WILMINGTON, Delaware — Elon Musk suffered one in all the largest legal losses in U.S. history this week when the Tesla CEO was stripped of his $56 billion pay package in a case brought by an unlikely opponent, a former heavy metal drummer.
Richard Tornetta sued Musk in 2018, when the Pennsylvania resident held just nine shares of Tesla. The case eventually made its strategy to trial in late 2022 and on Tuesday a judge sided with Tornetta, voiding the big pay deal for being unfair to him and all his fellow Tesla shareholders.
Tornetta couldn’t be reached for a comment and his attorney declined to comment.
Until Tornetta’s case, Musk prevailed in a string of trials accusing him of defamation, of breaching his duty to shareholders and of violating securities laws.
Based on his online presence, Tornetta seems to have more of an interest in creating audio gear for car-customizing enthusiasts than going after corporate excess and malfeasance.
He has posted light-hearted videos about gadgets he has created or mishaps, including describing how he torched his eyebrows.
Tornetta also turned up in videos drumming on the legendary former Recent York club CBGB together with his now-defunct metal band “Dawn of Correction”, which described its sound as “a swift kick to the face with a steel-toed work boot.”
On social media, fans of Tesla and Musk looked as if it would find the case a travesty of justice and speculated about Tornetta’s intentions and political affiliations, asking how an investor with such miniscule holdings could wield such power.
Delaware corporate case law is filled with cases bearing the names of individual investors with tiny shareholdings who wound up shaping America’s corporate law.
Many law firms that represent shareholders keep a stable of investors they’ll work with to bring cases, says Eric Talley, who teaches corporate law at Columbia Law School. They may be pension funds with a broad range of stock holdings but also they are often individuals like Tornetta.
The plaintiff signs paperwork to file the lawsuit after which generally gets out of the way in which, says Talley. The investors don’t pay the law firm, which takes the case on contingency, because the lawyers did within the Musk case.
Tornetta advantages from winning the case the identical way other Tesla shareholders profit: saving the corporate billions of dollars that a subservient board of directors paid to Musk.
Business groups have long criticized cases brought by individuals as a sign of probably abusive litigation. Delaware 10 years ago was plagued with lawsuits led by retail investors owning a couple of shares difficult merger deals. The cases were often quickly resolved with meaningless settlements that at all times included payments to the attorneys bringing the cases. Delaware judges and lawmakers eventually reined within the practice.
Experts said people like Tornetta are vital for policing boardrooms. Lawmakers and judges have long wanted large investment firms to steer such corporate litigation since they’re higher equipped to regulate their lawyers’ tactics. But experts said fund managers are not looking for to jeopardize relationships on Wall Street.
So it was as much as Tornetta to tackle Musk.
“His name is now etched within the annals of corporate law,” Talley said. “My students shall be reading Tornetta v Musk for the subsequent 10 years.”
This Article First Appeared At www.autoblog.com
