Richard J. Tornetta v. Elon Musk

Opinion

COURT OF CHANCERY OF THE STATE OF DELAWARE KATHALEEN ST. JUDE MCCORMICK LEONARD L. WILLIAMS JUSTICE CENTER CHANCELLOR 500 N. KING STREET, SUITE 11400 WILMINGTON, DELAWARE 19801-3734

December 2, 2024

Gregory V. Varallo William M. Lafferty Daniel E. Meyer Susan W. Waesco BERNSTEIN LITOWITZ Ryan D. Stottmann BERGER & GROSSMANN LLP Miranda N. Gilbert 500 Delaware Avenue, Suite 901 Jacob M. Perrone Wilmington, DE 19801 MORRIS, NICHOLS, ARSHT & TUNNELL LLP Peter B. Andrews 1201 N. Market Street, 16th Floor Craig J. Springer Wilmington, DE 19801 David M. Sborz Jackson E. Warren Rudolf Koch ANDREWS & SPRINGER LLC John D. Hendershot 4001 Kennett Pike, Suite 250 Kevin M. Gallagher Wilmington, DE 19807 Andrew L. Milam RICHARDS, LAYTON & FINGER, P.A. David E. Ross One Rodney Square Garrett B. Moritz 920 North King Street Thomas C. Mandracchia Wilmington, DE 19801 ROSS ARONSTAM & MORITZ LLP 1313 North Market St., Suite 1001 A. Thompson Bayliss Wilmington, DE 19801 Adam K. Schulman Eliezer Y. Feinstein Catherine A. Gaul ABRAMS & BAYLISS LLP Randall J. Teti 20 Montchanin Road, Suite 200 ASHBY & GEDDES, P.A. Wilmington, DE 19807 500 Delaware Avenue, 8th Floor Wilmington, DE 19801 David S. Eagle Sally E. Veghte John L. Reed KLEHR HARRISON HARVEY Ronald N. Brown, III BRANZBURG LLP Caleb G. Johnson 919 N. Market Street, Suite 1000 Daniel P. Klusman Wilmington, DE 19801 DLA PIPER LLP (US) 1201 N. Market Street, Suite 2100 Anthony A. Rickey Wilmington, DE 19801 MARGRAVE LAW LLC 3411 Silverside Road Baynard Building, Suite 104 Wilmington, DE 19810 C.A. No. 2018-0408-KSJM December 2, 2024 Page 2 of 4

Christine M. Mackintosh Theodore A. Kittila GRANT & EISENHOFER, P.A. HALLORAN FARKAS + KITTILA LLP 123 Justison Street 5722 Kennett Pike Wilmington, DE 19801 Wilmington, DE 19807

Daniel A. Griffith WHITEFORD TAYLOR & PRESTON LLC 600 North King Street Wilmington, DE 19801

Re: Richard J. Tornetta v. Elon Musk, et al., C.A. No. 2018-0408-KSJM

Dear Counsel:

This letter decision addresses the filings of Tesla stockholders: Amy Steffens,

joined by California Public Employees’ Retirement System (“CALPERS”); and David

Israel and Kurt Panouses, joined by ARK Investment Management LLC (“ARK”).1

All of the submissions expressed concerns with the Fee Petition. They also made

points pertinent to the Ratification Argument. And the stockholders’ counsel moved

for attorneys’ fees and expenses.2 Each of these stockholders styled their submissions

as “objections.”

I have serious concerns about granting stockholders standing to object in these

circumstances. This is not a class action brought on behalf of Tesla’s minority

stockholders. And the fee petition did not arise in the settlement context. These are

1 See No. 2018-0408-KSJM, Docket (“Dkt.”) 296 (Fee Petition); Dkts. 354 (Steffens

submissions); Dkts. 374 (CALPERS Joinder); Dkts. 380 (Israel & Panouses submissions), 402 (ARK’s Joinder), 419 (Israel, Panouses & ARK’s Supplemental Br.). I use the defined terms set out in my Opinion, published today, addressing the Fee Petition and Ratification Arguments (the “December 2 Opinion”). 2 Dkts. 437–38. C.A. No. 2018-0408-KSJM December 2, 2024 Page 3 of 4

post-trial proceedings in a derivative action concerning a Fee Petition that

Defendants and their army of lawyers opposed. None of the stockholders identify any

case where this court has permitted a stockholder to object in these circumstances.

Permitting any stockholder to appear and object where the parties have every

incentive to zealously represent their clients’ interests would lead to deeply inefficient

proceedings that potentially undermine the parties’ ability to control the litigation.

For that reason, I decline to extend standing to the stockholders here.

That said, as I noted in today’s decision, rescinding the Grant inured to the

direct benefit of Tesla stockholders. Thus, despite their lack of formal standing, I

carefully considered each of the stockholders’ arguments. I permitted their counsel

to present during the July 7 and August 2, 2024 hearings on the Fee Petition and

Ratification Argument, respectively. I appreciate the thought and care that they put

into their written and oral presentations. And I recognize that they appeared in court

in good faith and at their own expense. In the end, however, none of the points made C.A. No. 2018-0408-KSJM December 2, 2024 Page 4 of 4

by the stockholders altered the outcome of the December 2 Opinion.3 The

stockholders’ requests for fees are denied.4

Sincerely,

/s/ Kathaleen St. Jude McCormick

Chancellor

cc: All counsel of record (by File & ServeXpress)

3 Each of the stockholders also attack Plaintiff’s adequacy as a representative plaintiff. See Steffens Br. at 8, 23, n.17; Israel, Panouses & ARK’s Br. at 11; Dkt. 407 (7/8/2024 H’rg Tr.) at 268:16–269:15. But they did not do so timely nor pursuant to the procedure set forth by Court of Chancery Rules. See Ct. Ch. R. 23.1(c) (permitting the court to resolve appointment disputes or dismiss an action with inadequate derivative counsel); Ct. Ch. R. 24(a), (b) (permitting intervention pursuant to a timely motion); see also ITG Brands, LLC v. Reynolds Am. Inc., 2024 WL 1366198, at *2–3 (Del. Ch. Apr. 1, 2024) (noting timeliness “is fact specific and discretionary” and that courts refuse intervention that prejudices parties by “delay[ing] the termination of the litigation”). Moreover, Plaintiff has proven himself quite capable as a representative plaintiff. 4 See Maurer v. Int’l Re-Insurance Corp., 95 A.2d 827, 830 (Del. 1953) (“[A]part from

statute or contract, a litigant must pay his counsel fees. . . subject to but a few exceptions[.]’”).