The Lawyer—and Drummer—Who Felled Elon Musk’s $55.8 Billion Compensation Package

The bombshell decision, issued Tuesday in the Delaware Court of Chancery, came more than five years after a Tesla shareholder originally filed suit, asking the state’s business-law court to cancel Musk’s pay package at the electric-car maker.

The suit, filed in 2018, alleged Tesla’s CEO controlled the approval process and that the board misled investors, who later approved it. Musk has said he didn’t dictate the terms of his pay plan.

The judge in the case, Chancellor Kathaleen McCormick, found that the process for securing approval of Musk’s compensation was “deeply flawed," and agreed this week to rescind the CEO’s package, which was valued at a maximum of $55.8 billion.

“This would be as though it never happened," said Greg Varallo, lead lawyer for the single shareholder plaintiff, Richard Tornetta, referring to the board’s decision to award the package. Varallo and his team defeated a team of lawyers led by heavyweight New York law firm Cravath, Swaine & Moore and its chairman, Evan Chesler.

The case was originally filed by lawyers from Friedman Oster & Tejtel PLLC and Delaware-based Andrews & Springer LLC, which also represents Tornetta in a separate lawsuit that began in 2019. That suit, which is ongoing, is challenging the sale of Pandora Media to Sirius XM.

Friedman Oster & Tejtel is based in New York, but it specializes in corporate misconduct cases in Delaware, said principal David Tejtel. Tornetta’s lawyers at Andrews & Springer didn’t respond to requests for comments.

Varallo, 64, and several other lawyers at Bernstein, Litowitz, Berger & Grossman, joined the litigation in 2021. At the time, Tornetta had just survived a motion to dismiss by Tesla’s board of directors, raising the likelihood that the case could go to trial. Tejtel said the original legal team recognized it was going to be a massive undertaking.

“It made sense to enlist reinforcements," he said, on the decision to bring on Varallo. The trial began in 2022.

A former corporate-defense lawyer, Varallo has litigated hundreds of complex business disputes throughout the U.S., including in Delaware, according to a biography on his firm’s page. He represented Goldman Sachs in a challenge to its compensation structure, and served as lead counsel for News Corp and 21st Century Fox in shareholder litigation, the biography says. News Corp is the parent company of Dow Jones, publisher of The Wall Street Journal.

In 2019, after a three-decade career at corporate-defense firm Richards, Layton & Finger, Varallo—a self-described “blue-collar kid" from Philadelphia—made an uncommon decision for a well-established defense lawyer: to start working for plaintiffs.

“This was an opportunity in a very entrepreneurial way, to do something entirely new, to work with people that I did know, but in an area that would require some new learning on my part," he said in a 2021 podcast interview.

Varallo said in the interview that his initial warm welcome by his new colleagues was surprising. “I think as a defense lawyer, the perspective on the plaintiffs bar is unduly cabined, unduly narrow," he said in the interview. “Coming over, I was really heartened by the reception."

In his free time, Varallo says he enjoys goose and duck hunting—“I’m not the only Delaware lawyer that has this passion"—and playing poker.

“We litigate in a world where we have imperfect information, and you play competitive poker in a world where you’ve got imperfect information," he said. “There’s some, I think, overlap between the two."

Tornetta, who didn’t respond to requests for comment, previously worked for a company that created aftermarket audio equipment for cars and other automotive companies, according to public records and an archived version of his LinkedIn page.

In the mid-2000s, Tornetta drummed in a heavy metal band called Dawn of Correction, which described itself as “loud aggressive rock and roll with a foundation of old metal roots."

Tejtel praised Tornetta for not backing down during the litigation despite some people making negative online statements about the case. “It took a ton of courage to step forward and stay in the game," Tejtel said.

John Jasnoch, a partner at law firm Scott+Scott, said it isn’t uncommon in shareholder derivative suits for a plaintiff’s law firm to seek out a shareholder willing to serve as a lead plaintiff. Such plaintiffs don’t always play a big role in the case, but can receive compensation if a case is successful.

In these cases, the plaintiff “is standing in the shoes of the company," Jasnoch said, and sues its board or executives for actions that harmed the company. If the suit is successful, the financial benefits go to the company, while the plaintiff typically receives a small incentive award.

Lawyers have the potential to score a much bigger bounty, said Renee Zaytsev, a partner at law firm Boies Schiller Flexner. In Delaware, a judge has the final say on the fees lawyers receive. The fees are typically a percentage of the benefit the company receives and are dependent on the stage at which the case is resolved, Zaytsev said.

In the Musk case, the judge directed both sides to meet and come to an agreement on court costs and who pays them, as well as the precise language of a final order in the case, Varallo said. Tesla’s board of directors would then have 30 days to file an appeal once that order is entered, he said.

The nonjury trial, which lasted five days, saw several current and former Tesla board directors take the stand and included more than 1,700 exhibits, including emails and internal documents from the automaker.

Varallo agreed with one witness late in the trial that it had been an exhausting week.

“The days have blended together, as have the nights," he said.

Write to Ryan Felton at ryan.felton@wsj.com and James Fanelli at james.fanelli@wsj.com