Wilmington, Delaware – Three law firms representing a Tesla shareholder are seeking a record fee from the electric vehicle maker after successfully arguing that Elon Musk’s $56bn pay package was excessive. The lawyers have requested a fee of $6bn, payable in the form of Tesla’s stock, according to a court filing made in the court of chancery in Delaware.
The legal team defended their fee request, claiming that it is unprecedented in size but justified due to the benefit Tesla received from the return of Musk’s stock options. The fee, calculated to an hourly rate of $288,888, is structured to link the award directly to the benefit created, without impacting Tesla’s balance sheet for payment.
The attorneys representing Richard Tornetta, the shareholder who sued Musk in 2018 over the pay package, are from three law firms based in New York and Wilmington: Bernstein Litowitz Berger & Grossmann, Friedman Oster & Tejtel, and Andrews & Springer. The fee request is pending approval from Judge Kathaleen McCormick, who previously described Musk’s pay as “unfathomable” in her ruling earlier this year.
Tesla, Musk, and their attorneys have not yet responded to the request for comment. However, the company may object to the fee, as it is also facing a similar case over the pay for its directors. The legal team highlighted that the requested fee amount accounts for approximately 11% of the judgment in the case.
The court’s consideration of this fee request comes amidst a larger discussion on how attorney fees in shareholder cases are determined, with a focus on balancing risk, effort, and compensation. The Musk pay case had proceeded to a one-week trial before the Delaware judges.
It is noted that Musk’s pay package consisted of stock options that allowed him to purchase Tesla stock at discounted rates and required him to hold the stock for five years. The legal team’s request for stock without restrictions on selling portrays their intention to benefit from the success of their case immediately.
As the legal proceedings unfold, the outcome of this fee request will be closely monitored by shareholders, legal experts, and observers, shaping future practices and guidelines in similar cases within the corporate landscape.