Lawyers who invalidated Elon Musk’s pay as excessive seek $6 billion in fees By Reuters
© Reuters. FILE PHOTO: Elon Musk, CEO of SpaceX and Tesla and owner of . REUTERS/ Gon
Tom Hals
WILMINGTON, Del. (Reuters) – Lawyers who sought to invalidate Elon Musk’s $56 billion compensation claim as excessive will see a record $6 billion worth of legal fees payable with shares of the electric car maker, according to a court filing on Friday. They say they are asking for it.
“We acknowledge that the requested fees are unprecedented in absolute size,” the three law firms’ filing with the Delaware Court of Chancery reads.
The fees amount to $288,888 per hour, according to court filings.
The fee will be paid by Tesla (NASDAQ:) to an attorney representing Richard Tornetta, a Tesla shareholder who sued Musk in 2018 over his pay package. That’s something a Delaware judge rejected in January.
The electric car maker is being asked to pay a fee because it benefited from the return of Musk’s pay package, which his legal team said would result in 266 million shares being returned to the automaker.
The fee request must be approved by Kathaleen McCormick (NYSE:), the judge overseeing the case. In her ruling, she called Musk’s salary “unfathomable.”
Tesla and Musk’s lawyers did not immediately respond to requests for comment.
The company may challenge the fee as it has been sought in similar cases in relation to director salaries.
“This structure has the advantage of tying compensation directly to profits generated and preventing a single cent from being taken from Tesla’s balance sheet to pay fees,” the shareholder legal team said, noting that fees are also tax deductible to Tesla. pointed out.
The largest settlements in shareholder lawsuits are in federal court, and the largest fee was $688 million in 2008 for the legal team that won a $7.2 billion settlement in Enron Corp.’s failed securities fraud case.
The Tesla fee request comes as the Delaware Supreme Court is considering an appeal of a $267 million fee in a $1 billion settlement case involving Dell Technologies (NYSE:).
Delaware judges said cases that proceed in depth through depositions and trials should result in higher recovery rates, reflecting the risk and effort. The Musk salary case went on trial for a week.
Opponents of this approach have argued that as settlements and judgments grow in size, the percentage collected by attorneys must be reduced to avoid overcompensation.
The legal team said the requested fee was equivalent to approximately 11% of the judgment.
Musk’s pay package consists of stock options, which allows him to purchase Tesla stock at a steep discount and requires him to hold the shares for five years. The legal team said it was seeking inventory without restrictions on sales.
The shareholders’ legal team consisted of three law firms: New York-based Bernstein Litowitz Berger & Grossmann and Friedman Oster & Tejtel, and Wilmington’s Andrews & Springer.
