WEBVTT - SCOTUS May Gut Voting Rights Act & Elon Musk Pay Package 0:00:02.759 --> 0:00:07.480 This is Bloomberg Law with June Brossel from Bloomberg Radio. 0:00:08.720 --> 0:00:13.080 The Supreme Court's conservatives appeared ready today to gut a 0:00:13.200 --> 0:00:16.840 key tool that's been used to root out racial discrimination 0:00:17.000 --> 0:00:21.240 in voting for more than half a century. During oral arguments, 0:00:21.280 --> 0:00:25.960 the six Conservatives suggested they'll restrict the creation of majority 0:00:26.040 --> 0:00:30.440 black or Hispanic voting districts and gut the Voting Rights Act, 0:00:30.800 --> 0:00:34.839 the central legislation of the civil rights movement. Joining me 0:00:34.880 --> 0:00:38.920 is Bloomberg New Supreme Court reporter Greg store So. Greg 0:00:39.000 --> 0:00:40.720 explained the issue in the case. 0:00:41.560 --> 0:00:44.040 Yeah, so the issue is basically that under the Voting 0:00:44.080 --> 0:00:47.360 Rights Act since the nineteen eighties, there's been basically a 0:00:47.440 --> 0:00:49.360 test that if you're a racial minority, you can go 0:00:49.440 --> 0:00:54.080 to court and say this map illegally dilutes my vote, 0:00:54.760 --> 0:00:57.680 and if you meet certain criteria in this test to 0:00:57.760 --> 0:01:00.600 show that it's like racially polar I've voting in the 0:01:01.280 --> 0:01:04.640 state or jurisdiction, that you can win a Voting Rights 0:01:04.680 --> 0:01:07.840 Act claim. And the remedy in most cases will be 0:01:08.080 --> 0:01:10.679 that a district has to be drawn that has a 0:01:10.760 --> 0:01:15.080 majority members of your race in that district so that 0:01:15.160 --> 0:01:18.160 you can elect the candidate of your choice, and the 0:01:18.200 --> 0:01:24.160 Supreme Court is basically considering upending that entire regime and saying, no, 0:01:24.319 --> 0:01:27.960 it is not an appropriate remedy to intentionally use race, 0:01:28.400 --> 0:01:31.920 even if it's as a remedy for that vote dilution 0:01:32.280 --> 0:01:35.400 violation that a court has found and did. 0:01:35.240 --> 0:01:39.280 All the Conservative justices seem to be on the same page. 0:01:39.480 --> 0:01:42.560 Well, it sure seems like all six Conservatives are interested 0:01:42.600 --> 0:01:46.160 in limiting the Voting Rights Act and putting real restrictions 0:01:46.200 --> 0:01:50.160 on the requirement that sometimes states have to draw majority 0:01:50.320 --> 0:01:55.480 minority districts to ensure that racial minorities aren't suffering discrimination. 0:01:56.120 --> 0:02:00.480 So Justice Kavanaugh talked about, you know, these races based 0:02:00.520 --> 0:02:04.080 remedies should not be indefinite, should have an endpoint. But 0:02:04.240 --> 0:02:08.800 in these cases, aren't the plaintiffs showing that there is 0:02:09.080 --> 0:02:11.320 race based discrimination going on? 0:02:11.840 --> 0:02:15.280 Yeah? That is the counter to Justice Kavanaugh. So undoubtedly 0:02:15.320 --> 0:02:18.040 what Justice Kavanaugh is thinking about is what the Court 0:02:18.120 --> 0:02:20.600 said in the Affirmative Action case from a couple of 0:02:20.680 --> 0:02:23.600 years ago, where the Court basically said, you know, it 0:02:23.680 --> 0:02:27.200 might have been constitutional previously, but at some point, these 0:02:27.360 --> 0:02:29.679 what they considered to be racial preferences have to come 0:02:29.720 --> 0:02:32.560 to an end. And he's thinking about that same sort 0:02:32.560 --> 0:02:36.639 of principle here. But as you suggested, the folks on 0:02:36.680 --> 0:02:38.960 the other side of the case argued, Hey, the way 0:02:39.000 --> 0:02:42.640 the Voting Rights Act works is that you only draw 0:02:42.800 --> 0:02:45.920 a majority block of a majority Hispanic district if, based 0:02:45.919 --> 0:02:48.679 on current conditions, what's going on there is having a 0:02:48.760 --> 0:02:53.720 racially discriminatory effect. So that notion of you know, hey, 0:02:54.040 --> 0:02:56.680 the discrimination we dealt with decades ago is no longer 0:02:56.720 --> 0:02:58.920 there is sort of baked into the test. You have 0:02:59.000 --> 0:03:02.440 to prove based on the way voting happens now that 0:03:02.480 --> 0:03:04.680 there is still racial discrimination going on. 0:03:05.200 --> 0:03:09.200 There was pushback from the courts. Three liberals. What was their. 0:03:09.120 --> 0:03:12.720 Point, So, yeah, a couple different points. Justice Sonya Sodo 0:03:12.720 --> 0:03:16.800 Mayor at one point said, you're effectively killing Section two. 0:03:16.919 --> 0:03:19.520 You that's the effect of your position. Section two is 0:03:19.520 --> 0:03:21.920 one of the big problems of the Voting Rights Act. 0:03:22.120 --> 0:03:25.160 Justice Elena Kagan kind of made that point we were 0:03:25.200 --> 0:03:29.600 talking about earlier, that hey, this only happened, these intentionally 0:03:29.639 --> 0:03:34.280 crafted majority black, majority Hispanic districts only happened after a 0:03:34.360 --> 0:03:38.120 court has found there is racial discrimination going on, that 0:03:38.280 --> 0:03:41.640 black voters, that their votes aren't counting the same as 0:03:42.040 --> 0:03:44.520 white voters, or Hispanic voters aren't having their votes kind 0:03:44.560 --> 0:03:47.760 of the same way, So a lot of pushback there. 0:03:48.440 --> 0:03:51.960 Justice Kagan also asked the lawyer defending the Voting Rights 0:03:51.960 --> 0:03:54.440 Act to talk about the consequences of this, and she 0:03:54.560 --> 0:03:58.120 talked about just how big the consequences could be for 0:03:58.880 --> 0:04:02.800 minority this around the country, not just at the congressional level, 0:04:03.000 --> 0:04:04.360 but state local as well. 0:04:04.680 --> 0:04:08.680 What else were the conservatives concerned about, besides you know, 0:04:08.720 --> 0:04:12.840 a time limitation, Did anyone actually feel that there wasn't 0:04:13.080 --> 0:04:15.360 race based discrimination and voting anymore? 0:04:16.040 --> 0:04:18.960 The big thing that the conservative justices seemed to be 0:04:19.000 --> 0:04:23.279 concerned about was that there was discrimination going on, but 0:04:23.320 --> 0:04:25.200 it was going on in the other direction. That when 0:04:25.560 --> 0:04:30.640 a state is intentionally creating a majority black, majority Hispanic district, 0:04:30.880 --> 0:04:35.080 that is discrimination and that is really worrisome and unconstitutional. 0:04:35.200 --> 0:04:38.200 The majority also sort of fell back on this decision 0:04:38.200 --> 0:04:40.159 from a few years ago that I'm sure you recall, 0:04:40.240 --> 0:04:44.560 where the Court said, we're not going to police partisan 0:04:44.640 --> 0:04:47.760 jury manderin if a state or another jurisdiction wants to 0:04:47.800 --> 0:04:51.640 carve up its districts for political reasons in a certain way, 0:04:52.160 --> 0:04:54.960 it is free to do so. The Constitution does not 0:04:55.440 --> 0:04:58.720 put any limits on that. So some of the conservatives 0:04:58.760 --> 0:05:01.919 today were falling back on the idea that what's really 0:05:01.920 --> 0:05:07.080 going on here is partisan jerrymandering, not racial jerrymandering. 0:05:07.680 --> 0:05:11.400 Just remind us, the Supreme Court has taken out in 0:05:11.760 --> 0:05:15.799 recent years two parts of the Voting Rights Act already. 0:05:16.680 --> 0:05:19.880 Yeah, So the big one that everybody remembers is this 0:05:20.040 --> 0:05:25.080 case called Shelby County, and that basically nullified the so 0:05:25.160 --> 0:05:28.680 called preclearance regime, under which a lot of jurisdictions, mostly 0:05:28.680 --> 0:05:30.880 in the South, had to go to either the Justice 0:05:30.920 --> 0:05:34.160 Department or a federal court to get clearance before they 0:05:34.240 --> 0:05:37.800 changed their voting rules because of the history of discrimination 0:05:37.920 --> 0:05:41.320 in those jurisdictions. So that was one big decision, and 0:05:41.360 --> 0:05:44.040 then a more recent one just a few years ago, 0:05:44.480 --> 0:05:48.160 was the Court making it harder to show that voting 0:05:48.360 --> 0:05:52.520 rules as opposed to the maps are discriminatory. So I'm 0:05:52.520 --> 0:05:56.479 talking about things like rules governing the collection of mail 0:05:56.560 --> 0:06:00.440 ballots or the location of a polling place. The Court 0:06:00.880 --> 0:06:03.560 put in place a much tougher test to show that 0:06:03.600 --> 0:06:07.480 those changes are violations of the Voting Rights Act, and 0:06:07.520 --> 0:06:10.240 since then there has not been a successful claim of 0:06:10.240 --> 0:06:11.520 that type in court. 0:06:12.560 --> 0:06:16.279 If the Supreme Court's conservatives do away with this part 0:06:16.400 --> 0:06:18.839 of the Voting Rights Act as well. Does that mean 0:06:18.839 --> 0:06:22.480 that anything goes in drawing these maps. 0:06:22.760 --> 0:06:25.039 It's hard to say for sure. That is certainly the 0:06:25.160 --> 0:06:28.920 concern of folks on the other side of the case. 0:06:29.279 --> 0:06:32.800 Undoubtedly the Court will at least leave some theoretical room 0:06:32.920 --> 0:06:36.279 to say that there's intentional discrimination going on, and the 0:06:36.320 --> 0:06:39.920 state wouldn't be able to explicitly say we're doing this 0:06:40.080 --> 0:06:43.400 for racial reasons. We're drawing the lines this way. That's 0:06:43.440 --> 0:06:47.480 actually precluded under the Constitution in the fifteenth Amendment, So 0:06:47.680 --> 0:06:49.760 that would still be there. But you know how much 0:06:49.800 --> 0:06:53.640 that would matter as a practical matter, that's an open question. 0:06:53.720 --> 0:06:55.880 This will probably be one of those things where we'll 0:06:55.920 --> 0:06:58.560 just kind of have to wait and see what the 0:06:58.560 --> 0:07:02.000 court's ruling says and how it works out in practice. 0:07:02.240 --> 0:07:05.279 I mean, is there any chance that there'll be a 0:07:05.440 --> 0:07:07.159 very narrow ruling. 0:07:08.320 --> 0:07:11.640 There's certainly a chance. And you know, keep in mind 0:07:11.840 --> 0:07:15.120 that just a couple of years ago, the Court had 0:07:15.160 --> 0:07:17.920 a case that, you know, if I described the circumstances, 0:07:17.960 --> 0:07:20.680 you'd say it's very very similar. It's about Alabama and 0:07:20.720 --> 0:07:23.960 whether Alabama had to create a second majority Black district, 0:07:24.040 --> 0:07:27.000 which is exactly what's going on in Louisiana. And in 0:07:27.040 --> 0:07:31.360 that case, the Chief Justice and Justice Kavanaugh sided with 0:07:31.440 --> 0:07:33.720 the liberals and said, we're going to basically keep the 0:07:33.800 --> 0:07:36.560 rules the way they have been now. That case, as 0:07:36.600 --> 0:07:39.640 the Chief Justice pointed out today, didn't call into question, 0:07:39.800 --> 0:07:43.840 wasn't designed to potentially overturn any of the Court's precedents, 0:07:44.120 --> 0:07:46.960 unlike the current case. So I put that out there 0:07:47.000 --> 0:07:49.480 only to sort of say that the Chief Justice and 0:07:49.600 --> 0:07:53.880 Justice Kavanaugh, at least in that case, were acting a 0:07:53.880 --> 0:07:58.480 little bit cautiously. They weren't moving too quickly. It's possible, 0:07:58.640 --> 0:08:01.120 although it wasn't really apparent, but it's possible in those 0:08:01.160 --> 0:08:03.920 instincts will will come into play and the two of 0:08:03.960 --> 0:08:07.120 them might be interested in crafting a more narrow ruling here. 0:08:07.440 --> 0:08:10.200 I think a lot of the liberals and voting rights 0:08:10.240 --> 0:08:13.440 advocates were looking at that case and saying, well, that 0:08:13.560 --> 0:08:15.280 was just a couple of years ago. They're not going 0:08:15.320 --> 0:08:17.920 to change it now, are they. But apparently the Chief 0:08:18.080 --> 0:08:20.560 Justice saw a difference in the cases. 0:08:21.240 --> 0:08:24.960 Yeah, and you know, remember this Louisiana case was argued 0:08:25.040 --> 0:08:27.280 last term and the Court didn't decide it and when 0:08:27.280 --> 0:08:30.800 it was argued. Initially the question before the Court was 0:08:30.840 --> 0:08:33.280 pretty narrow, and at the end of the term the 0:08:33.320 --> 0:08:35.000 Court said, we're not going to decide it, We're going 0:08:35.080 --> 0:08:38.439 to consider a broader question. And that broader question ended 0:08:38.520 --> 0:08:43.320 up being whether this whole practice of creating intentionally creating 0:08:43.360 --> 0:08:48.080 majority black, majority Hispanic districts is unconstitutional. So they have 0:08:48.559 --> 0:08:52.000 now set themselves up for a potentially much bigger ruling, 0:08:52.240 --> 0:08:55.520 and one that could overturn a Supreme Court president or two. 0:08:55.800 --> 0:08:57.880 We're used to them overturning one, but two and one 0:08:57.880 --> 0:09:01.199 that would be something. So now, was it acknowledge that 0:09:01.400 --> 0:09:03.600 this kind of ruling by the Supreme Court gotting this 0:09:03.679 --> 0:09:07.719 part of the Voting Rights Act would help Republicans that. 0:09:07.760 --> 0:09:10.200 Did come out. I don't know if I would say acknowledged, 0:09:10.240 --> 0:09:13.280 but at least at the very end, the lawyer for 0:09:13.360 --> 0:09:17.120 the NAACP Legal Defense Fund, who was defending the second 0:09:17.160 --> 0:09:21.280 majority black district in Louisiana did allude to the political 0:09:21.320 --> 0:09:24.960 impact and the potential impact on the Supreme Court's legitimacy 0:09:25.280 --> 0:09:28.360 if it decided such a partisan issue in such a 0:09:28.360 --> 0:09:32.760 major way. It was not explicitly Republican versus Democrats in 0:09:32.800 --> 0:09:37.200 this argument, but it wasn't lost on anybody. Louisiana's a 0:09:37.400 --> 0:09:41.360 Republican run state. The Trump administration is on Louisiana side, 0:09:41.600 --> 0:09:45.000 arguing that the second majority black districts should be thrown out. 0:09:45.440 --> 0:09:47.839 So it was pretty apparent to people who was on 0:09:47.840 --> 0:09:48.839 what side of this case. 0:09:49.160 --> 0:09:53.280 And I will add that the six Conservatives are Republican appointees. 0:09:53.760 --> 0:09:56.400 Just putting it out there, and could the court rule 0:09:56.600 --> 0:09:59.880 fairly quickly, quickly in terms of the way the supp 0:10:00.240 --> 0:10:01.640 Court operates. 0:10:02.280 --> 0:10:04.600 Within a couple of months, so that this a new 0:10:04.640 --> 0:10:06.880 map in Louisiana can be put in place in time 0:10:06.960 --> 0:10:09.720 for the November election, because you know, they had the 0:10:09.760 --> 0:10:13.360 whole overhang of the Purcell doctrine right kind of out there. 0:10:13.520 --> 0:10:16.800 And if they wait until too late, then there's real 0:10:16.880 --> 0:10:20.240 questions about whether they're ruling could force a new map 0:10:20.320 --> 0:10:23.200 in time for the election. And if as they rule quickly, 0:10:23.240 --> 0:10:25.960 if they rule in December, then a lot of books 0:10:25.960 --> 0:10:29.000 are concerned that it will spark a whole new round 0:10:29.120 --> 0:10:31.760 of mid decade redistrict team even in actually in some 0:10:31.800 --> 0:10:34.160 states have already done it, like you know, Texas and 0:10:34.200 --> 0:10:37.520 Missouri could both if they weren't constrained by the Voting 0:10:37.559 --> 0:10:43.000 Rights Act, they could eliminate other majority Blacker majority Hispanic districts. 0:10:43.240 --> 0:10:47.400 Thanks so much, Greg, that Bloomberg Supreme Court reporter Greg Store. 0:10:48.080 --> 0:10:51.840 Coming up next on the Bloomberg Law Show, Delaware's highest 0:10:51.880 --> 0:10:56.920 Court considers Elon Musk's twenty eighteen fifty five billion dollars 0:10:57.080 --> 0:11:01.120 Tesla pay package. I'm June gross So and you're listening 0:11:01.200 --> 0:11:06.839 to Bloomberg. Tesla has launched an ad blitz not aimed 0:11:06.840 --> 0:11:09.760 at consumers to try to get them to buy cars 0:11:09.880 --> 0:11:13.720 or products, but aimed at its shareholders to try to 0:11:13.720 --> 0:11:18.520 get them to improve CEO Elon Musk's new one trillion 0:11:18.600 --> 0:11:21.360 dollar pay package. 0:11:21.559 --> 0:11:25.560 On November sixth, we'll hold our annual shareholders meeting this year. 0:11:25.880 --> 0:11:28.120 We have some critical measures on the ballot. We have 0:11:28.160 --> 0:11:30.760 a bold and ambitious plan to drive Tesla's next wave 0:11:30.800 --> 0:11:33.920 of growth and value creation. For you, the owners of 0:11:33.960 --> 0:11:39.760 the company, to execute on this plan and to continue 0:11:39.800 --> 0:11:42.640 to realize extraordinary shareholder value, we need to put in 0:11:42.720 --> 0:11:45.959 place the adequate incentive structure for our CEO and ensure 0:11:45.960 --> 0:11:48.600 the stability of our board of directors. The future of 0:11:48.640 --> 0:11:51.280 Tesla and the future of your investment are in your 0:11:51.320 --> 0:11:54.720 hands and require you to participate in the shareholder vote. 0:11:54.920 --> 0:11:57.480 We are counting on you to make your voice heard well. 0:11:57.520 --> 0:12:01.120 Tesla's shareholders will vote in Novae on what would be 0:12:01.160 --> 0:12:05.679 the largest pay package in corporate history for Musk. In 0:12:05.720 --> 0:12:10.160 the meantime, in Delaware's highest court today, Musk and Tesla 0:12:10.240 --> 0:12:15.520 are still fighting over Musk's twenty eighteen multi billion dollar 0:12:15.600 --> 0:12:19.520 pay package. A Delaware judge had rescinded that fifty five 0:12:19.600 --> 0:12:23.880 billion dollar package after finding that shareholders had not been 0:12:24.000 --> 0:12:27.520 properly informed about the plan when they approved it, and 0:12:27.559 --> 0:12:32.040 that director's conflicts of interest tainted the decision. Joining me 0:12:32.120 --> 0:12:37.079 is business law professor Eric Talley of Columbia Law School. So, Eric, 0:12:37.120 --> 0:12:41.079 what was the Delaware Supreme Court considering in the oral arguments? 0:12:41.760 --> 0:12:43.880 It was a hydpodge of things that were brought forward 0:12:43.920 --> 0:12:47.640 by the Tesla directors as well as the company itself, 0:12:47.720 --> 0:12:53.760 But it basically circulated around some aspects that involved revisiting 0:12:53.880 --> 0:12:57.560 the trial court's holding that there was a breach of 0:12:57.600 --> 0:13:02.360 fiduciary duty associated with miss Dr Musk's compensation agreement, and 0:13:02.480 --> 0:13:04.240 they got into that a little bit. But the more 0:13:04.280 --> 0:13:07.920 interesting parts I think had to do with the remedy 0:13:08.000 --> 0:13:12.360 that Chancellor McCormick imposed, which was to rescind the agreement 0:13:12.600 --> 0:13:16.200 after finding a fiduciary duty problem. And then what do 0:13:16.320 --> 0:13:19.960 we make of the second stockholder vote that took place 0:13:20.040 --> 0:13:24.480 in June twenty twenty four, six months after the original opinion. 0:13:24.880 --> 0:13:28.040 Did that somehow kind of overturn the opinion or at 0:13:28.120 --> 0:13:33.760 least overturn any possible remedy beyond just a small amount. 0:13:33.840 --> 0:13:36.760 And so the lawyers from both sides were arguing all 0:13:36.880 --> 0:13:39.960 three of these points, and any one of them or 0:13:40.000 --> 0:13:43.640 some combination of them could factor into a potential reversal. 0:13:43.720 --> 0:13:45.840 But my guess is it's going to be one of 0:13:45.920 --> 0:13:46.960 these three points. 0:13:47.320 --> 0:13:49.200 So you think they're going to reverse. 0:13:49.080 --> 0:13:51.720 I don't know for sure. I think that the probably 0:13:51.760 --> 0:13:55.600 the strongest argument that the Tesla appellants had had to 0:13:55.679 --> 0:13:59.359 deal with the remedy in the case, Chanceller McCormick rescinded 0:13:59.760 --> 0:14:02.840 the compensation package after finding that there was not a 0:14:03.120 --> 0:14:08.160 you know, adherence to fiduciary principles. Typically, what happens after 0:14:08.320 --> 0:14:10.600 a recision of a contract is you try to put 0:14:10.640 --> 0:14:13.360 the parties back in the position they were in before 0:14:13.400 --> 0:14:17.120 the contract got entered into but mister Musk is out. 0:14:17.200 --> 0:14:20.080 You know, according to the the appellance, you know, five 0:14:20.160 --> 0:14:23.160 years of working for the company and not getting paid anything. 0:14:23.400 --> 0:14:26.800 That was not something that the trial court asked for 0:14:26.960 --> 0:14:30.280 argumentation like if this, if this package wasn't fair, what 0:14:30.480 --> 0:14:33.360 would have been fair compensation? They never went there, And 0:14:33.400 --> 0:14:36.960 that's in part because the defendants in this case never 0:14:37.160 --> 0:14:40.520 raised what a second best type of compensation package would 0:14:40.520 --> 0:14:42.880 look like. At the time, that made sense to me, 0:14:42.960 --> 0:14:46.280 because it's hard to defend a big compensation package by then, 0:14:46.560 --> 0:14:49.040 you know, painting a target on your back by saying, Okay, 0:14:49.320 --> 0:14:51.320 you know, here's the really fair part. So I kind 0:14:51.320 --> 0:14:54.640 of understand why they didn't bring it forward. But the Chancellor, 0:14:54.640 --> 0:14:57.000 in her opinion, said, you didn't give me any alternatives 0:14:57.040 --> 0:15:00.000 other than recision to say, okay, here's here's at least 0:15:00.120 --> 0:15:02.720 something that I can award to pay you back. So 0:15:02.920 --> 0:15:05.760 that's going to be interesting and it may actually, you know, 0:15:05.840 --> 0:15:09.520 my senses is probably the strongest argument that the appellants 0:15:09.560 --> 0:15:11.400 have here. The other one that I think is pretty 0:15:11.400 --> 0:15:14.360 interesting is what do you make of these votes after 0:15:14.440 --> 0:15:17.720 the fact, Right, You've got a trial that completely comes 0:15:17.760 --> 0:15:20.920 out in favor of the plaintiffs, and you know, just 0:15:21.000 --> 0:15:24.720 before the the award argumentation, Tesla has a second vote. 0:15:25.160 --> 0:15:28.160 And the question is, well, how does that second vote 0:15:28.480 --> 0:15:31.480 that now has not only you know, more disclosures, but 0:15:31.480 --> 0:15:34.400 it even has been trial cord opinion from the original trial. 0:15:34.720 --> 0:15:38.360 Does that second stockholder vote fix all of these problems? 0:15:38.360 --> 0:15:41.760 And I think that the Tesla parties, the directors, and 0:15:42.000 --> 0:15:45.960 Tesla itself, we're saying, yeah, that should essentially undo or 0:15:46.000 --> 0:15:48.840 at least limit what is available as a remedy. If 0:15:48.880 --> 0:15:52.960 the stockholders vote again now with full information and they 0:15:52.960 --> 0:15:56.520 say no, we are okay with that initial compensation package, Now, 0:15:56.560 --> 0:15:59.360 that could end up having some traction as well. First 0:15:59.360 --> 0:16:02.480 of all, because I think most people sort of agree 0:16:02.560 --> 0:16:04.560 that that second vote, you know, you had the entire 0:16:04.600 --> 0:16:07.560 opinion that was attached to the proxy materials that were 0:16:07.560 --> 0:16:10.200 sent out, and it got pretty much exactly the same 0:16:10.320 --> 0:16:13.240 percentage vote. And so it may well be the case 0:16:13.320 --> 0:16:16.520 that the Supreme Court says, Okay, look, the trial court 0:16:16.600 --> 0:16:20.120 probably couldn't do something about an event that happened after 0:16:20.160 --> 0:16:23.040 the trial court opinion. That's something for an appeal, But 0:16:23.160 --> 0:16:25.480 now we want to remand it for the trial court 0:16:25.520 --> 0:16:28.600 to think about it. There is one very old case 0:16:28.720 --> 0:16:32.960 in Delaware that basically says that that's a potential thing 0:16:33.000 --> 0:16:37.680 to do. That involved executive compensation packages that were approved 0:16:38.120 --> 0:16:41.320 or ratified by shareholders after a trial court had said 0:16:41.440 --> 0:16:45.320 now those are improper, And interestingly enough, that case was 0:16:45.360 --> 0:16:48.760 being overseen by the father of the current Supreme Court 0:16:48.840 --> 0:16:49.880 Chief Justice CJ. 0:16:50.040 --> 0:16:50.280 Side. 0:16:50.520 --> 0:16:53.120 His father was the Chancellor of the Chancery Court. And 0:16:53.320 --> 0:16:56.640 in that case it was from basically the nineteen fifties 0:16:56.800 --> 0:16:58.840 with the Supreme Court and then the trial court basically 0:16:58.920 --> 0:17:01.840 held at least that for some component of an executive 0:17:01.840 --> 0:17:06.480 compensation package, a later occurring stockholder vote that can basically 0:17:06.720 --> 0:17:10.280 fix the infirmity at least in terms of the nullification 0:17:10.359 --> 0:17:12.480 of the award. So it may well be the case 0:17:12.560 --> 0:17:14.760 that the Supreme Court says, now we don't have anything 0:17:14.760 --> 0:17:17.800 to overturn in that trial court opinion, but now we 0:17:17.840 --> 0:17:21.199 want to remand it so that the Chancellor can consider what, 0:17:21.480 --> 0:17:24.840 if any effect would there be of this vote. And 0:17:25.000 --> 0:17:27.960 you know, that could end up causing yet another sort 0:17:28.000 --> 0:17:30.399 of trial on the merits, which would give us at 0:17:30.480 --> 0:17:32.760 least something to talk about for the next couple of years. 0:17:32.840 --> 0:17:35.840 Jim, what do you think was the best argument that 0:17:35.960 --> 0:17:37.680 the plaintiffs made. 0:17:37.359 --> 0:17:39.520 Well, I think the best arguments that the plane has made. 0:17:39.640 --> 0:17:42.680 They first tried to defend the opinion below, and I 0:17:42.720 --> 0:17:44.840 will say that there were some factual conclusions in the 0:17:44.880 --> 0:17:48.200 opinion below, like that Elon Musk was a controller and 0:17:48.520 --> 0:17:51.280 that the directors were beholden to him when they were 0:17:51.320 --> 0:17:55.439 negotiating this contract. Those were factual findings that you know, 0:17:55.480 --> 0:17:57.480 you can overturn them on appeal, but only if they're 0:17:57.480 --> 0:18:01.920 clearly wrong. But based on those factual findings the Chancellor's 0:18:02.000 --> 0:18:05.560 opinion in that trial court record below. You know, I've 0:18:05.600 --> 0:18:08.040 taught that opinion many times. It's pretty easy to teach 0:18:08.119 --> 0:18:12.200 because it pretty much followed you very very conventional textbook 0:18:12.240 --> 0:18:15.560 Delaware legal principles at every at every ground. I think 0:18:15.760 --> 0:18:18.640 most of the people that complain about the opinion don't 0:18:18.640 --> 0:18:22.000 complain about the judge following the flow chart of what 0:18:22.160 --> 0:18:24.880 doctrine tells you you're supposed to do as much as 0:18:25.400 --> 0:18:28.720 making factual determinations that you know, at least some people 0:18:28.760 --> 0:18:30.800 the defendants and I guess some others who were kind 0:18:30.800 --> 0:18:33.399 of you know, thought that the Musk parties had the 0:18:33.400 --> 0:18:36.439 stronger hand that they disagreed with those factual holdings. So 0:18:36.520 --> 0:18:39.520 I think the Tornetta folks, the plaintiffs in this case, 0:18:39.840 --> 0:18:41.800 did a pretty good job of sort of saying, look, 0:18:41.840 --> 0:18:45.560 there really wasn't that much remarkable about the legal reasoning below, 0:18:46.000 --> 0:18:48.720 and if you're going to overturn factual findings, there's a 0:18:48.840 --> 0:18:51.280 very high bar to do that. And that's not really 0:18:51.320 --> 0:18:54.600 where we are directing our boat. You know, the plaintiffs 0:18:54.600 --> 0:18:56.960 in this case, who were you know, basically responding to 0:18:57.000 --> 0:19:00.159 the appeal. It's much more of a black box to 0:19:00.200 --> 0:19:03.639 how the Court's going to deal with this second stockholder vote, 0:19:03.680 --> 0:19:07.760 whether that somehow reaches back to ratify things earlier on. 0:19:08.160 --> 0:19:11.360 That's something that Chancellor McCormick basically refused to comment on 0:19:11.680 --> 0:19:15.200 at any length, given that the trial had already concluded 0:19:15.200 --> 0:19:18.000 that there already was a breach of fiduciary duties. But 0:19:18.119 --> 0:19:20.680 it would be, you know, something that the Supreme Court 0:19:20.720 --> 0:19:24.199 could send back to her, and that was probably something 0:19:24.240 --> 0:19:27.240 that the plaintiffs in this case didn't have as much 0:19:27.280 --> 0:19:29.480 of an answer to. But it was also the you know, 0:19:29.640 --> 0:19:32.040 the very time limited argument, so they spent more time 0:19:32.080 --> 0:19:34.920 on the first part. So you know, I could see 0:19:35.040 --> 0:19:38.720 that ratification vote being a grounds for reversal, I could 0:19:38.760 --> 0:19:43.160 also see a partial reversal. It says, we're not going 0:19:43.200 --> 0:19:45.879 to reverse the outcome of the finding that there was 0:19:45.920 --> 0:19:49.320 a breach of fiduciary duty, but when you rescinded the 0:19:49.359 --> 0:19:52.000 pay package, it was going to be important to lay 0:19:52.000 --> 0:19:54.720 out some sort of a restitutionary award that would put 0:19:54.760 --> 0:19:57.280 mister Musk in, you know, that would make him whole 0:19:57.280 --> 0:20:01.280 at least relative to before that compensation package was granted. 0:20:01.400 --> 0:20:04.080 And he's not at this point because he you know, 0:20:04.240 --> 0:20:07.720 now effectively worked five years for free. And so my 0:20:07.920 --> 0:20:11.000 sense is that if there's a reversal, you'll probably see 0:20:11.000 --> 0:20:13.399 a reversal on one of those two grounds, and not 0:20:13.560 --> 0:20:16.720 as much a reversal that tries to dive back into 0:20:16.760 --> 0:20:20.359 the logic in the original opinion. You know, the one 0:20:20.400 --> 0:20:23.879 part that they could reverse in the original opinion is 0:20:24.200 --> 0:20:27.480 Chanser McCormick's, you know, finding that that Musk, while only 0:20:27.520 --> 0:20:30.080 owning about twenty one percent of the company, was such 0:20:30.119 --> 0:20:33.600 a superstar CEO that he just had undue influence at 0:20:33.680 --> 0:20:37.000 least over this transaction. You know, is the first time 0:20:37.080 --> 0:20:40.440 this idea of superstar CEOs had been used in a case, 0:20:40.840 --> 0:20:42.840 and so they might sort of say no that and 0:20:42.880 --> 0:20:44.840 it's from an academic article that a couple of law 0:20:44.840 --> 0:20:47.520 professors wrote. They might say, no, that's just not a 0:20:47.560 --> 0:20:50.960 sufficiently predictable or clear test, and they might overturn on 0:20:51.000 --> 0:20:53.320 that basis. But if I were going to bet on 0:20:53.720 --> 0:20:56.520 what grounds that they would use if they overturned, I 0:20:56.520 --> 0:20:58.159 don't think it would be that. I think it's going 0:20:58.240 --> 0:21:00.960 to be more maybe that this I can shareholder vote 0:21:01.080 --> 0:21:04.760 was an effective one, or that, you know, when you 0:21:04.840 --> 0:21:07.800 rescind a pay package, that the court has to then 0:21:07.920 --> 0:21:11.880 sort of take a briefing on what the appropriate amount 0:21:11.920 --> 0:21:15.240 that mister Musk should be paid if it's not from 0:21:15.280 --> 0:21:18.600 his you know, written contract to make him whole for 0:21:18.840 --> 0:21:21.919 and so he doesn't end up giving away his services 0:21:22.040 --> 0:21:25.240 having given away his services for free for five years. 0:21:25.560 --> 0:21:27.840 Coming up next on the Bloomberg Law Show, I'll continue 0:21:27.880 --> 0:21:32.200 this conversation with Columbia Law School professor Eric Tally. Why 0:21:32.320 --> 0:21:36.399 Musk and Tesla are returning to Chancery Court in Delaware 0:21:36.680 --> 0:21:42.440 on October twenty second, and our other Delaware corporations following 0:21:42.560 --> 0:21:46.679 Musk to Texas, I'm June Grosso and you're listening to Bloomberg. 0:21:48.880 --> 0:21:53.200 Elon Musk resumed his legal fight to reinstate a record 0:21:53.280 --> 0:21:57.800 setting twenty eighteen Tesla pay package that was thrown out 0:21:57.840 --> 0:22:01.679 by a lower court judge twice. The world's richest person 0:22:01.800 --> 0:22:04.720 claims he hasn't been paid for seven years of work 0:22:04.800 --> 0:22:09.639 as Tesla's CEO, even after reaching all the performance targets 0:22:09.640 --> 0:22:13.480 to trigger a payout that Bloomberg estimates would be worth 0:22:13.520 --> 0:22:17.040 about one hundred and twenty five billion dollars. During oral 0:22:17.160 --> 0:22:21.439 arguments before Delaware's highest court today, lawyers for Tesla and 0:22:21.560 --> 0:22:25.520 Musk argue that the pay plan approved by Tesla's board 0:22:25.840 --> 0:22:30.160 should be reinstated, in part because shareholders had voted for 0:22:30.200 --> 0:22:35.800 it twice, including after Delaware Chancery Court Judge Kathleen McCormick 0:22:36.359 --> 0:22:40.639 rejected it after concluding that the process for rewarding Musk 0:22:40.880 --> 0:22:45.160 was flawed by a conflicted board of directors and inadequate 0:22:45.240 --> 0:22:49.760 disclosures that were provided about Musk's compensation. I've been talking 0:22:49.800 --> 0:22:53.840 to Columbia Law School business professor Eric Talley. Eric, we've 0:22:53.880 --> 0:22:57.359