A Delaware decide dominated Tuesday that Elon Musk’s $56 billion multi-billion pay bundle is unfair, voiding the biggest in compensation deal in company historical past.

The choice, issued Tuesday within the Delaware Court docket of Chancery by Choose Kathaleen McCormick, signifies that Musk, the world’s richest particular person, can’t maintain the 2018 compensation bundle. The ruling might be appealed. Chancery Each day, which follows and shares replace on the Delaware Chancery Court docket, first reported the choice on Threads.

The ruling doesn’t present a tidy finish for Musk or the Tesla board. How Musk is compensated and what occurs to his wealth, which is basically tied up in his many firms, are unanswered questions.

In her ruling, McCormick wrote that Tesla “bore the burden of proving that the compensation plan was fair, and they failed to meet their burden.”

Musk shared his displeasure with the ruling by turning to X, the social media website previously often known as Twitter that he owns thanks partly to a earlier resolution by McCormick. The decide oversaw Twitter’s suit against Musk that resulted in him agreeing to shut his $44 billion deal. Musk largely financed the Twitter acquisition by selling his Tesla stock.

“Never incorporate your company in the state of Delaware,” Musk posted on X. Musk later posted a poll asking whether or not Tesla ought to change its state of incorporation to Texas.

This query of “fairness” was central to the case, which kicked off in 2019 when Tesla shareholder Richard Tornetta filed a suit to rescind Musk’s 2018 pay deal, claiming on the time that the bundle was unjustly paid to Musk with out demanding he focus fully on the carmaker.

The compensation plan authorized by shareholders in 2018 consisted of 20.3 million inventory possibility awards damaged up into 12 tranches of 1.69 million shares. Beneath the settlement, the choices vested in 12 increments if Tesla hit particular milestones on market cap, income and adjusted earnings (excluding sure one-time expenses equivalent to inventory compensation).

Whereas many could argue that it was truthful as a result of the overwhelming majority of shareholders authorized it, McCormick was unmoved. She wrote as a result of the “defendants were unable to prove that the stockholder vote was fully informed because the proxy statement inaccurately described key directors as independent and misleadingly omitted details about the process.”

McCormick described the method resulting in the approval of Musk’s compensation plan as “deeply flawed,” largely due to his deep ties to the folks, together with board members, who have been speculated to be negotiating on Tesla’s behalf. She additionally famous that testimony illustrated that this was much less a negotiation and extra a cooperative enterprise.

McCormick additionally weighed within the equity of the “price.” Defendants urged the courtroom to check what Tesla “gave” towards what Tesla “got.” Her evaluation was not sufficient. She writes:

“The compensation plan was not conditioned on Musk devoting any set amount of time to Tesla because the board never proposed such a term. Swept up by the rhetoric of “all upside,” or maybe starry eyed by Musk’s celebrity attraction, the board by no means requested the $55.8 billion query: Was the plan even needed for Tesla to retain Musk and obtain its targets?”

She did agree that the defendants (Tesla) proved Musk was “uniquely motivated by ambitious goals and that Tesla desperately needed Musk to succeed in its next stage of development.” However, she added, “these facts do not justify the largest compensation plan in the history of public markets.”