Lawyers who successfully voided Elon Musk's fifty-six billion dollars compensation package as excessive on Friday are now seeking a historic six billion dollarsn legal fee, payable in the electric car maker's stock.
The three law firms acknowledged the unprecedented nature of the requested fee in a Court of Chancery in Delaware filing, noting that it equates to an hourly rate of $288,888.
A "Criminal" Compensation Demand
Elon Musk criticized the attorneys' suggested compensation as "criminal" on his X platform, accusing the lawyers of only causing harm to Tesla.
Requests for comment from Tesla and Musk's attorney were not promptly addressed.
The company was set to compensate the lawyers representing Richard Tornetta, a former drummer for the Philadelphia-based thrash band Dawn of Correction, who sued Musk in 2018 over the pay package nullified by a Delaware judge in January.
The lawsuit, filed by Tornetta on behalf of other shareholders, claimed that Musk had significant control over the approval process for his compensation package and that the board misled investors who voted on the CEO's substantial compensation.
The electric vehicle manufacturer is requested to cover the fee since it benefited from the return of Musk's compensation package, which the legal team mentioned would lead to 266 million shares returned to the carmaker.
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A Tesla-Stock Payment
The lawyers stated that this arrangement directly ties the award to the created benefit without requiring any funds from Tesla's balance sheet for fee payment, adding that the fee would be tax-deductible for Tesla.
Judge Kathaleen McCormick, presiding over the case and responsible for determining the fee, described Musk's compensation as "unfathomable" in her ruling.
The company might protest the fee, as it is disputed a fee request in a similar case involving director pay.
The Largest Shareholders' Settlement
The highest settlements in shareholder lawsuits have been in federal court, with the largest fee being six hundred eighty-eight million dollars in 2008 for a legal team that secured a seven billion two hundred million dollars settlement in a securities fraud case against Enron Corp.
The fee request from Tesla coincides with the Delaware Supreme Court reviewing an appeal for a two hundred sixty-seven million dollars fee in a case settled for one billion dollars concerning Dell Technologies.
Delaware judges have emphasized that cases pursued extensively through litigation, including depositions and trials, deserve a higher percentage of the recovery to account for the risk and effort involved. The Musk compensation case proceeded to a trial for one week.
Critics of this stance contend that as settlements and judgments increase, attorneys should receive a decreasing percentage to prevent overcompensation. The legal team mentioned that the proposed fee amounted to approximately 11% of the judgment.
Musk's compensation package included stock options enabling him to purchase Tesla stock at significant discounts, requiring him to hold the shares for five years. The legal team stated they aimed to obtain unrestricted stock for selling.
The shareholders' legal representation consisted of three law firms: Bernstein Litowitz Berger & Grossmann, Friedman Oster & Tejtel, headquartered in New York, and Andrews & Springer, located in Wilmington.
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