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WSJ: Elon Musk and Donald Trump Cases Imperil the Rule of Law American prosperity rests on equal justice. Delaware and New York judges have called it into question.

  |   By Polling+ Staff

(Photo by NICHOLAS KAMM and Brendan Smialowski / AFP) (Photo by NICHOLAS KAMM,BRENDAN SMIALOWSKI/AFP via Getty Images)

Elon Musk and Donald Trump Cases Imperil the Rule of Law

American prosperity rests on equal justice. Delaware and New York judges have called it into question.

Jeb Bush gets it exactly.

Writing in the Wall Street Journal, former Florida Governor Bush and one Joe Lonsdale, “a founder of Palantir and managing partner of 8VC” write:

“The U.S. is the business capital of the world in large part because of its robust constitutional system and impartial judiciary. But two unprecedented legal decisions, against Donald Trump in New York and Elon Musk in Delaware, call that into question. In both cases, judges have ordered massive punitive judgments on behalf of dubious or nonexistent ‘victims.’  

Every American has a right to be critical of Mr. Trump’s politics—one of us ran against him in 2016—or Mr. Musk’s public persona. But equality before the law is precious, and these rulings represent a crisis not only for the soundness of our courts, but for the business environment that has allowed the U.S. to prosper. If these rulings stand, the damage could cascade through the economy, creating fear of arbitrary enforcement against entrepreneurs who seek public office or raise their voices as citizens in a way that politicians dislike. 

In Delaware, Chancellor Kathaleen McCormick of the Court of Chancery ordered the unwinding of five years of Mr. Musk’s incentive-based compensation at Tesla, which had been approved by 80% of the company’s shareholders. The plaintiff, Richard Tornetta, held nine shares in 2018—worth about $200 then and $2,000 today, after the execution of the compensation plan that supposedly injured him.

Mr. Musk’s compensation plan awarded him stock bonuses tied to earnings and stock-value benchmarks, which many critics thought he could never meet. When he did, he received $56 billion, enriching shareholders like Mr. Tornetta along the way. Judge McCormick has yet to say how she wants the pay package unwound, but Mr. Tornetta’s lawyers could petition her for a percentage of the $56 billion as a fee for having succeeded in their challenge. Mr. Musk’s performance at Tesla enriched all shareholders, but Judge McCormick’s ruling may primarily enrich Delaware trial lawyers.

In New York, Judge Arthur Engoron ordered Mr. Trump to pay more than $350 million in a civil fraud judgment for inflating the value of his real-estate holdings. That case was brought by Attorney General Letitia James, who ran for office in 2018 on a promise to target the man she called ‘an illegitimate president.’

The unusual New York law Ms. James used to investigate and sue Mr. Trump didn’t require her to prove that he had intended to defraud anyone, or even that anyone lost money. The Associated Press found that of the 12 cases brought under that law since its adoption in 1956 in which significant penalties were imposed, the case against Mr. Trump was the only instance without an alleged victim or financial loss. Bankers from Deutsche Bank, which lent money to Mr. Trump, testified that they were satisfied with having done so, given they were paid back on time and with interest. They also testified that they were uncertain whether the alleged exaggerations would have affected the terms of the loans to Mr. Trump—a key part of Ms. James’s case. Since there were no victims, the state will collect the damages.

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New York and Delaware have played an outsize role in business in the U.S. Many major companies are incorporated in Delaware owing to the state’s body of corporate legal precedents; and a significant number of banks operate in New York, the world financial capital. The appellate courts in those states now have a chance to review these dangerous judicial rulings and try to stop further damage to the reputations of their respective judiciaries.

If they don’t, blue-state politicians may have the satisfaction of ‘sticking it’ to Messrs. Trump and Musk, but the loss to those states will be significant. The damage to the legal fabric of the country will be even worse. A dispassionate justice system is at the heart of American exceptionalism, and the country will be poorer if we lose it.”

In short, the former Florida governor and his co-writer the businessman are saying that what these two judges have done to Messrs. Trump and Musk is not just egregiously wrong but decidedly dangerous to the rule of law.