In the lawsuit against Tesla CEO Elon Musk’s 2018 compensation package, attorneys have petitioned a Delaware judge for a fee of nearly $6 billion in Tesla stock. This request follows their successful argument that Musk’s $56 billion pay package was unlawful.
The attorneys, representing plaintiff Richard Tornetta, are seeking over 11% of the Tesla shares originally designated for Musk, equating to approximately 29.4 million shares. With Tesla’s stock closing at $202.64 per share on Friday, the fee amounts to roughly $5.96 billion. This amount, if approved, would set a new precedent, surpassing the $688 million awarded to lawyers in Enron-related class actions in 2008.
The legal team justified their request by stating, “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. It is also tax-deductible by Tesla.” They emphasized the alignment of their interests with Tesla shareholders, noting their willingness to “eat our cooking” by accepting payment in shares.
The Delaware chancery court had previously ruled in favor of revoking Musk’s pay package, citing Tesla’s board of directors’ failure to demonstrate its fairness to shareholders. The lawyers argued that their fee is “conservative” under Delaware law, which they claim entitles them to 33% of the “quantifiable conferred benefit,” according to NBC News.
In their petition, the lawyers highlighted the contingency nature of the case, stating, “Plaintiff’s Counsel have not been paid for their work, nor have any of their costs or expenses been reimbursed.” They also noted the substantial time and resources devoted to the case over six years, totaling 19,499.95 hours. This translates to a per-hour rate of $305,550 for the nearly $6 billion award.
Greg Varallo, the lead counsel for the plaintiffs and head of the Delaware practice for Bernstein Litowitz Berger & Grossmann, did not immediately respond to requests for further comment. Similarly, representatives for Musk and Tesla have yet to comment on the matter.
The lawsuit’s outcome has also spurred Musk to consider relocating Tesla’s incorporation to Texas. The CEO is expected to appeal Judge Kathaleen McCormick’s ruling, which described the process leading to Musk’s pay package as “deeply flawed.”
