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WILMINGTON, Del. — Tesla, its board of directors, and CEO Elon Musk were hit with a proposed class action lawsuit in Delaware Chancery Court on Thursday. The suit challenges Tesla's plan to seek stockholder approval for the same $55.8 billion Musk compensation plan previously voided in January, alongside the company's reincorporation as a Texas entity.

In an April filing with the U.S. Securities and Exchange Commission (SEC), Tesla's board asked shareholders to approve the reincorporation from Delaware to Texas and to "ratify" Musk's compensation package, which was struck down by the Chancery Court in January. The annual meeting to vote on these matters is set for June 13, 2024.

Shareholder Donald Bell filed the complaint, claiming that the redomestication vote breaches Tesla's "Amended and Restated Certificate of Incorporation" from August 4, 2022, which requires a higher voting standard of just over 66%, rather than a simple majority. According to Bell, the company's SEC proxy statement indicates that the redomestication would repeal the current charter, necessitating approval by at least 66⅔% of the voting power of all outstanding shares.

Bell also alleges that Musk has used coercive tactics to secure stockholder approval for both the reincorporation and the ratification of his compensation package. The suit cites Musk's January threat to transfer Tesla's artificial intelligence and robotics technologies to a new company unless he maintained "~25% voting control" at Tesla.

Furthermore, Bell argues that Tesla's board has not fully disclosed how ratifying the rescinded compensation package will impact the company and its stockholders. He warns of potential "radical tax implications" that could significantly reduce Tesla's pre-tax profits for the last two years.

The lawsuit seeks to represent a class of Tesla stockholders who are or will be threatened with injury due to the defendants' alleged wrongful actions. It calls for declaratory judgments stating that Tesla's proposed redomestication vote violates its charter and that the proposal to ratify Musk's compensation package is null and void. The suit also seeks damages, litigation costs, attorney fees, and other relief.

Counsel for Bell and a representative for Tesla did not immediately respond to requests for comment late Thursday.

In a 200-page ruling in January, Chancellor Kathaleen St. J. McCormick found that "Musk dictated the timing" of the compensation-setting process and made last-minute changes to the timeline and substantive terms during board meetings. The court determined that Tesla's directors approved the compensation plan through a flawed process, influenced by a board controlled by Musk.

Despite arguments from Tesla and its directors that Musk's ambitious goals were crucial for Tesla's success, the court concluded that these facts did not justify the largest compensation plan in public market history. Following the court's decision, Musk tweeted: "Never incorporate your company in the state of Delaware."

Last week, Chancellor McCormick ensured that Tesla would not evade state corporate law jurisdiction or a potentially substantial stockholder attorney fee dispute by rushing votes on the compensation plan and reincorporation in Texas.

Bell is represented by Thomas A. Uebler, Brian V. DeMott, Adam J. Waskie, Terisa A. Shoremount, and Allison Neff of McCollom D'Emilio Smith Uebler LLC, as well as D. Seamus Kaskela and Adrienne Bell of Kaskela Law LLC.

Counsel information for the defendants was not immediately available.

The case is Donald Ball v. Tesla Inc. et al., case number 2024-0622, in the Court of Chancery of the State of Delaware.