidence of fair dealing.”)); Jedwab, 509 A.2d at 599 (“As to the fact that the 

transaction was not structured to accord minority shareholders a veto, nor was an 
170

Board approved the Grant. Musk and Kimbal recused themselves. Five of the six 

directors who voted on the Grant were beholden to Musk or had compromising 

conflicts.815 Tesla voluntarily subjected the Grant to a majority of the minority vote, 

but the Board secured stockholder approval through the materially deficient Proxy.816 

independent board committee established to negotiate the apportionment of merger 

consideration on behalf of the minority, these are pertinent factors in assessing 

whether fairness was accorded to the minority.”); Sealy, 532 A.2d at 1336 (“A second 

indicium of fair dealing, or its absence, is whether the process by which the merger 

terms were arrived at involved procedural protections that would have tended to 

assure a fair result.”)).

815 Gesoff, 902 A.2d at 1150–51 (finding in a post-trial opinion, that the investment 

bank’s relationship with the buy-side controlling stockholder “robs [its] fairness 

opinion of its value as an indicator of fairness, and is itself an indicator that the 

parties did not structure the process in a way that was entirely fair”); see also In re 

El Paso Corp. S’holder Litig., 41 A.3d 432, 444 (Del. Ch. 2012) (noting that the 

conflicted negotiator has a duty “to squeeze the last drop of the lemon out for . . . 

stockholders,” but that the conflict gave the negotiator “a motive to keep juice in the 

lemon that he could use to make a financial [deal] for himself”).

816 Accord Weinberger, 457 A.2d at 703 (“Material information . . . was withheld under 

circumstances amounting to a breach of fiduciary duty. We therefore conclude that 

this merger does not meet the test of fairness . . . .”); Orchard, 88 A.3d at 29 

(concluding that a “disclosure issue on which the plaintiffs received summary 

judgment provide[d] some evidence of unfairness”); see also Delman v. 

GigAcquisitions3, LLC, 288 A.3d 692, 723 (Del. Ch. 2023) (finding entire fairness 

standard applied where defendants failed “to disclose the cash per share that Gig3 

would invest in the combined company[]” and “the value that Gig3 and its nonredeeming stockholders could expect to receive in exchange[]” because “[b]oth pieces 

of information would be essential to a stockholder deciding whether it was preferable 

to redeem her funds from the trust or to invest them in New Lightning”); In re 

MultiPlan Corp. S’holders Litig., 268 A.3d 784, 816 (Del. 2022) (stating plaintiff 

stated viable claim under the entire fairness standard where the defendants failed to 

disclose information necessary for the plaintiff to “knowledgeably exercise their 

redemption rights”); Voigt, 2020 WL 614999, at *24 (finding entire fairness standard 

applied where the proxy statement failed to disclose the equity of a purchased asset 

“because it directly addressed the fairness of the [c]hallenged [t]ransaction[]” (citation 

omitted)).
171

Neither Board approval nor stockholder approval is a positive factor here for the fair 

dealing analysis.

b. Fair Price

“In the fair price analysis, the court looks at the economic and financial 

considerations of the transaction to determine if it was substantively fair.”817 “Fair 

price and fair value standards call for equivalent economic inquiries.”818 “The fair 

price aspect of the entire fairness test,” however, “is not in itself a remedial 

calculation.”819 “Instead of picking a single number, the court’s task is ‘to determine 

whether the transaction price falls within a range of fairness.’”820 The fair price 

aspect of the entire fairness standard involves consideration of “all relevant factors” 

and may encompass “proof of value by any techniques or methods which are generally 

considered acceptable in the financial community[.]”821 

There is no absolute limit on the magnitude of a compensation grant that could 

be considered fair.822 But “[p]rocess can infect price.”823 And “where the pricing terms 

of a transaction that is the product of an unfair process cannot be justified by 

817 Ravenswood Inv. Co., L.P. v. Est. of Winmill, 2018 WL 1410860, at *13 (Del. Ch. 

Mar. 21, 2018) (citation omitted). 

818 Id. (cleaned up).

819 Id. (cleaned up).

820 SolarCity II, 2022 WL 1237185, at *39 (quoting Dole, 2015 WL 5052214, at *33).

821 Weinberger, 457 A.2d at 713; SolarCity II, 2022 WL 1237185, at *32. 

822 See Brehm v. Eisner, 746 A.2d 244, 263 (Del. 2000) (“the size and structure of 

executive compensation are inherently matters of judgment” (citation omitted)). 

823 Reis, 28 A.3d at 467 (citations omitted); Bomarko, Inc. v. Int’l Telecharge Inc., 794 

A.2d 1161, 1183 (Del. Ch. 1999) (“[T]he unfairness of the process also infects the 

fairness of the price.”), aff’d, 766 A.2d 437 (Del. 2000).
172

reference to reliable markets or by comparison to substantial and dependable 

precedent transactions, the burden of persuading the court of the fairness of the 

terms will be exceptionally difficult.”824 

Defendants’ primarily urge the court to evaluate price by comparing the terms 

of the exchange—what Tesla “gave” against what Tesla “got.”825 This allows 

Defendants to argue that the Grant was “all upside” for the Tesla stockholders, who 

they say risked nothing and gave “6% for $600 billion[.]”826 There are many 

alternative ways to analyze price fairness.827 And there are good reasons to reject 

the give/get model where no market-based evidence supports the price.828 But 

because Defendants bear the burden of proving fair price, the court starts with their 

give/get argument. 

Defendants’ other affirmative arguments go as follows. They argue that a 

unique set of circumstances warranted an unprecedented Grant, which was 

824 Valeant, 921 A.2d at 748–49; see also Loral, 2008 WL 4293781, at *22 (“When the 

process used involves no market check and the resulting transaction is a highly 

unusual one impossible to compare with confidence to other arms-length 

transactions, the court is left with no reasoned basis to conclude that the outcome 

was fair.”).

825 Defs.’ Post-Trial Opening Br. at 69–70 (citing S. Peru, 52 A.3d at 801–02; 

Dieckman v. Regency GP LP, 2021 WL 537325, at *34–35 (Del. Ch. Feb. 15, 2021)). 

826 Id. at 70, 74.

827 See, e.g., SolarCity II, 2022 WL 1237185, at *39–48 (structuring the price analysis 

to follow the parties’ competing price arguments).

828 Valeant, 921 A.2d at 750 (observing that the price terms could not be “justified by 

reference to any reliable market[]” and that there was no “proof in the record of 

substantial comparable transactions to which the court might look to find support for 

the payment of bonuses”).
173

“necessary . . . at this time, for this CEO, and in this form.”829 They contend that the 

Grant was “only upside” for the additional reason that the Grant’s structure aligned 

Musk’s interests with the stockholders. They assert that the Grant’s milestones were 

ambitious and difficult to achieve. They maintain that the Grant is an exceptional 

deal when compared to private equity compensation plans. They say that the 

stockholder vote was an indicator of fair price. And they insist that the Grant worked 

by delivering to stockholders all that was promised.

Each of Defendants’ fair price arguments fail. Defendants did not prove that 

the Grant falls within a range of fairness.

i. The Give/Get

A “get” in this context asks what terms advance a company’s goals. A “give” is 

only reasonable if it is calibrated to further those goals. To contextualize the “give” 

and the “get” discussion, therefore, the court must first ask: What did Tesla want? 

As set out in the June 16 Compensation Committee meeting minutes, the goals 

in structuring Musk’s compensation plan were to “retain[]” Musk, “properly 

incentiviz[e]” Musk, and “[k]eep . . . Musk as the Company’s fully-engaged CEO” 

given the “multiple other successful large companies” he manages.830 The lawyercurated record of the relevant Board and Compensation Committee meetings 

identifies these goals, in general terms, as well as the directors’ desires to align 

829 Defs.’ Post-Trial Opening Br. at 78.

830 JX-439.
174

Musk’s interests with stockholder value.831 These are all versions of commonly cited 

and accepted goals of equity-based compensation plans. Here, however, the words 

831 JX-407 (6/6/17 Board meeting minutes) (“Mr. Ehrenpreis then updated the Board 

on the status and near fulfillment of all performance milestones related to Mr. E. 

Musk’s current compensation plan, and that plans were underway to design the next 

compensation program for Mr. E. Musk. The Board acknowledged Mr. E. Musk’s 

extraordinary achievement of the stretch milestones it had set for him and for having 

increased the market capitalization of the Company by more than 10x over the last 

five years.”); JX-439 (6/23/17 Compensation Committee meeting minutes) (“Mr. 

Ehrenpreis then led a Committee discussion evaluating the importance of retaining 

and properly incentivizing Mr. Musk. The Committee discussed how Mr. Musk had 

been and would likely remain a key driver of the Company’s success and its prospects 

for growth, and that, accordingly, it would be in Tesla’s interest, and in the interest 

of its stockholders, to structure a compensation package that would keep Mr. Musk 

as the Company’s fully-engaged CEO. The Committee also discussed the fact that 

unlike most other Chief Executive Officers, Mr. Musk manages multiple successful 

large companies. The Committee discussed the importance of keeping Mr. Musk 

focused and deeply involved in the Company’s business, and the corresponding need 

to formulate a compensation package that would best ensure that Mr. Musk focuses 

his innovation, strategy and leadership on the Company and its mission.”); JX-509 

(7/7/17 Compensation Committee meeting minutes) (“The Committee determined 

that one important theme for any compensation plan was to ensure that it created 

adequate structural incentives to focus on the long term growth and success of the 

Company and the creation of shareholder value as opposed to simply short-term 

increases in stock price, while at the same time properly balancing risks and rewards 

for the Company, its shareholders and Mr. Musk. With these principles in view, the 

Committee again deliberated the pros and cons of various structures, and various 

Committee members continued to express their views that the 2012 Compensation 

Plan had worked extremely well for the Company, its stockholders and in 

incentivizing Mr. Musk to spend the bulk of his time on the Company and create 

enormous value for the Company. In light of these factors, Committee members 

expressed their views that there could be significant benefits from creating a 

similarly structured program for Mr. Musk’s next compensation plan, including 

providing strong shareholder alignment, while also recognizing the changed nature 

and size of the Company since the 2012 Plan was implemented. The Committee 

further recognized Mr. Musk’s unique drive for major accomplishments and the 

desire and need to motivate him with significant goals and milestones. The 

Committee recognized and expressed its desire to properly balance the motivation of 

stretch goals for Mr. Musk against any de-motivating factors created by seemingly 

impractical, unrealistic or unachievable goals. The Committee then discussed with 

Compensia and Radford the valuation and accounting considerations for a potential 
175

equity grant. Questions were asked and full discussion ensued.”); JX-571 (8/1/17 

Compensation Committee meeting minutes) (“The Committee discussed the overall 

size of the new program and how it should reflect Mr. Musk’s qualities and 

motivations. They also discussed the need for stretch goals and a long term outlook 

heavily focused on the creation of significant shareholder value. The Committee 

discussed an overall framework of a plan that could last 10-15 years, while also noting 

the pace at which Mr. Musk achieved the ambitious goals set forth in the 2012 

Compensation Program (including leading the Company during a period in which the 

market cap of the company grew over 10x in five years). As part of this discussion, 

the Committee considered whether it was appropriate to consider new and/or 

alternative metrics for milestones in light of the Company’s increased size and focus, 

or whether the ultimate focus should be on the growth of the Company and the 

creation of significant shareholder value. The Committee further discussed the 

setting of major milestones and the importance of balancing the creation .of 

aggressive incentives for Mr. Musk while not disincentivizing him with seemingly 

impracticable or achievable goals. The Committee also discussed the appropriateness 

of large stretch goals and a structure in which Mr. Musk would receive zero 

compensation unless he achieved an incredibly significant milestone and created 

significant shareholder value, and how this type of structure had served shareholders 

and the Company so effectively in the 2012 Compensation Program. The Committee 

acknowledged that if Mr. Musk agreed to accept the significant risk in such a 

structure, the reward would have to be likewise significant, but yet fair to the 

Company and optimal for the shareholders given the milestones that would be 

achieved and the value created. The Committee discussed the milestones and various 

metrics that could be used to measure performance. The members of the Committee 

expressed a preference for simplicity and their desire to fully align the performance 

metrics to, ultimately, the creation of shareholder value.”); JX-631 (9/19/17 Board 

meeting minutes) (“Various topics were discussed, including the success of the 

previous 2012 CEO Compensation Program and how motivating it as for Mr. Musk; 

Mr. Musk’s ambitions for the Company and its potential to be one of the most valuable 

companies in the world; Mr. Musk’s passion and dedication to the Company and its 

mission; the directors’ views of Mr. Musk’s incentives; and Mr. Musk’s other 

commitments and potential competing interests. The directors expressed their desire 

to significantly align Mr. Musk’s compensation with shareholder interests; to focus 

on long term creation of value; and to balance risk and reward for all stakeholders. A 

full discussion ensued. During this discussion, the Board recognized, among other 

things, the challenges of the CEO role and Mr. Musk’s value to the Company, its 

products and businesses, and its culture of innovation. In particular, the Board 

recognized Mr. Musk’s ability to execute in the face of significant challenges. The 

Board further discussed Mr. Musk’s motivations and how the CEO Compensation 

Program might best serve the Company and its shareholders, while properly 

incentivizing Mr. Musk’s ambitions for the Company.”); JX-729 (12/12/17 special 

Board meeting minutes) (stating that the “program was characterized by the . . . full 
176

seem like empty phrases. One obvious reason to question these statements is that 

the Board said that it wished to retain Musk as the “fully engaged CEO,” yet the 

Leadership Requirement allowed Musk to step down to the role of “Chief Product 

Officer.”

There is a more fundamental issue. Professor Charles Elson submitted an 

amicus brief in this action persuasively arguing that “[e]quity compensation for 

corporate executives was designed to solve a specific problem at a specific time in 

American corporate history.”832 To summarize that lesson in broad strokes, the first 

half of the 1900s witnessed a transition from “era of the ‘robber barons’” to the era of 

the Berle-Means corporation, where corporations were run by “professional managers 

with little skin in the game.”833 The theory behind equity-linked compensation plans 

was that “[b]road-based equity ownership throughout the organization by 

management, directors, and employees” is “the most effective motivation for 

continuous vigilance throughout the organization.”834 For that reason and due to 

alignment of CEO gains with the creation of shareholder value” and that “[t]he Board 

acknowledged this alignment as one of their primary focuses and discussed their 

understanding that this full shareholder alignment was Mr. Musk’s desire as well”); 

JX-791 (1/21/18 Board meeting minutes) (stating that “the Board concluded that the 

proposed CEO Performance Award created very close alignment with shareholder 

interests that had the potential to powerfully incentivize Mr. Musk, and created the 

greatest likelihood to propel the Company through its next stages of growth”).

832 Elson Amicus Br. at 4.

833 Id. at 4 (citing Amy Deen Westbrook & David A. Westbrook, Unicorns, Guardians, 

and the Concentration of the U.S. Equity Markets, 96 Neb. L. Rev. 688, 693–94

(2018)). 

834 Id. at 7 (quoting Report Of The NACD Best Practices Council: Coping With Fraud 

And Other Illegal Activity 16 (1998)). 
177

changes in federal tax law, by the 1980s, “pressure built on companies to . . . 

strengthen the link between pay and performance.”835 Corporations began “using 

much more equity-based compensation.”836

Equity-based compensation continues to be a powerful way to reduce agency 

costs and align the interests of management with those of the stockholders,837 as 

Delaware law recognizes.838 But where an executive has a sizeable pre-existing 

equity stake, there is a good argument that the executive’s interests are already 

aligned with those of the stockholders. There are many examples of visionaries with 

large pre-existing equity holdings foregoing compensation entirely: Zuckerberg, 

835 Id. at 6 (quoting Brian R. Cheffins, Delaware and the Transformation of Corporate 

Governance, 40 Del. J. Corp. L. 1, 14 (2015)); see also John C. Coffee, Jr., What Caused 

Enron? A Capsule Social and Economic History of the 1990s, 89 Cornell L. Rev. 269, 

273–75 (2004) (discussing the trend toward equity-based compensation).

836 Elson Amicus Br. at 6 (quoting Cheffins, Delaware and the Transformation of 

Corporate Governance, 40 Del. J. Corp. L. at 14). 

837 See generally id. at 7–8; but see Coffee, What Caused Enron? A Capsule Social and 

Economic History of the 1990s, 89 Cornell L. Rev. at 278–79 (cautioning that equitybased compensation can create perverse incentives when deployed without 

restrictions such as hold periods).

838 See, e.g., Chen, 87 A.3d at 670–71 (observing that owning material amounts of 

stock “aligns [fiduciaries’] interests with other stockholders by giving them a 

‘motivation to seek the highest price’ and the ‘personal incentive as stockholders to 

think about the trade off between selling now and the risks of not doing so’” (quoting

In re Dollar Thrifty S’holder Litig., 14 A.3d 573, 600 (Del. Ch. 2010))); Orman v. 

Cullman, 794 A.2d 5, 27 n.56 (Del. Ch. 2002) (“A director who is also a shareholder of 

his corporation is more likely to have interests that are aligned with the other 

shareholders of that corporation as it is in his best interest, as a shareholder, to 

negotiate a transaction that will result in the largest return for all shareholders.”);

In re Mobile Commc’ns Corp. of Am., Inc. Consol. Litig., 1991 WL 1392, at *9 (Del. 

Ch. Jan. 7, 1991) (observing that directors’ equity ownership created “powerful 

economic (and psychological) incentives to get the best available deal”), aff’d, 608 A.2d 

729 (Del. 1992) (TABLE).
178

Bezos, Gates, and others so familiar to the world that no first names are required.839 

In each instance, the CEO’s board recognized that the executive’s preexisting 

ownership stake provided sufficient incentive to grow the companies that they had 

built.840

So why not here? Why did Tesla have to “give” anything in these 

circumstances? Musk owned 21.9% of Tesla at the time of the Grant.841 If the goals 

were retention, engagement, and alignment, then Musk’s pre-existing equity stake 

839 Elson Amicus Br. at 1–4; see also Dunn Dep. Tr at 138:17–139:10 (“There are 

people, you know, like Jeff Bezos, for example, who doesn’t take any compensation 

including no equity compensation. The only thing that shows up in his proxy is like 

his security expense. . . . Warren Buffett, I think his salary is $100,000. That what 

he takes in compensation, because he owns such a significant portion of the shares.”); 

Dunn Opening Expert Report at 114–15 (showing how much more Musk’s 

compensation for 2018 would be compared to similar high-profile executives for 2018 

(Bezos, $1.6 million) (Pessina (Walgreens) $12.7 million) (Buffett, $390 thousand) 

(Zuckerberg, $22 million) (Musk, $2.3 billion) (numbers are approximate)). The threeyear average compensation (from 2016–2018) paid to Musk (assuming the much 

lower $2.3 billion valuation of the 2018 Grant) is “over 110x what was paid to the 

median of the group” Dunn analyzed (approximately $6.8 million (others) to $761.4 

million (Musk)). Id.

840 See generally Elson Amicus Br. at 3 (citing 10/4/06 Microsoft Schedule 14A Proxy 

at 14 (“Messrs. Gates and Ballmer do not receive equity-based pay from the Company 

because they already own a significant amount of Company stock.”); 4/29/16 Alphabet 

Schedule 14A Proxy at 30 (“Larry and Sergey have voluntarily elected to only receive 

nominal cash compensation. As significant stockholders, a large portion of their 

personal wealth is tied directly to Alphabet’s stock price performance, which provides 

direct alignment with stockholder interests.”); 4/14/22 Amazon Schedule 14A Proxy

at 92 (“Due to Mr. Bezos’s substantial stock ownership, he believes he is appropriately 

incentivized and his interests are appropriately aligned with shareholders’ interests. 

Accordingly, Mr. Bezos has never received any stock-based compensation from 

Amazon.”); 4/12/19 Facebook Schedule 14A Proxy at 28 (“Mr. Zuckerberg did not 

receive any additional equity awards . . . because our compensation & governance 

committee believed that his existing equity ownership position sufficiently aligns his 

interests with those of our stockholders.”)).

841 PTO ¶ 64.
179

provided a powerful incentive for Musk to stay and grow Tesla’s market 

capitalization. After all, he stood to benefit by over $10 billion for every $50 billion 

increase. His equity stake was also a powerful incentive to avoid allowing Tesla to 

fall in what Musk might consider to be incapable hands.842 Moreover, Musk was not 

going anywhere. He stated publicly at the outset of the process and repeated 

throughout this litigation that he was a lifer who intended to stay at Tesla for the 

remainder of his days (or until he becomes “too crazy”), with or without the Grant.843 

The principal defect with Defendants’ give/get argument (indeed, their fair 

price argument as a whole) is that it does not address the $55.8 billion question: 

Given Musk’s pre-existing equity stake, was the Grant within the range of reasonable 

approaches to achieve the Board’s purported goals? Or, at a minimum, could the 

Board have accomplished its goals with less, and would Musk have taken it?

Defendants’ primary response is to reduce the issue to a straw man, stating 

that “Plaintiff’s allegations boil down to the position that Musk should be happy to 

work for free.”844 They make a similar point elsewhere, stating that if Musk “fell 

short of achieving some or all of the [Grant’s] milestones, the stockholders retained 

the benefit of any increase in Tesla’s stock price, while Musk risked receiving 

842 Trial Tr. at 1421:9–13 (Buss) (“Q. Shifting gears, during your board tenure, the 

Tesla board had no formal documented succession plan to replace Mr. Musk; correct? 

A. Formally documented, no. We had various discussions. But correct, nothing 

documented.”); id. at 857:9–858:10 (Murdoch) (confirming Musk had not identified a 

successor until the months after his 2021 deposition). 

843 See e.g., JX-390 at 20–21.

844 Dkt. 227 (“Defs.’ Pre-Trial Br.”) at 43 (emphasis added).
180

nothing.”845 For free? Receive nothing? Defendants’ arguments ignore the obvious: 

Musk stood to gain considerably from achieving the Grant’s market capitalization

milestones (over $10 billion for each $50 billion increase in market capitalization). 

Defendants also neglect the magnitude of the give in their give/get argument. 

The Grant was, by Compensia’s reckoning, the “larg[est] compensation opportunity 

to [a] CEO that [they] have seen.”846 Even other “highly leveraged plan designs with 

very aggressive performance requirements” did not compare to the Grant.847 The 

Grant was more than 30x greater than its nearest comparable plan, and that was 

Musk’s 2012 Grant.848 ISS noted that the Grant was 250x greater than the median 

peer 2017 CEO compensation.849 The incredible size of the biggest compensation plan 

ever—an unfathomable sum—seems to have been calibrated to help Musk achieve 

what he believed would make “a good future for humanity.”850 

A good future for humanity is a really good thing. Some might question 

whether colonizing Mars is the logical next step. But, in all events, that “get” had no 

relation to Tesla’s goals with the compensation plan. Considering this glaring defect 

in Defendants’ give/get argument, it does not support a finding of fair price.

845 Defs.’ Post-Trial Opening Br. at 70 (emphasis added).

846 JX-440 at 106. 

847 Id. at 14. 

848 PDX-2 at 5.

849 JX-916. 

850 JX-664 at 1. It is questionable as to whether the Grant would even make a dent 

in that goal, given that Musk testified that his space odyssey would cost trillions. 

Musk Dep. Tr. at 115:24–117 (Musk discussing his goals and stating that SpaceX’s 

goals would require the help of “other companies and governments”).
181

ii. The Unique Circumstances And CEO

Defendants next argue that the Grant was suited for “this time” and “this 

CEO.”851 To support that argument, they advance the following factual narrative. 

Tesla was setting an ambitious course—to become “one of the most valuable 

companies in the world”852 and “accomplish[] Tesla’s mission of accelerating the 

world’s transition to sustainable energy.”853 Tesla’s ambitious goals forced it to the 

point of an existential crisis in 2017, and Musk was critical to Tesla’s future.854 Musk 

was on the verge of walking away and was distracted by his other ventures. Musk 

required an “added incentive” to stay “at the helm,” and he is uniquely motivated by 

highly ambitious goals.855 As Gracias explained, the Board looked to fashion 

milestones that would give Musk the “dopamine hits” he needed.856 

There is no doubt that “this time” was precarious at Tesla, that the Board 

viewed “this CEO” as critical to Tesla’s success, that Musk is a unique person who 

has been singularly instrumental to Tesla, and that Musk is genuinely motivated by 

highly ambitious goals. But there are reasons to question other aspects of 

Defendants’ factual narrative. For example, if transformative growth is the goal, 

then why set milestones at the time of the Grant that were 70% likely to be achieved? 

851 Defs.’ Post-Trial Opening Br. at 78. 

852 JX-878 at 3 (2/8/18 Schedule 14A Proxy Statement).

853 Id.

854 Trial Tr. at 1251:4–23 (Murphy).

855 Id. at 1251:17–22 (Murphy); id. at 730:21–731:7 (Gracias).

856 Id. at 728:23–729:13 (Gracias).
182

Even assuming that the 70% figure was a conservative accounting metric, it casts 

some doubt on the “stretch” nature of the early milestones. Further, how can one 

conclude that Musk was on the verge of walking away from a leadership role at Tesla 

when Musk made it clear that he “would not quit Tesla,” is “heavily invested in Tesla, 

both financially and emotionally, and views Tesla as part of his family[?]”857 

Defendants also argue that Musk needed additional incentives to stay on at 

Tesla or he would spend more time at SpaceX, where he could fulfill his galactic 

ambitions to establish interplanetary travel, colonize Mars, and potentially earn 

more money in the meantime.858 That argument begs another question: if 

encouraging Musk to prioritize Tesla over his other ventures was so important, why 

not place guardrails on how much time or energy Musk had to put into Tesla?

Even assuming the truth of all of Defendants’ points, they do not add up. There 

is simply no evidence that the “added incentive” provided by a Grant of this

magnitude was necessary, much less fair. This unique circumstance and this unique 

CEO do not support a finding of fair price.

857 JX-831 at 13–14; see also Trial Tr. at 644:11–15 (Musk) (affirming that as of early 

2018, he was heavily invested in Tesla both financially and emotionally and viewed 

Tesla as part of his family); id. at 76:7–15 (Ehrenpreis) (confirming Musk affirmed 

his love for Tesla during the first discussion regarding a new grant); id. at 785:1–7 

(Gracias) (testifying that Musk views Tesla as one of the most important things in 

his life).

858 Defs.’ Post-Trial Opening Br. at 15–16; Murphy Opening Rep., at 50–51; Defs.’ 

Post-Trial Opening Suppl. Br. at 23 (suggesting that Musk, without the Grant, could 

work at SpaceX and keep his Tesla shares as a “passive investment”). 
183

iii. The “Only Upside” Argument

Defendants “only upside” argument relies on the Grant’s structure, which they 

say ensured that Musk drove meaningful and sustained growth in four ways. 

First, Defendants argue that pairing market capitalization milestones with 

operational milestones provided “safety in the structure.”859 

The market capitalization milestones operated as the “primary goals,” while the 

operational goals functioned as “support for those [market capitalization] goals.”860

Brown testified: “There’s a high level of performance required to earn one of these. 

So then, if it was possible to drive that kind of growth on a solid operational basis and 

earn more than one of them in a year, that seemed like a win for . . . shareholders.”861 

But of the two operational metrics, the revenue milestones were not dependent on 

profitability. As Compensia acknowledged, this aspect of the Grant “ignores 

profitability.”862 ISS noted that “up to eight tranches (three-quarters of the award, 

or nearly $2 billion in value) may vest based on market capitalization and revenue 

goals, even if earnings do not clear the EBITDA performance hurdles.”863 Thus, 

Musk could still receive billions under the Grant without Tesla experiencing the 

fundamental growth that the Grant was intended to incentivize.864

859 Defs.’ Post-Trial Opening Br. at 75.

860 Trial Tr. at 1439:7–18 (Brown).

861 Id. 

862 JX-530 at 5 (7/17/17 Working Group discussion document).

863 JX-987 at 6 (3/21/18 ISS proxy analysis & benchmark policy voting 

recommendations). 

864 Dunn Opening Expert Rep. at 56. 
184

Second, Defendants argue the Grant’s trailing average requirements for the 

market capitalization milestones—and the four-consecutive-quarter requirement for 

the operational milestones—are stockholder-friendly.865 The Board apparently “put 

in both the six-month trailing average and the 30-day trailing average to ensure that 

when the market capitalization would potentially increase to one of these milestones, 

it would stay there for a requisite period of time that it actually seemed fair to award 

the milestone to Elon.”866 Similarly, the operational milestones required sustained 

performance for four consecutive quarters.867 Although those timing requirements 

do provide stockholders with protection, that protection is limited, because the Grant 

lacks any protection for lost value when the Company’s performance falls below 

previously met thresholds. 

Third, Defendants argue that the M&A Adjustment—which applied to both 

the market capitalization and operational milestones—prevented Musk from 

“gam[ing]” any of the milestones.868 Maron explained that the adjustments “ensure 

that if Elon was going to benefit from this plan, that it was because he had led the 

Company to organic value creation, not just buying another big company and having 

that add significantly to the market capitalization of Tesla.”869 The adjustments 

would be triggered not only by stock deals, but also by cash deals, a term that 

865 Defs.’ Post-Trial Opening Br. at 75 (citing Trial Tr. at 1274:23–1276:9 (Murphy)).

866 Trial Tr. at 264:16–21 (Maron).

867 JX-878 at 15 (2/8/18 Schedule 14A Proxy Statement).

868 JX-784 at 1–2 (1/17/18 emails between Maron and Musk). 

869 Trial Tr. at 265:8–13 (Maron). 
185

Compensia “hadn’t put in . . . other plans before.”870 But an M&A adjustment is 

standard in executive compensation,871 and Musk acknowledged that Tesla would not 

“be making any big acquisitions,” limiting the utility of this provision.872 

Fourth, Defendants argue that the Five-Year Hold Period served stockholder 

interests.873 Defendants state that “[w]hile every other stockholder could have 

cashed in during the nearly 400 trading days that Tesla’s market capitalization was 

over $650 billion,874 Musk was unable to sell a single share of the compensation he 

earned under the 2018 [Grant].”875 This is true.876 But it ignores that there was no 

limit to Musk’s ability to sell any of the millions of Tesla shares he already owned.

Certainly, the structural provisions on which Defendants rely have value. But 

that value is limited as to each provision. Given the other defects in the Grant, these 

provisions do not individually or in the aggregate lead to a finding of fair price.

iv. The Ambitious Milestones

Defendants argue that the Grant price was fair because its milestones were 

ambitious and difficult to achieve. The defense witnesses all testified in harmony 

870 Id. at 1465:11–19 (Brown). 

871 Id. at 1010:20–24 (Dunn). 

872 JX-784 at 2. 

873 Defs.’ Post-Trial Opening Br. at 76–77.

874 Id. at 77 (citing JX-1510 at 1). 

875 Id.

876 Trial Tr. at 255:6–13 (Maron) (discussing holding periods and the “lock” on Musk); 

id. at 63:20–64:1 (Ehrenpreis) (stating the Board “negotiated an agreement that 

[Musk] would hold for five years after both the achievement and vesting and exercise 

of the options”).
186

that the milestones were “audacious” and “extraordinarily ambitious.”877 Defendants 

concede that three operational milestones aligned with internal projections but note 

that the Company routinely missed projections.878 

It is hard to square Defendants’ coordinated trial testimony concerning Tesla’s 

internal projections with the contemporaneous evidence.879 The Board deemed some 

of the milestones 70% likely to be achieved soon after the Grant was approved.880 

This assessment was made under a conservative accounting metric, but there are 

other indications that Tesla viewed its projections as reliable. They were developed 

in the ordinary course, approved by Musk and the Board, regularly updated, shared 

with investment banks and ratings agencies, and used by the Board to run Tesla.881 

Several Tesla executives affirmed their quality, accuracy, and reliability.882 Plus, 

Tesla hit the first three milestones, consistent with its projections, by September 30, 

2020. 883

877 Defs.’ Post-Trial Opening Br. at 85. 

878 Defs.’ Post-Trial Answering Br. at 67–68.

879 See, e.g., BCIM Strategic Value Master Fund, LP v. HFF Inc., 2022 WL 304840, at 

*2 (Del. Ch. Feb. 2, 2022) (“The witness testimony often conflicted with the 

contemporaneous record. In resolving factual disputes, this decision generally has 

given greater weight to the contemporaneous documents.”).

880 JX-1028 at 15 (4/27/18 Audit Committee Agenda); JX-1023 at 6 (4/27/18 

Significant Accounting Matters for 2018 Q1 Audit Committee). 

881 See e.g., id. at 353:6–355:15 (Ahuja) (projections were “accurate and truthful”); id.

at 466:14–469:24 (Ahuja) (noting the projections were shared with outside rating 

agencies).

882 See e.g., id. at 391:16–23 (Maron) (“Tesla would do its . . . earnest best to . . . provide 

quality information” to the rating agencies). 

883 PTO ¶¶ 265–71.
187

Defendants bore the burden of proving fair price. Given the conflicting

testimony concerning the projections, Defendants failed to prove the factual predicate 

for their argument that all the milestones were “ambitious” and difficult to achieve. 

This argument does not support a finding of fair price.

v. The Private-Equity Analogy

Defendants argue that the Grant price is fair by comparing the Grant to 

compensation structures common in the portfolio companies backed by venture 

capital and private equity funds, where CEOs often receive a percentage of the equity. 

That argument has one obvious problem: Tesla is not a privately held portfolio 

company. 

Defendants offer no theoretical justification for comparing the Grant to 

venture capital or private equity compensation structures when Tesla is not a venture 

capital or private equity backed entity. This was something Defendants came up with 

for trial. During the negotiations, neither Defendants nor their experts benchmarked 

the Grant to venture capital compensation. They never considered an analogy to a 

venture capital or private equity investment. That is because Tesla was a publicly 

traded corporation with a market capitalization of $53 billion, tens of thousands of 

stockholders, and a CEO who already owned 21.9% of Tesla’s equity. 

Examined on its own terms, Defendants’ private-equity analogy relies on 

valuing the Grant as a percentage of Tesla’s fully diluted shares. Defendants peg 

that percentage at 6.4%, but there is no evidence that Musk, the Board, the 

Compensation Committee, or its advisors ever considered this figure during the 
188

process. Defendants take the 6.4% figure from the Proxy, which based the figure on 

“illustrat[ive]” dilution assumptions.884 

Focusing on the 6.4% figure alone, Defendants’ financial expert testified that 

“something like 6 to 10 percent [equity] for a new CEO would be totally normal” in

VC- and private-equity-backed companies.885 Gracias testified that an equity stake 

of around 6% for a CEO would be considered “on the low end.”886 Defendants describe 

the Grant as riskier than VC compensation, because it was “100 percent risk-free” for 

Tesla and its stockholders,887 but Musk would get “nothing if we hadn’t doubled the 

market cap.”888 Referring to his portfolio companies, Gracias put it bluntly: “I don’t 

have a CEO who would sign up for that.”889 Gracias’s testimony, however, was simply 

not credible. Based on Tesla’s April 25, 2022 market capitalization of just over $900 

billion,890 6% of Tesla would be worth $54 billion, just under the maximum value 

884 JX-878 at 24 (2/8/18 Schedule 14A Proxy Statement). It represents one of many 

possible scenarios for what Musk could receive on a fully diluted basis if the Grant 

fully vests and all five of the assumptions listed in the Proxy hold. For example, for 

Musk to achieve a mere 6% under the Grant, “the 527,491 shares of common stock 

subject to the tenth and final tranche of the 2012 [Grant]” would need to “become 

fully vested, outstanding and held by Musk.” Id. But the tenth tranche of the 2012 

Grant never vested. PTO ¶¶ 209–10. 

885 Trial Tr. at 1112:2–24 (Gompers). 

886 Id. at 735:11–736:2 (Gracias). 

887 Id. at 1395:19–1398:3 (Buss).

888 Id. at 736:24–737:11 (Gracias). 

889 Id. at 736:24–737:4 (Gracias).

890 PTO ¶ 71.
189

disclosed in the Proxy.891 Any number of CEOs would sign up for that. And many VC 

startups offer CEOs the prospect of great riches or nothing at all. 

Even if the comparison holds, Musk already is earning more than the 20% a 

hedge fund would earn as a typical carried interest. So, while Musk is not receiving 

a base salary, he is already receiving more (incentive-wise) than a fund who would 

manage Tesla’s assets. And given that Musk does not need a base salary to keep his 

pretend hedge fund afloat, it would not be necessary. 

Regardless, there are other ways to value the Grant, such as its maximum 

value and its grant date fair value. The Board and stockholders were told that, if 

Musk achieved all 12 tranches of the Grant, he would receive a maximum value of 

$55.8 billion.892 As disclosed to the Board and stockholders, the grant date fair value

was $2,615,190,052.893 By this measure, it was a massive award—an internal ISS 

email described it as “about 250 times the peer median.”894 Brown, Ehrenpreis, and 

Denholm all acknowledged that the award was exceptionally large, with Ehrenpreis 

agreeing it was “entirely without precedent.” 895 Plaintiff’s expert noted that the 

Grant was 33x larger than Musk’s 2012 Grant’s $78M grant date fair value.896 By 

891 JX-878 at 18 (2/8/18 Schedule 14A Proxy Statement).

892 Id. at 24.

893 JX-792 at 7; JX-878 at 34.

894 JX-916.

895 Trial Tr. at 130:22–131:7 (Ehrenpreis); id. at 360:20–361:12 (Denholm); id. at

1480:9–14 (Brown).

896 Dunn Opening Expert Rep. at 103; Dkt. 291 (“Pl.’s Demonstrative 2”), at 9 

(showing the magnitude of the comparison); Trial Tr. 994:7–13 (noting the 

comparison between the two grants).
190

the most conservative comparison that Plaintiff’s expert could conceivably devise, the 

Grant’s grant date fair value was 11.7x larger than the median peer group.897 Indeed, 

the Grant entitled Musk to billions even if Tesla significantly underperformed its 

historical results.898 Just as they did during the negotiation process, Defendants 

ignored these figures. 

Defendants’ portfolio-company analogy misses the mark in multiple ways. It 

does not support a finding of fair price.

vi. The Stockholder Vote

Defendants argue that disinterested stockholder approval is “compelling 

evidence” that the price was fair.899 The stockholder vote is one component of the fair 

price analysis, but whether the vote represents a form of market evidence that can 

support a certain price depends on the sufficiency of the disclosure. Generally, a 

stockholder vote is only “compelling evidence” of fairness absent a disclosure 

violation.900 The Delaware Supreme Court in Weinberger held that an uninformed 

897 Trial Tr. at 992:2–7 (Dunn); Pl.’s Demonstrative 2 at 6, 7. Dunn’s most aggressive 

estimation reflected that the Grant was 544.8x greater than the median peer group. 

Pl.’s Demonstrative 2 at 6, 8.

898 Gompers Dep. Tr. at 302:10–303:19. 

899 Defs.’ Post-Trial Opening Suppl. Br. at 21 (citing ACP Master, Ltd. v. Sprint Corp., 

2017 WL 3421142, at *29 (Del. Ch. Aug. 8, 2017)).

900 ACP, 2017 WL 3421142, at *29; cf. Kahn v. Lynch Commc’ns Sys., Inc., 669 A.2d 

79, 89 (Del. 1995) (holding that a finding of adequate disclosure in a parent-subsidiary 

merger was persuasive evidence of entire fairness, because “although the merger was 

not conditioned on a majority of the minority vote . . . more than 94 percent of the 

shares were tendered in response to [the] offer”); Cinerama II, 663 A.2d at 1176

(considering the stockholder vote as persuasive evidence of fair price where “the 

directors had complied with the disclosure duty”).
191

stockholder vote is totally “meaningless.”901 Under Weinberger, therefore, the 

stockholder vote is a meaningless indicator as to fair price. In SolarCity III, the high 

court took a more nuanced approach, affording a stockholder vote some weight 

despite a deficient proxy statement where the key issue was SolarCity’s value. The 

high court noted that there was significant public information available concerning 

that issue, “SolarCity traded in an efficient market,” and a strong independent 

fiduciary positively affected the process.902 Defendants did not establish those facts 

here.903 

Because the stockholder vote was not fully informed, it does not support a 

finding of fair price.

vii. The Hindsight Defense

Defendants finally argue from hindsight. They claim the Grant was fair 

because it worked: “Tesla thrived because of the 2018 Plan.”904 With this argument, 

Defendants ask the court to infer a direct causal relationship between the Grant and 

Tesla’s subsequent performance. But Defendants failed to prove that Musk’s lessthan-full time efforts for Tesla were solely or directly responsible for Tesla’s recent 

901 Weinberger, 457 A.2d at 712.

902 SolarCity III, 298 A.3d at 728–29.

903 See also ACP, 2017 WL 3421142, at *23 (holding that, where information was not 

expected nor asked for by a committee, that information was not required to be 

disclosed because there was not an unfair disparity between the market and the 

decision-makers). 

904 Defs.’ Post-Trial Opening Br. at 52 (emphasis added).
192

growth, or that the Grant was solely or directly responsible for Musk’s efforts. This 

last argument is empty rhetoric, not evidence of fair price. 

D. Rescission Is A Reasonable And Appropriate Remedy.

As a remedy, Plaintiff only seeks recission.905 Plaintiff’s lead argument is that 

the court must rescind the Grant due to the disclosure defects because the Board 

conditioned the Grant on stockholder approval.906 Plaintiff also argues that the court 

has discretion to order rescission as a remedy for fiduciary breaches.907 Plaintiff 

further argues that, “at minimum,” the court should rescind the options for the first 

three tranches given lack of disclosure regarding the probability of achievement.908 

Plaintiff’s first argument does not work. It would create an overly rigid rule 

that runs contrary to the Delaware Supreme Court’s holding in Weinberger. But 

Plaintiff’s second argument prevails, so the court need not reach Plaintiff’s third 

argument. The court orders rescission of the Grant as a remedy for Defendants’ 

fiduciary breaches.

905 Plaintiff sought alternative remedies but has abandoned those requests. Pl.’s 

Post-Trial Opening Br. at 104–06. 

906 The court referred to this as Plaintiff’s “kill shot” theory, which was a reference to 

the racquet term meaning an unreturnable volley that ends a match, not the Eminem 

song.

907 Pl.’s Post-Trial Opening Br. at 105.

908 Id. at 105–06.
193

1. The Automatic-Invalidation Argument Fails.

In their lead argument, Plaintiff argues that because Tesla conditioned the 

Grant on stockholder approval,909 “a single material disclosure failure invalidates” 

the Grant.910 Plaintiff says that because stockholder approval was secured by a 

materially misleading Proxy, the Grant is void, and rescission must follow 

automatically. 

There is appeal in the simplicity of Plaintiff’s approach, but it is not quite right. 

The consequence of an uninformed stockholder vote depends in part on whether that 

vote was required or voluntary.911 The DGCL requires stockholder approval of 

certain transactions—a merger, sale of assets, or charter amendment, for example.912

For transactions that require stockholder approval, there are strong arguments that 

a material disclosure deficiency “warrant[s] an injunction against, or rescission of, 

the transaction.”913 

But even when a Delaware statute requires a vote, this court does not 

necessarily void the transaction when that vote was uninformed.914 In Weinberger, 

909 JX-791 at 4 (Board resolution approving the Grant) (stating that the Grant was 

effective “subject to the Requisite Stockholder Approval” and that if the Grant 

“fail[ed] to receive the affirmative vote” of a majority of non-Musk shares, it would be 

“forfeited and cancelled”).

910 Pl.’s Post-Trial Opening Br. at 1–11.

911 See generally In re Wayport, Inc. Litig., 76 A.3d 296, 314 (Del. Ch. 2013).

912 8 Del. C. §§ 241, 242, 271, 251(c). 

913 Wayport, 76 A.3d at 314–15; Gantler, 965 A.2d at 713.

914 See SolarCity III, 298 A.3d at 729; Arnold v. Soc’y for Sav. Bancorp, Inc., 678 A.2d 

533, 537 (Del. 1996) (holding that “the argument that the disclosure violation renders 
194

the Delaware Supreme Court made that plain by correcting a misunderstanding that 

it believed had arisen regarding the importance of its ruling in Vickers. That earlier 

decision held that rescission was the preferred remedy for a transaction tainted by 

disclosure violations and that rescissory damages—the monetary equivalent of 

rescission—could substitute where rescission was not feasible.915 The Weinberger 

decision stressed that rescissory damages were not the exclusive remedy for a 

disclosure violation.916 By the same logic, rescission need not follow automatically 

either. 

That is especially true for transactions where the DGCL does not require a 

stockholder vote. A corporation may seek stockholder approval for those 

transactions, and the vote is “voluntary” in this sense.917 When voluntarily seeking 

stockholder approval, the failure to disclose material information “will eliminate any 

effect that a favorable stockholder vote otherwise might have for the validity of the 

transaction or for the applicable standard of review.”918 For example, the failure to 

disclose material information will render Corwin cleansing and burden shifting 

the statutory merger void must fail”); see also 13 Am. Jur. 2d Cancellation of 

Instruments § 4 (“Cancellation or rescission as an equitable remedy is not available

as a matter of right. Rather, relief by way of cancellation is a matter within the court’s 

discretion and is granted or withheld according to what is reasonable and proper 

under the circumstances of each case.”).

915 See Vickers, 429 A.2d at 501.

916 Weinberger, 457 A.2d at 704 (overruling Vickers “to the extent that it purports to 

limit a stockholder’s monetary relief to a specific damage formula”).

917 Wayport, 76 A.3d at 314 (citing Gantler, 965 A.2d at 713).

918 Id.
195

unavailable.919 The failure to disclose material information might also support an 

independent claim and remedies for breach of the duty of disclosure,920 but the court 

has discretion when fashioning a remedy in that context as well. The failure to 

disclose material information for voluntary stockholder votes, however, does not 

automatically invalidate the transaction. 

The stockholder vote on the Grant was not required by the DGCL.921 The 

Proxy deficiencies defeated Defendants’ effort to shift the burden under the entire 

919 See, e.g., van der Fluit, 2017 WL 5953514, at *8 n.115 (“[O]ne violation is sufficient 

to prevent application of Corwin.”).

920 See, e.g., Weinberger, 457 A.2d at 703; In re Mindbody, Inc., S’holder Litig., 2023 

WL 7704774, at *10–11 (Del. Ch. Nov. 15, 2023) (awarding Weinberger damages); In 

re Columbia Pipeline Gp., Merger Litig., 299 A.3d 393, 494–500 (Del. Ch. 2023)

(same).

921 In this case, the stockholder vote was required by NASDAQ Rules. NASDAQ R. 

5635(c) (“Shareholder approval is required prior to the issuance of securities when a 

stock option or purchase plan is to be established or materially amended or other 

equity compensation arrangement made or materially amended”). Plaintiff argues 

that the NASDAQ requirement renders the vote “legally required” and thus 

mandates recission for transactions approved by a materially deficient vote. Pl.’s 

Post-Trial Suppl. Answering Br. at 8. Effectively, Plaintiff urges this court to serve 

as NASDAQ enforcement agent, which would run contrary to multiple strains of 

Delaware law. See Teamsters Union 25 Health Servs. & Ins. Plan v. Baiera, 119 A.3d 

44, 70 (Del. Ch. 2015) (holding that stockholder plaintiff had no standing to prosecute 

a violation of the NYSE Rules); In re Aquila Inc. S’holders Litig. 805 A.2d 184, 192 

n.11 (Del. Ch. 2002) (noting that plaintiffs conceded they had “no standing directly to 

bring an action to enforce the NYSE rules or to seek sanctions for any alleged 

violation thereof”); see also Mill Bridge V, Inc. v. Benton, 2009 WL 4639641, *12 (E.D. 

Pa. Dec. 3, 2009) (“courts in [the Third Circuit] have ‘unanimously refused to 

recognize any private right of action for violation of a stock exchange rule” (quoting 

In re Farmers Gp. Stock Options Litig., 1989 WL 73245, at *3 (E.D. Pa. July 5, 1989))). 

Given the complexities of this issue in an otherwise complex case, the court does not 

reach it. And the court need not do so because, ultimately, Plaintiff is getting what 

he asks for—recission. 
196

fairness standard to Plaintiff, but the uninformed vote does not automatically 

invalidate the Grant.

Plaintiff responds that although a stockholder vote was not required by the 

DGCL, the Board elevated the vote to a requirement by conditioning the Grant on a 

favorable vote. That does not change the outcome, because the court has the 

discretion to determine a remedy for corporate transactions where a vote is required. 

The same is true for a transaction that is conditioned on a vote. 

2. Rescission Is Warranted.

Although rescission does not automatically flow from the disclosure 

deficiencies, it is nevertheless an available and appropriate remedy. 

The remedy of rescission “restore[s] the parties substantially to the position 

which they occupied before making the contract.”922 “Rescission ‘is not given for every

serious mistake and it is neither given nor withheld automatically, but is awarded as

a matter of judgment.’”923 The court has broad discretion to award recission where 

the facts and circumstances warrant.924 This court has awarded rescission as a

922 Craft v. Bariglio, 1984 WL 8207, at *12 (Del. Ch. Mar. 1, 1984) (citing Henry 

Campbell Black, On Rescission and Cancellation § 616 (2nd ed.)); accord Geronta 

Funding v. Brighthouse Life Ins. Co., 284 A.3d 47, 61 (Del. 2022) (“rescission results 

in abrogation or unmaking of an agreement, and attempts to return the parties to the 

status quo” (quoting Norton v. Poplos, 443 A.2d 1, 4 (Del. 1982)); id. at 61 

(“‘[E]quitable rescission offers a platform to provide additional equitable relief, such 

as cancellation of a valid instrument—the formal annulment or setting aside of an 

instrument or obligation.’” (quoting Ravenswood, 2018 WL 1410860, at *21)).

923 Gotham P’rs, L.P. v. Hallwood Realty P’rs, L.P., 817 A.2d 160, 174 (Del. 2002) 

(quoting Gaffin v. Teledyne, Inc., 1990 WL 195914, at *16 (Del. Ch. Dec. 4, 1990)).

924 Id. at 164 (stating that whether to order rescission is within the discretion of the 

Court of Chancery); 13 Am. Jur. 2d Cancellation of Instruments § 4 (“Cancellation or 
197

remedy for breach of fiduciary duty,925 particularly in the context of self-dealing

transactions.926 Indeed, as discussed above, the Delaware Supreme Court referred to

recission as “the preferrable remedy” in Vickers for breach of fiduciary duty where

one party has misled another.927 

rescission as an equitable remedy is not available as a matter of right. Rather, relief 

by way of cancellation is a matter within the court’s discretion and is granted or 

withheld according to what is reasonable and proper under the circumstances of each 

case. A court may shape the rescission of contract remedy in order to serve substantial 

justice.”); see also Weinberger, 457 A.2d at 714 (“[T]he Chancellor’s powers are 

complete to fashion any form of equitable and monetary relief as may be 

appropriate.”); Int’l Telecharge, Inc. v. Bomarko, Inc., 766 A.2d 437, 440 (Del. 2000)

(“In determining damages, the powers of the Court of Chancery are very broad in 

fashioning equitable and monetary relief under the entire fairness standard as may 

be appropriate, including rescissory damages” (internal citations omitted)).

925 See, e.g., eBay Domestic Hldgs., Inc. v. Newmark, 16 A.3d 1, 46 (Del. Ch. 2010) 

(ordering rescission of a rights plan as a remedy for breach of fiduciary duty); 

Coleman v. Newborn, 948 A.2d 422, 433 (Del. Ch. 2007) (ordering rescission of a deed 

as remedy for breach of fiduciary duty); Valeant, 921 A.2d at 752 (ordering rescission 

of a compensation plan where the defendants “failed to show that the transaction was 

entirely fair” and it was “clear that he has no right to retain any of the $3 million 

bonus he received”); see also Zutrau v. Jansing, 2014 WL 3772859, at *26 (Del. Ch. 

July 31, 2014) (ordering partial rescission); Loral, 2008 WL 4293781, at *32 (same).

926 Zutrau, 2014 WL 3772859, at *26 (stating “recission frequently is granted where 

self-dealing transactions are found not to be entirely fair”); see also Oberly v. Kirby,

592 A.2d 445, 466 (Del. 1991) (“An interested transaction is not void but is voidable, 

and a court will uphold such a transaction against a beneficiary challenge only if the 

trustee can show that the transaction was fair and that the beneficiaries consented 

to the transaction after receiving full disclosure of its terms.”); Firefighters’ Pension 

Sys. of Kans. City, Mo. Tr. v. Presidio, Inc., 251 A.3d 212, 251 (Del. Ch. 2021) (“A 

finding that a transaction is not entirely fair thus could lead to transaction-based 

relief, such as an injunction, rescission, or an equitable modification of the 

transaction’s terms.”).

927 Vickers, 429 A.2d at 501; but see ENI Hldgs., LLC v. KBR Gp. Hldgs., LLC, 2013 

WL 6186326, at *24 (Del. Ch. Nov. 27, 2013) (denying on a motion to dismiss a request 

for rescission, but noting that “[r]escission is . . . a remedy available only where facts 

indicate equity so requires,” and that the plaintiff’s “burden to establish an 

entitlement to rescission, in light of the likely change in circumstances due to the 

passage of time, is heavy”).
198

To be entitled to equitable rescission, a plaintiff must demonstrate that 

rescission is both “reasonable and appropriate” under the circumstances.928 This 

includes showing that it is possible for “all parties to the transaction [to] be restored 

to the status quo ante, i.e., to the position they occupied before the challenged 

transaction.”929

Plaintiff has demonstrated that rescission is reasonable, appropriate, and 

practicable. This Grant is not “too complex to unscramble[.]”930 Rescission is 

uniquely available: no third-party interests are implicated, the entire Grant sits 

unexercised and undisturbed, and exercised shares would be subject to the Five-Year 

Hold Period.931 

Defendants argue that rescission is a harsh consequence that would leave 

Musk uncompensated. But Musk’s preexisting equity stake provided him tens of 

billions of dollars for his efforts. And Defendants have not offered a viable alternative 

short of leaving the Grant intact. 

On this point, Valeant is instructive.932 There, the plaintiff claimed that the 

directors of Valeant Pharmaceuticals International breached their fiduciary duties 

by awarding themselves and other executives and employees large cash bonuses in 

928 Lenois v. Lawal, 2017 WL 5289611, at *20 (Del. Ch. Nov. 7, 2017).

929 Strassburger v. Earley, 752 A.2d 557, 578 (Del. Ch. 2000) (emphasis in original).

930 In re Sunbelt Beverage Corp. S’holder Litig., 2010 WL 26539, at *14 (Del. Ch. Jan. 

5, 2010); see, e.g., Weinberger, 457 A.3d at 714 (finding transaction “too involved to 

undo[]”).

931 JX-878 at 56 (2/8/18 Schedule 14A Proxy Statement).

932 Valeant, 921 A.2d 732.
199

connection with a “later-aborted corporate restructuring.”933 All but one defendant 

settled before trial, and the court found that the remaining defendant failed to prove 

that the transaction was fair.934 Although that defendant went all-in on the defense 

that the entirety of his bonus was fair and presented no evidence for why a portion of 

the bonus was more defensible than the remaining amount,935 he asked that the court 

limit disgorgement “to the extent that the bonus was unfair.”936 The court rejected 

that argument given the defendant’s failure of proof and ordered disgorgement of the 

entire amount.937

As in Valeant, Defendants heralded the Grant as fair but failed to meet their 

burden. They also failed to identify any logically defensible delta between the unfair 

Grant and a fair one. As a result, there is nothing in the record to allow the court to 

fashion a remedy that would order recission only to the extent the Grant was unfair.

“Once a breach of duty is established, uncertainties in awarding damages are 

generally resolved against the wrongdoer.”938 Here, the wrongdoers are Defendants, 

and so the court resolves uncertainty against them.

933 921 A.2d at 735.

934 See id. at 736. 

935 Id. at 744 (noting that the defendant “embrace[d]” the burden).

936 Id. at 752.

937 Id. at 752–53.

938 Dole, 2015 WL 5052214, at *44 (quoting Thorpe v. CERBCO, Inc., 1993 WL 

443406, at *12 (Del. Ch. Oct. 29, 1993)).
200

III. CONCLUSION

For the foregoing reasons, judgment is entered in Plaintiff’s favor. The parties 

are to confer on a form of final order implementing this decision and submit a joint 

letter identifying all issues, including fees,939 that need to be addressed to bring this 

matter to a conclusion at the trial level.

939 See Pope Invs. LLC v. Marilyn Abrams Living Tr., 166 A.3d 912, 2017 WL 2774361, 

at *1 (Del. June 26, 2017) (TABLE) (holding that “a judgment on the merits is not 

final until an outstanding related application for an award of attorneys fees has been 

decided” (citing Lipson v. Lipson, 799 A.2d 345, 348 (Del. 2001))).