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

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 EFiled: Jun 21 2024 01:27PM EDT
Transaction ID 73426123
Case No. 2018-0408-KSJM
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

RICHARD J. TORNETTA, derivatively on

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

PLAINTIFF’S REPLY BRIEF IN FURTHER SUPPORT OF

APPLICATION FOR AN AWARD OF FEES AND EXPENSES

Of Counsel: BERNSTEIN LITOWITZ BERGER

& GROSSMANN LLP
Jeroen van Kwawegen Gregory V. Varallo (Bar No. 2242)
Margaret Sanborn-Lowing Glenn R. McGillivray (Bar No. 6057)
BERNSTEIN LITOWITZ BERGER 500 Delaware Avenue, Suite 901
& GROSSMANN LLP Wilmington, DE 19801
1251 Avenue of the Americas
New York, NY 10020 ANDREWS & SPRINGER LLC
Peter B. Andrews (Bar No. 4623)
Jeremy S. Friedman Craig J. Springer (Bar No. 5529)
Spencer M. Oster David M. Sborz (Bar No. 6203)
David F.E. Tejtel Andrew J. Peach (Bar No. 5789)
FRIEDMAN OSTER Jackson E. Warren (Bar No. 6957)
& TEJTEL PLLC 4001 Kennett Pike, Suite 250
493 Bedford Center Road, Suite 2D Wilmington, DE 19807
Bedford Hills, NY 10507
Counsel for Plaintiff
Dated: June 21, 2024
 TABLE OF CONTENTS

Page

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

ARGUMENT ............................................................................................................4

I. THE FEE AWARD SHOULD BE BASED ON THE VALUE OF

THE BENEFIT CONFERRED, AT THE TIME OF CONFERRAL .............4

II. THIS ACTION CONFERRED SUBSTANTIAL AND

QUANTIFIABLE BENEFITS........................................................................8

A. Rescission Conveyed Quantifiable Value By Reversing The

Grant’s Dilutive Effects ........................................................................8

B. Eliminating Dilution Is A Derivative Benefit, But Even If

Direct Would Still Be A Proper Basis To Compensate
Contingent Counsel.............................................................................11

C. Rescission Restores 303,960,630 Shares to Tesla ..............................13

D. The Litigation Created Additional Non-Quantified Value .................17

III. TESLA’S FIXATION ON GDFV MISPRICES THE BENEFIT

CONFERRED ...............................................................................................18

A. GDFV Does Not Reflect the Actual Economic Benefit

Conferred and Is Inherently Limited and Unreliable..........................18

B. Tesla’s GDFV Calculation Was Severely Understated ......................20

IV. DEFENDANTS’ AND OBJECTORS’ EVENT STUDIES PROVE

NOTHING ABOUT THE VALUE OF THE BENEFITS
CONFERRED BY THE ACTION................................................................23

V. THE REQUESTED FEE IS APPROPRIATE ..............................................30

VI. THE COURT SHOULD REJECT A QUANTUM MERUIT

APPROACH .................................................................................................36

A. Delaware Has Rejected Defendants’ Back-Door Lodestar

Approach.............................................................................................36

i
 B. Quantum Meruit Is Inapplicable And Tesla’s Authorities Are
Unavailing...........................................................................................38

C. Tesla’s Quantum Meruit Approach is Deeply Flawed .......................43

VII. TESLA’S RATIFICATION GAMBIT FAILS.............................................43

A. The Purported “Ratification” is an Extrajudicial Scheme That

Has No Effect on the Court’s Merits Judgment..................................44

B. The Purported “Ratification” Defies Delaware Law in Other

Ways ...................................................................................................46

C. The Purported “Ratification” Has No Effect Because It Was

Not Validly Approved by the Board, Was Coerced, and Was
Not Fully Informed .............................................................................48

VIII. ALTERNATIVE FEE AWARD STRUCTURE ..........................................50

CONCLUSION .......................................................................................................54

ii
 TABLE OF AUTHORITIES

Page(s)
Cases

Ams. Mining Corp. v. Theriault,

51 A.3d 1213 (Del. 2012).............................................................................37, 52

In re Anderson Clayton S’holders Litig.,

1988 WL 97480 (Del. Ch. Sep. 19, 1988)..........................................................42

Baker v. Sadiq,
2016 WL 4375250 (Del. Ch. Aug. 16, 2016).....................................................12

Brookfield Asset Mgmt., Inc. v. Rosson,

261 A.3d 1251 (Del. 2021)...........................................................................11, 12

In re Cal-Maine Foods, Inc. S’holders Litig.,

C.A. No. 20507-VCS (Del. Ch. Jan. 27, 2004) (TRANSCRIPT) ......................42

In re Cheniere Energy, Inc.,

Consol. C.A. Nos. 9710-VCL & 9766-VCL (Del. Mar. 16, 2015)
(TRANSCRIPT) .................................................................................................40

In re China Agritech, Inc. S’holder Deriv. Litig.,

C.A. No. 7163-VCL (Del. Ch. Feb. 13, 2015) (ORDER) ..................................13

In re Clear Channel Outdoor Hldgs., Inc. Deriv. Litig.,

Consol. C.A. No. 7315-CS (Del. Ch. Sept. 9, 2013) (TRANSCRIPT)..............13

In re Compellent Techs., Inc. S’holder Litig.,

2011 WL 6382523 (Del. Ch. Dec. 9, 2011) ...................................................6, 23

Dann v. Chrysler Corp.,

215 A.2d 709 (Del. Ch. 1965) ......................................................................33, 34

Davis v. Holmes,
C.A. No. 638-N (Del. Ch. June 21, 2006) (TRANSCRIPT)..............................13

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

300 A.3d 679 (Del. Ch. 2023) .....................................................................passim

iii
Emerald Partners v. Berlin,
726 A.2d 1215 (Del. 1999).................................................................................48

In re Energy Transfer Equity, L.P. Unitholder Litig.,

2019 WL 994045 (Del. Ch. Feb. 28, 2019)........................................................42

Firmenich Inc. v. Nat. Flavors, Inc.,

2020 WL 1816191 (Del. Super. Ct. Apr. 7, 2020) ...............................................7

Fishel v. Liberty Media Corp.,

C.A. No. 2021-0820-KSJM (Del. Ch. Apr. 8, 2024) (TRANSCRIPT) .............12

Franchi v. Barabe,
C.A. No. 2020-0648-KSJM (Del. Ch. July 21, 2022) (TRANSCRIPT)..............4

Franklin Balance Sheet Inv. Fund v. Crowley,

2007 WL 2495018 (Del. Ch. Aug. 30, 2007).....................................................13

In re Freeport-McMoRan Copper & Gold Inc. Deriv. Litig.,

Consol. C.A. No. 8145-VCN (Del. Ch. Apr. 7, 2015) (TRANSCRIPT) ...........13

Friedman v. Baxter Travenol Laby’s, Inc.,

1986 WL 2254 (Del. Ch. Feb. 18, 1986)............................................................42

Gantler v. Stephens,
965 A.2d 695 (Del. 2009)...................................................................................48

Gerber v. EPE Hldgs. LLC,

C.A. Nos. 5989-VCN & 3543-VCN (Del. Ch. July 1, 2014)
(TRANSCRIPT) .................................................................................................13

Highfields Cap., Ltd. v. AXA Fin., Inc.,

939 A.2d 34 (Del. Ch. 2007) ..............................................................................24

In re Invs. Bancorp, Inc.,

Consol. C.A. No. 12327-VCS (Del. Ch. June 17, 2019) (TRANSCRIPT)........41

Kahn v. M & F Worldwide Corp.,

88 A.3d 635 (Del. 2014).....................................................................................49

Knight v. Miller,
2023 WL 3750376 (Del. Ch. June 1, 2023) .......................................................42

iv
Krinsky v. Helfand,
156 A.2d 90 (Del. Ch. 1959) ..............................................................................42

La. State Emps. Ret. Sys. v. Citrix Sys., Inc.,

2001 WL 1131364 (Del. Ch. Sept. 19, 2001).....................................................39

Lacey v. Larrea Mota-Velasco,

C.A. No 11779-VCG (Del. Ch. Jan. 4, 2019) (ORDER) ...................................13

LAMPERS v. Bergstein,
C.A. No. 7764-VCL (Del. Ch. Sept. 10, 2014) (ORDER).............................4, 41

In re Loral Space & Commc’ns Inc. Consol. Litig.,

C.A. No. 2808-VCS (Del. Ch. Dec. 22, 2008) (TRANSCRIPT).......................42

In re Match Grp., Deriv. Litig.,

2024 WL 1449815 (Del. Apr. 4, 2024) ..............................................................48

MidAtlantic Farm Credit, ACA v. Morgan,

2015 WL 1035423 (Del. Ch. Mar. 4, 2015) .................................................16, 46

Montgomery v. Erickson Inc.,

C.A. No. 8784-VCL (Del. Ch. Sept. 12, 2016) (ORDER).................................13

Mudrick Cap. Mgmt. v. Monroe,

C.A. No. 2018-0699-TMR (Del. Ch. Sept. 5, 2019) (TRANSCRIPT) ..............24

Off v. Ross,
2009 WL 4725978 (Del. Ch. Dec. 10, 2009) .....................................................42

In re Orchard Enters., Inc. S’holder Litig.,

88 A.3d 1 (Del. Ch. 2014) ....................................................................................7

Police & Fire Ret. Sys. City of Detroit v. Musk,

C.A No. 2020-0477-KSJM (Del. Ch. Oct. 13, 2023) (TRANSCRIPT)...2, 15, 33

Rovner v. Health-Chem Corp.,

1998 WL 227908 (Del. Ch. Apr. 27, 1998)........................................................42

Sciabacucchi v. Howley,
2023 WL 4345406 (Del. Ch. July 3, 2023) ........................................................38

v
Sciabacucchi v. Salzberg,
2018 WL 6719718 (Del. Ch. Dec. 19, 2018) .....................................................44

Seinfeld v. Coker,
847 A.2d 330 (Del. Ch. 2000) ......................................................................34, 36

In re Stillwater Mining Co.,

2019 WL 3943851 (Del. Ch. Aug. 21, 2019).....................................................24

In re S. Peru Copper Corp. S’holder Deriv. Litig.,

52 A.3d 761 (Del. Ch. 2011) ........................................................................51, 52

Sugarland Indus., Inc. v. Thomas,

420 A.2d 142 (Del. 1980).............................................................................34, 36

Tandycrafts, Inc. v. Initio Partners,

562 A.2d 1162 (Del. 1989).................................................................................13

Tornetta v. Musk,
250 A.3d 793 (Del. Ch. 2019) ......................................................................47, 48

In re Wheelabrator Techs., Inc. S’holder Litig.,

663 A.2d 1194 (Del. Ch. 1995) ..........................................................................48

In re Xencor, Inc.,
C.A. No. 10742-CB (Del. Ch. Dec. 10, 2015) (TRANSCRIPT) .......................42

STATUTES & OTHER AUTHORITIES

8 Del. C. § 204(h)(1) ...............................................................................................46

Brian T. Fitzpatrick, A Fiduciary Judge’s Guide to Awarding Fees In

Class Actions, 89 FORDHAM L. REV. 1151 (2021) .............................................37

C. Stephen Bigler & John Mark Zeberkiewicz (Richards, Layton &

Finger, P.A.), Restoring Equity: Delaware’s Legislative Cure for
Defects in Stock Issuances and Other Corporate Acts, 69 BUS.
LAWYER 393 (2014) ...........................................................................................47

Delaware General Assembly, House Bill 127, Original Synopsis

(2013) .................................................................................................................47

vi
Delaware Judge Likely Pushes TSLA to Incorporate in Texas-Musk
Could Get to 25%, Wedbush (Feb. 2, 2024) ......................................................26

Eric Helland & Seth A. Seabury, Contingent-Fee Contracts in

Litigation: A Survey and Assessment, RESEARCH HANDBOOK ON
THE ECONOMICS OF TORTS 383 (Jenniffer Arlen ed., 2013) ..............................37

Gipper, Lombardi & Skinner, The Politics of Standard-Setting: A

Review of Empirical Research (Stan. Grad. Sch. Bus., Working
Paper No. 3441, Oct. 17, 2013) ..........................................................................19

In a Shocker Delaware Judge Voids Musk Comp Package; Next Move

in Board’s Hand, Wedbush (Jan. 31, 2024) .......................................................26

Jeffrey R. Wolters & James D. Honaker (Morris, Nichols, Arsht &

Tunnell LLP), Analysis of the 2013 Amendments to the Delaware
General Corporation Law ..................................................................................47

Report of the Third Circuit Task Force, Court Awarded Attorney Fees,
108 F.R.D. 237 (1986)........................................................................................36

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

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

The Stock Price That Didn’t React: Tesla Reaction to Court’s Ruling,
CRA Insights Finance (Feb. 2024).....................................................................26

vii
 PRELIMINARY STATEMENT1

Tesla’s papers2—and those submitted by the Objectors—attack the nature of

the benefit created by Plaintiff’s total victory at trial; argue that benefit should be

measured as of 2018, not when it was conferred in 2024; propose a vastly lower

value benchmark (reversal of accounting charge or even quantum meruit); suggest

offsetting the benefit based on “appropriate” compensation for Musk (of which

Defendants declined to offer proof at trial); and claim the fee request on the

unprecedented judgment seeks a prohibited windfall. Tesla also now asserts

arguments relating to the June 13 “ratification” vote. Reading Tesla’s and the

Objectors’ papers would lead the casual observer to conclude that Plaintiff’s

efforts—which rescinded the largest compensation grant in human history (by

multiples)—created no value at all. Indeed, in an argument best described as

“gaslighting,” the Florida Objectors assert the litigation led to a negative result.3

But facts—and Delaware law—still matter. The 303,960,630 options

rescinded by the Court’s judgment via the Post-Trial Opinion were fully vested, and

Tesla’s own experts concede those deeply in-the-money options would be exercised

1Undefined capitalized terms have the meanings ascribed in Plaintiff’s Opening Brief in
Support of Application for an Award of Fees and Expenses (“OB” or “Opening Brief”)
(Dkt. 296). Citations to “Ex. __” refer to exhibits attached hereto.
2Tesla’s Answering Brief in Opposition to Plaintiff’s Counsel’s Request for an Award of
Attorneys’ Fees and Expenses (“AB”) (Dkt. 357).
3 See Dkt. 380 (“Florida Objection”).

1
and that the market price reflected the dilution inherent in that exercise. By

rescinding them, Tesla—and all its stockholders—shared the benefit of reversing

that dilution. And Tesla’s experts agree with both the value of those rescinded

options (~$51B) and the dilution avoided by the Rescission (~8%).

Tesla’s expert Grenadier likewise agrees that the Rescission’s dilution

reversal is properly valued at $50B.4 In his view, however, that $50B in value was

wiped out by market concerns that the Rescission would make Musk an “unhappy

camper and focus on other stuff.”5 Thus, Tesla’s own expert agrees that dilution

reversal has value and that the value is measured as Plaintiff’s experts describe. He

merely acknowledges that if the market does not value the Rescission as both sides’

economists do, it is only because the market anticipates Tesla’s supine Board will

repeat its fiduciary breaches.

Idiosyncratic concerns about Musk aside, Tesla conceded in open court6 the

appropriateness of Plaintiff’s approach here.7

Likewise, when creating the Grant, the Board “authoriz[ed] and reserv[ed]”

for issuance and directed the Company to “issue and deliver” upon exercise the

4See Deposition Transcript of Steven Grenadier (May 27, 2024) (“Grenadier Tr.”), at
178:15-19 (Dkt. 362, Ex. 5).
5 Id. at 84:15-85:1.
6Police & Fire Ret. Sys. City of Detroit v. Musk (“Director Compensation Action”), C.A
No. 2020-0477-KSJM (Del. Ch. Oct. 13, 2023) (TRANSCRIPT).
7 See infra Section II.C.

2
shares underlying the Grant’s 303,960,630 options. The Rescission means the shares

are no longer “reserved” for issuance and are available again to Tesla for any

purpose. They had real, quantifiable, agreed-upon value at the Rescission date—

approximately $51B.

This reply addresses the nature and extent of the benefit this Action created,

when that benefit should be measured, the unhelpful alternatives suggested by Tesla

and the Objectors, and the supposed windfall. Fortunately, Delaware law—

including its longstanding Sugarland analysis—incentivizes maximizing

stockholder litigation benefits, especially when achieved through full adjudication

and without compromising the underlying claims. The Court should decline Tesla’s

invitation to change the law.

While Plaintiff’s Counsel firmly believe the fee request is both supported by

governing law and earned by the unprecedented benefit conferred, to be helpful to

the Court, Plaintiff includes herein a cash-based alternative structure the Court could

consider were it to grant something other than shares.

3
 ARGUMENT

I. THE FEE AWARD SHOULD BE BASED ON THE VALUE OF THE

BENEFIT CONFERRED, AT THE TIME OF CONFERRAL

As Tesla concedes, “[t]he first Sugarland factor, the benefit achieved, is the

most important.”8 The primary benefits achieved through Plaintiff’s trial victory are

freeing up 303,960,630 Tesla shares exclusively reserved for the Grant and reversing

~$51B in dilution to Tesla stockholders, as well as significant unquantified

governance effects. Delaware law is also clear that in determining a fee award, the

value of the conferred benefit is measured upon the benefit’s conferral.9

Tesla seeks to circumvent these fundamental principles in two ways.

First, Tesla ignores the massive benefit conferred to Tesla stockholders.

Ignoring governing law, they argue that benefits to Tesla’s stockholders cannot be

8 AB 18; see also Dkt. 376, Ex. A (“CoC Amicus”) at 4 (acknowledging the Sugarland
factors “determine the fee award” and “Sugarland places the greatest weight on the benefit
achieved”); Dkt. 354 (“Steffens Objection”) at 16 (acknowledging Sugarland dictates the
fee determination).
9 See OB 24 n.85 (citing cases valuing options at time benefit was conferred);
see also, e.g., LAMPERS v. Bergstein, C.A. No. 7764-VCL, ¶¶2-4 (Del. Ch. Sept. 10,
2014) (ORDER) (calculating benefit conferred by modification to challenged option-based
plan based on present—rather than grant date—values of plans); id. Dkt. 150, ¶20
(Affidavit of Allan Ferrell) (reflecting valuation based on options’ present value); id.
Dkt. 57, at 12 (Ross Aronstam & Moritz LLP citing Compellent for proposition that value
of cash rights underlying warrants should be “measured at the time the parties reached
agreement” (emphasis added)); accord id. Dkt. 51, at 23; Franchi v. Barabe,
C.A. No. 2020-0648-KSJM, at 55-56 (Del. Ch. July 21, 2022) (TRANSCRIPT) (valuing,
as of settlement entry, benefit conferred by waiver of rights to receive cash under warrants).

4
the basis for a fee since Tesla (the entity) did not benefit separately from its owners.

Plaintiff addresses that argument in Section II.B below.

Second, Tesla illogically and erroneously contends the Rescission’s benefits

must be measured not upon conferral, but instead over six years ago when Tesla

issued the Grant.10 But Tesla’s own experts concede that Plaintiff’s expert correctly

calculated the intrinsic value of the options at ~$51B as of the Court’s

January 30, 2024 Post-Trial Opinion.11 Ignoring governing law, Tesla directed its

experts to measure only the benefits as of the grant date.12 That directive violates

law and logic.

Valuing the benefit conferred by the Rescission based on circumstances

existing over six years prior, particularly given Tesla’s inherently unreliable and

severely understated $2.3B grant date fair value (“GDFV”) estimate13—which even

10 See, e.g., AB 28-31.

11 See, e.g., Deposition Transcript of Douglas Skinner (May 30, 2024) (“Skinner Tr.”), at
446:15-22 (Dkt. 362, Ex. 6) (“Q. You don’t dispute that the estimated intrinsic value of the
ESOs on the date of the post-trial opinion is approximately $51.1[B], correct? A. I do not
dispute that, no.”); Grenadier Tr. 88:16-89:10 (“Q. [Y]ou’re not disputing Professor
Taylor’s calculation of the intrinsic value of the rescinded options at the time of the post-
trial opinion exceeding $51[B]? A. That’s correct.”).
12 See, e.g., Expert Declaration of Steven R. Grenadier (May 8, 2024) (“Grenadier Report”),

¶67 (Dkt. 359) (“[I]f the relevant consideration is placing the firm back into the same
position as just prior to the date on which the options were granted (a legal issue I take no
position on), then an ex ante analysis of value is reasonable.” (emphasis added)); Skinner
Tr. 179:3-180:1.
13 See infra Section III.

5
Defendants conceded is “flawed as a measure of value”14—makes little sense. Tesla

would presumably agree that in valuing the benefit conferred by disgorging $51B in

cash received by an executive from selling disloyally obtained stock options, the

Court would use the $51B in recovered cash, not the options’ $2.3B GDFV. The

only difference between that scenario and this Action is the form of the benefit

conferred (i.e., cash versus options), which is irrelevant to when the benefit’s value

should be measured.

Tesla ignored all five cases cited in Plaintiff’s Opening Brief establishing that

the conferred benefit’s value is measured at conferral. And the lone case Tesla cites

as support for measuring the benefit over six years earlier—Compellent15—

undermines Tesla’s position. Compellent confirms that the conferred benefit is

measured upon conferral—i.e., “as of the time [the settlement] was agreed to” in

Compellent, and “as of the time” of the Opinion granting Rescission here.16

14Director Defendants’ Pretrial Brief (Dkt. 227), at 57; see also id. at 56-57 (conceding
that GDFV “represent[s] the stock-based compensation expense a company recognizes for
an option award, not the value to Musk or to Tesla’s stockholders”).
15 In re Compellent Techs., Inc. S’holder Litig., 2011 WL 6382523, at *20
(Del. Ch. Dec. 9, 2011) (AB 28).
16 Id. Ironically, Tesla violates Compellent’s prohibition on considering “after-the-fact
events” post-dating benefit conferral (id.) by infecting the Sugarland analysis with: (i) the
Board’s unlawful attempts to reinstate the Grant; and (ii) purported potential harm arising
from Musk’s threats to usurp Tesla’s corporate opportunities unless he is given 25% of
Tesla. See also Steffens Objection 4 (Dkt. 354). In the highly unlikely extent after-the-
fact events could ever warrant a post hoc reduction of a post-trial benefit conferred, no such
reduction can be warranted by a board’s stated attempt to evade a post-trial judgment, or a

6
 Tesla’s ex ante approach also misconstrues the nature of the rescission

remedy. Orchard is instructive.17 Orchard explains that rescissory damages—the

“monetary equivalent of rescission”—are “available for an adjudicated…loyalty

[breach], such as cases involving self-dealing or where a fiduciary puts personal

interests ahead of the interests of its beneficiary” and that these damages “can be

measured at the time of judgment, the time of resale, or at an intervening point when

the stock had a higher value and remained in control of the disloyal fiduciary.”18

Rescissory remedies are an “exception” to the normal measure of compensatory

damages because they are measured “as of a point in time after the transaction” and

“could include post-transaction incremental value elements that would not be

captured in an ‘out-of-pocket’” recovery.19

Defendants’ insistence on ex ante measurement of the Rescission’s conferred

benefits is thus incorrect as a matter of law. Further, because rescissory damages

can be measured at any point between the breach and judgment, including the highest

CEO/controlling stockholder’s violations of his loyalty duty. Nor does Tesla—or Objector
Steffens—explain how the Court could possibly determine the appropriate scope or
endpoint for any such after-the-fact analysis.
17 In re Orchard Enters. Inc. S’holder Litig., 88 A.3d 1 (Del. Ch. 2014).
18 Id. at 39.
19Firmenich Inc. v. Nat. Flavors, Inc., 2020 WL 1816191, at *8 (Del. Super. Ct. Apr. 7,
2020).

7
point between the two,20 the Court likewise should incorporate changes in the

rescinded options’ value between the breach and the judgment in valuing the benefit

conferred by an actual rescission.

Indeed here, Tesla has claimed the Court must ignore the actual intrinsic value

of the benefit conferred by rescinding 303,960,630 options worth ~$51B, and instead

reduce the remedy’s value to remove market value appreciation, which the Court is

apparently supposed to assume is solely attributable to Musk.21 That argument

stands the remedy on its head and flatly contradicts Delaware law.

II. THIS ACTION CONFERRED SUBSTANTIAL AND

QUANTIFIABLE BENEFITS

A. Rescission Conveyed Quantifiable Value By Reversing The

Grant’s Dilutive Effects

Each side’s experts agree that Tesla’s common stock priced-in the dilutive

effect of the now-rescinded—but formerly deeply in-the-money—options. Tesla’s

expert Grenadier admitted that dilution was “looming” and priced into the shares.22

20Here, that value is $125,991,681,135 (i.e., $414.50 (Tesla’s peak price on November 4,
2021) x 303,960,630 options).
21 Opinion 7 (“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.”).
22Grenadier Report 11 n.40 (“[T]he impact of the looming dilution would have been priced
in prior to the Opinion.”); see also id. ¶42 (calculating “8.2% expected dilution” from the
Grant); Deposition Transcript of Daniel Fischel (May 31, 2024) (“Fischel Tr.”), at 112:6-
9 (Dkt. 362, Ex. 4).

8
Tesla’s expert Skinner admitted the options were “deeply in the money”23 as of the

Rescission and “would be exercised”24 because it would be “economically

irrational” for Musk not to exercise them.25 Plaintiff’s experts agree.26

The experts also agree that rescinding the Grant eliminates its dilution. As

Tesla’s Grenadier concedes, “a rescission of the 2018 Grant would decrease the

expected dilution from the exercise of Mr. Musk’s options…[by]...removal of the

8.2% expected dilution.”27

23 Skinner Tr. 264:10-19.

24Expert Declaration of Douglas J. Skinner (May 8, 2025) (“Skinner Report”), ¶79 (Dkt.
360); Skinner Tr. 266:2-12.
25Skinner Report ¶57 (“When the stock price exceeds the exercise price during the exercise
period (i.e., the options are ‘in-the-money’), a rational employee will exercise their
options.” (emphasis added)); Skinner Tr. 265:17-266:1, 264:4-9; Grenadier Tr. 18:6-14
(“[R]escinding the shares, which while they’re options…they’re well in the money. So for
most intents and purposes…means that the pie that I would call Tesla is now held by the
outside shareholders more than they would have had they had to share that pie with Mr.
Musk.”).
26Joint Declaration of Lucian Bebchuk & Robert J. Jackson, Jr., dated Mar. 1, 2024
(“Bebchuk/Jackson Decl.”), ¶46 (Dkt. 296); Deposition Transcript of Lucian A. Bebchuk
(May 27, 2024) (“Bebchuk Tr”), at 60:19-61:16 (Dkt. 362, Ex. 1) (“[I]f the options were
not rescinded, one would expect, with very high likelihood, for Mr. Musk to
exercise…because the options are so much in the money.”); Deposition Transcript of
Robert Jackson, Jr. (May 31, 2024) (“Jackson Tr.”), at 111:3-10 (Dkt. 362, Ex. 2) (“Tesla’s
shareholders at the time had reason to expect that dilution was very likely because the
options were vested…and were so significantly in the money.”).
27Grenadier Report ¶42; see also Grenadier Tr. 20:16-21:9, 88:16-89:10, 122:16-123:1,
178:15-19; Declaration of Daniel R. Fischel (May 8, 2024) (“Fischel Report”), ¶24; Fischel
Tr. 249:18-250:3.

9
 Bebchuk and Jackson quantified the value of reversing the dilution as the

market value of the shares underlying the rescinded options, logically explaining that

once shares that the market had already priced into Tesla’s trading price are no

longer “looming,” the value of the reversal of that already-priced dilution is the

shares’ market value.28 Tesla’s Grenadier stated in his report that, “all else equal”

he would expect that dilution reversal would “result in a corresponding increase in

Tesla’s share price,”29 and testified that “$50[B] by itself is the antidilution effect.”30

In short, both sides agree: (i) the Grant caused ~8% dilution, valued at ~$50B;

(ii) as of the Court’s Opinion, the Grant’s options were so deeply in-the-money that

the dilution was priced into the market for Tesla shares; and (iii) the Court’s Opinion

rescinding the options reversed that dilution, creating tangible and substantial value

equal to the market price of the shares underlying the rescinded options.31

Removing ~8% dilution was a benefit indisputably achieved through this Action,

with a roughly $50B agreed-upon value.32

28Bebchuk/Jackson Decl. ¶¶36-47; Bebchuk Tr. 56:3-16, 57:3-58:3, 76:10-22, 77:7-78:3;

Jackson Tr. 111:3-22, 112:7-16.
29 Grenadier Report ¶42; see also Grenadier Tr. 188:23-189:18; Fischel Tr. 21:24-22:14.
30 Grenadier Tr. 178:15-19.
31 Grenadier argues that the Rescission’s anti-dilutive effect was erased by market
anticipation that the Board would recycle the Grant, but that observation has no relevance
to valuing recission here.
32Affidavit of Daniel J. Taylor (Mar. 1, 2024) (“Taylor Report”), ¶¶4(a), 13, 28 (Dkt. 296);
see also Skinner Tr. 446:15-22; Grenadier Tr. 88:16-89:10, 178:15-19.

10
 Tesla therefore argues that reversing dilution is not a benefit to Tesla. Plaintiff

addresses that argument next.

B. Eliminating Dilution Is A Derivative Benefit, But Even If Direct

Would Still Be A Proper Basis To Compensate Contingent
Counsel

In Brookfield, the Delaware Supreme Court eliminated the exception to the

“traditional rule that dilution claims are classically derivative.”33 In doing so, it held

that “economic and voting power dilution”—which Tesla faced until the

Rescission—“flow[s] indirectly to [the stockholders] in proportion to, and via, their

shares” and remedies flow to the stockholders “derivatively via the corporation.”34

Thus, “[t]o the extent the corporation’s issuance of equity does not result in a shift

in control[,]…overpayment/dilution claims…are exclusively derivative.”35

Applying those principles to the overpayment here (i.e., the entire Grant), the

“economic dilution in the value of [Tesla’s] stock is the unavoidable result of the

reduction in the value of the entire corporate entity, of which each share of equity

represents an equal fraction.”36

Thus, under Supreme Court precedent, “overpayment/dilution claims…are

exclusively derivative,” and reversing the Grant’s dilution confers value to “the

33 Brookfield Asset Mgmt., Inc. v. Rosson, 261 A.3d 1251, 1266-67 (Del. 2021).
34 Id. (emphasis added).
35 Id. (emphasis added).
36 Id. (emphasis added).

11
entire corporate entity.”37 Indeed, the parties’ Court-ordered joint stipulation

dismissing Plaintiff’s direct claims in this Action expressly noted that Brookfield

“held that ‘corporation overpayment/dilution…claims, like those present here, are

exclusively derivative…. ’”38

But even if the Rescission’s anti-dilution benefit were not derivative (it is), it

would still be fully compensable. Defendants ignore well-settled Delaware law that

investor-level benefits are a proper basis for compensating contingent derivative

counsel. “The transitive property of entity litigation recognizes that a derivative

action that asserts claims for breaches of fiduciary duty…and an investor class action

that asserts similar theories…can be functionally equivalent and, therefore,

substitutes.”39 In other words, “an entity-level recovery can be the equivalent of an

investor-level recovery and vice versa” and one can be “reframed” as the other.40

Indeed, under these principles, derivative actions are routinely resolved “using

investor-level relief.”41 And as the Delaware Supreme Court further explained in

37 Id.
38 Dkt. 175 (emphasis added).
39 Baker v. Sadiq, 2016 WL 4375250, at *1 (Del. Ch. Aug. 16, 2016).
40 Id. at *1.
41 Id. at *1-3 (collecting cases); see also, e.g., Fishel v. Liberty Media Corp., C.A. No.
2021-0820-KSJM, at 43 (Del. Ch. Apr. 8, 2024) (TRANSCRIPT) (“Damages on the
derivative claims would have gone to Sirius XM. Minority stockholders would not
necessarily have received benefits as a consequence. The proposed settlement avoids this
result by paying the settlement fund directly to minority stockholders.”); accord Lacey v.

12
Tandycrafts, Inc. v. Initio Partners, “the form of suit is not a deciding factor [in

awarding attorneys’ fees]; rather, the question to be determined is whether a

Plaintiff, in bringing a suit either individually or representatively, has conferred a

benefit on others.”42

Thus, Tesla’s argument that “stockholder dilution is not an injury to the

corporation”43 is not only wrong but irrelevant. Even if the anti-dilution benefit

conferred here were considered an investor-level (i.e., direct) benefit, it would still

be fully compensable.

C. Rescission Restores 303,960,630 Shares to Tesla

Elevating form over economic substance, Tesla argues that because Musk had

not yet exercised the Grant’s options, no shares were actually issued and, therefore,

no shares were “returned” to Tesla via this Action. Tesla thus illogically claims the

litigation conferred little-to-no value.

Larrea Mota-Velasco, C.A. No 11779-VCG (Del. Ch. Jan. 4, 2019) (ORDER);

Montgomery v. Erickson Inc., C.A. No. 8784-VCL (Del. Ch. Sept. 12, 2016) (ORDER); In
re China Agritech, Inc. S’holder Deriv. Litig., C.A. No. 7163-VCL (Del. Ch. Feb. 13, 2015)
(ORDER); In re Clear Channel Outdoor Hldgs., Inc. Deriv. Litig., Consol. C.A. No. 7315-
CS (Del. Ch. Sept. 9, 2013) (TRANSCRIPT) (deploying transitive property to settle
derivative actions using investor-level relief); Davis v. Holmes, C.A. No. 638-N, at 23 (Del.
Ch. June 21, 2006) (TRANSCRIPT) (same); In re Freeport-McMoRan Copper & Gold
Inc. Deriv. Litig., Consol. C.A. No. 8145-VCN (Del. Ch. Apr. 7, 2015) (TRANSCRIPT)
(same); Franklin Balance Sheet Inv. Fund v. Crowley, 2007 WL 2495018 (Del. Ch. Aug.
30, 2007) (same); Gerber v. EPE Hldgs. LLC, C.A. Nos. 5989-VCN & 3543-VCN (Del.
Ch. July 1, 2014) (TRANSCRIPT) (same).
42 562 A.2d 1162, 1166 (Del. 1989).
43 AB 26-27.

13
 As discussed supra at Section II.A, the parties agree the Grant’s options were

fully vested, deeply in-the-money, and capable of exercise at any time. Likewise—

and as also discussed above—the experts agree that, as a matter of economics, the

market for Tesla shares had already priced-in the dilutive effect of the looming

issuance because Musk’s exercise of the options was a foregone conclusion given

the economic irrationality of not exercising them.

When awarding the Grant, the Board’s resolutions reserved shares for

issuance, directed the transfer agent to so note, and authorized Tesla to “issue and

deliver, without further authorization…such number of shares…as may be required

to be issued pursuant to any vesting and exercise” of the Grant.44 The Board

likewise directed registration of the shares on Form S-8.45

In addition to reversing dilution, therefore, the Rescission removed a

restriction on the shares earmarked for and underlying the Grant’s options, and

restored them to Tesla for any corporate purpose.

Critically, Tesla itself recently told the Court precisely how this situation

should be assessed and how such options should be valued. Contesting the fee

petition in the Director Compensation Action, Tesla’s counsel disputed the value of

44 JX0791.0006.
45Id. Tesla’s suggestion that Plaintiff asks the Court to order registration of shares ignores
the Board’s prior directive to do just that.

14
invalidated options within Tesla’s generalized employee/executive option pool on

the following basis:

Because of the specific characteristics of the Tesla 2019 EIP, and if we

look at the specific language of the settlement stipulation, what’s going
to happen is those shares are going to go back into the plan. And
because they are reserved today before the settlement and because those
authorized shares are going to be reserved tomorrow after the
settlement, they simply can’t be used for any corporate purpose.46

Tesla’s counsel then engaged in a colloquy during which he explained the

value created in the very situation presented here:

TESLA COUNSEL: [T]his is a good example—if we had an options

case where it’s just an independent options award, there’s no plan. So
we have the CEO, we issue options to that CEO, there’s a challenge
made, and either through mootness or through a settlement agreement
that’s reversed. Well, if there’s no plan it has to go back into, in that
scenario, there would be stock now freed up to do with what the
corporation needed. Right? It’s just a treasury issue.

THE COURT: So it would be the equivalent of the cash stock…bucket

of the settlement?

TESLA COUNSEL: Exactly. It would be like the first tranche of the

settlement.47

46Director Compensation Action, C.A No. 2020-0477-KSJM, Tr. at 68. See also id. at 62-
63 (Tesla Counsel: “A share goes back into what can be awarded under the EIP. But now
what happens? We don’t have a share that’s free to go out there and do whatever we want
to for corporate purposes. It’s still reserved. Today it’s reserved for the returned options
in case they were right now exercised. Right? Tomorrow, if the settlement is approved,
they are still going to be reserved. They are now reserved for future awards. So you can’t
go monetize them….”).
47 Id. at 78-79 (emphasis added).

15
 This Action presents “[e]xactly” the situation described by Tesla in the

Director Compensation Action, and the Court should treat the value created here

exactly as Tesla described it.

Tesla now argues that because it had many authorized but unissued shares

available, returning 303,960,630 shares created little-to-no additional value.48 That

argument is irreconcilable with Tesla’s prior representations, and illogical.

Plaintiff’s experts established that because dilution attributable to those shares was

already priced into the Tesla stock, avoiding those shares’ imminent issuance would

have allowed them to be sold for full market price.49 In short, Tesla had it right the

first time and cannot now legitimately take an antithetical position in a related

proceeding.50

48 AB 24-25.
49 Bebchuk Tr. 60:9-18 (“Tesla does now have, as a result of the rescission, roughly 300[M]

shares which were earlier set aside and now Tesla is free to sell.”); id. at 76:10-20 (“[I]t is
valuable…to get the shares…set aside back to the treasury” regardless of whether there are
“authorized shares in reserve” because Musk’s “300[M] options…create an expected
dilution” and result in a lower share price); Jackson Tr. 111:3-22 (“[Rescission] eliminates
Mr. Musk’s contractual right to acquire several hundred million shares on…advantageous
terms” and “removes the prospect of…looming dilution”).
50 Director Compensation Action, C.A. No. 2020-0477-KSJM, Dkt. 183 at 1-2 (Del. Ch.
Jan. 31, 2024) (Letter from Court) (“Given…the likelihood that [the Tornetta Action] will
raise legal arguments similar to those at issue here, I am holding the pending motions in
this action in abeyance.”); cf. MidAtlantic Farm Credit, ACA v. Morgan, 2015 WL
1035423, at *5 (Del. Ch. Mar. 4, 2015) (estopping “shifting positions” in related litigation).

16
 D. The Litigation Created Additional Non-Quantified Value

In addition to the tens of billions of dollars of tangible and quantifiable value

created by returning 303,960,630 shares to Tesla and reversing the associated

dilution, this Action conferred significant governance benefits on Tesla.

The Action exposed the Board’s significant conflicts and that—at least here—

Musk controlled the Board. Indeed, even Objector Steffens concedes that “[t]he

Opinion clarified additional disclosure and process requirements for the stockholder

vote and special committee process, and Tesla will presumably govern itself in

accordance with those requirements in the future.”51 The Post-Trial Opinion also

provided a master class on executive compensation (and transaction processes

generally), should the controlled Board endeavor to discharge their fiduciary duties

in the future. While these benefits were not quantified, they should52 create

significant value for Tesla stockholders far into the future.

51Steffens Objection 36; see also id. (acknowledging the “therapeutic benefit of improved
procedures”).
52Sadly, it is not clear that the Board—a majority of which the Court found conflicted
regarding the Grant, but which still voted to approve “ratification”—and particularly its
Chair, received the message. See, e.g., Tabby Kinder and Stephen Morris, I Might Wake
Up to a Tweet. I Don’t Wake Up to a Strategy Shift, Financial Times (May 17, 2024)
(Ex. 1) (Denholm quoted as referring to aspects of the Court’s Opinion as “crap” and
“absolute BS”).

17
III. TESLA’S FIXATION ON GDFV MISPRICES THE BENEFIT
CONFERRED

Defendants concede that the Rescission at least provides Tesla a $2.3B

accounting benefit.53 But basing the fee award solely on that benefit improperly

ignores the substantially more significant benefits discussed supra at Section II.

Doing so is also improper because (i) GDFV does not reflect economic reality; and

(ii) Tesla’s $2.3B GDFV calculation is compromised by the inherent limitations and

unreliability of GDFV calculations generally, and understated for several reasons.

A. GDFV Does Not Reflect the Actual Economic Benefit Conferred

and Is Inherently Limited and Unreliable

As Tesla acknowledges, the $2.3B GDFV “accounting charge…is an estimate

of the [GDFV] of the [employee stock options (’ESOs’)]…[and] represents the

relevant accounting measure at…the grant date of January 21, 2018.”54 Tesla

previously denigrated that same estimate as “not even a probabilistic estimate of the

compensation expense Tesla is likely to incur under the [Grant], much less a

probabilistic estimate of the value Musk is likely to realize under the [Grant].”55

Tesla’s accounting expert Skinner—who used Tesla’s $2.3B GDFV

calculation as the sole basis56 for his “accounting perspective only” analysis of the

53 See, e.g., AB 6, 13, 14, 31.

54 AB 35-36.
55 Dkt. 29 at 3.
56 Skinner Tr. 415:14-23.

18
Rescission’s “possible impact to Tesla”57—distinguished his “accounting

perspective” from (and expressly disclaimed assessment of): (i) “a valuation

perspective,”58 (ii) “economic value” or “enterprise value,”59 or (iii) an “economic

analysis.”60

Further, ASC 718—pursuant to which Tesla calculated the $2.3B GDFV—

does not accurately reflect actual economic reality; it is the product of an extremely

politicized legislative compromise.61

GDFV calculations are also inherently limited and unreliable.

GDFVs are rough estimates that exclusively focus on the grant date, ignoring

all subsequent events. As Skinner acknowledged, “ASC 718 is not designed to and

does not reflect the economic substance of ESOs at any time subsequent to the grant

57 Skinner Report ¶9(c).

58Skinner Tr. 94:13-18 (“So, again, I was asked to evaluate this from an accounting
perspective. There may be different considerations from a valuation perspective, which I
haven’t, in this matter, considered.”).
59 Id. at 178:14-20, 227:16-20, 475:15-20.
60 Id. at 473:3-7.
61 See, e.g., Gipper, Lombardi & Skinner, The Politics of Standard-Setting: A Review of
Empirical Research (Stan. Grad. Sch. Bus., Working Paper No. 3441, Oct. 17, 2013), at
Abstract, https://www.gsb.stanford.edu/faculty-research/working-papers/politics-account
ing-standard-setting-review-empirical-research (“[I]t is clear…that politics sometimes
plays a first-order role in the FASB’s determination of accounting standards[.]”); id. at 39-
40 (“Perhaps the best known…example of political interference in standard-setting was the
tremendous political pressure” imposed to combat the expensing of ESOs); Skinner Tr.
297:4-22, 298:5-300:6, 323:16-324:18.

19
date of those ESOs.”62 Indeed, the Grant’s $2.3B GDFV cannot possibly reflect

present economic reality because, as Tesla concedes, granting Musk the same plan

today would result in a GDFV “in excess of $25 billion.”63

Further, as Skinner conceded, GDFV calculations require numerous

assumptions and estimates,64 and “there’s a lot of…judgment involved” such that

“none of [it] is an exact science.”65 In fact, GDFV calculations are so conjectural

that Skinner testified: “I would not say there is a correct number…we’re making

judgments and estimates.”66

B. Tesla’s GDFV Calculation Was Severely Understated

Tesla’s $2.3B GDFV calculation was severely flawed and understated.

The Court held—yet Skinner was unaware that—Tesla’s Compensation

Committee actively sought “‘creative options’ they could employ to ‘solve for

getting a bigger discount’ on the publicly reported [GDFV],”67 resulting in the

62 Skinner Tr. at 414:17-415:12.

63Tesla, Inc., Proxy Statement (Schedule 14A) (Apr. 29, 2024) (“Proxy”), at 87 (Dkt. 324,
Ex. 2).
64 Skinner Tr. 344:18-345:1.
65 Id. at 423:12-21.
66 Id. at 427:12-428:18.
67 Opinion 54 (quoting JX0535); Skinner Tr. 394:8:17.

20
unsound68 “10.52% illiquidity discount based on the Five-Year Hold Period,”69

which reduced the GDFV by ~$300M. That concerted effort to minimize the Grant’s

GDFV independently disqualifies it as an accurate reflection of economic value.

Further, confronted with published SEC guidance regarding ASC 718,

Skinner conceded that the SEC mandates upward adjustment of GDFV calculations

to account for positive internal projections and other MNPI.70 Thus, to the extent a

GDFV ever approximates economic reality, it does so only when all required

adjustments are made.

But as the Court recognized, Tesla’s $2.3B GDFV calculation “did not

account for the probability of hitting the operational milestones, nor did it

incorporate Tesla’s internal projections.”71 Thus, the GDFV ignored the Board’s

determination that three milestones were “70% likely to be achieved soon after the

Grant was approved,”72 “the S-curve’s exponential growth phase was imminent,”73

and Tesla’s projections “predicted achievement of [nine]…milestones by the end of

68 Among other things, as Skinner conceded, the Grant allowed Musk to immediately sell
post-exercise shares to pay both the exercise price and his tax obligations from exercising
all the options (Skinner Tr. 150:18-153:10, 412:2-19), which together could entail
immediately selling 50+% of the post-exercise shares.
69 Opinion 79.
70 Skinner Tr. 378:18-379:1, 380:9-381:2.
71 Opinion 79.
72 Id. at 186.
73 Id. at 84.

21
2020.”74 Critically, Skinner acknowledged that (i) to the extent Tesla’s internal

projections, milestone achievement probability assessments, and/or imminent

ascension of the manufacturing S-curve constituted MNPI, adjustment of the GDFV

calculation was required;75 and (ii) any such adjustment would have increased the

Grant’s GDFV.76

As such, Tesla’s $2.3B GDFV calculation is severely understated. It is thus

unsurprising that Glass Lewis and ISS—despite not knowing about the above-

described MNPI or the campaign to “solve for getting a bigger discount”—each

independently calculated a $3.7B GDFV for the Grant.

* * *

In sum, GDFV calculations generally do not reflect economic reality. They

are thus inherently limited and unreliable as the (sole) basis for determining an

appropriate fee award. But here, Tesla intentionally skewed its $2.3B calculation

away from any semblance of reality. The Court should reject Tesla’s hubris in

arguing for a measure that Tesla’s own actions skewed and which Tesla previously

rejected.

74 Id. at 186.
75 Skinner Tr. 389:5-21, 392:18-393:16.
76 Id. at 381:4-382:2.

22
IV. DEFENDANTS’ AND OBJECTORS’ EVENT STUDIES PROVE
NOTHING ABOUT THE VALUE OF THE BENEFITS CONFERRED
BY THE ACTION

Defendants and Objectors rely heavily on event studies to undermine the

benefit achieved by Plaintiff. Given the clear valuation of the benefit conferred as

described supra, the Court need not consider any event study. Vice Chancellor

Laster observed in Compellent: “[I]n awarding fees under Sugarland, I am not

constrained to follow the market’s lead, and our law accords value to benefits other

than the present value of projected future cash flows as reflected in market prices.”77

But even if the Court considered the proffered event studies, they are useless

here because the benefit conferred is known and discretely quantifiable. As Bebchuk

explained, if a bank lost $50B because a deposit account went under, no event study

would be necessary to assess the value of the loss—the $50B loss is the direct result

of the event.78 Thus, no event study is necessary where the parties agree that the

rescinded options have an intrinsic value of ~$51B, and that “$50[B] by itself is the

antidilution effect.”79

Moreover, event studies are valuable only for addressing market reactions to

isolated financial and earnings-related disclosures, “[a]ssuming the absence of

77 2011 WL 6382523, at *20 n.6.

78 Bebchuk Tr. 215:4-216:15.
79 Grenadier Tr. 178:15-19.

23
confounding news.”80 In complex fact patterns with confounding information, they

become unreliable and essentially useless, especially where—like here—they fail to

consider and disaggregate that confounding information.81

Indeed, Delaware law is clear that in fee contests (like in other situations),82

event studies are “unreliable” if potentially confounding factors are not fully

incorporated and disaggregated. In Mudrick Capital Management v. Monroe,83 for

example, plaintiff’s counsel argued that significant governance reforms achieved

through settlement could be valued through an event study showing positive market

reaction to the settlement’s public announcement. The Court rejected the study,

citing “too many influencing factors in the market that the study does not adequately

80 Grenadier Report ¶32 (emphasis added).

81See, e.g., In re Apple Inc. Sec. Litig., Case No. 4:19-cv-02033-YGR (N.D. Cal. June 10,
2022) (Grenadier Expert Report) (Ex. 2), ¶65 (“If multiple pieces of information are
revealed simultaneously, an event study regression captures the impact of all of that
information, and does not allow a researcher to separate the impact of one piece of
information from another.”); SEB Inv. Mgmt. v. Symantec Corp., Case No. 3:18-cv-02902-
WHA (N.D. Cal. Feb. 12, 2021) (Skinner Expert Report) (Ex. 3), ¶86 (“[A]n event study
alone usually is not sufficient to reliably establish loss causation in cases with complex fact
patterns. [It] measures the price impact of all new information revealed during the study’s
event window; it cannot reliably apportion the price impact of an individual piece of
information when multiple pieces of information are disclosed within a given event
window.”).
82 See, e.g., In re Stillwater Mining Co., 2019 WL 3943851, at *56 (Del. Ch. Aug. 21,
2019) (rejecting event studies in favor of “a superior market-based metric, like the deal
price.”); Highfields Cap., Ltd. v. AXA Fin., Inc., 939 A.2d 34, 59 (Del. Ch. 2007) (rejecting
event study based on “highly speculative” assumptions).
83 C.A. No. 2018-0699-TMR (Del. Ch. Sept. 5, 2019) (TRANSCRIPT).

24
take into account.”84 Despite the plaintiff’s expert’s claim that the news was already

priced into the market, the Court found the event study “unreliable for purposes of

determining the value of the settlement.”85

Here, within minutes of the Opinion—which was issued after trading hours—

Musk made public statements reflecting his rejection of the Court’s rulings, and

pumped confounding information into the market.86 Those public statements—

signaling a forthcoming appeal, redomestication to Texas, and potentially other

attempts to evade the Court’s Rescission order—impacted the market’s

interpretation of the Opinion and its finality.87 Tesla’s brazen attempts to

circumvent the Rescission were well-known, confounding its impact on Tesla’s

stock price.

Indeed, Tesla’s experts Grenadier and Fischel both cite a Wedbush report

published the day after the Opinion’s issuance, stating it “now creates a tornado

84 Id. at 20.
85 Id. at 21.
86 See, e.g., Elon Musk, Twitter (Jan. 30, 2024, 5:14 p.m.), https://x.com/elonmusk/
status/1752455348106166598; Elon Musk, Twitter (Jan. 30, 2024 7:40 p.m.),
https://twitter.com/elonmusk/status/1752491924848820595; Elon Musk, Twitter (Feb. 1,
2024 12:09 a.m.), https://twitter.com/elonmusk/status/1752922071229722990.
87 See, e.g., Ex. 4 at 2 (“There are two pieces of negative information accompanying the
issuance of the Tornetta opinion that could have offset a positive benefit from the rescission
that both Fischel and Grenadier chose to ignore: (i) Increase in potential costs from Musk’s
AI threat….(ii) Negative information about Tesla governance….”); Bebchuk Tr. 206:9-
210:3 (same); Grenadier Tr. 108:24-109:8 (conceding failure to consider these events);
Fischel Tr. 235:6-20, 238:24-239:13, 241:22-242:5 (same).

25
situation for Tesla’s Board in the next move with the Street closely watching this

poker move.”88 That report, along with another issued two days later, delineates

three actions the Board might pursue: (i) appeal the Opinion, (ii) create a new 2018

compensation plan; or (iii) create a new compensation package enabling Musk to

obtain the 25% voting control he was seeking by threat.89

Similarly, Larcker cites a Charles River Associates report90 stating that

Tesla’s Board might seek to replace the rescinded Grant “with a substantial

replacement compensation package,” that Musk’s redomestication demand might

affect the share price, and that Musk’s threat to shift his AI and robotics focus

elsewhere absent a 25% Tesla stake—which carried particular force given Musk’s

characterization of AI and robotics as Tesla’s essence and future91—“could also

cause the market to reduce Tesla’s value.”92 That report and Tesla’s own experts’

testimony confirm that Musk’s threats to usurp Tesla’s AI and robotics-related

In a Shocker Delaware Judge Voids Musk Comp Package; Next Move in Board’s Hand,
88

Wedbush (Jan. 31, 2024) (Dkt. 354, Rickey Aff., Ex. A).
89Id.; Delaware Judge Likely Pushes TSLA to Incorporate in Texas-Musk Could Get to
25%, Wedbush (Feb. 2, 2024) (Ex. 5); see Grenadier Report ¶42.
90 Steffens Objection, Larcker Aff. ¶27.
91 See, e.g., Elon Musk (@elonmusk), X (Jan. 3, 2024 12:51am), https://x.com
/elonmusk/status/1742423298217033776 (“Tesla is an AI/robotics company that appears
to many to be a car company”); Elon Musk (@elonmusk), X (Apr. 27, 2024 8:13pm),
https://x.com/elonmusk/status/1784375472887066653 (“Tesla is the biggest AI
project on earth”).
92The Stock Price That Didn’t React: Tesla Reaction to Court’s Ruling, CRA Insights
Finance (Feb. 2024).

26
corporate opportunities—first made approximately two weeks before this Court’s

ruling93—fueled market concern regarding Musk’s potential reaction to the Court-

ordered Rescission.94

Tesla’s and Objectors’ experts made no serious attempt to disaggregate the

Rescission’s effect on the stock price from the impact of any of the confounding

information above—e.g., the likelihood Tesla would evade the Rescission and the

risk of Musk moving AI away from Tesla.95 That failure alone dooms their event

studies.96

For example, Grenadier admitted that “of course” a potential new

compensation package for Musk could move the market for Tesla stock by $50B,97

and acknowledged the possibility that Musk losing focus linked to AI could move

93 Elon Musk, Twitter (Jan. 15, 2024 3:55 p.m.), https://twitter.com/elonmusk

/status/1746999488252703098.
94Objector Steffens indicated Musk’s threats succeeded: “Musk may be disincentivized if
his compensation is rescinded, and that, in turn would negatively affect the value of [her]
Tesla stock.” Steffens Aff. (Dkt. 354), ¶31; see also Fischel Tr. 240:2-242:11 (Musk’s AI
threat “was certainly something that was discussed as a negative.”).
95See Steffens Objection, Larcker Aff. ¶27 (“Based on my review of Tesla-related news
surrounding [the Opinion’s issuance, relevant] dates do not appear to be affected by
confounding events.”); Florida Objection, Ex. A (Pomerantz Decl.), at 8-11 (no
consideration of confounding information).
96See, e.g., Ex. 3 ¶86 (“If there is confounding news, a financial economist needs to apply
additional techniques to isolate any portion of the price decline that was caused by the
corrective disclosure.”); Ex. 4 at 2 (acknowledging that “other news on the same dates as
the studies…could ‘contaminate’ the results.”).
97 Grenadier Tr. 182:2-6.

27
the market by $50B.98 Yet Grenadier did not disaggregate those or other factors.99

Likewise, Fischel testified he did not analyze in isolation the stock price reaction to

Musk’s threat to divert AI and robotics away from Tesla.100

Moreover, Grenadier concluded that the lack of market movement in response

to dilution reversal—which he conceded should be valued at $50B—was likely due

to “Musk’s desire to be compensated,” which the “stock price reaction took…into

account.”101 According to Grenadier, once the market digested the Opinion, it

concluded that Musk would be an “unhappy camper”102 who would demand

replacement compensation that would wipe out the Rescission’s antidilution

effect.103 Thus, according to Grenadier, the lack of market reaction to the Opinion

most likely resulted from the market assuming the supine Board would again violate

its fiduciary duties by re-authorizing the now-rescinded Grant. That alone

invalidates Tesla’s use of event studies.104

98 Id. at 181:16-182:1.
99 Id. at 125:13-21, 129:17-24.
100 Fischel Tr. 238:24-240:1.
101 Grenadier Tr. 141:14-21.
102 Id. at 84:20-85:1; see also Fischel Tr. 240:2-13.
103 Grenadier Tr. at 83:13-18.
104Grenadier’s attempts to meaningfully distinguish between “confounding factors” and
“ramifications” (see, e.g., Grenadier Tr. 125:13-127:25) fails. He admits—as he must—
that the Opinion’s purported “ramifications”—such as Musk’s threats to move to Texas or
the likelihood that Tesla would defy the Court—could impact the stock price, thus

28
 Additionally, the Opinion introduced significant other confounding

information ignored by Tesla’s and Objectors’ experts, including severe Board

conflicts and deficiencies in Tesla’s corporate governance.105 Such deficiencies

were exacerbated by Musk’s threats to take his focus—and Tesla’s assets and

corporate opportunities—elsewhere, and his demand for redomestication in

immediate response to the Opinion. The proffered event studies fail to recognize or

control for these and other factors.

The event studies also present myriad other issues. As Bebchuk and Jackson

noted, “Tesla[’s] stock price is very volatile, which makes it difficult even for effects

of substantial magnitude to result in statistically significant returns.”106 Further,

Fischel could not articulate the criteria used in selecting the events analyzed in his

study and why he omitted certain events related to this Action, such as the Court’s

denial of Defendants’ motion to dismiss or the stock price reaction on each trial

day.107 And despite Musk’s own descriptions of Tesla as an AI or robotics company,

necessitating disaggregation from the Recission’s anti-dilution effect. See, e.g., id. at
129:2-130:20.
105 Opinion 123-58.
106 Ex. 4 at 3.
107 Fischel Tr. 177:7-24.

29
Fischel failed to use an industry benchmark for his event study that includes AI and

robotics to assess Tesla’s expected stock returns.108

V. THE REQUESTED FEE IS APPROPRIATE

Tesla agrees that “Delaware public policy seeks to reward…risk taking by

awarding a premium to plaintiffs’ counsel who bring meritorious claims.”109 And

Tesla does not dispute the general proposition that under well-settled Delaware law,

“a full adjudication” “warrant[s] an award of 33%.”110 Instead, Tesla argues that, as

applied here, those principles trigger a windfall. Those arguments fail.

First, Tesla’s argument that the requested fee constitutes a windfall because

Musk “worked for free” ignores that (i) the dispositive input for determining the

appropriate fee is the benefit conferred (not a comparison to the wrongdoer);

(ii) Musk was the biggest beneficiary of Tesla’s post-Grant stock price increase,

“benefit[ing] by over $10[B] for every $50[B] increase,” totaling well-over

$100B;111 and (iii) through mid-August 2022, Musk was still being compensated

under his 2012 compensation plan.112

108 Id. at 215:13-21.

109 AB 43.
110In re Dell Techs. Inc. Class V S’holders Litig., 300 A.3d 679, 695 (Del. Ch. 2023); see
also OB 13 n.52 (citing numerous cases).
111 Opinion 179.
112 See, e.g., Fischel Tr. 140:19-142:3.

30
 Second, Tesla claims it is unfair to credit Plaintiff’s Counsel for the $50B+

Rescission-based benefit because they did not drive the underlying increase in

Tesla’s stock price.113 That argument ignores the nature of the rescission remedy

and that, under Sugarland,114 the fee is dictated by—and directly proportional to—

the Rescission’s conferred benefit. Tesla’s sky-is-falling theory that adhering to

Delaware’s longstanding “percentage-of-benefit method”115 would “place a bounty

on corporate treasuries”116 ignores that (i) no fee is paid unless a compensable

benefit is conferred and (ii) the fee is a mere fraction of the conferred benefit.117

Third, Tesla addresses the incentive effects of granting Plaintiff’s requested

fee,118 yet completely ignores the perverse incentives engendered by their unserious

proposal to award “a fee equal to the $13.6[M] claimed lodestar.”119 Under Tesla’s

113 AB 43-44.
114 Id. at 18.
115 Dell, 300 A.3d at 687.
116 AB 44-45.
117 The CoC’s arguments about “abusive stockholder litigation” and “frivolous lawsuits
against corporations” (CoC Amicus 1-2, 5) are absurd in a case resulting in post-trial
findings of fiduciary breaches and elimination of a $55B compensation plan. The CoC’s
call for “greater transparency” in plaintiff’s counsel’s fee arrangements and “additional
safeguards” to reduce agency costs in derivative actions is grandstanding. Id. at 19-26.
Delaware fee requests are (i) made strictly under Delaware law; (ii) made in a fully public
and adversarial context; and (iii) adjudicated by the Court, which exercises its discretion
in a fiduciary capacity.
118AB 43-45; see also CoC Amicus 14-19 (urging Court to “consider the incentives it is
creating for other lawyers in bringing future cases”).
119 AB 2; see also Steffens Objection 27-29 (discussing contingent counsel incentives).

31
approach, a fee exceeding Tesla’s proposed $13.6M fee could have been achieved

in this Action by agreeing to a settlement shortly before the Opinion whereby Musk

would disgorge just 271,405120 of the 303,960,630 options Plaintiff rescinded via the

Rescission, or pay $45.7M121 in cash. Under either construct, Tesla and its

stockholders would have received less than 0.1%122 of the benefit achieved by

Plaintiff’s Counsel by shouldering full contingent risk and achieving total victory

(i.e., the Rescission) through trial.123

This example highlights the wisdom and necessity of Delaware’s

incentivization of plaintiff’s counsel to maximize stockholder returns through the

percentage-of-benefit method. Ironically, Tesla underscored that critical point in the

Director Compensation Action: “As this Court has made clear, ‘The wealth

120 The per-option intrinsic value is $191.59 - $23.33 = $168.26. $45,666,667

(intrinsic value of 271,405 options) x 30% (fee percentage) = $13.7M fee. See Dell, 300
A.3d at 699 (finding a 30% fee is warranted after post-trial briefing and argument).
121 $45.7M x 30% (fee percentage) = $13.7M.
122 271,405 ÷ 303,960,630 = 0.0008929.
123 Per Tesla, “in no event” should the Court award “more than a 4x multiple to [] lodestar,”
i.e., $54.4M. AB 2. That fee could have been achieved by a settlement either disgorging
1,077,737 options or securing $181.34M in cash, either of which would confer a benefit
below 0.4% of the benefit conferred by the Rescission (1,077,737 ÷ 303,960,630 =
0.00354564). Curiously, the proposal precisely mirrors Texas’s 4x cap on class lodestars—
which is not the law in Delaware.

32
proposition for plaintiffs’ counsel is simple: If you want more for yourself, get more

for those whom you represent.’”124

Fourth, Tesla’s claim that “Plaintiff’s Counsel seeks to capitalize on the

benefit of hindsight to expropriate the spoils of risks already borne by Tesla

investors”125 ignores that, as in all Delaware cases, the Sugarland doctrine dictates

that the benefit conferred drives the appropriate award, and that Plaintiff did not

control the timing of his request. Thus, the fee request is not “opportunistic[.]”126

Those arguments also misunderstand the nature of the rescission remedy—it is not

“compensatory” in nature and does not contemplate the reversal of changes that

occurred during the Action.127

Additionally, Objector Steffens’s citations to Dann128 and Sugarland are

unavailing.129 In Dann, after settling their claims, the plaintiffs sought fees for

purportedly achieving a “Change in Management at Chrysler,” after which

Chrysler’s performance improved.130 The Court held that:

124 Director Compensation Action, C.A. No. 2020-0477-KSJM, Dkt. 166 at 2 (Del. Ch.
Sept. 29, 2023) (Tesla’s Answering Brief) (quoting In re Orchard Enters., Inc. S’holder
Litig., 2014 WL 4181912, at *8 (Del. Ch. Aug. 22, 2014)).
125 AB 44.
126 Steffens Objection 21.
127 See supra Section I.
128 Dann v. Chrysler Corp., 215 A.2d 709 (Del. Ch. 1965).
129 See Steffens Objection 18-19.
130 Dann, 215 A.2d at 715.

33
 • “[P]laintiffs’ counsel failed to prove that they filed meritorious
claims[.]”131

• “[T]he bulk of” the plaintiffs’ change-seeking activities “lacked

legal substance.”132

• “[P]laintiffs admit[ted] that the ‘new’ management was not their

choice,” and “attacked the[m]” after they were appointed.133

• “[S]ome of the so-called changes and improvements…were ‘in the

works’ before…plaintiffs say the new management took over.”134

Dann bears zero resemblance to this Action.135

In Sugarland, after an early-stage settlement, the Supreme Court awarded

plaintiffs’ counsel full credit (i.e., 20%) for a $3.2M increased real estate sale price136

and partial credit (i.e., 5%) for a subsequent price increase arising from a bidding

process that post-dated the injunction plaintiffs’ counsel obtained.137

Here, where the benefit conferred is entirely co-extensive with the Rescission

itself—i.e., is untethered to any event post-dating the Rescission and does not rely

on monetizing any pre-existing company asset (e.g., the real estate in Sugarland)—

131 Id.
132 Id. at 716.
133 Id.
134 Id.
135 Tesla’s citation to Medley’s paraphrasing of Dann is thus also unavailing. AB 44.
Seinfeld v. Coker is also clearly inapposite. 847 A.2d 330, 338 (Del. Ch. 2000) (“Nor was
this lawsuit a particularly hard fought, cost-intensive suit….No motion practice
occurred.”).
136 Sugarland Indus., Inc. v. Thomas, 420 A.2d 142, 150-51 (Del. 1980).
137 Id.

34
full credit is warranted. Sugarland thus strongly supports Plaintiff’s fee request and

underscores that, like in Dell and Americas Mining, the benefit conferred here is

attributable solely to Plaintiff’s Counsel’s efforts.

Fifth, as further discussed infra at Section VI.A, any suggestion that the Court

should apply a declining-percentage approach contravenes Delaware law,138

including the Court’s recent Dell decision, which juxtaposed the pitfalls of a

declining-percentage approach against the virtues of Delaware’s longstanding

“percentage-of-benefit method.”139

Finally, as Tesla acknowledges, lodestar “may be used as a ‘backstop check’

when assessing the reasonableness of a fee award.”140 Here, where Plaintiff’s

Counsel achieved complete post-trial victory and quantifiable economic benefits, the

proper metric is the percentage-of-the-benefit.141 Indeed, in Sugarland itself, the

138See, e.g., CoC Amicus 11 (acknowledging that “the Supreme Court did not impose a
declining percentage rule or cap in Americas Mining”).
139 Dell, 300 A.3d at 687, 703-15. Indeed, even in the federal securities context—which
entails significantly lower fee percentages than Delaware for several reasons, including
lower contingency risk given the higher likelihood of pre-trial settlement—“when
awarding fees for settlements of $1[B] or more, federal courts award approximately 10%”
(id. at 704 (emphasis added)), closely aligning with the 11.0145% requested here.
140AB 45 (quoting In re Cox Radio, Inc. S’holders Litig., 2010 WL 1806616, at *23
(Del. Ch. May 6, 2010) (emphasis added); see also, e.g., CoC Amicus 10 (acknowledging
“the Supreme Court has rejected a mechanical use of the lodestar method”).
141 See OB 33-34.

35
Supreme Court awarded a percentage-of-the-benefit fee without calculating or

assessing the fee “on an hourly rate basis.”142

A lodestar cross-check is particularly ill-suited here because the requested

share-based fee’s value is ever-changing. As recently as April 22, Tesla stock—and

therefore the requested fee’s value—had fallen nearly 26% relative to the January

30 Opinion date. Defendants’ upcoming appeal guarantees a long timeline before

any fee is final, which compounds the risk and uncertainty associated with Plaintiff’s

fee request and further undercuts the probity of a lodestar cross-check.143

VI. THE COURT SHOULD REJECT A QUANTUM MERUIT

APPROACH

A. Delaware Has Rejected Defendants’ Back-Door Lodestar

Approach

Delaware has wisely chosen not to institute a lodestar-based fee system, which

incentivizes inefficient litigation and imposes unnecessary court costs.144 The

Delaware Supreme Court has “explicitly disapproved the Third Circuit’s lodestar

142 Sugarland, 420 A.2d at 151-52.

143 Plaintiff’s Counsel have not submitted additional affidavits reflecting time spent
protecting the Court-ordered remedy and the Court’s very jurisdiction, or in addressing
Tesla’s “ratification” scheme. That time was considerable, and if past is prologue,
Plaintiff’s Counsel are not finished contending with Tesla hijinks.
144 See, e.g., Report of the Third Circuit Task Force, Court Awarded Attorney Fees,
108 F.R.D. 237, 246–49 (1986); Seinfeld, 847 A.2d at 333 (“[T]he Court does not want to
be in a position of encouraging the churning of wheels and devoting unnecessary hours to
litigation in order to be able to present larger numbers to the Court.”).

36
method” in favor of the Sugarland factors.145 This Court should not “deploy[] the

[lodestar] methodology to undermine that decision.”146

Americas Mining advocates for “increasing percentages” of the benefit

conferred as a plaintiff progresses deeper into litigation.147 A detailed study of fee

agreements found that sophisticated clients consistently “opt for a percentage-of-

the-benefit-model,” “either with fixed [] or escalating percentages as litigation

matures.”148 “If sophisticated clients do not care about lodestar multipliers when

percentages are available, judges should not care about them either.”149

Defendants’ analogy to federal securities mega-settlements is inapt. As noted

in Dell, such actions often benefit from criminal or regulatory investigations, and

“securities class actions almost never go to trial,” with “many settl[ing] prior to

145Ams. Mining, Corp. v. Theriault, 51 A.3d 1213, 1254 (Del. 2012); see also Dell, 300
A.3d at 693.
146 Dell, 300 A.3d at 693.
147 Id.; see also, e.g., Eric Helland & Seth A. Seabury, Contingent-Fee Contracts in
Litigation: A Survey and Assessment, in RESEARCH HANDBOOK ON THE ECONOMICS OF
TORTS 383, 387-88 (Jenniffer Arlen ed., 2013) (identifying contingency fee agreements in
other contexts awarding 33% after surviving motion to dismiss and 40% in the event of an
appeal).
Dell, 300 A.3d at 706 (citing Brian T. Fitzpatrick, A Fiduciary Judge’s Guide to
148

Awarding Fees In Class Actions, 89 FORDHAM L. REV. 1151, 1160 (2021)).

In re Dell Tech. Class V S’holders Litig., No. 349, 2023, at 8 (Del. Dec. 28, 2023)
149

(Amicus Brief).

37
discovery.”150 “In Chancery [] litigation, the calculus is quite different. Cases are

tried. The risk of a post-trial loss is real, and the risk of reversal is high.”151

Confirming that stark difference, Plaintiff and Plaintiff’s Counsel—the only litigant

and counsel who stepped up to challenge the Grant—had to undertake “a detailed

investigation before filing suit, surviv[ed] [a] motion to dismiss, buil[t] a strong case

through [fact and expert] discovery,” “litigat[ed the] case through trial,” and

obtained an eleven-figure judgment, which they must now defend through appeal.152

Applying the federal securities settlement approach by using “the declining-

percentage method as a backdoor” and “backward-looking lodestar method”153 is

inappropriate.

B. Quantum Meruit Is Inapplicable And Tesla’s Authorities Are

Unavailing

Tesla unhelpfully urges the Court to adopt a quantum-meruit approach to

calculate the fee award, contending the benefits conferred are speculative and

nonquantifiable.154 They are neither. As explained supra at Section II, the benefits

150Dell, 300 A.3d at 709; see also id. at 707-08 (“These figures suggest that per case filed,
plaintiff’s lawyers in Chancery [] litigation face far higher rates of dismissal, far lower
prospects of settlement, and far smaller potential recoveries.”); accord id. at 710 (“Cases
are not tried, so there is no risk of a post-trial loss or a reversal of a victory on appeal.”).
151 Id. at 710.
152 Id. at 709.
153 Id. at 707.
154 Sciabacucchi v. Howley, 2023 WL 4345406, at *4 (Del. Ch. July 3, 2023).

38
to Tesla and its stockholders—restoring 303,960,630 shares and reversing ~8%

dilution—are known, and each side’s experts agree on the value of both. None of

Tesla’s authorities alter that conclusion.

Citrix,155 which Tesla mischaracterizes, is readily distinguishable. There, the

plaintiff sued to invalidate a stock plan amendment that the defendants subsequently

withdrew, mooting the claim.156 The Court struggled to value the withdrawn plan

and its attendant incentives because, unlike here, “the Company never issued any of

these additional options.”157 Here, the intrinsic value of the issued, fully vested, and

deeply in-the-money rescinded options is determinate and indeed undisputed by

Defendants’ experts, and no incentive offset is needed. Given that, unlike here, the

options in Citrix were never issued, had no determinate intrinsic value, created no

dilution effect, were never adjudged entirely unfair post-trial, and therefore required

an offset for future replacement awards, the Court resorted to quantum meruit to

determine plaintiff’s fee.158 None of these factors apply here.

155La. State. Emps.’ Ret. Sys. v. Citrix Sys., Inc., 2001 WL 1131364 (Del. Ch. Sept. 19,
2001).
156 Id. at *1, *3.
157 Id. at *7 (emphasis added).
158See id. at *7-9. The Citrix Court also considered an event study by Grenadier
which—contrary to Tesla’s mischaracterization—the Court found had “clear
shortcomings.” Id. at *8.

39
 Tesla’s other authorities are similarly unavailing. To the extent relevant,

Cheniere fully supports the requested Fee Award. There, as part of a settlement, the

company agreed not to seek stockholder approval of further employee equity

issuances for three years. Vice Chancellor Laster struggled to value the benefit

because neither party valued an anticipated alternative plan and its attendant

incentives.159 Here, the Court placed that failure singularly and squarely on

Defendants, and unlike in Cheniere, the benefits of the judgment rescinding the

Grant are tangible and quantifiable.

Indeed, in Simon Properties, Vice Chancellor Laster held that no offset to a

benefit conferred could be considered where a compensation plan is invalidated

post-trial: “If the plaintiffs had obtained a decision from the court on the merits that

invalidated the Original Award, then the facts would be different. In that case, the

comparison would be between a situation before the litigation where Simon had

received the Original Award, and a situation after the litigation where Simon did not

hold any award. The plaintiffs therefore would be entitled to have the benefits

In re Cheniere Energy, Inc. S’holders Litig., C.A. Nos. 9710-VCL & 9766-VCL, at 103-
159

04 (Del. Ch. Mar. 16, 2015) (TRANSCRIPT) (“I’ve considered whether to essentially
make the defendants lie in the bed they’ve made by not allowing them to make any
deduction for the unknown plan.”).

40
measured by the value of the full amount of the Original Award.”160 For that reason,

the Court should not consider any offset here.161

Investors Bancorp likewise mandates that result. There, following

settlement—not a post-trial judgment rescinding a grant—the company eliminated

75% of contested equity awards even though, as the Court observed, “defendants

might have prevailed on the fair price component of the entire fairness review.”162

The Court struggled to value the canceled awards “based on different inputs to a

modified Black-Scholes option pricing model”163—unlike here, where Tesla’s

experts concede the rescinded options’ ~$51B intrinsic valuation.164 Following

settlement, the company authorized and approved replacement equity awards to two

executives.165 The Investors Bancorp Court noted that “[r]educing the settlement

fund by the value of the replacement awards would seem to punish plaintiffs for

reaching a successful settlement instead of going to trial,”166 clearly implying that

160 LAMPERS, C.A. Nos. 7764-VCL & 7902-VCL, ¶ 4 (emphasis added).

161Should the Court, contrary to Simon Properties, seek to offset the benefit conferred with
a reasonable alternative plan, the highest market-based comparable considered by Tesla
was Charter Communications’ CEO’s 2016 total compensation of $98,012,344.
See JX0512.0016.
In re Invs. Bancorp, Inc., Consol. C.A. No. 12327-VCS, at 12 (Del. Ch. June 17, 2019)
162

(TRANSCRIPT).
163 Id. at 16.
164 Grenadier Tr. 88:16-20; Skinner Tr. 446:15-22.
165 Invs. Bancorp., Consol. C.A. No. 12327-VCS, Tr. at 9-10.
166 Id. at 19-20 (emphasis added).

41
post-trial—as Simon Properties expressly held—the Court does not consider any

offset. Given those complexities, absent here, the Court awarded a fee representing

over 19% of what plaintiffs identified as a $39M common fund.167 Here, the ~11%

fee sought as a percentage-of-the-benefit conferred is roughly half the Investors

Bancorp award.

167 Id. at 10, 27. Nor are any other of Tesla’s other authorities on-point. See In re Anderson
Clayton S’holders Litig., 1988 WL 97480, at *4 (Del. Ch. Sept. 19, 1988) (finding litigation
“bears too attenuated a causal relationship” to purported benefit “to justify a fee calculated
by a formula or approach that incorporates…the value of that [purported benefit]”);
Friedman v. Baxter Travenol Laby’s, Inc., 1986 WL 2254, at *5 (Del. Ch. Feb. 18, 1986)
(finding plaintiff “made no effort to establish any discount to reflect [certain] possibilities
in attempting to value the benefit” despite “conced[ing]…at the hearing[] that [the $25-
$29M purported benefit] would have to be discounted”); In re Loral Space & Commc’ns
Inc. Consol. Litig., C.A. No. 2808-VCS, at 75 (Del. Ch. Dec. 22, 2008) (TRANSCRIPT)
(finding, but for certain non-contingent plaintiffs, the requested fee based on a percentage-
of-the-benefit would have been “easily justifiable”); In re Xencor, Inc., C.A. No. 10742-
CB, at 51 (Del. Ch. Dec. 10, 2015) (TRANSCRIPT) (granting fees requested for partial
settlement “clearing up a cloud in the capital structure of a corporation”); Off v. Ross, 2009
WL 4725978, at *7 (Del. Ch. Dec. 10, 2009) (granting mootness fee for
“negotiat[ing]…the proposed settlement that caused Defendants to extend the Rights
Offering on the terms they did,” which the Court rejected but Defendants nonetheless
implemented); In re Energy Transfer Equity, L.P. Unitholder Litig., 2019 WL 994045, at
*5 (Del. Ch. Feb. 28, 2019) (“I cannot tie [the $35.8M distribution increases] to the
litigation with sufficient certainty to shift fees.”); Knight v. Miller, 2023 WL 3750376, at
*8, *5 (Del. Ch. June 1, 2023) (providing no fee analysis after rejecting proposed
settlement which “does nothing of consequence” and finding the “categories of
enhancements [which] might arguably have provided some tangible (albeit modest)
benefits…were implemented well before the settlement was reached”); Krinsky v. Helfand,
156 A.2d 90, 94 (Del. Ch. 1959) (estimating total settlement value at $500,000, where
$200,000 represented “the difference between the option and market prices” when the
options were cancelled); Rovner v. Health-Chem Corp., 1998 WL 227908, at *4 (Del. Ch.
Apr. 27, 1998) (finding unpersuasive defendant’s argument that the “lawsuit did not
produce any tangible benefit for the class”); In re Cal-Maine Foods, Inc. S’holders Litig.,
C.A. No. 20507-VCS, at 74 (Del. Ch. Jan. 27, 2004) (TRANSCRIPT) (characterizing
valuation of the benefit as difference between deal price and closing price on day the deal
was abandoned as “a modest way of quantifying the benefit here”).

42
 C. Tesla’s Quantum Meruit Approach is Deeply Flawed

Tesla’s quantum meruit proposal is also illogical, including because it ignores

the unprecedented outcome achieved by Plaintiff Counsel’s total trial victory, the

substantial contingency risk borne for over six years of litigation, the substantial time

spent litigating this Action since submitting Plaintiff’s Counsel’s lodestar—

including protecting the Court-ordered judgment against Defendants’ attempts to

circumvent it168—and the substantial time to be spent on further proceedings

including appeal.169

Moreover, awarding quantum meruit (i.e., less than 0.01% of the benefit

conferred) for rescinding the largest compensation plan in history (by multiples)

would have problematic policy implications, including severely disincentivizing

challenges to compensation plans in Delaware, no matter how egregious and unfair.

VII. TESLA’S RATIFICATION GAMBIT FAILS

Defendants’ purported “ratification” vote seeks to undermine this Court’s

judgment that “ordered rescission of the [Grant].”170 It fails for several reasons.

168 See Dkts. 308-11, 324-325, 333, 340.

169Dell, 300 A.3d at 699 (“[G]oing the distance requires more effort, accepts the risk of
receiving nothing after trial, and takes on the additional work and risk associated with an
appeal.”).
170 Proxy 74, 82.

43
 A. The Purported “Ratification” is an Extrajudicial Scheme That
Has No Effect on the Court’s Merits Judgment

Following trial, the Court “enter[ed] judgment for the [P]laintiff”171 and

“order[ed] rescission of the Grant.”172 Tesla admits—as it must—that the Opinion

was a “‘final judgment on the merits’” rescinding the Grant.173 Tesla can only

challenge that judgment at this juncture through appeal or motion under Rules 59 or

60.174 Thus, the purported “ratification” cannot reinstate the Grant, has no effect on

the Court’s judgment and is irrelevant to the July 8 fee hearing—any other result

completely undermines this Court’s authority.175

After Plaintiff’s trial victory, Tesla proposed “ratification,” telling

stockholders that: (i) “[w]e do not agree with what the Delaware Court

decided…[s]o we are coming to [stockholders] now so you can help fix the issue”176

and (ii) Tesla would apparently defy the Court’s Rescission order and “restore[] to

171Opinion 1; see also id. at 200 (“For the foregoing reasons, judgment is entered in
Plaintiff’s favor.”).
172 Id. at 192.
Dkt. 324 at 13 (citation omitted); see also id. at 14-15 (deeming order implementing the
173

Court’s judgment unnecessary because it would be “redundant” and “superfluous” and

would “serve[] no substantive purpose”).
174 See Ct. Ch. R. 59, 60.
175See Sciabacucchi v. Salzberg, 2018 WL 6719718, at *2 (Del. Ch. Dec. 19, 2018) (“As
the sovereign that created the entity, Delaware can use its corporate law to regulate the
corporation’s internal affairs.”), rev’d on other grounds, 227 A.3d 102 (Del. 2020).
176 Proxy, Letter to Stockholders.

44
Mr. Musk” all the rescinded options if “ratification” passed.177 Tesla’s counsel then

ambiguously told the Court: “Ratification…would materially impact these

proceedings, including Plaintiff’s Fee Petition.”178

Concerned that Defendants were seeking extra-judicial means to avoid the

Court’s judgment, Plaintiff filed motions to preserve that judgment and the Court’s

jurisdiction.179 In response, Tesla acknowledged that the July 8 hearing relates only

to Plaintiff’s fee petition,180 and represented that Tesla will “obey the Court’s final

judgment on the merits”181 regardless of ratification and that the ratification “would

[not] ‘interfere with this Court’s jurisdiction over the...[f]ee [p]etition or this Court’s

ability to enter a final judgment so that the case may be appealed.’”182 The Court

denied Plaintiff’s motions based on those understandings, stating “defense

counsel—as officers of the court—are duty-bound to correct” them if they are

mistaken.183

177 Id. at 85 (“If the [Grant] is ratified...[it] will be restored to Mr. Musk….”).
178 Dkt. 306 at 2.
179 See Dkts. 308-11.
180 Dkt. 313 at 8-9.
181 Dkt. 324 at 13.
182 Dkt. 340 at 6 (citing Dkt. 324 at 5-6).
183 Id. at 7.

45
 Now, seemingly in defiance of those representations (and after using them to

“successfully induc[e]”184 the Court to deny Plaintiff’s preservation motions), Tesla

claims the ratification “significantly impacts the claims and issues in this action,

including the Court’s final judgment” and claims that the July 8 hearing is not only

“on the Fee Petition [but also the] judgment.”185 That about-face has no bearing on

the Court’s judgment—which is final as to the merits of this Action—or Plaintiff’s

pending fee petition. And Defendants are estopped from arguing otherwise.186

The “ratification” is irrelevant to this Action.

B. The Purported “Ratification” Defies Delaware Law in Other

Ways

Defendants’ attempted “ratification” gambit under “Delaware common law”

and “Section 204 of the DGCL”187 fails for several additional reasons.

Preliminarily, the self-dealing Grant does not meet Section 204’s threshold

definition of “Defective corporate act.”188 The Court “order[ed] rescission of the

Grant as a remedy for Defendants’ fiduciary breaches,”189 not due to a “failure of

184 MidAtlantic, 2015 WL 1035423, at *3.

185 Dkt. 377 at 2 (emphasis added).
186MidAtlantic, 2015 WL 1035423, at *5 (finding estoppel where litigant “would derive
an unfair advantage from his shifting positions”).
187 Proxy 64.
188 8 Del. C. § 204(h)(1).
189 Opinion 192.

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authorization.” Additionally, Section 204’s synopsis expressly states that it “is not

intended to modify…fiduciary duties” and that “[d]efective corporate acts, even if

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

review.”190 Underscoring this view—and exposing the insincerity of Defendants’

statutory ratification ploy—two law firms representing Tesla in this Action have

acknowledged: “Sections 204 and 205 only address the technical validity of prior

defectively-authorized acts, and do not affect fiduciary duties or any equitable claims

against such acts.”191

Defendants’ common-law “ratification” attempt likewise fails. The Court

rejected Defendants’ initial ratification defense at the pleading stage nearly five

years ago.192 Citing the inherent coercion present when any conflicted controller

seeks to assert ratification, the Court ruled: “[W]hen conflicted controllers are

involved, our courts will not allow the controller to rely upon stockholder approval

of the transaction at the pleadings stage to ‘cleanse’…well-plead breaches of

190 Delaware General Assembly, House Bill 127, Original Synopsis (2013),
https://legis.delaware.gov/BillDetail/22641
191 Jeffrey R. Wolters & James D. Honaker (Morris, Nichols, Arsht & Tunnell LLP),
Analysis of the 2013 Amendments to the Delaware General Corporation Law,
https://www.law.upenn.edu/live/files/6893-analysis-of-2013-dgcl-amendmentspdf; see
also C. Stephen Bigler & John Mark Zeberkiewicz (Richards, Layton & Finger, P.A.),
Restoring Equity: Delaware’s Legislative Cure for Defects in Stock Issuances and Other
Corporate Acts, 69 BUS. LAWYER 393, 414 (2014) (“An act that is properly ratified under
section 204…would not be insulated from an equitable challenge.”).
192 Tornetta v. Musk, 250 A.3d 793, 797-98, 809-10 (Del. Ch. 2019).

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duty.”193 That is not only an accurate description of Delaware law; it is also—like

the Rescission itself—the binding law of the case.

Any renewed, post-judgment “ratification” defense—offered six years after

Plaintiff filed suit—has long been waived.194 And, at best, timely common-law

ratification could shift burdens at trial, but has no legal effect after a post-trial

judgment on the merits.195

C. The Purported “Ratification” Has No Effect Because It Was Not

Validly Approved by the Board, Was Coerced, and Was Not Fully
Informed

A Board must properly approve a ratification resolution before it is submitted

to stockholders.196 Here, the Court found half of the directors who approved the

purported ratification conflicted regarding the very Grant they voted to ratify.197

Thus, that approval—like the Board’s Grant approval in 2018198—was invalid as a

matter of law, rendering the ratification invalid.

193 Id. at 807-08.

194 See Emerald Partners v. Berlin, 726 A.2d 1215, 1224 (Del. 1999).
195See Gantler v. Stephens, 965 A.2d 695, 713 (Del. 2009); In re Match Grp., Deriv. Litig.,
2024 WL 1449815, at *1 (Del. Apr. 4, 2024); In re Wheelabrator Techs., Inc. S’holder
Litig., 663 A.2d 1194, 1202-03 (Del. Ch. 1995).
196Proxy 48 (“Under the DGCL,…[t]he board of directors must adopt a resolution ratifying
the defective corporate action…[which then] must be submitted to stockholders for
approval.”).
197Opinion 125-127 (finding Denholm, Ehrenpreis, and Murdoch—three of six directors
that approved “ratification”—conflicted regarding the Grant).
198 See AB 12 (“This Court invalidated the Board approval of the Plan….”).

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 Moreover, even shifting the burden at trial requires a non-coercive and

fully informed vote.199 Defendants’ purported ratification fails on both counts for

several independent reasons:

• Musk—and Tesla’s public filings issued in connection with the

ratification—repeatedly characterize AI and robotics as critical to
Tesla’s future, and Musk threatened to usurp those opportunities
unless given 25% of Tesla. Acting on this threat, Musk redirected
thousands of Nvidia AI chips, previously reserved for Tesla, to X
and xAI. The ratification vote was therefore coerced.

• The ratification vote was also coerced because Tesla’s directors

were “threatening stockholders with a $25[B] charge against
earnings if they vote against ratification.”200

• Tesla’s Proxy is false and materially misleading because, inter alia,

it: (i) describes Denholm, Ehrenpreis, and Murdoch—whom the
Court found conflicted regarding the Grant—as “independent”; (ii)
is silent on how Wilson-Thompson’s more than $135M in Tesla
stock grants compares to her non-Tesla-related compensation; (iii)
fails to disclose that Wilson-Thompson adopted a Rule 10b-5
trading plan to sell 36% of her Tesla shares five days before
accepting her appointment to the special committee; and (iv)
ignored the Court’s findings regarding the Grant process.201

* * *

199Kahn v. M & F Worldwide Corp., 88 A.3d 635, 645-46 (Del. 2014) (“A controller that
employs and/or establishes only one of these dual procedural protections [i.e., “a fully-
informed, uncoerced majority of the minority stockholder[] vote[]”] would continue to
receive burden-shifting within the entire fairness standard of review framework.”); see also
[Proposed] Amicus Brief of Professor Charles M. Elson (“Elson Amicus”) (Dkt. 329,
Ex. A).
200 Elson Amicus 10 n.35; see also Proxy 89.
201Compare Proxy 75 (“[Grant] discussions first took place among the then-members of
the Compensation Committee….”), with Opinion 31 (“Musk put forward terms of a new
compensation plan during the April 9 call.”).

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 Thus, for several independent reasons, “ratification” cannot rescue

Defendants from the Court’s judgment and Rescission order.

VIII. ALTERNATIVE FEE AWARD STRUCTURE

As explained herein and in Plaintiff’s Opening Brief, a stock-based award is

variable, fluctuates with the market, and ties directly to the primary benefits achieved

in this Action.202 Attempting to quantify in dollars the share-based award where the

share value continually changes is not particularly helpful as a cross-check. Indeed,

year-to-date, Tesla shares have fallen nearly 30%, as Musk has: (i) threatened

stockholders that he must own 25% of Tesla to be “comfortable” not competing with

Tesla; (ii) attacked the Court and its Opinion, including demanding reincorporation

to Texas; and (iii) most recently, purloined Nvidia chips necessary to Tesla’s

promised future in AI to benefit one of his other companies. It would thus be foolish

to isolate Tesla’s January 30 share price and apply it to Plaintiff’s Counsel’s pre-

Opinion hours as a meaningful “cross check.” That overstates the “ask” by the

market’s decline and, given Tesla’s volatility (not to mention Musk’s), perhaps even

more.

While Plaintiff’s Counsel sincerely believe the award sought is appropriate,

earned, and indeed conservative under Delaware law—the Action did, after all,

202 Further, as discussed by Bebchuk/Jackson, any concern regarding the impact of

liquidating a share-based fee (see CoC Amicus 7) can be readily mitigated.
Bebchuk/Jackson Decl. ¶¶85, 97.

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rescind an “unfathomable” $55B compensation package, the largest in history by

multiples—Plaintiff’s Counsel acknowledge the requested award, if granted, would

be record-setting and the subject of significant commentary. Were the Court

concerned by the requested award’s size and desirous of a different approach, there

are other alternatives available that address the expressed concerns about

“windfalls.”

Specifically, $35,000/hour cannot be a “windfall” because that hourly rate

was awarded by this Court and affirmed by the Supreme Court over a decade ago in

Southern Peru. Adjusted to today’s dollars, a $35,000 hourly rate would be over

$55,600/hour.203 It follows, a fortiori, that for a substantial verdict on the order of

Southern Peru, an award of at least $55,600/hour is not a “windfall.”

Indeed, even Tesla argues that this Action created compensable value equal

to its calculation of the Grant’s $2.3B GDFV (which, as discussed supra at Section

III, is substantially understated). But even using this low-end value estimate, the

benefit Plaintiff achieved here was significantly higher than the $1.347B (pre-

interest) Southern Peru benefit.204 Thus, a low-end cash award of roughly $1.0842B

203See OB 36-37 & n.123 (Americas Mining hourly rate ($35,000) in August 2012 adjusted
for inflation in January 2024).
204 In re S. Peru Copper Corp. S’holder Deriv. Litig., 52 A.3d 761, 819 (Del. Ch. 2011).

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could be fashioned based solely on the affirmed, inflation-adjusted Southern Peru

numbers.205

But any such award would be unfairly low for two reasons. First, as noted in

Plaintiff’s Opening Brief, this Court in Southern Peru—after admonishing

plaintiff’s counsel to seek a conservative fee given “the reality [that] their own delays

affected the remedy awarded”206—further reduced that request by one-third as a

penalty for counsel taking so long to prosecute the case that rescission was

impossible.207 Second, the ~$51B benefit achieved here is approximately 38x higher

than the benefit achieved in Southern Peru.208

Adjusting for the one-third penalty assessed in Southern Peru—which was

applied to an already conservative 22.5% request by that plaintiff—brings the

inflation-adjusted lodestar to $73,948/hour, which yields a fee of approximately

$1.44B. Adjusting further to reflect the much higher result here is a matter of the

Court’s discretion. Plaintiff’s Counsel would submit that exercising the Court’s

discretion to award a cash fee of roughly twice the inflation-adjusted Southern Peru

205 19,499.95 (pre-Opinion hours) x $55,600 = $1,084,197,220.

206 52 A.3d 761, 819 n.206.
Ams. Mining, 51 A.3d at 1252. See also Dell, 300 A.3d at 703 (noting the Americas
207

Mining Court reduced the fee “because of plaintiff’s delay in prosecuting the case.”).
208 $51.1B ÷ $1.347B = 37.94.

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hourly rate after reversing for the discount appropriately reflects the substantially

greater benefit achieved here.

* * *

Plaintiff’s Counsel hopes this alternative pathway assists in the Court in

determining a “fair” award under the circumstances. Plaintiff’s Counsel remains

confident in its initial request, particularly given the unprecedented result achieved

here through complete victory at trial. Should the Court have concerns, Plaintiff’s

Counsel provide a precedent-anchored approach to a cash award as an alternative.

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 CONCLUSION

For the foregoing reasons and those in Plaintiff’s Opening Brief, Plaintiff

respectfully requests that the Court approve the requested Fee Award.

BERNSTEIN LITOWITZ BERGER

& GROSSMANN LLP

Of Counsel: /s/ Gregory V. Varallo

Gregory V. Varallo (Bar No. 2242)
Jeroen van Kwawegen Glenn R. McGillivray (Bar No. 6057)
Margaret Sanborn-Lowing 500 Delaware Avenue, Suite 901
BERNSTEIN LITOWITZ BERGER Wilmington, DE 19801
& GROSSMANN LLP (302) 364-3061
1251 Avenue of the Americas ANDREWS & SPRINGER LLC
New York, NY 10020 Peter B. Andrews (Bar No. 4623)
(212) 554-1400 Craig J. Springer (Bar No. 5529)
Jeremy S. Friedman David M. Sborz (Bar No. 6203)
Spencer M. Oster Andrew J. Peach (Bar No. 5789)
David F.E. Tejtel Jackson E. Warren (Bar No. 6957)
FRIEDMAN OSTER 4001 Kennett Pike, Suite 250
& TEJTEL PLLC Wilmington, DE 19807
493 Bedford Center Road, Suite 2D (302) 504-4957
Bedford Hills, NY 10507 Counsel for Plaintiff
(888) 529-1108
WORDS: 12,456 of 12,500 Word
Limit (Dkt. 379)

Dated: June 21, 2024

54