Elon Musk won legal dispute over $56bn pay package in shareholder vote, Tesla tells court

Judge who scrapped compensation deal set to hold hearing in case that looms over Musk's relationship with company

Elon Musk is seeking a larger ownership stake in Tesla, which has faced lower sales and stiffer competition. AP

Tesla claims Elon Musk won his legal battle over his $56 billion pay package because shareholders voted for the compensation, despite a judge rescinding it earlier this year, according to court filing made public on Friday.

The company's filing comes two weeks after Tesla shareholders voted to ratify the 2018 package of stock options. Tesla held the vote following a January ruling by a judge in the US state of Delaware that voided the compensation.

The ruling said Mr Musk improperly controlled the negotiation process and the company misled shareholders about key details.

Tesla has faced slower sales and stiffer competition, with Mr Musk saying he could develop some products outside the company if he does not obtain a larger ownership stake. The case is looming over Mr Musk's relationship with the company.

Tesla made its claim in its proposal for how the judge, Kathaleen McCormick of the Delaware Court of Chancery, should craft a final order, which is needed for the January ruling to be implemented. Tesla said the final order should state that "judgment is entered for the defendants".

The shareholders' legal team wants the judge to stick with her original ruling that rescind Mr Musk's pay package. They want her to order Tesla to pay them potentially billions of dollars worth of stock as a legal fee award.

A fair fee could be as low as $13.6 million, Tesla said.

On Thursday, Judge McCormick ordered the parties to begin preparing briefs laying out their views on the effect of the shareholder vote on the case. She also asked the parties to agree on a date in late July or early August to make oral arguments.

She will hear oral arguments over the legal fee on July 8. It could take weeks before a final ruling is issued.

Even if she does not reverse the January ruling, Judge McCormick could recognise that the shareholder vote demonstrated there was little value in winning the case, because Tesla shareholders want the record compensation.

That would undermine the fee request from the shareholders' legal team. The request is based on the value they provided to the company by rescinding the pay package.