By Tom Hals
WILMINGTON, Delaware, March 30 (Reuters) - The chief judge on Delaware's corporate court said she will reassign three cases involving Elon Musk to avoid unnecessary media attention after the billionaire entrepreneur complained that her activity on social media had shown bias against him.
Chancellor Kathaleen McCormick of the Court of Chancery said she was reassigning three cases against Musk and Tesla board members that are potentially worth billions of dollars after the defendants said she supported
a post on LinkedIn celebrating a jury verdict against Musk in an unrelated securities fraud case.
"As should be obvious, disproportionate media attention surrounding a judge’s handling of an action is detrimental to the administration of justice," McCormick wrote in her letter to the legal teams in the three cases, adding she was not biased against the defendants. She also said the motion for her recusal was based on the false premise that she was supportive of the LinkedIn post.
The defendants' motion included a screenshot of a LinkedIn post by a jury consultant that congratulated the legal teams that led a federal securities fraud case against Musk for "standing up for the little guy against the richest man in the world." It showed McCormick had supported the post using her personal LinkedIn account.
In a letter to the legal teams last week, McCormick said she had not read the post and reported the incident as suspicious activity to LinkedIn.
The defendants said if McCormick eventually sided with Tesla's shareholders, her ruling would be tainted by her "support" for the people standing up to Musk.
McCormick said she would select a time for the reassignment to take place and directed the attorneys who requested the move to attend to "witness what they requested."
After McCormick posted her letter on the court docket, Tesla shareholder David Wagner dismissed his case. Wagner sued in 2022 alleging the Tesla board failed to enforce a 2018 agreement with the Securities and Exchange Commission that required Musk to obtain Tesla approval for social media posts about the company.
Attorneys for the shareholders and defendants did not immediately respond to requests for comment.
Musk has attacked McCormick and Delaware courts since her ruling in 2024 stripping him of his record pay package from Tesla after she found the board breached its fiduciary duties to shareholders in approving it. The Delaware Supreme Court reinstated the pay package, worth more than $100 billion, in December.
After McCormick's ruling against Musk's pay package, Musk led his companies including SpaceX and Tesla to reincorporate outside of Delaware. Just before Tesla left, several of the company's shareholders brought legal claims against its board in Delaware's Court of Chancery, which include the cases that McCormick reassigned.
McCormick is reassigning the cases as the parties are waiting for her to rule on a request by the defendants to dismiss the cases before going to trial.
The cases allege that Musk's acquisition of Twitter, now known as X, and his work with artificial intelligence company xAI came at the expense of Tesla. The shareholders want Musk to be ordered to disgorge his equity stake in xAI, among other remedies.
The defendants denied the allegations and said that Tesla has thrived under Musk and that his activities were not unfair to the automaker.
(Reporting by Tom Hals in Wilmington, Delaware; Editing by Matthew Lewis)
