1
00:00:02,759 --> 00:00:07,480
Speaker 1: This is Bloomberg Law with June Brossel from Bloomberg Radio.

2
00:00:08,720 --> 00:00:13,080
Speaker 2: The Supreme Court's conservatives appeared ready today to gut a

3
00:00:13,200 --> 00:00:16,840
Speaker 2: key tool that's been used to root out racial discrimination

4
00:00:17,000 --> 00:00:21,240
Speaker 2: in voting for more than half a century. During oral arguments,

5
00:00:21,280 --> 00:00:25,960
Speaker 2: the six Conservatives suggested they'll restrict the creation of majority

6
00:00:26,040 --> 00:00:30,440
Speaker 2: black or Hispanic voting districts and gut the Voting Rights Act,

7
00:00:30,800 --> 00:00:34,839
Speaker 2: the central legislation of the civil rights movement. Joining me

8
00:00:34,880 --> 00:00:38,920
Speaker 2: is Bloomberg New Supreme Court reporter Greg store So. Greg

9
00:00:39,000 --> 00:00:40,720
Speaker 2: explained the issue in the case.

10
00:00:41,560 --> 00:00:44,040
Speaker 3: Yeah, so the issue is basically that under the Voting

11
00:00:44,080 --> 00:00:47,360
Speaker 3: Rights Act since the nineteen eighties, there's been basically a

12
00:00:47,440 --> 00:00:49,360
Speaker 3: test that if you're a racial minority, you can go

13
00:00:49,440 --> 00:00:54,080
Speaker 3: to court and say this map illegally dilutes my vote,

14
00:00:54,760 --> 00:00:57,680
Speaker 3: and if you meet certain criteria in this test to

15
00:00:57,760 --> 00:01:00,600
Speaker 3: show that it's like racially polar I've voting in the

16
00:01:01,280 --> 00:01:04,640
Speaker 3: state or jurisdiction, that you can win a Voting Rights

17
00:01:04,680 --> 00:01:07,840
Speaker 3: Act claim. And the remedy in most cases will be

18
00:01:08,080 --> 00:01:10,679
Speaker 3: that a district has to be drawn that has a

19
00:01:10,760 --> 00:01:15,080
Speaker 3: majority members of your race in that district so that

20
00:01:15,160 --> 00:01:18,160
Speaker 3: you can elect the candidate of your choice, and the

21
00:01:18,200 --> 00:01:24,160
Speaker 3: Supreme Court is basically considering upending that entire regime and saying, no,

22
00:01:24,319 --> 00:01:27,960
Speaker 3: it is not an appropriate remedy to intentionally use race,

23
00:01:28,400 --> 00:01:31,920
Speaker 3: even if it's as a remedy for that vote dilution

24
00:01:32,280 --> 00:01:35,400
Speaker 3: violation that a court has found and did.

25
00:01:35,240 --> 00:01:39,280
Speaker 2: All the Conservative justices seem to be on the same page.

26
00:01:39,480 --> 00:01:42,560
Speaker 3: Well, it sure seems like all six Conservatives are interested

27
00:01:42,600 --> 00:01:46,160
Speaker 3: in limiting the Voting Rights Act and putting real restrictions

28
00:01:46,200 --> 00:01:50,160
Speaker 3: on the requirement that sometimes states have to draw majority

29
00:01:50,320 --> 00:01:55,480
Speaker 3: minority districts to ensure that racial minorities aren't suffering discrimination.

30
00:01:56,120 --> 00:02:00,480
Speaker 2: So Justice Kavanaugh talked about, you know, these races based

31
00:02:00,520 --> 00:02:04,080
Speaker 2: remedies should not be indefinite, should have an endpoint. But

32
00:02:04,240 --> 00:02:08,800
Speaker 2: in these cases, aren't the plaintiffs showing that there is

33
00:02:09,080 --> 00:02:11,320
Speaker 2: race based discrimination going on?

34
00:02:11,840 --> 00:02:15,280
Speaker 3: Yeah? That is the counter to Justice Kavanaugh. So undoubtedly

35
00:02:15,320 --> 00:02:18,040
Speaker 3: what Justice Kavanaugh is thinking about is what the Court

36
00:02:18,120 --> 00:02:20,600
Speaker 3: said in the Affirmative Action case from a couple of

37
00:02:20,680 --> 00:02:23,600
Speaker 3: years ago, where the Court basically said, you know, it

38
00:02:23,680 --> 00:02:27,200
Speaker 3: might have been constitutional previously, but at some point, these

39
00:02:27,360 --> 00:02:29,679
Speaker 3: what they considered to be racial preferences have to come

40
00:02:29,720 --> 00:02:32,560
Speaker 3: to an end. And he's thinking about that same sort

41
00:02:32,560 --> 00:02:36,639
Speaker 3: of principle here. But as you suggested, the folks on

42
00:02:36,680 --> 00:02:38,960
Speaker 3: the other side of the case argued, Hey, the way

43
00:02:39,000 --> 00:02:42,640
Speaker 3: the Voting Rights Act works is that you only draw

44
00:02:42,800 --> 00:02:45,920
Speaker 3: a majority block of a majority Hispanic district if, based

45
00:02:45,919 --> 00:02:48,679
Speaker 3: on current conditions, what's going on there is having a

46
00:02:48,760 --> 00:02:53,720
Speaker 3: racially discriminatory effect. So that notion of you know, hey,

47
00:02:54,040 --> 00:02:56,680
Speaker 3: the discrimination we dealt with decades ago is no longer

48
00:02:56,720 --> 00:02:58,920
Speaker 3: there is sort of baked into the test. You have

49
00:02:59,000 --> 00:03:02,440
Speaker 3: to prove based on the way voting happens now that

50
00:03:02,480 --> 00:03:04,680
Speaker 3: there is still racial discrimination going on.

51
00:03:05,200 --> 00:03:09,200
Speaker 2: There was pushback from the courts. Three liberals. What was their.

52
00:03:09,120 --> 00:03:12,720
Speaker 3: Point, So, yeah, a couple different points. Justice Sonya Sodo

53
00:03:12,720 --> 00:03:16,800
Speaker 3: Mayor at one point said, you're effectively killing Section two.

54
00:03:16,919 --> 00:03:19,520
Speaker 3: You that's the effect of your position. Section two is

55
00:03:19,520 --> 00:03:21,920
Speaker 3: one of the big problems of the Voting Rights Act.

56
00:03:22,120 --> 00:03:25,160
Speaker 3: Justice Elena Kagan kind of made that point we were

57
00:03:25,200 --> 00:03:29,600
Speaker 3: talking about earlier, that hey, this only happened, these intentionally

58
00:03:29,639 --> 00:03:34,280
Speaker 3: crafted majority black, majority Hispanic districts only happened after a

59
00:03:34,360 --> 00:03:38,120
Speaker 3: court has found there is racial discrimination going on, that

60
00:03:38,280 --> 00:03:41,640
Speaker 3: black voters, that their votes aren't counting the same as

61
00:03:42,040 --> 00:03:44,520
Speaker 3: white voters, or Hispanic voters aren't having their votes kind

62
00:03:44,560 --> 00:03:47,760
Speaker 3: of the same way, So a lot of pushback there.

63
00:03:48,440 --> 00:03:51,960
Speaker 3: Justice Kagan also asked the lawyer defending the Voting Rights

64
00:03:51,960 --> 00:03:54,440
Speaker 3: Act to talk about the consequences of this, and she

65
00:03:54,560 --> 00:03:58,120
Speaker 3: talked about just how big the consequences could be for

66
00:03:58,880 --> 00:04:02,800
Speaker 3: minority this around the country, not just at the congressional level,

67
00:04:03,000 --> 00:04:04,360
Speaker 3: but state local as well.

68
00:04:04,680 --> 00:04:08,680
Speaker 2: What else were the conservatives concerned about, besides you know,

69
00:04:08,720 --> 00:04:12,840
Speaker 2: a time limitation, Did anyone actually feel that there wasn't

70
00:04:13,080 --> 00:04:15,360
Speaker 2: race based discrimination and voting anymore?

71
00:04:16,040 --> 00:04:18,960
Speaker 3: The big thing that the conservative justices seemed to be

72
00:04:19,000 --> 00:04:23,279
Speaker 3: concerned about was that there was discrimination going on, but

73
00:04:23,320 --> 00:04:25,200
Speaker 3: it was going on in the other direction. That when

74
00:04:25,560 --> 00:04:30,640
Speaker 3: a state is intentionally creating a majority black, majority Hispanic district,

75
00:04:30,880 --> 00:04:35,080
Speaker 3: that is discrimination and that is really worrisome and unconstitutional.

76
00:04:35,200 --> 00:04:38,200
Speaker 3: The majority also sort of fell back on this decision

77
00:04:38,200 --> 00:04:40,159
Speaker 3: from a few years ago that I'm sure you recall,

78
00:04:40,240 --> 00:04:44,560
Speaker 3: where the Court said, we're not going to police partisan

79
00:04:44,640 --> 00:04:47,760
Speaker 3: jury manderin if a state or another jurisdiction wants to

80
00:04:47,800 --> 00:04:51,640
Speaker 3: carve up its districts for political reasons in a certain way,

81
00:04:52,160 --> 00:04:54,960
Speaker 3: it is free to do so. The Constitution does not

82
00:04:55,440 --> 00:04:58,720
Speaker 3: put any limits on that. So some of the conservatives

83
00:04:58,760 --> 00:05:01,919
Speaker 3: today were falling back on the idea that what's really

84
00:05:01,920 --> 00:05:07,080
Speaker 3: going on here is partisan jerrymandering, not racial jerrymandering.

85
00:05:07,680 --> 00:05:11,400
Speaker 2: Just remind us, the Supreme Court has taken out in

86
00:05:11,760 --> 00:05:15,799
Speaker 2: recent years two parts of the Voting Rights Act already.

87
00:05:16,680 --> 00:05:19,880
Speaker 3: Yeah, So the big one that everybody remembers is this

88
00:05:20,040 --> 00:05:25,080
Speaker 3: case called Shelby County, and that basically nullified the so

89
00:05:25,160 --> 00:05:28,680
Speaker 3: called preclearance regime, under which a lot of jurisdictions, mostly

90
00:05:28,680 --> 00:05:30,880
Speaker 3: in the South, had to go to either the Justice

91
00:05:30,920 --> 00:05:34,160
Speaker 3: Department or a federal court to get clearance before they

92
00:05:34,240 --> 00:05:37,800
Speaker 3: changed their voting rules because of the history of discrimination

93
00:05:37,920 --> 00:05:41,320
Speaker 3: in those jurisdictions. So that was one big decision, and

94
00:05:41,360 --> 00:05:44,040
Speaker 3: then a more recent one just a few years ago,

95
00:05:44,480 --> 00:05:48,160
Speaker 3: was the Court making it harder to show that voting

96
00:05:48,360 --> 00:05:52,520
Speaker 3: rules as opposed to the maps are discriminatory. So I'm

97
00:05:52,520 --> 00:05:56,479
Speaker 3: talking about things like rules governing the collection of mail

98
00:05:56,560 --> 00:06:00,440
Speaker 3: ballots or the location of a polling place. The Court

99
00:06:00,880 --> 00:06:03,560
Speaker 3: put in place a much tougher test to show that

100
00:06:03,600 --> 00:06:07,480
Speaker 3: those changes are violations of the Voting Rights Act, and

101
00:06:07,520 --> 00:06:10,240
Speaker 3: since then there has not been a successful claim of

102
00:06:10,240 --> 00:06:11,520
Speaker 3: that type in court.

103
00:06:12,560 --> 00:06:16,279
Speaker 2: If the Supreme Court's conservatives do away with this part

104
00:06:16,400 --> 00:06:18,839
Speaker 2: of the Voting Rights Act as well. Does that mean

105
00:06:18,839 --> 00:06:22,480
Speaker 2: that anything goes in drawing these maps.

106
00:06:22,760 --> 00:06:25,039
Speaker 3: It's hard to say for sure. That is certainly the

107
00:06:25,160 --> 00:06:28,920
Speaker 3: concern of folks on the other side of the case.

108
00:06:29,279 --> 00:06:32,800
Speaker 3: Undoubtedly the Court will at least leave some theoretical room

109
00:06:32,920 --> 00:06:36,279
Speaker 3: to say that there's intentional discrimination going on, and the

110
00:06:36,320 --> 00:06:39,920
Speaker 3: state wouldn't be able to explicitly say we're doing this

111
00:06:40,080 --> 00:06:43,400
Speaker 3: for racial reasons. We're drawing the lines this way. That's

112
00:06:43,440 --> 00:06:47,480
Speaker 3: actually precluded under the Constitution in the fifteenth Amendment, So

113
00:06:47,680 --> 00:06:49,760
Speaker 3: that would still be there. But you know how much

114
00:06:49,800 --> 00:06:53,640
Speaker 3: that would matter as a practical matter, that's an open question.

115
00:06:53,720 --> 00:06:55,880
Speaker 3: This will probably be one of those things where we'll

116
00:06:55,920 --> 00:06:58,560
Speaker 3: just kind of have to wait and see what the

117
00:06:58,560 --> 00:07:02,000
Speaker 3: court's ruling says and how it works out in practice.

118
00:07:02,240 --> 00:07:05,279
Speaker 2: I mean, is there any chance that there'll be a

119
00:07:05,440 --> 00:07:07,159
Speaker 2: very narrow ruling.

120
00:07:08,320 --> 00:07:11,640
Speaker 3: There's certainly a chance. And you know, keep in mind

121
00:07:11,840 --> 00:07:15,120
Speaker 3: that just a couple of years ago, the Court had

122
00:07:15,160 --> 00:07:17,920
Speaker 3: a case that, you know, if I described the circumstances,

123
00:07:17,960 --> 00:07:20,680
Speaker 3: you'd say it's very very similar. It's about Alabama and

124
00:07:20,720 --> 00:07:23,960
Speaker 3: whether Alabama had to create a second majority Black district,

125
00:07:24,040 --> 00:07:27,000
Speaker 3: which is exactly what's going on in Louisiana. And in

126
00:07:27,040 --> 00:07:31,360
Speaker 3: that case, the Chief Justice and Justice Kavanaugh sided with

127
00:07:31,440 --> 00:07:33,720
Speaker 3: the liberals and said, we're going to basically keep the

128
00:07:33,800 --> 00:07:36,560
Speaker 3: rules the way they have been now. That case, as

129
00:07:36,600 --> 00:07:39,640
Speaker 3: the Chief Justice pointed out today, didn't call into question,

130
00:07:39,800 --> 00:07:43,840
Speaker 3: wasn't designed to potentially overturn any of the Court's precedents,

131
00:07:44,120 --> 00:07:46,960
Speaker 3: unlike the current case. So I put that out there

132
00:07:47,000 --> 00:07:49,480
Speaker 3: only to sort of say that the Chief Justice and

133
00:07:49,600 --> 00:07:53,880
Speaker 3: Justice Kavanaugh, at least in that case, were acting a

134
00:07:53,880 --> 00:07:58,480
Speaker 3: little bit cautiously. They weren't moving too quickly. It's possible,

135
00:07:58,640 --> 00:08:01,120
Speaker 3: although it wasn't really apparent, but it's possible in those

136
00:08:01,160 --> 00:08:03,920
Speaker 3: instincts will will come into play and the two of

137
00:08:03,960 --> 00:08:07,120
Speaker 3: them might be interested in crafting a more narrow ruling here.

138
00:08:07,440 --> 00:08:10,200
Speaker 2: I think a lot of the liberals and voting rights

139
00:08:10,240 --> 00:08:13,440
Speaker 2: advocates were looking at that case and saying, well, that

140
00:08:13,560 --> 00:08:15,280
Speaker 2: was just a couple of years ago. They're not going

141
00:08:15,320 --> 00:08:17,920
Speaker 2: to change it now, are they. But apparently the Chief

142
00:08:18,080 --> 00:08:20,560
Speaker 2: Justice saw a difference in the cases.

143
00:08:21,240 --> 00:08:24,960
Speaker 3: Yeah, and you know, remember this Louisiana case was argued

144
00:08:25,040 --> 00:08:27,280
Speaker 3: last term and the Court didn't decide it and when

145
00:08:27,280 --> 00:08:30,800
Speaker 3: it was argued. Initially the question before the Court was

146
00:08:30,840 --> 00:08:33,280
Speaker 3: pretty narrow, and at the end of the term the

147
00:08:33,320 --> 00:08:35,000
Speaker 3: Court said, we're not going to decide it, We're going

148
00:08:35,080 --> 00:08:38,439
Speaker 3: to consider a broader question. And that broader question ended

149
00:08:38,520 --> 00:08:43,320
Speaker 3: up being whether this whole practice of creating intentionally creating

150
00:08:43,360 --> 00:08:48,080
Speaker 3: majority black, majority Hispanic districts is unconstitutional. So they have

151
00:08:48,559 --> 00:08:52,000
Speaker 3: now set themselves up for a potentially much bigger ruling,

152
00:08:52,240 --> 00:08:55,520
Speaker 3: and one that could overturn a Supreme Court president or two.

153
00:08:55,800 --> 00:08:57,880
Speaker 2: We're used to them overturning one, but two and one

154
00:08:57,880 --> 00:09:01,199
Speaker 2: that would be something. So now, was it acknowledge that

155
00:09:01,400 --> 00:09:03,600
Speaker 2: this kind of ruling by the Supreme Court gotting this

156
00:09:03,679 --> 00:09:07,719
Speaker 2: part of the Voting Rights Act would help Republicans that.

157
00:09:07,760 --> 00:09:10,200
Speaker 3: Did come out. I don't know if I would say acknowledged,

158
00:09:10,240 --> 00:09:13,280
Speaker 3: but at least at the very end, the lawyer for

159
00:09:13,360 --> 00:09:17,120
Speaker 3: the NAACP Legal Defense Fund, who was defending the second

160
00:09:17,160 --> 00:09:21,280
Speaker 3: majority black district in Louisiana did allude to the political

161
00:09:21,320 --> 00:09:24,960
Speaker 3: impact and the potential impact on the Supreme Court's legitimacy

162
00:09:25,280 --> 00:09:28,360
Speaker 3: if it decided such a partisan issue in such a

163
00:09:28,360 --> 00:09:32,760
Speaker 3: major way. It was not explicitly Republican versus Democrats in

164
00:09:32,800 --> 00:09:37,200
Speaker 3: this argument, but it wasn't lost on anybody. Louisiana's a

165
00:09:37,400 --> 00:09:41,360
Speaker 3: Republican run state. The Trump administration is on Louisiana side,

166
00:09:41,600 --> 00:09:45,000
Speaker 3: arguing that the second majority black districts should be thrown out.

167
00:09:45,440 --> 00:09:47,839
Speaker 3: So it was pretty apparent to people who was on

168
00:09:47,840 --> 00:09:48,839
Speaker 3: what side of this case.

169
00:09:49,160 --> 00:09:53,280
Speaker 2: And I will add that the six Conservatives are Republican appointees.

170
00:09:53,760 --> 00:09:56,400
Speaker 2: Just putting it out there, and could the court rule

171
00:09:56,600 --> 00:09:59,880
Speaker 2: fairly quickly, quickly in terms of the way the supp

172
00:10:00,240 --> 00:10:01,640
Speaker 2: Court operates.

173
00:10:02,280 --> 00:10:04,600
Speaker 3: Within a couple of months, so that this a new

174
00:10:04,640 --> 00:10:06,880
Speaker 3: map in Louisiana can be put in place in time

175
00:10:06,960 --> 00:10:09,720
Speaker 3: for the November election, because you know, they had the

176
00:10:09,760 --> 00:10:13,360
Speaker 3: whole overhang of the Purcell doctrine right kind of out there.

177
00:10:13,520 --> 00:10:16,800
Speaker 3: And if they wait until too late, then there's real

178
00:10:16,880 --> 00:10:20,240
Speaker 3: questions about whether they're ruling could force a new map

179
00:10:20,320 --> 00:10:23,200
Speaker 3: in time for the election. And if as they rule quickly,

180
00:10:23,240 --> 00:10:25,960
Speaker 3: if they rule in December, then a lot of books

181
00:10:25,960 --> 00:10:29,000
Speaker 3: are concerned that it will spark a whole new round

182
00:10:29,120 --> 00:10:31,760
Speaker 3: of mid decade redistrict team even in actually in some

183
00:10:31,800 --> 00:10:34,160
Speaker 3: states have already done it, like you know, Texas and

184
00:10:34,200 --> 00:10:37,520
Speaker 3: Missouri could both if they weren't constrained by the Voting

185
00:10:37,559 --> 00:10:43,000
Speaker 3: Rights Act, they could eliminate other majority Blacker majority Hispanic districts.

186
00:10:43,240 --> 00:10:47,400
Speaker 2: Thanks so much, Greg, that Bloomberg Supreme Court reporter Greg Store.

187
00:10:48,080 --> 00:10:51,840
Speaker 2: Coming up next on the Bloomberg Law Show, Delaware's highest

188
00:10:51,880 --> 00:10:56,920
Speaker 2: Court considers Elon Musk's twenty eighteen fifty five billion dollars

189
00:10:57,080 --> 00:11:01,120
Speaker 2: Tesla pay package. I'm June gross So and you're listening

190
00:11:01,200 --> 00:11:06,839
Speaker 2: to Bloomberg. Tesla has launched an ad blitz not aimed

191
00:11:06,840 --> 00:11:09,760
Speaker 2: at consumers to try to get them to buy cars

192
00:11:09,880 --> 00:11:13,720
Speaker 2: or products, but aimed at its shareholders to try to

193
00:11:13,720 --> 00:11:18,520
Speaker 2: get them to improve CEO Elon Musk's new one trillion

194
00:11:18,600 --> 00:11:21,360
Speaker 2: dollar pay package.

195
00:11:21,559 --> 00:11:25,560
Speaker 1: On November sixth, we'll hold our annual shareholders meeting this year.

196
00:11:25,880 --> 00:11:28,120
Speaker 1: We have some critical measures on the ballot. We have

197
00:11:28,160 --> 00:11:30,760
Speaker 1: a bold and ambitious plan to drive Tesla's next wave

198
00:11:30,800 --> 00:11:33,920
Speaker 1: of growth and value creation. For you, the owners of

199
00:11:33,960 --> 00:11:39,760
Speaker 1: the company, to execute on this plan and to continue

200
00:11:39,800 --> 00:11:42,640
Speaker 1: to realize extraordinary shareholder value, we need to put in

201
00:11:42,720 --> 00:11:45,959
Speaker 1: place the adequate incentive structure for our CEO and ensure

202
00:11:45,960 --> 00:11:48,600
Speaker 1: the stability of our board of directors. The future of

203
00:11:48,640 --> 00:11:51,280
Speaker 1: Tesla and the future of your investment are in your

204
00:11:51,320 --> 00:11:54,720
Speaker 1: hands and require you to participate in the shareholder vote.

205
00:11:54,920 --> 00:11:57,480
Speaker 1: We are counting on you to make your voice heard well.

206
00:11:57,520 --> 00:12:01,120
Speaker 2: Tesla's shareholders will vote in Novae on what would be

207
00:12:01,160 --> 00:12:05,679
Speaker 2: the largest pay package in corporate history for Musk. In

208
00:12:05,720 --> 00:12:10,160
Speaker 2: the meantime, in Delaware's highest court today, Musk and Tesla

209
00:12:10,240 --> 00:12:15,520
Speaker 2: are still fighting over Musk's twenty eighteen multi billion dollar

210
00:12:15,600 --> 00:12:19,520
Speaker 2: pay package. A Delaware judge had rescinded that fifty five

211
00:12:19,600 --> 00:12:23,880
Speaker 2: billion dollar package after finding that shareholders had not been

212
00:12:24,000 --> 00:12:27,520
Speaker 2: properly informed about the plan when they approved it, and

213
00:12:27,559 --> 00:12:32,040
Speaker 2: that director's conflicts of interest tainted the decision. Joining me

214
00:12:32,120 --> 00:12:37,079
Speaker 2: is business law professor Eric Talley of Columbia Law School. So, Eric,

215
00:12:37,120 --> 00:12:41,079
Speaker 2: what was the Delaware Supreme Court considering in the oral arguments?

216
00:12:41,760 --> 00:12:43,880
Speaker 4: It was a hydpodge of things that were brought forward

217
00:12:43,920 --> 00:12:47,640
Speaker 4: by the Tesla directors as well as the company itself,

218
00:12:47,720 --> 00:12:53,760
Speaker 4: But it basically circulated around some aspects that involved revisiting

219
00:12:53,880 --> 00:12:57,560
Speaker 4: the trial court's holding that there was a breach of

220
00:12:57,600 --> 00:13:02,360
Speaker 4: fiduciary duty associated with miss Dr Musk's compensation agreement, and

221
00:13:02,480 --> 00:13:04,240
Speaker 4: they got into that a little bit. But the more

222
00:13:04,280 --> 00:13:07,920
Speaker 4: interesting parts I think had to do with the remedy

223
00:13:08,000 --> 00:13:12,360
Speaker 4: that Chancellor McCormick imposed, which was to rescind the agreement

224
00:13:12,600 --> 00:13:16,200
Speaker 4: after finding a fiduciary duty problem. And then what do

225
00:13:16,320 --> 00:13:19,960
Speaker 4: we make of the second stockholder vote that took place

226
00:13:20,040 --> 00:13:24,480
Speaker 4: in June twenty twenty four, six months after the original opinion.

227
00:13:24,880 --> 00:13:28,040
Speaker 4: Did that somehow kind of overturn the opinion or at

228
00:13:28,120 --> 00:13:33,760
Speaker 4: least overturn any possible remedy beyond just a small amount.

229
00:13:33,840 --> 00:13:36,760
Speaker 4: And so the lawyers from both sides were arguing all

230
00:13:36,880 --> 00:13:39,960
Speaker 4: three of these points, and any one of them or

231
00:13:40,000 --> 00:13:43,640
Speaker 4: some combination of them could factor into a potential reversal.

232
00:13:43,720 --> 00:13:45,840
Speaker 4: But my guess is it's going to be one of

233
00:13:45,920 --> 00:13:46,960
Speaker 4: these three points.

234
00:13:47,320 --> 00:13:49,200
Speaker 2: So you think they're going to reverse.

235
00:13:49,080 --> 00:13:51,720
Speaker 4: I don't know for sure. I think that the probably

236
00:13:51,760 --> 00:13:55,600
Speaker 4: the strongest argument that the Tesla appellants had had to

237
00:13:55,679 --> 00:13:59,359
Speaker 4: deal with the remedy in the case, Chanceller McCormick rescinded

238
00:13:59,760 --> 00:14:02,840
Speaker 4: the compensation package after finding that there was not a

239
00:14:03,120 --> 00:14:08,160
Speaker 4: you know, adherence to fiduciary principles. Typically, what happens after

240
00:14:08,320 --> 00:14:10,600
Speaker 4: a recision of a contract is you try to put

241
00:14:10,640 --> 00:14:13,360
Speaker 4: the parties back in the position they were in before

242
00:14:13,400 --> 00:14:17,120
Speaker 4: the contract got entered into but mister Musk is out.

243
00:14:17,200 --> 00:14:20,080
Speaker 4: You know, according to the the appellance, you know, five

244
00:14:20,160 --> 00:14:23,160
Speaker 4: years of working for the company and not getting paid anything.

245
00:14:23,400 --> 00:14:26,800
Speaker 4: That was not something that the trial court asked for

246
00:14:26,960 --> 00:14:30,280
Speaker 4: argumentation like if this, if this package wasn't fair, what

247
00:14:30,480 --> 00:14:33,360
Speaker 4: would have been fair compensation? They never went there, And

248
00:14:33,400 --> 00:14:36,960
Speaker 4: that's in part because the defendants in this case never

249
00:14:37,160 --> 00:14:40,520
Speaker 4: raised what a second best type of compensation package would

250
00:14:40,520 --> 00:14:42,880
Speaker 4: look like. At the time, that made sense to me,

251
00:14:42,960 --> 00:14:46,280
Speaker 4: because it's hard to defend a big compensation package by then,

252
00:14:46,560 --> 00:14:49,040
Speaker 4: you know, painting a target on your back by saying, Okay,

253
00:14:49,320 --> 00:14:51,320
Speaker 4: you know, here's the really fair part. So I kind

254
00:14:51,320 --> 00:14:54,640
Speaker 4: of understand why they didn't bring it forward. But the Chancellor,

255
00:14:54,640 --> 00:14:57,000
Speaker 4: in her opinion, said, you didn't give me any alternatives

256
00:14:57,040 --> 00:15:00,000
Speaker 4: other than recision to say, okay, here's here's at least

257
00:15:00,120 --> 00:15:02,720
Speaker 4: something that I can award to pay you back. So

258
00:15:02,920 --> 00:15:05,760
Speaker 4: that's going to be interesting and it may actually, you know,

259
00:15:05,840 --> 00:15:09,520
Speaker 4: my senses is probably the strongest argument that the appellants

260
00:15:09,560 --> 00:15:11,400
Speaker 4: have here. The other one that I think is pretty

261
00:15:11,400 --> 00:15:14,360
Speaker 4: interesting is what do you make of these votes after

262
00:15:14,440 --> 00:15:17,720
Speaker 4: the fact, Right, You've got a trial that completely comes

263
00:15:17,760 --> 00:15:20,920
Speaker 4: out in favor of the plaintiffs, and you know, just

264
00:15:21,000 --> 00:15:24,720
Speaker 4: before the the award argumentation, Tesla has a second vote.

265
00:15:25,160 --> 00:15:28,160
Speaker 4: And the question is, well, how does that second vote

266
00:15:28,480 --> 00:15:31,480
Speaker 4: that now has not only you know, more disclosures, but

267
00:15:31,480 --> 00:15:34,400
Speaker 4: it even has been trial cord opinion from the original trial.

268
00:15:34,720 --> 00:15:38,360
Speaker 4: Does that second stockholder vote fix all of these problems?

269
00:15:38,360 --> 00:15:41,760
Speaker 4: And I think that the Tesla parties, the directors, and

270
00:15:42,000 --> 00:15:45,960
Speaker 4: Tesla itself, we're saying, yeah, that should essentially undo or

271
00:15:46,000 --> 00:15:48,840
Speaker 4: at least limit what is available as a remedy. If

272
00:15:48,880 --> 00:15:52,960
Speaker 4: the stockholders vote again now with full information and they

273
00:15:52,960 --> 00:15:56,520
Speaker 4: say no, we are okay with that initial compensation package, Now,

274
00:15:56,560 --> 00:15:59,360
Speaker 4: that could end up having some traction as well. First

275
00:15:59,360 --> 00:16:02,480
Speaker 4: of all, because I think most people sort of agree

276
00:16:02,560 --> 00:16:04,560
Speaker 4: that that second vote, you know, you had the entire

277
00:16:04,600 --> 00:16:07,560
Speaker 4: opinion that was attached to the proxy materials that were

278
00:16:07,560 --> 00:16:10,200
Speaker 4: sent out, and it got pretty much exactly the same

279
00:16:10,320 --> 00:16:13,240
Speaker 4: percentage vote. And so it may well be the case

280
00:16:13,320 --> 00:16:16,520
Speaker 4: that the Supreme Court says, Okay, look, the trial court

281
00:16:16,600 --> 00:16:20,120
Speaker 4: probably couldn't do something about an event that happened after

282
00:16:20,160 --> 00:16:23,040
Speaker 4: the trial court opinion. That's something for an appeal, But

283
00:16:23,160 --> 00:16:25,480
Speaker 4: now we want to remand it for the trial court

284
00:16:25,520 --> 00:16:28,600
Speaker 4: to think about it. There is one very old case

285
00:16:28,720 --> 00:16:32,960
Speaker 4: in Delaware that basically says that that's a potential thing

286
00:16:33,000 --> 00:16:37,680
Speaker 4: to do. That involved executive compensation packages that were approved

287
00:16:38,120 --> 00:16:41,320
Speaker 4: or ratified by shareholders after a trial court had said

288
00:16:41,440 --> 00:16:45,320
Speaker 4: now those are improper, And interestingly enough, that case was

289
00:16:45,360 --> 00:16:48,760
Speaker 4: being overseen by the father of the current Supreme Court

290
00:16:48,840 --> 00:16:49,880
Speaker 4: Chief Justice CJ.

291
00:16:50,040 --> 00:16:50,280
Speaker 3: Side.

292
00:16:50,520 --> 00:16:53,120
Speaker 4: His father was the Chancellor of the Chancery Court. And

293
00:16:53,320 --> 00:16:56,640
Speaker 4: in that case it was from basically the nineteen fifties

294
00:16:56,800 --> 00:16:58,840
Speaker 4: with the Supreme Court and then the trial court basically

295
00:16:58,920 --> 00:17:01,840
Speaker 4: held at least that for some component of an executive

296
00:17:01,840 --> 00:17:06,480
Speaker 4: compensation package, a later occurring stockholder vote that can basically

297
00:17:06,720 --> 00:17:10,280
Speaker 4: fix the infirmity at least in terms of the nullification

298
00:17:10,359 --> 00:17:12,480
Speaker 4: of the award. So it may well be the case

299
00:17:12,560 --> 00:17:14,760
Speaker 4: that the Supreme Court says, now we don't have anything

300
00:17:14,760 --> 00:17:17,800
Speaker 4: to overturn in that trial court opinion, but now we

301
00:17:17,840 --> 00:17:21,199
Speaker 4: want to remand it so that the Chancellor can consider what,

302
00:17:21,480 --> 00:17:24,840
Speaker 4: if any effect would there be of this vote. And

303
00:17:25,000 --> 00:17:27,960
Speaker 4: you know, that could end up causing yet another sort

304
00:17:28,000 --> 00:17:30,399
Speaker 4: of trial on the merits, which would give us at

305
00:17:30,480 --> 00:17:32,760
Speaker 4: least something to talk about for the next couple of years.

306
00:17:32,840 --> 00:17:35,840
Speaker 2: Jim, what do you think was the best argument that

307
00:17:35,960 --> 00:17:37,680
Speaker 2: the plaintiffs made.

308
00:17:37,359 --> 00:17:39,520
Speaker 4: Well, I think the best arguments that the plane has made.

309
00:17:39,640 --> 00:17:42,680
Speaker 4: They first tried to defend the opinion below, and I

310
00:17:42,720 --> 00:17:44,840
Speaker 4: will say that there were some factual conclusions in the

311
00:17:44,880 --> 00:17:48,200
Speaker 4: opinion below, like that Elon Musk was a controller and

312
00:17:48,520 --> 00:17:51,280
Speaker 4: that the directors were beholden to him when they were

313
00:17:51,320 --> 00:17:55,439
Speaker 4: negotiating this contract. Those were factual findings that you know,

314
00:17:55,480 --> 00:17:57,480
Speaker 4: you can overturn them on appeal, but only if they're

315
00:17:57,480 --> 00:18:01,920
Speaker 4: clearly wrong. But based on those factual findings the Chancellor's

316
00:18:02,000 --> 00:18:05,560
Speaker 4: opinion in that trial court record below. You know, I've

317
00:18:05,600 --> 00:18:08,040
Speaker 4: taught that opinion many times. It's pretty easy to teach

318
00:18:08,119 --> 00:18:12,200
Speaker 4: because it pretty much followed you very very conventional textbook

319
00:18:12,240 --> 00:18:15,560
Speaker 4: Delaware legal principles at every at every ground. I think

320
00:18:15,760 --> 00:18:18,640
Speaker 4: most of the people that complain about the opinion don't

321
00:18:18,640 --> 00:18:22,000
Speaker 4: complain about the judge following the flow chart of what

322
00:18:22,160 --> 00:18:24,880
Speaker 4: doctrine tells you you're supposed to do as much as

323
00:18:25,400 --> 00:18:28,720
Speaker 4: making factual determinations that you know, at least some people

324
00:18:28,760 --> 00:18:30,800
Speaker 4: the defendants and I guess some others who were kind

325
00:18:30,800 --> 00:18:33,399
Speaker 4: of you know, thought that the Musk parties had the

326
00:18:33,400 --> 00:18:36,439
Speaker 4: stronger hand that they disagreed with those factual holdings. So

327
00:18:36,520 --> 00:18:39,520
Speaker 4: I think the Tornetta folks, the plaintiffs in this case,

328
00:18:39,840 --> 00:18:41,800
Speaker 4: did a pretty good job of sort of saying, look,

329
00:18:41,840 --> 00:18:45,560
Speaker 4: there really wasn't that much remarkable about the legal reasoning below,

330
00:18:46,000 --> 00:18:48,720
Speaker 4: and if you're going to overturn factual findings, there's a

331
00:18:48,840 --> 00:18:51,280
Speaker 4: very high bar to do that. And that's not really

332
00:18:51,320 --> 00:18:54,600
Speaker 4: where we are directing our boat. You know, the plaintiffs

333
00:18:54,600 --> 00:18:56,960
Speaker 4: in this case, who were you know, basically responding to

334
00:18:57,000 --> 00:19:00,159
Speaker 4: the appeal. It's much more of a black box to

335
00:19:00,200 --> 00:19:03,639
Speaker 4: how the Court's going to deal with this second stockholder vote,

336
00:19:03,680 --> 00:19:07,760
Speaker 4: whether that somehow reaches back to ratify things earlier on.

337
00:19:08,160 --> 00:19:11,360
Speaker 4: That's something that Chancellor McCormick basically refused to comment on

338
00:19:11,680 --> 00:19:15,200
Speaker 4: at any length, given that the trial had already concluded

339
00:19:15,200 --> 00:19:18,000
Speaker 4: that there already was a breach of fiduciary duties. But

340
00:19:18,119 --> 00:19:20,680
Speaker 4: it would be, you know, something that the Supreme Court

341
00:19:20,720 --> 00:19:24,199
Speaker 4: could send back to her, and that was probably something

342
00:19:24,240 --> 00:19:27,240
Speaker 4: that the plaintiffs in this case didn't have as much

343
00:19:27,280 --> 00:19:29,480
Speaker 4: of an answer to. But it was also the you know,

344
00:19:29,640 --> 00:19:32,040
Speaker 4: the very time limited argument, so they spent more time

345
00:19:32,080 --> 00:19:34,920
Speaker 4: on the first part. So you know, I could see

346
00:19:35,040 --> 00:19:38,720
Speaker 4: that ratification vote being a grounds for reversal, I could

347
00:19:38,760 --> 00:19:43,160
Speaker 4: also see a partial reversal. It says, we're not going

348
00:19:43,200 --> 00:19:45,879
Speaker 4: to reverse the outcome of the finding that there was

349
00:19:45,920 --> 00:19:49,320
Speaker 4: a breach of fiduciary duty, but when you rescinded the

350
00:19:49,359 --> 00:19:52,000
Speaker 4: pay package, it was going to be important to lay

351
00:19:52,000 --> 00:19:54,720
Speaker 4: out some sort of a restitutionary award that would put

352
00:19:54,760 --> 00:19:57,280
Speaker 4: mister Musk in, you know, that would make him whole

353
00:19:57,280 --> 00:20:01,280
Speaker 4: at least relative to before that compensation package was granted.

354
00:20:01,400 --> 00:20:04,080
Speaker 4: And he's not at this point because he you know,

355
00:20:04,240 --> 00:20:07,720
Speaker 4: now effectively worked five years for free. And so my

356
00:20:07,920 --> 00:20:11,000
Speaker 4: sense is that if there's a reversal, you'll probably see

357
00:20:11,000 --> 00:20:13,399
Speaker 4: a reversal on one of those two grounds, and not

358
00:20:13,560 --> 00:20:16,720
Speaker 4: as much a reversal that tries to dive back into

359
00:20:16,760 --> 00:20:20,359
Speaker 4: the logic in the original opinion. You know, the one

360
00:20:20,400 --> 00:20:23,879
Speaker 4: part that they could reverse in the original opinion is

361
00:20:24,200 --> 00:20:27,480
Speaker 4: Chanser McCormick's, you know, finding that that Musk, while only

362
00:20:27,520 --> 00:20:30,080
Speaker 4: owning about twenty one percent of the company, was such

363
00:20:30,119 --> 00:20:33,600
Speaker 4: a superstar CEO that he just had undue influence at

364
00:20:33,680 --> 00:20:37,000
Speaker 4: least over this transaction. You know, is the first time

365
00:20:37,080 --> 00:20:40,440
Speaker 4: this idea of superstar CEOs had been used in a case,

366
00:20:40,840 --> 00:20:42,840
Speaker 4: and so they might sort of say no that and

367
00:20:42,880 --> 00:20:44,840
Speaker 4: it's from an academic article that a couple of law

368
00:20:44,840 --> 00:20:47,520
Speaker 4: professors wrote. They might say, no, that's just not a

369
00:20:47,560 --> 00:20:50,960
Speaker 4: sufficiently predictable or clear test, and they might overturn on

370
00:20:51,000 --> 00:20:53,320
Speaker 4: that basis. But if I were going to bet on

371
00:20:53,720 --> 00:20:56,520
Speaker 4: what grounds that they would use if they overturned, I

372
00:20:56,520 --> 00:20:58,159
Speaker 4: don't think it would be that. I think it's going

373
00:20:58,240 --> 00:21:00,960
Speaker 4: to be more maybe that this I can shareholder vote

374
00:21:01,080 --> 00:21:04,760
Speaker 4: was an effective one, or that, you know, when you

375
00:21:04,840 --> 00:21:07,800
Speaker 4: rescind a pay package, that the court has to then

376
00:21:07,920 --> 00:21:11,880
Speaker 4: sort of take a briefing on what the appropriate amount

377
00:21:11,920 --> 00:21:15,240
Speaker 4: that mister Musk should be paid if it's not from

378
00:21:15,280 --> 00:21:18,600
Speaker 4: his you know, written contract to make him whole for

379
00:21:18,840 --> 00:21:21,919
Speaker 4: and so he doesn't end up giving away his services

380
00:21:22,040 --> 00:21:25,240
Speaker 4: having given away his services for free for five years.

381
00:21:25,560 --> 00:21:27,840
Speaker 2: Coming up next on the Bloomberg Law Show, I'll continue

382
00:21:27,880 --> 00:21:32,200
Speaker 2: this conversation with Columbia Law School professor Eric Tally. Why

383
00:21:32,320 --> 00:21:36,399
Speaker 2: Musk and Tesla are returning to Chancery Court in Delaware

384
00:21:36,680 --> 00:21:42,440
Speaker 2: on October twenty second, and our other Delaware corporations following

385
00:21:42,560 --> 00:21:46,679
Speaker 2: Musk to Texas, I'm June Grosso and you're listening to Bloomberg.

386
00:21:48,880 --> 00:21:53,200
Speaker 2: Elon Musk resumed his legal fight to reinstate a record

387
00:21:53,280 --> 00:21:57,800
Speaker 2: setting twenty eighteen Tesla pay package that was thrown out

388
00:21:57,840 --> 00:22:01,679
Speaker 2: by a lower court judge twice. The world's richest person

389
00:22:01,800 --> 00:22:04,720
Speaker 2: claims he hasn't been paid for seven years of work

390
00:22:04,800 --> 00:22:09,639
Speaker 2: as Tesla's CEO, even after reaching all the performance targets

391
00:22:09,640 --> 00:22:13,480
Speaker 2: to trigger a payout that Bloomberg estimates would be worth

392
00:22:13,520 --> 00:22:17,040
Speaker 2: about one hundred and twenty five billion dollars. During oral

393
00:22:17,160 --> 00:22:21,439
Speaker 2: arguments before Delaware's highest court today, lawyers for Tesla and

394
00:22:21,560 --> 00:22:25,520
Speaker 2: Musk argue that the pay plan approved by Tesla's board

395
00:22:25,840 --> 00:22:30,160
Speaker 2: should be reinstated, in part because shareholders had voted for

396
00:22:30,200 --> 00:22:35,800
Speaker 2: it twice, including after Delaware Chancery Court Judge Kathleen McCormick

397
00:22:36,359 --> 00:22:40,639
Speaker 2: rejected it after concluding that the process for rewarding Musk

398
00:22:40,880 --> 00:22:45,160
Speaker 2: was flawed by a conflicted board of directors and inadequate

399
00:22:45,240 --> 00:22:49,760
Speaker 2: disclosures that were provided about Musk's compensation. I've been talking

400
00:22:49,800 --> 00:22:53,840
Speaker 2: to Columbia Law School business professor Eric Talley. Eric, we've

401
00:22:53,880 --> 00:22:57,359
Speaker 2: been talking about some possible decisions. Do you think that

402
00:22:58,000 --> 00:23:01,680
Speaker 2: most likely any decisions going to involve sending it back

403
00:23:01,920 --> 00:23:02,879
Speaker 2: to the trial court.

404
00:23:03,240 --> 00:23:06,200
Speaker 4: Well, the interesting thing about it is, I think even

405
00:23:06,240 --> 00:23:09,840
Speaker 4: these later two approaches, the one that doesn't attack the

406
00:23:10,560 --> 00:23:13,960
Speaker 4: logic of the original opinion but talks about either remedy

407
00:23:14,240 --> 00:23:16,760
Speaker 4: or the effect of the second ratification vote, I think

408
00:23:16,800 --> 00:23:18,760
Speaker 4: they have to you know, if they reverse on either

409
00:23:18,800 --> 00:23:20,920
Speaker 4: one of those things, they're going to have to remand

410
00:23:20,960 --> 00:23:22,560
Speaker 4: it to the trial court for a little bit more

411
00:23:22,600 --> 00:23:24,560
Speaker 4: work to do. The one in which you know, they

412
00:23:24,560 --> 00:23:27,480
Speaker 4: have to come up with a fair restitutionary amount for

413
00:23:27,560 --> 00:23:31,120
Speaker 4: mister Musk. That's going to require additional testimony, some expert

414
00:23:31,119 --> 00:23:33,639
Speaker 4: witnesses saying, Okay, here's what a fair amount would be

415
00:23:33,640 --> 00:23:36,160
Speaker 4: if you're going to disallow the contract. Here are some

416
00:23:36,280 --> 00:23:39,200
Speaker 4: you know, market comparables out there or some other measuring

417
00:23:39,240 --> 00:23:42,480
Speaker 4: stick for the value that you delivered to Tesla. So

418
00:23:42,520 --> 00:23:45,840
Speaker 4: that's going to be a very factually rich area. The

419
00:23:46,080 --> 00:23:48,359
Speaker 4: appellance in this case had sort of said, it's just,

420
00:23:48,480 --> 00:23:52,440
Speaker 4: you know, the plaints themselves didn't offer that, and therefore

421
00:23:52,480 --> 00:23:56,240
Speaker 4: you should basically say, you know, it's impossible and there

422
00:23:56,280 --> 00:23:59,440
Speaker 4: should just be nothing more than nominal damages. My sense

423
00:23:59,520 --> 00:24:02,160
Speaker 4: is that if if they reverse on that ground, they're

424
00:24:02,200 --> 00:24:03,879
Speaker 4: going to have to send it back to the trial

425
00:24:03,920 --> 00:24:07,760
Speaker 4: court to fight that battle out. The second stockholder ratification

426
00:24:07,800 --> 00:24:10,000
Speaker 4: that may be a little bit more of a clean vote.

427
00:24:10,080 --> 00:24:14,119
Speaker 4: If the Supreme Court says, well, there has been a

428
00:24:14,160 --> 00:24:16,679
Speaker 4: second vote and that acts to sort of, you know,

429
00:24:16,840 --> 00:24:20,639
Speaker 4: to sort of undo at least either liability or just

430
00:24:20,680 --> 00:24:24,600
Speaker 4: the remedy from the original transaction, that one they might

431
00:24:24,680 --> 00:24:27,840
Speaker 4: be able to remand and say, we think the known

432
00:24:27,920 --> 00:24:31,320
Speaker 4: facts from that second stockholder vote are clear enough that

433
00:24:31,600 --> 00:24:35,520
Speaker 4: it basically absolves the company and mister Musk and the

434
00:24:35,560 --> 00:24:39,760
Speaker 4: directors from liability, and we're going to instruct the Chancellor

435
00:24:39,840 --> 00:24:43,040
Speaker 4: to hold that it had you know, a ratification effect,

436
00:24:43,400 --> 00:24:46,919
Speaker 4: and to re implement the original conversation package. So I

437
00:24:46,920 --> 00:24:50,080
Speaker 4: think that one probably could give rise to the cleanest

438
00:24:50,080 --> 00:24:55,480
Speaker 4: form of reversal that wouldn't require a lot more work

439
00:24:55,520 --> 00:24:58,480
Speaker 4: at the trial court level. But it also is you know,

440
00:24:58,560 --> 00:25:00,480
Speaker 4: that sort of reasoning is going to req aquire them

441
00:25:00,520 --> 00:25:04,200
Speaker 4: to think pretty seriously about how do they create new

442
00:25:04,320 --> 00:25:07,920
Speaker 4: law related to you know, having a second or maybe

443
00:25:07,920 --> 00:25:10,840
Speaker 4: a third or maybe a fourth stockholder vote each time

444
00:25:11,000 --> 00:25:13,040
Speaker 4: you know there's an infirmity, do you just go back

445
00:25:13,040 --> 00:25:15,320
Speaker 4: to the stockholders and try again. One of the things

446
00:25:15,320 --> 00:25:18,000
Speaker 4: that chance for McCormick had made pretty clear in her

447
00:25:18,040 --> 00:25:20,280
Speaker 4: prior opinions, is that, you know, if you had a

448
00:25:20,359 --> 00:25:23,720
Speaker 4: law that basically just kept giving the defendants a second life,

449
00:25:23,720 --> 00:25:26,439
Speaker 4: a third life, a fourth life, it's a process that

450
00:25:26,520 --> 00:25:29,240
Speaker 4: has no logical endpoint because they can keep going back

451
00:25:29,280 --> 00:25:31,119
Speaker 4: to the well and trying to get yet another stockholder

452
00:25:31,200 --> 00:25:34,159
Speaker 4: vote until finally they hit pay dirt. So that's going

453
00:25:34,240 --> 00:25:36,199
Speaker 4: to be something that the Supreme Court will have to

454
00:25:36,240 --> 00:25:39,520
Speaker 4: think through if they want to reverse on the grounds

455
00:25:39,560 --> 00:25:42,920
Speaker 4: of that second stockholder vote fixing things. So it makes

456
00:25:42,960 --> 00:25:45,359
Speaker 4: it messy in a different way, even though they could

457
00:25:45,400 --> 00:25:47,480
Speaker 4: possibly do it in a way that doesn't cause the

458
00:25:47,480 --> 00:25:50,440
Speaker 4: whole case to go back into trial court for a protracted,

459
00:25:50,920 --> 00:25:54,040
Speaker 4: you know, new proceeding, which you know, at this stage

460
00:25:54,119 --> 00:25:56,040
Speaker 4: probably you know, a lot of a lot of folks

461
00:25:56,359 --> 00:25:58,920
Speaker 4: would like to avoid and explain.

462
00:25:58,600 --> 00:26:02,760
Speaker 2: Why Musk won't see this kind of derivative challenge in

463
00:26:02,840 --> 00:26:05,560
Speaker 2: Tesla's new home of Texas.

464
00:26:05,119 --> 00:26:07,000
Speaker 4: Yeah, well, we don't know for sure yet. I mean,

465
00:26:07,000 --> 00:26:09,480
Speaker 4: one of the things that's kind of interesting about Texas

466
00:26:09,560 --> 00:26:13,359
Speaker 4: is that it has a very very thinly developed set

467
00:26:13,400 --> 00:26:17,520
Speaker 4: of precedents out there. Now. The Texas business courts have

468
00:26:17,680 --> 00:26:19,920
Speaker 4: you know, have ramped up and you know, are now

469
00:26:19,960 --> 00:26:23,120
Speaker 4: in operation. There still aren't that many precedents out there,

470
00:26:23,160 --> 00:26:25,520
Speaker 4: so I think there's a it's in some ways a

471
00:26:25,520 --> 00:26:30,520
Speaker 4: big wildcard about exactly what those Texas business courts would do.

472
00:26:31,560 --> 00:26:34,560
Speaker 4: And in fact, mister Musk has a new compensation package

473
00:26:34,920 --> 00:26:40,160
Speaker 4: that was that was authorized under the Texas Corporate Code

474
00:26:40,800 --> 00:26:44,280
Speaker 4: and it itself could be subject to challenge, but we

475
00:26:44,280 --> 00:26:46,919
Speaker 4: don't know exactly what the rules would be like, so

476
00:26:47,160 --> 00:26:51,160
Speaker 4: you know, to essentially judge the processes and the substance

477
00:26:51,200 --> 00:26:54,760
Speaker 4: of that executive compensation challenge. I think everyone expects that

478
00:26:54,880 --> 00:26:57,879
Speaker 4: Texas courts, you know, they're kind of advertising themselves as

479
00:26:57,920 --> 00:27:01,520
Speaker 4: being more friendly to corporate controller and CEOs and manager types,

480
00:27:01,600 --> 00:27:04,199
Speaker 4: so everyone sort of as a best guess, thinks that

481
00:27:04,240 --> 00:27:09,000
Speaker 4: they would be more friendly to the same set of

482
00:27:09,080 --> 00:27:13,040
Speaker 4: facts if adjudicated in Texas. But you know, the wild

483
00:27:13,080 --> 00:27:14,840
Speaker 4: card on this is that we just don't have much

484
00:27:14,880 --> 00:27:16,919
Speaker 4: Texas law to depend on. And in fact, if you

485
00:27:17,000 --> 00:27:20,120
Speaker 4: look into Texas corporate law, as often as not, its

486
00:27:20,119 --> 00:27:23,120
Speaker 4: cites to Delaware as being kind of its instructional load

487
00:27:23,160 --> 00:27:26,080
Speaker 4: star that it's going to follow. So in order for

488
00:27:26,520 --> 00:27:29,320
Speaker 4: us to not have better predictions about how Texas law

489
00:27:29,359 --> 00:27:32,320
Speaker 4: would come out. We're going to need more cases to

490
00:27:32,400 --> 00:27:35,400
Speaker 4: be adjudicated in Texas, and you know, if this new

491
00:27:35,440 --> 00:27:38,560
Speaker 4: compensation package gets challenged, then you know that's going to

492
00:27:38,560 --> 00:27:40,879
Speaker 4: be a kind of dead center. Won't be very helpful

493
00:27:40,880 --> 00:27:42,840
Speaker 4: to the current parties. But for the future, we'll kind

494
00:27:42,840 --> 00:27:44,200
Speaker 4: of get a little bit of a sense of how

495
00:27:44,320 --> 00:27:48,439
Speaker 4: Texas courts would deal with these things differently than Delaware courts.

496
00:27:48,720 --> 00:27:51,879
Speaker 2: Has Delaware lost a lot of corporations to Texas.

497
00:27:52,960 --> 00:27:55,160
Speaker 4: No, there are very few that have gone to Texas

498
00:27:55,160 --> 00:27:57,760
Speaker 4: as a matter of fact, in part because people don't

499
00:27:57,800 --> 00:28:00,520
Speaker 4: know exactly what to expect. There have been a there's

500
00:28:00,520 --> 00:28:04,800
Speaker 4: been more of a trickle out of Delaware and into Nevada,

501
00:28:05,280 --> 00:28:07,639
Speaker 4: and that's in some part because Nevada has been around

502
00:28:07,720 --> 00:28:13,000
Speaker 4: as a long time would be competitor to Delaware. You know,

503
00:28:13,560 --> 00:28:16,239
Speaker 4: some of this I think is probably you know, a

504
00:28:16,400 --> 00:28:20,320
Speaker 4: version of virtue signaling right sort of publicly, you know,

505
00:28:20,440 --> 00:28:24,560
Speaker 4: showing support for people including mister Musco, have been critics

506
00:28:24,600 --> 00:28:28,760
Speaker 4: of Delaware over the longer haul. I would be surprised

507
00:28:28,920 --> 00:28:32,520
Speaker 4: to see Delaware lose too much of its perch in

508
00:28:32,600 --> 00:28:36,920
Speaker 4: a really short order form simply because there aren't that many.

509
00:28:36,960 --> 00:28:39,560
Speaker 4: You know, Texas's remains a bit of a wild card.

510
00:28:39,680 --> 00:28:43,880
Speaker 4: Even Nevada is reconstituting a bunch of its systems as well,

511
00:28:43,960 --> 00:28:46,280
Speaker 4: so it's a bit of a wild card as well.

512
00:28:46,840 --> 00:28:50,040
Speaker 4: So we really haven't seen the kind of a huge

513
00:28:50,120 --> 00:28:53,360
Speaker 4: outflow that everyone was saying would take place. By the

514
00:28:53,400 --> 00:28:56,880
Speaker 4: same token, it has ticked up a little bit compared

515
00:28:56,920 --> 00:28:59,760
Speaker 4: to before, you know, January twenty twenty four, which is

516
00:28:59,800 --> 00:29:02,880
Speaker 4: when trial court opinion came out. But you know, some

517
00:29:02,960 --> 00:29:05,160
Speaker 4: of this I think probably is in part kind of

518
00:29:05,200 --> 00:29:09,840
Speaker 4: an orchestrated, you know, political statement rather than you know,

519
00:29:09,920 --> 00:29:12,240
Speaker 4: trying to trying to really sort of get a sense of,

520
00:29:12,400 --> 00:29:15,080
Speaker 4: you know, what the compared to what question, like what

521
00:29:15,080 --> 00:29:16,640
Speaker 4: are what are we get into if we go to

522
00:29:16,680 --> 00:29:19,640
Speaker 4: Texas and leave Delaware and they're you know, I think

523
00:29:19,640 --> 00:29:22,480
Speaker 4: it's like in some ways everyone's got reads the tea

524
00:29:22,560 --> 00:29:24,880
Speaker 4: leaves a little bit differently, just because there aren't very

525
00:29:24,920 --> 00:29:26,600
Speaker 4: many tea leaves down there to read.

526
00:29:27,440 --> 00:29:30,240
Speaker 2: And it's amazing to me that. But Musk and Tesla

527
00:29:30,280 --> 00:29:33,120
Speaker 2: are going to be back in the Chancery Court on

528
00:29:33,160 --> 00:29:37,400
Speaker 2: October twenty second and must acquisition of Twitter is still

529
00:29:38,040 --> 00:29:39,120
Speaker 2: a point of contention.

530
00:29:40,000 --> 00:29:42,479
Speaker 4: Yeah, it is still a point of contention on some

531
00:29:42,800 --> 00:29:45,880
Speaker 4: on some level of that. Obviously, the deal itself long

532
00:29:45,920 --> 00:29:49,200
Speaker 4: ago closed and that part of it went away. But

533
00:29:49,640 --> 00:29:52,200
Speaker 4: you know, during this period of time, there were people

534
00:29:52,200 --> 00:29:55,840
Speaker 4: that were buying and selling stock based on you know,

535
00:29:55,960 --> 00:30:00,200
Speaker 4: statements that mister Musk was making, sometimes over Twitter, sometimes elsewhere,

536
00:30:00,640 --> 00:30:03,720
Speaker 4: and some of that subsidiary stuff that is still being

537
00:30:03,800 --> 00:30:06,240
Speaker 4: sort of fleshed out in the courts. But you know,

538
00:30:06,280 --> 00:30:08,800
Speaker 4: on some level that's just that's a different case, and

539
00:30:08,840 --> 00:30:11,200
Speaker 4: this is all about the compensation aspect of it. So

540
00:30:11,240 --> 00:30:14,080
Speaker 4: I don't expect that they're going to collide very much

541
00:30:14,680 --> 00:30:16,960
Speaker 4: other than the fact that you know, we've got pretty

542
00:30:17,040 --> 00:30:20,360
Speaker 4: much the same larger than life personality in the court

543
00:30:20,600 --> 00:30:22,920
Speaker 4: that is kind of the center of attention in both cases.

544
00:30:23,360 --> 00:30:26,440
Speaker 2: I can't disagree with that. Thanks so much, Eric. That's

545
00:30:26,440 --> 00:30:30,280
Speaker 2: Professor Eric Talley of Columbia Law School, and that's it

546
00:30:30,320 --> 00:30:32,920
Speaker 2: for this edition of The Bloomberg Law Show. Remember you

547
00:30:32,920 --> 00:30:35,400
Speaker 2: can always get the latest legal news on our Bloomberg

548
00:30:35,480 --> 00:30:39,080
Speaker 2: Law Podcast. You can find them on Apple Podcasts, Spotify,

549
00:30:39,280 --> 00:30:44,000
Speaker 2: and at www dot Bloomberg dot com. Slash Podcast, Slash

550
00:30:44,080 --> 00:30:46,840
Speaker 2: Law and remember to tune into the Bloomberg Law Show

551
00:30:47,000 --> 00:30:50,840
Speaker 2: every weeknight at ten pm Wall Street Time. I'm June

552
00:30:50,840 --> 00:30:53,000
Speaker 2: Grosso and you're listening to Bloomberg