Lawyers who successfully challenged Elon Musk’s excessive compensation are seeking a record $6 billion legal fee, payable in Tesla stock. The fee request, which has been criticized by Musk, is currently under consideration by the court.
Lawyers Seek Record $6 Billion Legal Fee in Elon Musk Compensation Case
A group of lawyers is seeking a record-breaking $6 billion legal fee in the highly publicized compensation case involving Elon Musk, CEO of Tesla. The legal team, comprised of three prominent firms, is requesting payment in Tesla stock, which has caused controversy and drawn criticism from Musk himself.
( Credit to: Reuters )
The lawyers, representing Richard Tornetta, a shareholder who sued Musk over his excessive pay package, argue that the requested fee is justified given the benefit Tesla received from the return of Musk’s compensation. They claim that the fee, which amounts to an hourly rate of $288,888, is unprecedented in terms of its absolute size but is warranted in this case.
( Credit to: Reuters )
Musk, however, has vehemently opposed the fee request, referring to it as ‘criminal.’ He took to his X platform to express his disdain for the lawyers, accusing them of causing damage to Tesla and now seeking an exorbitant fee.
Tesla’s Response and Pending Decision
As of now, Tesla and Musk’s attorney have not responded to the fee request. If approved, Tesla would be responsible for paying the lawyers who successfully challenged Musk’s compensation. The final decision on the fee will be made by Judge Kathaleen McCormick, who previously referred to Musk’s pay as ‘unfathomable’ in her ruling.
It remains to be seen whether Tesla will object to the fee, especially considering the company has a pending fee request in a similar case involving the pay for its directors. The outcome of this decision will have significant implications for both Tesla and the legal industry as a whole.
The Justification for the Fee Request
The legal team is arguing that the $6 billion fee should be paid in Tesla stock, as this would result in the return of 266 million shares to the carmaker. They emphasize that this structure directly links the fee to the benefit created and avoids using any funds from Tesla’s balance sheet. Furthermore, they highlight that the fee would be tax-deductible for Tesla.
While the requested fee is unprecedented in size for a legal settlement, the lawyers compare it to previous shareholder cases where substantial fees were awarded. They point to a 2008 case involving Enron Corp, where a legal team received a $688 million fee for securing a $7.2 billion settlement in a securities fraud case.
Delaware Supreme Court’s Consideration
The fee request comes at a time when the Delaware Supreme Court is considering an appeal of a $267 million fee in a case involving Dell Technologies. Delaware judges have expressed the view that attorneys who pursue cases deep into litigation, including depositions and trial, should receive a higher percentage of the recovery to account for the risk and effort involved.
However, critics argue that as settlements and judgments increase in size, attorneys should collect a declining percentage to prevent overcompensation. The outcome of the Dell Technologies case and the decision on the fee request in the Elon Musk compensation case will shape the future landscape of legal fees in Delaware.
Background on Elon Musk’s Compensation
Elon Musk’s pay package consisted of stock options that allowed him to purchase Tesla stock at discounted prices and required him to hold the stock for five years. However, the legal team representing the shareholder is seeking unrestricted stock without any selling restrictions.
In January, a Delaware judge ruled in favor of Richard Tornetta, voiding Musk’s compensation and sparking this ongoing legal battle over the legal fee. The judge referred to Musk’s pay as ‘unfathomable,’ setting the stage for the subsequent fee request.
Conclusion
The request for a $6 billion legal fee in the Elon Musk compensation case has garnered significant attention and sparked a heated debate. The lawyers argue that the fee is justified given the benefit Tesla received from the return of Musk’s pay package, while Musk himself vehemently opposes the request.
The final decision on the fee will be made by Judge Kathaleen McCormick, and it remains to be seen how Tesla will respond. This case, along with the ongoing consideration of legal fees by the Delaware Supreme Court, will shape the future of compensation and legal fees in high-profile cases.
