Wilmington, DE:
Elon Musk suffered one of the biggest legal losses in U.S. history this week, with the Tesla CEO being stripped of his rights in a lawsuit filed by an unlikely opponent, a former heavy metal drummer $56 billion in compensation.
Richard Tornetta sued Musk in 2018, when the Pennsylvania resident owned just nine Tesla shares. The case eventually went to trial in late 2022, and on Tuesday, a judge sided with Tornetta, invalidating the massive pay deal because it was unfair to him and all Tesla shareholders.
Tornetta could not be reached for comment, and his attorney declined to comment.
Prior to the Tornetta case, Musk had won a series of trials accusing him of defamation, breach of shareholder duties and violations of securities laws.
Based on his online presence, Tornetta appears to be more interested in creating audio gear for car customization enthusiasts than pursuing corporate excesses and malfeasance.
He posts light-hearted videos about gadgets he creates or misadventures, including describing how he lights up his eyebrows.
Tornetta also appeared in a video of former legendary New York club CBGB playing drums with his now-defunct metal band Dawn of Correction, whose sound was described as “a quick kick in the face with a steel-toed work boot.”
On social media, fans of Tesla and Musk appeared to view the case as a travesty of justice and speculated on Tornetta’s intentions and politics, questioning how an investor with such a small stake could exercise such a large amount of power. that power.
Delaware corporate case law is replete with examples of individual investors holding small stakes who ultimately shaped corporate law in the United States.
Eric Talley, who teaches corporate law at Columbia Law School, said many law firms representing shareholders have stable investors they can work with to file lawsuits. They may be pension funds holding a variety of stocks, but they also tend to be individuals like Tonetta.
Plaintiffs sign documents to file lawsuits and then typically recuse themselves, Tully said. Investors don’t pay law firms, which take the case on a contingency basis, as lawyers did in the Musk case.
Tornetta benefited from winning the case just as other Tesla shareholders benefited: saving the company billions of dollars that a compliant board paid to Musk.
Business groups have long criticized cases brought by individuals as a sign of potentially abusive litigation. A decade ago, Delaware was beset by lawsuits filed by retail investors who owned small amounts of stock challenging merger deals. These cases often result in quick and meaningless settlements, which invariably include a payment to the attorney who filed the case. Delaware judges and lawmakers ultimately limited the practice.
Experts say people like Tonetta are crucial to keeping order in the boardroom. Lawmakers and judges have long wanted large investment firms to dominate such corporate litigation because they are better able to focus on lawyers’ strategies. But experts say fund managers don’t want to jeopardize their relationships with Wall Street.
So Tornetta needs to take on Musk.
“His name is now etched in the annals of corporate law,” Tully said. “My students will be reading Tonetta v. Musk for the next 10 years.”
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
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