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Tesla attorneys ask judge to vacate decision invalidating massive pay package for Elon Musk

Defense attorneys say the vote makes clear that Tesla shareholders, with full knowledge of the flaws in the 2018 process that McCormick pointed out in her January ruling, are adamant that Musk is entitled to the pay package. Photo via cdn.britannica.com

Attorneys for Elon Musk and Tesla’s corporate directors are asking a Delaware judge to vacate her ruling requiring the company to rescind a massive and unprecedented pay package for Musk.

Friday's hearing follows a January ruling in which Chancellor Kathaleen St. Jude McCormick concluded that Musk engineered the landmark 2018 pay package in sham negotiations with directors who were not independent. The compensation package initially carried a potential maximum value of about $56 billion, but that sum has fluctuated over the years based on Tesla's stock price.

Following the court ruling, Tesla shareholders met in June and ratified Musk’s 2018 pay package for a second time, again by an overwhelming margin.

Defense attorneys say the vote makes clear that Tesla shareholders, with full knowledge of the flaws in the 2018 process that McCormick pointed out in her January ruling, are adamant that Musk is entitled to the pay package.

“Honoring the shoulder vote would affirm the strength of our corporate system,” David Ross, an attorney for Musk and the other individual defendants, told McCormick. “This was stockholder democracy working.”

Ross told the judge that the defendants were not challenging the factual findings or legal conclusions in her ruling, but simply asking that she vacate her order directing Tesla to rescind the pay package.

McCormick, however, seemed skeptical of the defense arguments, peppering attorneys with questions and noting that there is no precedent in Delaware law for allowing a post-trial shareholder vote to ratify adjudicated breaches of fiduciary duty by corporate directors.

“This has never been done before,” she said.

Defense attorneys argued that, while they could find no case that is exactly comparable, Delaware law has long recognized shareholder ratification as a cure to corporate governance errors, and has long acknowledged the “sovereignty” of shareholders as the ultimate owners of a corporation.

“I candidly don’t see how Delaware law can tell the owners of the company that they’re not entitled to make the decision they made,” said Rudolf Koch, an attorney for Tesla.

Donald Verrilli, a lawyer for an induvial stockholder who owns more than 19,000 Tesla shares, suggested that it would be wrong for the lone shareholder who filed the lawsuit to thwart the will of the majority of Tesla shareholders. At the time the lawsuit was filed, the plaintiff owned just nine shares of Tesla stock.

“The voice of the majority of shareholders should matter…. This lawsuit is not representing the interest of the shareholders," Verrilli said.

Thomas Grady, an attorney for a group of Florida objectors who own or manage almost 8 million Tesla shares with some $2 billion, argued that for McCormick to rule for the plaintiff, she has to “disenfranchise” all other Tesla shareholders.

Greg Varallo, an attorney for the plaintiff, urged McCormick not to give any credence to the June shareholder vote, saying it has no legal precedent in Delaware or anywhere else. There also is no reason for the court to reopen the trial record and admit new evidence, he said.

Under Delaware law, stockholders have no authority to overrule courts by trying to use a post-trial ratification vote as a “giant eraser,” Varallo argued.

“Ratification is not magic, and it never has been,” Varallo added. “This should end here and now.”

McCormick gave no indication on when she would rule. She also has yet to rule on a huge and unprecedented fee request by plaintiff attorneys, who contend that they are entitled to legal fees in the form of Tesla stock valued at more than $7 billion.

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A View From HETI

A new report predicts that Texas will be home to 30 percent of the U.S. data center market by 2028. Photo via Chevron.com

Data centers are proving to be a massive economic force in Texas.

For instance, a new report from clean energy company Bloom Energy predicts Texas will see a 142 percent increase in its market share for data centers from 2025 to 2028. That would be the highest increase of any state.

Bloom Energy expects Texas to exceed 40 gigawatts of data-center capacity by 2028, representing a nearly 30 percent share of the U.S. market. A typical AI data center consumes 1 to 2 gigawatts of energy.

“Data center and AI factory developers can’t afford delays,” Natalie Sunderland, Bloom Energy’s chief marketing officer, said in the report. “Our analysis and survey results show that they’re moving into power‑advantaged regions where capacity can be secured faster — and increasingly designing campuses to operate independently of the grid.”

“The surge in AI demand creates a clear opportunity for states that can adapt to support large-scale AI deployments at speed,” Sunderland adds.

Further evidence of the data center explosion in Texas comes from ConstructConnect, a provider of data and software for contractors and manufacturers. ConstructConnect reported that in the 12-month span through November 2025, data-center construction starts in Texas accounted for $11 billion in spending. At $12.5 billion, only Louisiana surpassed the Texas total.

Capital expenses for U.S. data centers were expected to surpass $425 billion last year, according to ratings agency S&P Global.

ConstructConnect also reports that Texas is among five states collectively grabbing 80 percent of potential data center construction starts. Currently, Texas hosts around 400 data centers, with close to 60 of them in the Houston market.

A large pool of data-center construction spending in Texas is flowing from Google, which announced in November that it would earmark $40 billion for new AI data centers in the state.

“Texas leads in AI and tech innovation,” Gov. Greg Abbott proclaimed when the Google investment was unveiled.

Other studies and reports lay out just how much data centers are influencing economic growth in the Lone Star State:

  • A study by Texas Royalty Brokers indicates Texas leads the U.S. with 17 clusters of AI data centers. The study measured the density of AI data centers by counting the number of graphics processing units (GPUs) installed in those clusters. GPUs are specialized chips built to run AI models and perform complex calculations.
  • Citing data from construction consulting company FMI, The Wall Street Journal reported that spending on construction of data centers is expected to rise 23 percent in 2026 compared with last year. Much of that construction spending will happen in Texas. In the 12 months through November 2025, the average data center cost $597 million, according to ConstructConnect.
  • Data published in 2025 by commercial real estate services company Cushman & Wakefield shows three Texas markets — Austin, Dallas and San Antonio — boast the lowest construction costs for data centers among the 19 U.S. markets that were analyzed. The mid-range of costs in that trio of markets is roughly $10.65 million per megawatt. Houston isn’t included in the data.

Although Houston isn’t cited in the Cushman & Wakefield data, it nonetheless is playing a major role in the data-center boom. Houston-area energy giants Chevron and ExxonMobil are chasing opportunities to supply natural gas as a power source for data centers, for example.

“As Houston rapidly evolves into a hub for AI, cloud computing, and data infrastructure, the city is experiencing a surge in data-center investments driven by its unique position at the intersection of energy, technology, and innovation,” says the Greater Houston Partnership.

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