In a much-anticipated decision issued on December 19, 2025, the Delaware Supreme Court reversed the Delaware Court of Chancery’s rescission of Elon Musk’s 2018 equity compensation package and, as a result, significantly cut back the trial court’s award of attorneys’ fees to the plaintiffs’ attorneys. The opinion1 resolves a multi-year litigation over Musk’s compensation, which was valued at approximately $56 billion at the time of the Court of Chancery’s post-trial decision in 2024.
Of particular note, the Supreme Court’s opinion did not address the trial court’s rulings going to liability: whether Musk was a controlling stockholder for purposes of the compensation package, whether Musk and the Tesla board of directors had breached their fiduciary duties in implementing the compensation package, and whether the compensation package was unfair. The opinion—issued “per curiam”2 by the Supreme Court—instead expressly stated that “the Justices have varying views on the liability determination.” What the Justices did agree on, however, was that rescission was an “improper remedy” and that the case could be decided on that “narrower” ground alone. The Supreme Court noted that rescission, an “extreme remedy,” is only appropriate where parties can be restored to the original status quo, but that rescission in this case would leave Musk uncompensated after years of leading Tesla through significant growth. The focus of the decision also means that the Supreme Court did not decide the effect of the Tesla stockholder vote held after the Court of Chancery’s decision seeking to ratify and reinstate the pay package.
In the end, the Delaware Supreme Court awarded nominal damages of just $1 to the plaintiff and accepted Tesla’s offered approach to the payment of the plaintiff’s attorneys’ fee award based on a quantum meruit approach: a multiplier of four times their time spent on the case, which appears to amount to approximately $54.5 million, down from the $345 million in fees awarded by the Court of Chancery. The Supreme Court noted that it would normally remand such a fee determination back to the Court of Chancery, but that given the length of the case and that the Chancellor had “devoted enormous time and attention” to the case “at great personal sacrifice,” the Supreme Court decided the issue itself.
The opinion is noteworthy on its own merits, but also as an entry in the broader discussion that surrounded the litigation over Musk’s compensation package. Following the Court of Chancery’s decision, Musk publicly criticized Delaware as the traditionally favored state of incorporation, with Tesla subsequently reincorporating to Texas and Musk’s other companies reincorporating to Texas or Nevada as well. In response to broader concern in the market over recent developments in Delaware law, the Delaware governor and legislature acted promptly in 2024 and 2025 to rebalance Delaware law on a number of issues. The 2025 amendments to the Delaware General Corporation Law in particular reworked the rules on the types of controlling stockholder transactions at issue in the Musk case—providing clarity on when a controlling stockholder exists under Delaware law, giving public company independent directors a greater presumption that they will be considered disinterested for purposes of Delaware litigation, and providing companies with clearer rules for approving transactions involving conflicts and avoiding protracted and unnecessary litigation.3 A constitutional challenge to the safe harbor provisions of the 2025 amendments is now pending before the Delaware Supreme Court, and although we believe the challenge is unlikely to succeed, the Supreme Court’s decision in that case will represent another important development in the current corporate law landscape.
Tesla, for its part, recently granted a new large equity compensation package to Musk but publicly disclosed that, should the Delaware Supreme Court reinstate Musk’s 2018 pay package, Tesla would ensure that Musk would not be able to “double dip”—and indeed, his new award agreements provide for some forfeiture of compensation in such an event.
The last two years have involved a remarkable debate around fundamentals of corporate law, including the appropriate balance of power and obligations among boards, founders and other large stockholders, and investors, as well as the optimal state of incorporation for companies. The Delaware Supreme Court’s opinion in this case was measured in its analysis and significant in its result. Other upcoming cases from the Delaware Supreme Court, and undoubtedly other developments, will continue to shape the ongoing debate.
1 In re Tesla, Inc. Derivative Litigation, No. 534, 2024 (Del. 2025).
2 Pursuant to the Delaware Supreme Court’s Internal Operating Procedures, per curiam opinions are issued “when the Court wishes to speak with one voice” as opposed to the Court’s more typical procedure of identifying the primary authority on the first page of the opinion. Of 500 decisions and orders issued by the Delaware Supreme Court in 2025, only five were issued per curiam.
3 For more detail on these amendments, see our prior client alert available here: https://www.wsgr.com/en/insights/delaware-enacts-landmark-corporate-law-amendments.html.
