This will be the thread for live-tooting of the Tornetta v. Musk post-trial argument on Tuesday, February 21st at 1:30pm Eastern.
Live-tooting has been a difficult and very meh experience in the past, so I'm trying some things to make it better, including making this anchor post now, and also using the hashtag #Tornetta — which I trust is not a frequently-used hashtag unless there is definitely something I do not know anything about, which I also suppose is def possible. 🫠
1/
One thing I don't know about fediverse threading is if there's any way to fck it up like you can on Twitter, whether there is a kind of non-threading reply or not...
but there's only one way to find out, the same way I did on Twitter, by trial and error.
So, here is post numero dos, with the background information on the #Tornetta case.
Let's see how the threading goes. 🤞🏻
2/
https://thechancerydaily.substack.com/p/tornetta-musk-and-55-billion-in-options
Bookmark this thread for 1:30pm Eastern on Tuesday where we will be live-tooting the Tornetta v. Musk post-trial argument hearing about the $55 billion compensation case being heard in the Delaware Court of Chancery. Absolutely everything you need to get up-to-speed can be found in the linked posts above.
#Law #LawFedi #CouryOfChancery #thechancerydaily
3/
If you want to dial in to listen along as I live-screech, kinda-sorta-but-not-really like we did in the old days, you can do so:
(774) 267-7689
N.B. Remember the words of Chancellor Kathaleen St. Jude McCormick: The standard instruction applies: Aside from our Court of Chancery Court Reporter, no one (i.e., no party, counsel, member of the press, or any other attendee) may record the hearing in any manner (i.e., video, audio, or otherwise). This includes a prohibition on rebroadcasting.
4/
Oh boy, this is like old school Twitter v. Musk live-tweeting vibes, waiting for the Chancellor to get on the line! Wooooooooooweeeeeeee let's gooooooooo team!
It will be interesting trying it out here in the fediverse. It's all going to be different, & it will have hiccups, & I don't care. I'm not going back to Twitter. I'll build a new damn way of communicating if I have to. I'll learn Morse Code if I have to. I'm not going back to that cess pool to provide content. It's not happening.
5/
In case anyone is looking for the dial-in details, here they are again:
(774) 267-7689
#Tornetta #CourtofChancery #DelawareCourts #Law #lawfedi
We have done microphone testing, and we should be getting underway shortly. The teams were at the Courthouse yesterday setting up their presentation equipment, so we know we will have slide presentations that we cannot see. ::sad trombone::
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There's not a huge live-tooting community on Mastodon that I know of, I am not sure that threading is even a previously utilized tool. Some servers even allow posts of up to 4k - 5k characters! (I did not know this when I chose my server, some of you will be grateful to know!)
It's still mind boggling to me that Mastodon has a million apps and interfaces, and none of them are ad supported (at least in the main, or any that I know of).
It's THE CHANCELLOR!
/7
Ok, we are doing introductions. The Chancellor sounds relaxed, which I'm glad to hear. She has sounded overwhelmed for the past few weeks.
The presentations will be plaintiff, defendant, plaintiff, defendant.
Plaintiff, by Varallo, jumps right in.
He says it doesn't matter what we think of Elon Musk, it matters whether this compensation package (to a part-time executive) was "entirely fair," which is the legal standard.
/8
Varallo is pressing first on the disclosure point. This is what I have been harping on in the various places I have been harping about this matter. Tesla decided to make the vote contingent upon a vote of the stockholders, and this requires full disclosure of all relevant information and potential conflicts of interests.
/9
Varallo says they "win the case if a preponderance of the evidence shows either a material omission or misstatement in the proxy, or if we're able to show partial disclosure w/out an accurate full & fair characterization to place that partial disclosure in proper context. The evidence developed at trial shows both material omissions in the statements and materially misleading partial disclosures, any of which warrant cancellation of the plan for failure of a condition precedent."
/10
This previous point is interesting (and jfc Varallo is talking fast and really running through a lot) because he's saying not just that a new vote is warranted but that the plan should be cancelled for failure of a condition precedent if the vote wasn't fully informed. This is a slight but also massive difference from what they were previously arguing.
/11
Now we are onto the specifics of the disclosures about the conflicts. Varallo is trucking right along. Again, here we are walking through the evidence that was marshaled at trial. This is what post-trial argument is for. What I find most interesting from all this is how plaintiff has strongly shifted from an argument that this failure of proper proxy disclosure should require a new sh vote to that the remedy is cancellation. It will be interesting to look at the cases on this.
/12
You can think of this as basically a summary of all those tweet threads we went through at trial when this evidence was being elicited at trial from witnesses. Right now, Varallo is going through Ira Ehrenpreis' conflicts, he finished going through Antonio Gracias, this is generally a similar order in which they have consistently presented the evidence throughout, from strongest connections to weakest.
/13
Varallo pointing out that Ira Ehrenpreis is the one who initiated contact with Musk in 2017 in the context of this case, arguing that his actions in this matter itself show his conflicts in his relationship with Musk, in the way that he "pressure tested" the accounting advice that he got from Tesla's CFO to align them more with Musk's ask.
/14
Varallo [Plaintiff], on Ira Ehrenpreis' conflict as an "independent" director:
"When it came time to involve the committee itself, Ehrenpreis seems never to have shared the genesis of the grant, allowing the committee to proceed without any detail about Musk's huge ask where that ask's central role as the basis for the grant is [not] actually presented to the committee until two months after Musk made the ask to Ehrenpreis."
15/
Now we are on to Robyn Denholm's conflicts as a so-called independent director, who realized a quarter of a billion dollars for three years of service.
Varallo does a great job of showing how "[his] friends really can't have it both ways." The Court should either consider the actual realized value or consider the Black–Scholes model value, while the defendants want them to consider neither, since she hadn't sold before the approval of the grant and didn't sell until thereafter.
16/
Varallo is doing a very good job in my opinion here. He's very effective when he is on, and he's currently on. "Indeed, the court may recall that Denholm engaged in an almost endless equivocation on the point [...] until the court broke in and required an answer. But I have to say, I was somewhat amused to review testimony to find that the Court had to ask the question three times yourself to get that answer."
17/
We're now running through the remaining committee members, Brad Buss, Mr. Murdoch (think he'll mention Super Bowl with Dad and sister lol, nope seems like he'll let it slide by oblique reference ... oop no, there it is hahaha, picture on the board and everything).
18/
Now I need to know if he used my screen cap of the Super Bowl or what.
19/
Varallo is now differentiating the case law and the arguments cited by defendants against plaintiff's disclosure claims. The question is really: is there a disclosure claim that is viable in this information economy? Because if there is, this seems to be a pretty strong one. If the language of the case law still holds, despite this insane informational melieu in which we swim, this case seems to be on all fours on disclosure.
20/
Varallo has brought out the "doozy" — "And I want to pause here because I gotta tell you, this one's a doozy Your Honor. The idea that I could have invested hundreds of millions of dollars in private Musk entities; vacation literally around the world with him and his family and my family; owe him for literally handing me generational wealth; and that I nonetheless come into court and testify that none of that mattered to me because I was a really independent guy..."
21/
"...Your Honor, if that's all a director needs to do to satisfy an independent director inquiry, is simply to say that he wasn't swayed by evidence negating any claim of independence, then we don't have a system capable of enforcing fiduciary duties any longer. In Delaware, we don't credit self serving testimony over hard facts."
22/
Now we are onto the disclosure about the grant's genesis and development, and disclosure about milestones and their likelihood of achievement. There's a lot of baggage and backstory echoing in the background here about disclosure claims in Delaware that's hard to nuance in here, even with a 500 character limit (be glad I didn't join a server with a 5k character limit lol).
23/
Varallo covering the "probable of achievement" disclosures. We have entered the S-curve phase, and Varallo has brought out the Immaculate Heart of Mary nuns and how they taught him to draw an S, and he's describing how Tesla explains an S-curve from a Tesla tweet.
24/
Varallo: "At the early part of production of Model 3 or any new car, it's not entirely clear that they're going to succeed. But there comes a point on the curve as it begins to leave flat and ascend, where the production issues have been tied down. The production problems have been solved, and mass production is about to print money for the company. That's what an S-curve is."
25/
Varallo: "That's what this shows and the testimony you got during the trial about where the parties were on the S-curve is highly probative of exactly how difficult it was going to be to meet these milestones. If we were on the upward slope of the S-curve, then these projections were highly likely to be achieved and indeed, many of the milestones were highly likely to be achieved. If we were way at the left, then we have a different story."
[referring to an S-curve demonstrative]
26/
LOL on Musk being a part-time CEO
Varallo: "Indeed, while Mr. Musk came to trial saying that that he anticipated his full time activity at Twitter to end and I'm quoting 'probably this week and next week' [trial was November 14-18, 2022], he was quoted in the financial press last week on February 15, as saying that he anticipated being able to appoint a new Twitter CEO by the end of 2023."
27/
After spending more than an hour on the disclosure claims, Varallo now turns to entire fairness, after reminding the Court that she need not reach entire fairness if there is a finding that the grant fails for any of the disclosure claims. I'm not really clear how they are going to have time for rebuttal the way this is going.
28/
Varallo: "I submit to Your Honor, that the board's wholesale lack of engagement here, including a stunning silence in the face of a less personal and very public jihad against the SEC tells Your Honor all that you need to know about who dominates and controls this company and its board, and frankly the lack of character, integrity of the board, which is subservient to Mr. Musk."
Tell us how you really feel. 🫠
29/
Talking about Musk bringing Boring Company and Tesla employees to Twitter:
"Once again, where was the adult in the boardroom who stepped forward to say that Tesla was not Musk's playpen for which he could simply draw volunteers to his other pursuits?"
30/
"The evidence shows a founder CEO single-largest shareholder's self-appointed techno-king of Tesla alone promulgates masterplans for the company. running w/out board supervision and a board which is sufficiently empowered by him to sit idle while he single-handedly wages war with the company's primary regulator to engage the company's engineers for his private interest and contribute sadly to the deterioration of more than half of Tesla's market capitalization in a matter of a few months."
31/
Varallo is talking so fast, it's a good thing that the Court has post-trial briefs with all this information. But they can't have more than three hours allotted for this argument, so he's got to have less than 14 minutes left of his time, so ten minutes for rebuttal, if he stops now, and he doesn't seem to be stopping...or have I lost track of time and space again?
32/
@chancerydaily He let Team Musk have it with both barrels.
Mind you, he's not wrong.
Chance The Lawyer ⚡︎
Ann Lipton
OldHound