Richard J. Tornetta v. Elon Musk

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

December 13, 2024

Gregory V. Varallo William M. Lafferty
Daniel E. Meyer Susan W. Waesco
BERNSTEIN LITOWITZ Ryan D. Stottmann
BERGER & GROSSMANN LLP Miranda N. Gilbert
500 Delaware Avenue, Suite 901 Jacob M. Perrone
Wilmington, DE 19801 MORRIS, NICHOLS,
ARSHT & TUNNELL LLP
Peter B. Andrews 1201 N. Market Street, 16th Floor
Craig J. Springer Wilmington, DE 19801
David M. Sborz
Jackson E. Warren Rudolf Koch
ANDREWS & SPRINGER LLC John D. Hendershot
4001 Kennett Pike, Suite 250 Kevin M. Gallagher
Wilmington, DE 19807 Andrew L. Milam
RICHARDS, LAYTON & FINGER, P.A.
David E. Ross One Rodney Square
Garrett B. Moritz 920 North King Street
Thomas C. Mandracchia Wilmington, DE 19801
ROSS ARONSTAM & MORITZ LLP
1313 North Market St., Suite 1001 A. Thompson Bayliss
Wilmington, DE 19801 Adam K. Schulman
Eliezer Y. Feinstein
Catherine A. Gaul ABRAMS & BAYLISS LLP
Randall J. Teti 20 Montchanin Road, Suite 200
ASHBY & GEDDES, P.A. Wilmington, DE 19807
500 Delaware Avenue, 8th Floor
Wilmington, DE 19801 David S. Eagle
Sally E. Veghte
John L. Reed KLEHR HARRISON HARVEY
Ronald N. Brown, III BRANZBURG LLP
Caleb G. Johnson 919 N. Market Street, Suite 1000
Daniel P. Klusman Wilmington, DE 19801
DLA PIPER LLP (US)
1201 N. Market Street, Suite 2100 Anthony A. Rickey
Wilmington, DE 19801 MARGRAVE LAW LLC
3411 Silverside Road
Baynard Building, Suite 104
Wilmington, DE 19810
C.A. No. 2018-0408-KSJM
December 13, 2024
Page 2 of 7

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

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

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

Dear Counsel:

After I issued my December 2, 2024 letter opinion (“December 2 Letter

Opinion”) addressing stockholder submissions concerning the Ratification Argument

and Fee Petition, 1 Tesla stockholders David Israel, Kurt Panouses, and ARK

Investment Management LLC (“ARK,” and with Israel and Panouses, the “Florida

Stockholders”) moved for clarification (the “Motion for Clarification”). 2 Through the

Motion for Clarification, the Florida Stockholders ask the court to recognize that they

were “entitled to intervene” in this action. 3 On December 10, 2024, Tesla stockholder

Amy Steffens (with the “Florida Stockholders,” the “Stockholders”) moved to

intervene “for the limited purpose of preserving her rights” to appeal the December 2

1 C.A. No. 2018-0408-KSJM, Docket (“Dkt.”) 443 (December 2 Ltr. Op.). This decision
adopts the defined terms set out in the Post-Trial Opinion, Dkt. 294.
2 See Dkt. 444 (Mot. for Clarification); see also Dkt. 380 (“Florida Stockholders’ Initial

Submission” re: Fee Petition); Dkt. 419 (“Florida Stockholders’ Supp. Submission” re:
Ratification Argument).
3 Mot. for Clarification ¶ 5.
C.A. No. 2018-0408-KSJM
December 13, 2024
Page 3 of 7

Letter Opinion and “any final judgment entered in this Action” (the “Motion to

Intervene”). 4

The Stockholders’ motions to intervene are granted for the limited purpose of

allowing them to appeal my December 2 Letter Opinion denying them standing and

rejecting their Rule 23.1 challenges to Plaintiff’s adequacy.

To the extent the Stockholders seek to intervene for any other purpose, their

motions are denied as untimely.

The Stockholders based their motions to intervene on Rule 24(a) governing

mandatory intervention and Rule 24(b) governing permissive intervening.

Timeliness is an express prerequisite to relief under both Rules 24(a) and Rule 24(b). 5

“There is no ‘bright-line rule’ for timeliness under Rule 24.” 6 It is an exercise in

discretion that involves a fact-specific inquiry. 7 This court has described the

timeliness inquiry of Rule 24 as focusing on “two factors on a sliding scale: the

inexcusableness of the delay and the prejudice to the existing parties.” 8 In Shawe v.

4 Dkt. 446 (Mot. to Intervene) at 1–2; see also Dkt. 354 (“Steffens’ Initial Submission”

re: Fee Petition); Dkt. 422 (“Steffens’ Supp. Submission” re: Ratification Argument).
5 Ct. Ch. R. 24(a) & (b) (each requiring a “timely motion”); see also Wion v. Nat’l

Recreation Prods. Inc., 1980 WL 268059, at *2 (Del. Ch. Dec. 5, 1980) (describing
timeliness as a prerequisite to intervenetion).
6 In re Reinz Wisconsin Gasket, LLC, 2023 WL 4986411, at *2 (Del. Ch. Aug. 3, 2023)

(quoting Carlyle Inv. Mgmt. L.L.C. v. Moonmouth Co. S.A., 2015 WL 778846, at *5
(Del. Ch. Feb. 24, 2015)).
7 Id. (collecting cases).

8 Great Am. Leasing Corp. v. Republic Bank, 2003 WL 22389464, at *1 (Del. Ch. Oct.

3, 2003); see also Reinz, 2023 WL 4986411, at *2 (applying two-factor “sliding scale”
rule of Great American).
C.A. No. 2018-0408-KSJM
December 13, 2024
Page 4 of 7

Elting, Chancellor Bouchard adopted the four-factor federal test for timeliness, which

breaks these two considerations down further. 9 The four Shawe factors are:

(1) The length of time the movant knew or reasonably
should have known of her interest before she petitioned to
intervene; (2) prejudice to the existing parties due to failure
to petition for intervention earlier; (3) . . . prejudice the
movant would suffer if not allowed to intervene; and (4) the
existence of unusual circumstances weighing either for or
against intervention. 10

Under the Shawe factors, the motions were untimely.

First, the Florida Stockholders’ first submission in this action was on June 17,

2024; they never formally moved to intervene. 11 Ms. Steffens’ first submission was

9 Shawe v. Elting, 2015 WL 5167835, at *2 (Del. Ch. Sept. 2, 2015), aff’d 137 A.3d 150

(Del. 2016) (TABLE).
10 Id. (collecting cases).

11 The Florida Stockholders filed an “objection” to the Fee Petition and, in that filing,

dropped a footnote stating: “In the event this Court disagrees,” with their standing
arguments, “the Florida [Stockholders] respectfully request that the Court do so
without prejudice such that they will be free [to] seek to intervene pursuant to, inter
alia, Court of Chancery Rules 24(a) and 24(b).” Dkt. 380 at 8 n.8 (emphasis added).
The phrase “will be free to” is future-looking; it means that, in their view, they had
not done so. The Florida Stockholders later filed their Supplemental Submission
concerning the Ratification Argument, which did not mention intervention. Dkt. 419.
The Florida Stockholders were allowed to appear and be heard at both the July 8 and
August 2, 2024 hearings, and did not mention intervention then either. See Dkt. 407
(7/8/24 Hr’g Tr.) at 276:18–291:23; Dkt. 435 (8/2/24 Hr’g Tr.) at 147:24–157:21,
158:15–161:3, 161:11–162:7, 287:6–290:23. In their Motion for Clarification, the
Florida Stockholders intimate that they had previously sought “leave to intervene,”
Mot. for Clarification ¶ 2, which Rule 24 does not require. The Florida Stockholders
did not seek leave in any event. This decision nevertheless grants the Florida
Stockholders’ a limited right to intervene for the purpose of appealing the December
2 Letter Opinion.
C.A. No. 2018-0408-KSJM
December 13, 2024
Page 5 of 7

on June 5, 2024; she did not move to intervene until December 10, 2024. 12 The

Stockholders should have known about the litigation long before their initial filings.

This well-publicized case had been pending for six years. 13 Tesla had disclosed the

existence of the lawsuit in each annual proxy statement during that period. 14 And

the court had issued its post-trial decision six months before. The delay was not

excusable.

In search of a contrary outcome, the Stockholders argue that the bulk of their

submissions spoke to the Fee Petition, which was filed in March 2024. 15 Of course,

in the December 2 Letter Opinion, I held that they lacked standing to object to the

Fee Petition. In this decision, I have held that the Stockholders may intervene for

the purpose of appealing the December 2 Letter Opinion. But the Stockholders’

submissions went beyond the Fee Petition. Their submissions concerning the Fee

Petition collaterally attacked the findings in the Post-Trial Opinion. 16 And their

supplemental submissions spoke exclusively to the Ratification Arguments. 17 In this

12 Steffens’ Initial Submission (dated June 2, 2024), Mot. to Intervene (dated Dec. 10,

2024).
13 See Dkt. 1 (Complaint filed June 5, 2018).

14 See, e.g., Tesla, Inc., Annual Report (Form 10-K) (Feb. 19, 2019) at 132 (“Litigation

Relating to 2018 CEO Performance Award”).
15 Dkt. 296.

16 See, e.g., Florida Stockholders’ Initial Submission at 15–20, 36–40.

17 Florida Stockholders’ Supp. Submission; Steffens’ Supp. Submission.
C.A. No. 2018-0408-KSJM
December 13, 2024
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way, the Stockholders appeared to be shadowing Defendants’ efforts to litigate this

action. If that was their intent, they moved to intervene way too late.

Second, Plaintiff would be prejudiced were the court to allow the Stockholders

to intervene for broader purposes. The case has been heavily litigated. At the trial-

court level, it is done. Allowing the Stockholders to intervene to relitigate this action

would thwart the goal of finality, which serves the administration of justice to

Plaintiff’s detriment. Consistent with this principle, Delaware courts generally do

not permit intervention at this stage in the proceedings. 18

Third, the Stockholders would not be prejudiced absent broader intervention.

Any interest they have in this litigation is adequately represented by Plaintiff, as I

held in the December 2 Letter Opinion. And Defendants are more than capable of

presenting any opposition to Plaintiff’s arguments, including those advanced by the

Stockholders.

Fourth, the unusual circumstances of this case are not ones that excuse the

Stockholders’ untimely motions. The Stockholders maintain the court has already

impliedly allowed intervention by allowing them to appear and be heard on their

submissions during the July 8 and August 2, 2024 hearings. They rely on Braun v.

Fleming-Hall Tobacco Co., where the Delaware Supreme Court heard an objector’s

appeal despite the objector’s failure to formally intervene. 19 But Braun merely

18 See, e.g., Reinz, 2023 WL 4986411 (denying intervention after a post-trial opinion).

19 92 A.2d 302 (Del. 1952).
C.A. No. 2018-0408-KSJM
December 13, 2024
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overlooked a technicality in favor of the objector for the purpose of rejecting the

objector’s appellate arguments on the merits. Braun does not warrant intervention

beyond the limited purposes granted here.

IT IS SO ORDERED.

Sincerely,

/s/ Kathaleen St. Jude McCormick

Chancellor

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