Current Month (December 2025)
Delaware Supreme Court Reinstates Elon Musk’s Executive Compensation Package
By Lisa R. Stark, Hirschler Fleischer
In In re Tesla Derivative Litig., No. 2018-0408 (Del. Dec. 19, 2025), the Delaware Supreme Court addressed an appeal from the Delaware Court of Chancery’s 2024 post-trial decision to rescind Elon Musk’s 2018 equity compensation package, initially valued at $56 billion, consisting of stock options to purchase Tesla common stock that vested in twelve tranches, with each tranche exercisable for 1 percent of Tesla’s common stock outstanding as of January 19, 2018 (the “2018 Grants”). The Court of Chancery ordered rescission of the 2018 Grants after finding that the director defendants: (1) failed to prove that the 2018 Grants were entirely fair to Tesla and Tesla’s stockholders, and (2) misled Tesla’s stockholders in connection with two stockholder votes to ratify the 2018 Grant. The Court of Chancery also awarded $345 million to plaintiff’s attorneys as a fee award. At the time of trial before the Court of Chancery, it was undisputed that Musk fully performed under the 2018 Grants.
In this appeal, the director defendants challenged the Court of Chancery’s decision: (1) to apply the entire fairness standard of review based on a finding that Elon Musk was a controlling stockholder, and (2) award equitable rescission as a remedy. The Court of Chancery applied the entire fairness standard of review to the 2018 Grants after finding that defendant Elon Musk operated as a controlling stockholder with respect to the 2018 Grants despite the fact that Musk owned only 21.9 percent of Tesla’s stock. The Court of Chancery found that between Musk’s stock ownership and a web of personal and professional relationships between Musk and the Tesla directors who approved the 2018 Grants, Musk dictated the terms of the 2018 Grants.
The Delaware Supreme Court did not address the Court of Chancery’s decision to find Musk to be a controlling stockholder with respect to the 2018 Grants, but it reversed the Court of Chancery’s decision to award equitable rescission of the 2018 Grants as a remedy. According to the Delaware Supreme Court, a plaintiff seeking equitable rescission bears the burden of establishing that (1) equitable rescission is a viable remedy, and (2) the court can restore all of the challenged transaction’s parties to the status quo. Here, the Delaware Supreme Court found that rescission could not restore all parties to the status quo and was inequitable—rescission left Musk uncompensated for nearly six years of work. The Delaware Supreme Court also held that the Court of Chancery erred in placing the burden on the defendants to prove an alternative remedy, found that it had the authority to grant a remedy, and awarded $1.00 in nominal damages. The Delaware Supreme Court also awarded plaintiff attorneys’ fees based on quantum meruit at a multiplier of four times their lodestar, substantially reducing the fee award to approximately $54.5 million.
Eleventh Circuit Issues Ruling Upholding the Corporate Transparency Act in Its Entirety
By William E. H. Quick, Outside Inside Counsel, LLC
The Eleventh Circuit Court of Appeals, on December 16, 2025, issued a ruling in National Small Business United v. U.S. Department of the Treasury upholding the constitutionality of the Corporate Transparency Act (“CTA”) and overruling the U.S. District Court for the Northern District of Alabama.
Although this ruling will likely have little immediate impact on the enforcement posture of the Financial Crimes Enforcement Network (“FinCEN”) with respect to the CTA—contained in FinCEN’s March 26, 2025, interim final rule, which removes the requirement for U.S. companies and U.S. persons to report beneficial ownership information to FinCEN under the CTA—it does further anchor the CTA as the law of the land, and as a lurking enforcement cudgel for a future presidential administration whose enforcement policy and priorities may not continue to adhere to those of the present administration. Given this, practitioners should take heed of the Eleventh Circuit’s decision.
The Eleventh Circuit’s three-judge panel, under de novo review of the district court’s disposition of a motion for summary judgment in favor of the plaintiffs, unanimously ruled that “by effectively prohibiting anonymous business dealings, the CTA facially regulates economic activities having a substantial aggregate impact on interstate commerce” (fitting under Congress’s Commerce Clause power). Moreover, the Eleventh Circuit held that “as a uniform and limited reporting requirement, the CTA does not facially violate the Fourth Amendment.”
The Eleventh Circuit went on to state that “the CTA is a constitutional exercise of Congress’s enumerated power to regulate interstate commerce. Because it is directed at the ownership and maintenance of corporations, it is a regulation of economic activity. And Congress rationally concluded that this activity has a substantial aggregate impact on interstate commerce.”
What this ruling means in the long term will depend not on whether the law may be imposed, but instead on how the CTA may be further implemented and enforced. The CTA will remain “on the books” unless and until Congress takes steps to reverse it—which, to date, Congress has been unwilling to do.
