This appeal arises from a high-profile stockholder derivative challenge to Tesla’s 2018 CEO performance-based equity compensation plan for Elon Musk (the “2018 Grant”). A Tesla stockholder (Plaintiff) sued Musk and directors who approved the plan, alleging that Musk—treated by the Court of Chancery as a controlling stockholder for this transaction—extracted excessive compensation through a conflicted process and misleading disclosures.

After a five-day trial, the Court of Chancery applied the “entire fairness” standard, found fiduciary breaches, ordered rescission of the 2018 Grant, and later awarded attorneys’ fees using a “grant-date-fair-value” benefit measure. Following that post-trial liability decision, Tesla conducted a second stockholder vote with new disclosures (including the Chancery opinion), and defendants sought to revise the judgment based on alleged “ratification.” The Court of Chancery refused.

On appeal, the Supreme Court took a deliberately narrow path. Although it acknowledged “varying views” among the Justices about the underlying liability determination, it resolved the appeal principally on remedial doctrine: whether rescission was legally and equitably available after Musk fully performed under the incentive plan.

Key issues

• Whether rescission can be ordered when the defendant has fully performed and restoration of the status quo ante is not feasible for all parties.
• Whether Musk’s preexisting equity stake can substitute as “consideration” to justify rescission that leaves him uncompensated under the challenged grant.
• Whether the Court of Chancery improperly shifted to defendants the burden to propose a “viable alternative” remedy.
• What remedy is available when rescission fails and the plaintiff did not prove another workable damages model.
• How attorneys’ fees should be awarded when the plaintiff obtains only nominal damages but litigation confers some corporate benefit.

The Supreme Court held that the Court of Chancery erred by ordering rescission of the 2018 Grant. Rescission was improper because the court could not restore the parties—especially Musk—to the status quo ante after six years of performance to achieve the plan’s milestones. The Court further held that Musk’s preexisting equity gains (from prior grants and holdings) could not be treated as substitute consideration for the labor he provided under the 2018 Grant.

The Court also rejected the Chancery court’s premise that defendants’ failure to propose an alternative remedy justified total rescission: the plaintiff bears the burden to establish entitlement to rescission and to support alternative relief with evidence.

Because the Plaintiff sought only equitable rescission and failed to establish an evidentiary basis for other relief, the Court awarded $1 nominal damages, reinstated the 2018 Grant, and recalculated attorneys’ fees on a quantum meruit basis (lodestar plus a four-times multiplier), with post-judgment interest from December 2, 2024.

• Tornetta v. Musk, 310 A.3d 430 (Del. Ch. 2024) [Post-Trial Op.] and Tornetta v. Musk, 326 A.3d 203 (Del. Ch. 2024) [Ratification and Fee Op.]
  These Chancery opinions were the immediate backdrop: the liability finding under entire fairness, the rescission remedy, the refusal to revise based on the Second Stockholder Vote, and the original fee award (valuing the benefit at $2.3 billion and applying a 15% “Sugarland” percentage). The Supreme Court largely accepted the trial findings as context but did not affirmatively endorse the liability analysis; instead, it reversed the remedy and the fee methodology as inconsistent with the remedial record.
• Brookfield Asset Management, Inc. v. Rosson, 261 A.3d 1251 (Del. 2021)
  Brookfield explains why the case proceeded as derivative rather than direct after amendment: overpayment/dilution claims are derivative. This classification matters remedially because the “benefit” runs to the corporation and also because fee doctrine in derivative cases turns on corporate benefit and causation.
• Kahn v. Lynch Communication Systems, Inc., 638 A.2d 1110 (Del. 1994)
  The Chancery court used Lynch to address burden-shifting within entire fairness (committee or majority-of-the-minority vote). Although the Supreme Court did not decide the underlying standard-of-review dispute, it referenced the Chancery approach to show why rescission was chosen and how the case was litigated.
• Geronta Funding v. Brighthouse Life Ins. Co., 284 A.3d 47 (Del. 2022) and Norton v. Poplos, 443 A.2d 1 (Del. 1982)
  These cases supply core rescission doctrine: rescission “unmakes” an agreement and attempts to return parties to the status quo. The Supreme Court used them to anchor the central holding: rescission fails where mutual restoration is not feasible—particularly after years of performance that cannot be “returned.”
• Ravenswood Inv. Co., L.P. v. Est. of Winmill, 2018 WL 1410860 (Del. Ch. Mar. 21, 2018)
  Ravenswood became the Court’s remedial “escape hatch”: when rescission/rescissory damages do not work and the plaintiff fails to prove an alternative damages model, the court may award nominal damages (often $1) to recognize a proven wrong without manufacturing an unsupported monetary remedy. The Supreme Court analogized the evidentiary deficiency here to Ravenswood.
• Gotham Partners, L.P. v. Hallwood Realty Partners, L.P., 817 A.2d 160 (Del. 2002) and Weinberger v. UOP, Inc., 457 A.2d 701 (Del. 1983)
  These decisions confirm the Court of Chancery’s broad remedial discretion in fiduciary cases and identify rescissory damages as a potential “preferred” tool where entire fairness is not satisfied but rescission is impracticable. The Supreme Court invoked them to emphasize that remedial discretion is broad but not unbounded: a court still needs feasible restoration (for rescission) or an evidentiary basis (for damages). Here, the plaintiff did not pursue rescissory damages and did not prove a workable alternative.
• Gimbel v. Signal Cos., 316 A.2d 599 (Del. Ch. 1974)
  The classic “unscramble the eggs” line frames impracticability limits on rescission. The Supreme Court distinguished this case from typical transactional complexity problems: the “egg” problem was not accounting/tax mechanics but rather the impossibility of returning six years of executive performance as part of mutual restoration.
• Lynch v. Vickers Energy Corp., 429 A.2d 497 (Del. 1981) (overruled on other grounds by Weinberger v. UOP, Inc.)
  The Chancery court cited Lynch for the attractiveness of rescission where misleading inducement is shown. The Supreme Court effectively limited that impulse by re-centering the status-quo prerequisite: even if rescission is “preferable” in some inducement scenarios, it is not available when it would produce inequitable non-restoration—especially after full performance.
• SIGA Techs., Inc. v. Pharmathene, Inc., 67 A.3d 330 (Del. 2013) and Schock v. Nash, 732 A.2d 217 (Del. 1999)
  These cases supply the standards of appellate review for equitable remedies: de novo for correct standards; abuse of discretion for application and remedy fashioning. The Supreme Court used this framework to justify reversing the rescission remedy while avoiding broader liability re-litigation.
• Valeant Pharmaceuticals v. Jerney, 921 A.2d 732 (Del. Ch. 2007) and Technicorp International II, Inc. v. Johnston, 1997 WL 538671 (Del. Ch. Aug. 25, 1997)
  The Chancery court relied on Valeant when faulting defendants for not supplying a “delta” between unfair and fair. The Supreme Court distinguished Valeant as a disgorgement case (not rescission), emphasizing that disgorgement does not require mutual restoration, while rescission does. The Court also used Technicorp to illustrate that compensation remedies can be tailored, but only with doctrinal fit and evidentiary support.
• Sugarland Industries, Inc. v. Thomas, 420 A.2d 142 (Del. 1980)
  This is the traditional Chancery framework for fee awards in representative litigation. The Supreme Court did not apply the percentage-of-benefit approach; instead it moved to quantum meruit given nominal damages/unquantifiable benefit, implicitly showing that Sugarland factors do not compel a percentage method where the “benefit” cannot be reliably measured or is not realized in the way originally assumed.
• In re Oracle Corp. Deriv. Litig., 339 A.3d 1 (Del. 2025), Oxbow Carbon & Mins. Holdings, Inc. v. Crestview-Oxbow Acquisition, LLC, 202 A.3d 482 (Del. 2019), and Holifield v. XRI Investment Holdings LLC, 304 A.3d 896 (Del. 2023)
  These authorities were used on waiver/preservation. The Court held defendants did not waive the rescission challenge because the Court of Chancery understood and addressed it, satisfying the “fairly presented” requirement.

1. Narrow path: remedy, not liability.
   The Court expressly avoided deciding the full liability debate (“varying views”) and reversed based on the impropriety of rescission alone. This is a notable institutional move: it preserves doctrinal stability around entire fairness/controller issues while correcting what the Court viewed as a clear remedial overreach.
2. Waiver rejected because the trial court addressed the issue.
   Even though defendants’ rescission argument was not maximally developed in the main post-trial briefing, the Supreme Court treated it as preserved because the Court of Chancery identified and ruled on the core contention (“rescission is a harsh consequence that would leave Musk uncompensated”).
3. Rescission requires mutual restoration; here, it fails on the CEO-performance component.
   The Court treated “status quo ante” restoration as the decisive constraint: Musk fully performed over roughly six years to hit milestones. That performance cannot be returned. A remedy that “unmakes” the bargain but leaves one party having delivered non-returnable consideration (years of labor and management) is not equitable rescission.
4. Preexisting equity value is not “substitute consideration.”
   The Court rejected the idea that Musk’s historical equity stake and gains could be used to justify rescinding compensation earned under a distinct bargain. The opinion frames this in consideration logic: the 2018 Grant promised new compensation for new performance; past arrangements cannot be treated as payment for the later-bargained-for services. (The Court underscored that “past consideration” cannot support a new promise.)
5. Burden allocation: plaintiff must prove rescission and support alternative relief.
   The Court held it was error to fault defendants for not proposing a partial remedy or a “logically defensible delta.” In the Supreme Court’s framing:
   • Plaintiff bears the burden to prove rescission is viable (including feasibility of restoring status quo ante).
   • If plaintiff wants something else (partial rescission, rescissory damages, or other monetary relief), plaintiff must plead and prove it with evidence.
   • A court cannot award “made up” relief simply because defendants did not hand the court a different number.
   The Court distinguished Valeant Pharmaceuticals v. Jerney as dealing with disgorgement, where mutual status-quo restoration is not the governing prerequisite.
6. Remedy when rescission fails and no damages model is proven: nominal damages.
   Using Ravenswood Inv. Co., L.P. v. Est. of Winmill as the template, the Court awarded $1 nominal damages—recognizing an established wrong without endorsing an unsupported monetary reconstruction.
7. Fee award: quantum meruit with a four-times multiplier.
   Because the plaintiff ultimately received only nominal damages, the Supreme Court moved away from the Chancery court’s $2.3 billion “benefit” valuation and percentage award. It awarded fees based on quantum meruit (reasonable value of services) with a 4x multiplier (an approach Tesla itself proposed), while acknowledging there was still corporate benefit from counsel’s efforts.

1. A concrete remedial limit in controller-compensation litigation

The opinion establishes a practical ceiling on rescission in fiduciary challenges to long-horizon performance compensation: where the executive has fully performed and the “give” side of the bargain is non-returnable (years of management effort tied to corporate growth), rescission may be unavailable even if liability is assumed or found.

2. Burden clarity: plaintiffs must come to court with a workable remedial case

Plaintiffs cannot rely on a court to engineer a “fair” compensation figure in the absence of evidence. If rescission is not feasible, plaintiffs should expect to plead and prove an alternative (e.g., rescissory damages, partial rescission/reformation, disgorgement-type theories where doctrinally available), or risk nominal damages.

3. Fee doctrine signal: “benefit” must be real, not assumed

The move to quantum meruit in a marquee case signals skepticism toward massive percentage-of-benefit awards where the asserted benefit is not actually realized (here, rescission was reversed and the plan reinstated). Future fee petitions in representative litigation may face stronger demands to tie fees to durable, court-approved outcomes or reliably measured, realized benefits.

4. Strategic implications for boards and litigants

• Boards/defendants: Even where liability risk is substantial, defendants can meaningfully contest remedy and fee exposure by focusing on status-quo feasibility and evidentiary gaps in plaintiffs’ damages theories.
• Plaintiffs: Remedy strategy must anticipate the possibility that rescission will be deemed inequitable after performance; building an evidentiary record for alternative monetary relief becomes essential.
• Courts: The opinion reinforces that remedial discretion has doctrinal guardrails (restoration feasibility; evidentiary basis) and that “equity” is not authority to improvise.

• Derivative vs. direct (see Brookfield Asset Management, Inc. v. Rosson):
  A derivative claim belongs to the corporation (stockholder sues on the company’s behalf). Overpayment/dilution claims are usually derivative because the harm is to the corporate enterprise.
• Controlling stockholder (transaction-specific control):
  Even without majority voting power, a stockholder can be treated as a controller for a particular deal if they exercise dominating influence over that specific transaction’s process and outcome.
• Entire fairness:
  Delaware’s most demanding fiduciary review for conflicted transactions, requiring proof of fair dealing (process) and fair price (economic terms).
• Rescission vs. rescissory damages vs. disgorgement:
  
  • Rescission: unwind the transaction and restore both sides to where they were before (status quo ante).
  • Rescissory damages: money substitute for rescission when unwinding is warranted but not feasible.
  • Disgorgement: strip a wrongdoer’s gains; does not require restoring both parties to the pre-transaction position.
• Status quo ante:
  The pre-transaction baseline. If a remedy depends on returning to that baseline but the court cannot do so for all parties (e.g., six years of performance cannot be “returned”), rescission is generally improper.
• Nominal damages (see Ravenswood Inv. Co., L.P. v. Est. of Winmill):
  A token amount (often $1) awarded to recognize a legal wrong when no supported compensatory measure is proven or available.
• Quantum meruit fees:
  Attorneys’ fees based on the reasonable value of services (lodestar), sometimes enhanced by a multiplier to reflect risk, effort, and results when a traditional “percentage of benefit” method is not appropriate.
• MFW framework:
  A pathway to business judgment review for controller transactions if (among other requirements) an independent special committee and an effective majority-of-the-minority vote are both in place before economic negotiations begin.

IN RE Tesla, Inc. Derivative Litigation is foremost a remedial decision. Without finally resolving the underlying controller/entire-fairness merits, the Supreme Court held that equitable rescission cannot be used to wipe out a long-term, milestone-based compensation bargain after the executive has fully performed, where mutual restoration to the status quo ante is not feasible and where prior equity gains cannot serve as substitute consideration for later-bargained-for labor.

The Court clarified burden allocation: plaintiffs must prove rescission’s feasibility and must support any alternative monetary remedy with evidence. When that showing fails, Delaware courts may recognize the wrong through nominal damages rather than inventing a remedial “delta.” Finally, the decision recalibrates fee incentives by shifting from an asserted multi-billion-dollar “benefit” percentage to quantum meruit (with a multiplier), tying compensation for counsel more tightly to demonstrable, legally sustainable outcomes.