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Once again, a judge has blocked Elon Musk’s lucrative Tesla payout. Delaware Chancery Court Judge Kathaleen St. Jude McCormick has reaffirmed her decision to invalidate Tesla CEO Elon Musk’s controversial $56 billion compensation package. The ruling was issued on Monday, rejecting Tesla’s appeal to overturn the earlier judgment despite an overwhelming vote from shareholders in favor of the compensation plan.

The centerpiece of the dispute is a compensation package granted to Elon Musk in 2018, which, at the time, was the largest ever awarded to a public company executive. The deal provided the billionaire with stock options worth up to $56 billion if Tesla achieved certain performance targets. However, the plan sparked immediate controversy, with critics arguing that the package was excessive. Tesla shareholder Richard Tornetta later filed a lawsuit, arguing that that the compensation plan was the result of improper negotiations between Musk and the board, which failed to act in the best interests of shareholders.

Earlier this year, in January, Judge McCormick ruled in favor of Tornetta, finding that the approval process for the pay package had been deeply flawed. She concluded that Musk had undue control over Tesla’s board and that that the package did not meet the standard of fairness required under Delaware law. In her opinion, the process through which the pay package was negotiated and approved lacked the independence and transparency needed for such a substantial decision.

In response, Tesla and Musk sought to reverse the decision. In June, the automaker held a shareholder vote, in which the majority approved the re-ratification of the pay package, arguing that the vote showed that the shareholders supported the deal.

In a detailed 103-page opinion issued on Monday, Judge McCormick rejected Tesla’s arguments, stating that the vote could not retroactively validate a package that had been improperly negotiated. Alongside her decision to uphold the ruling, McCormick also addressed the issue of legal fees. The attorneys representing Tesla shareholders had requested $5.6 billion in fees, based on the benefit their legal action allegedly provided to Tesla by preventing Musk from claiming the full value of his compensation package. However, McCormick found that this amount was excessive and awarded $345 million (a fraction of the original amount) instead.

Tesla is not taking lying down and intends to appeal the ruling. “A Delaware judge just overruled a supermajority of shareholders who own Tesla and who voted twice to pay @elonmusk what he’s worth. The court’s decision is wrong, and we’re going to appeal. This ruling, if not overturned, means that judges and plaintiffs’ lawyers run Delaware companies rather than their rightful owners – the shareholders,” the company said in a post on X.

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