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Tesla has secured another major legal victory in Delaware, with the state’s Supreme Court slashing more than $100 million from the legal fees awarded to shareholder attorneys in a long-running dispute over board compensation. According to Bloomberg Law, the court reduced the fee award to about $71 million, down sharply from the $176 million previously approved by the Delaware Chancery Court.
The case stems from a derivative lawsuit challenging four years of compensation paid to Tesla’s directors between 2017 and 2020. Those directors included CEO Elon Musk, Oracle founder Larry Ellison, Musk’s brother Kimbal Musk, and James Murdoch. The settlement requires Tesla’s board to return stock and options valued at up to $735 million and to forgo an additional three years of compensation worth roughly $184 million.
In its ruling, the Delaware Supreme Court said the lower court erred by factoring in the intrinsic value of returned stock options when calculating the financial benefit used to justify the attorneys’ fees. Chief Justice Collins J. Seitz Jr. wrote that while the value of those options mattered for determining how many should be returned, it shouldn’t have been used to inflate the fee award. The justices concluded that $71 million represented a reasonable fee and avoided what they described as a potential windfall for counsel.
Tesla had argued during oral arguments that a fee in that range was appropriate, a position the court ultimately agreed with. Notably, the Supreme Court upheld the underlying settlement itself, focusing its decision solely on the size of the legal payout.
This ruling follows another high-profile win for Tesla just last month, when Delaware’s top court reinstated Elon Musk’s 2018 CEO compensation package, valued at roughly $56 billion at the time it fully vested. In that case, the court also dramatically reduced the legal fees awarded to shareholder attorneys, signaling a growing reluctance to rubber-stamp nine-figure payouts in corporate governance cases.
Taken together, the decisions mark a clear trend in Tesla’s favor. While shareholder lawsuits have forced changes to board pay and governance, Delaware’s Supreme Court is drawing firmer lines around how much plaintiffs’ lawyers can collect. For Tesla, that translates into hundreds of millions of dollars saved — and yet another courtroom victory at a pivotal moment for the company.
