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A Delaware judge has once again struck down Elon Musk’s multibillion-dollar Tesla pay package, citing conflicts of interest and procedural unfairness despite its reapproval by shareholders earlier this year.

Let’s bring you up to speed: Back in 2018, Tesla’s board and a majority of its shareholders approved a $56 billion pay package for Elon Musk, designed to incentivize his continued leadership at the company. The package granted Musk 303 million stock options tied to Tesla achieving a series of ambitious operational and financial milestones, allowing him to purchase shares at a significant discount. Despite the approval, a Tesla shareholder filed a lawsuit, arguing that the board had failed to negotiate the deal fairly and that the terms were overly favorable to Musk due to his close ties to the board. The lawsuit claimed that the agreement represented a conflict of interest and was not in the best interests of Tesla shareholders, ultimately leading to a prolonged legal battle over the fairness and validity of the compensation plan.

What’s going on now: In a final ruling, Judge Kathaleen McCormick upheld her decision to invalidate Elon Musk’s $56 billion pay package, citing conflicts of interest and procedural flaws in its approval. She rejected Tesla’s and Musk’s arguments that the package was ratified by a majority of shareholders in a subsequent vote, ruling that a post-trial shareholder vote could not retroactively legitimize a conflicted transaction. The judge also criticized the Tesla board for failing to negotiate the terms fairly and deemed the package excessively generous and detrimental to shareholder interests.  

Tesla reacts: Tesla reacted to the court’s decision, issuing a statement that criticized the ruling and vowed to appeal. In a statement, Tesla said, “A Delaware judge just overruled a supermajority of shareholders who own Tesla and who voted twice to pay Elon Musk what he’s worth. The court’s decision is wrong, and we’re going to appeal. This ruling, if not overturned, means that judges and plaintiffs’ lawyers run Delaware companies rather than their rightful owners – the shareholders.”

Elon Musk also reacted to the court’s decision, accusing the judge of using “lawfare” against him.