Lawyers who nullified Elon Musk’s pay as excessive seek US$6 billion fee
- The lawyers said the record legal fee should be paid in the form of US$6 billion in Tesla stock
- Tesla shareholder Richard Tornetta sued Musk in 2018 over his US$56 billion pay package, which a court nixed in January
“We recognise that the requested fee is unprecedented in terms of absolute size,” said the filing with the Court of Chancery in Delaware by the three law firms.
The fee works out to an hourly rate of US$288,888, according to the court filing.
Musk blasted the request as “criminal,” posting on his X platform (formerly Twitter) that “the lawyers who did nothing but damage Tesla want US$6 billion.”
The fee will be paid by Tesla to lawyers who represented Richard Tornetta, a Tesla shareholder who sued Musk in 2018 over the pay package, which a Delaware judge nixed in January.
The electric vehicle maker is being asked to pay the fee because it benefited from the return of Musk’s pay package, which the legal team said will result in the return to the car maker of 266 million shares.
The fee request must be approved by Kathaleen McCormick, the judge overseeing the case. She called Musk’s pay “unfathomable” in her ruling.
Tesla and Musk’s lawyer did not immediately respond to a request for comment.
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The company may object to the fee, as it has a fee request in a similar case over the pay for its directors.
“This structure has the benefit of linking the award directly to the benefit created and avoids taking even one cent from the Tesla balance sheet to pay fees,” said the shareholder legal team, noting the fee is also tax-deductible to Tesla.
The largest settlements in shareholder cases occur in federal court and the biggest fee was US$688 million in 2008 for the legal team that obtained a US$7.2 billion settlement in securities fraud case over the failure of Enron Corp.
The Tesla fee request comes as the Delaware Supreme Court is considering an appeal of a US$267 million fee in a case that settled for US$1 billion involving Dell Technologies.
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Delaware judges have said that pursuing cases deep into litigation, through depositions and toward trial, should get a higher percentage of the recovery to reflect the risk and effort. The Musk pay case went to a one-week trial.
Opponents of this approach argued that as settlements and judgments grow in size, lawyers should collect a declining percentage to avoid overcompensation.
The legal team said the requested fee worked out to about 11 per cent of the judgment.
Musk’s pay package consisted of stock options that allowed him to purchase Tesla stock at heavily discounted prices and required him to hold the stock for five years. The legal team said they are seeking stock without restrictions on selling it.
The shareholder’s legal team comprised three law firms, Bernstein Litowitz Berger & Grossmann and Friedman Oster & Tejtel, both based in New York, and Andrews & Springer of Wilmington.
