Lawyers who had Elon Musk’s pay dismissed as excessive seek $6bn in Tesla shares
The lawyers who successfully argued that Elon Musk’s $56bn pay package was excessive are seeking a record legal fee worth $6bn, payable in the electric car maker’s stock, according to a court filing.
“We recognise that the requested fee is unprecedented in terms of absolute size,” Friday’s filing by the three law firms with the court of chancery in Delaware said.
The fee works out to an hourly rate of $288,888, according to the filing.
The electric vehicle maker is being asked to pay the fee because it benefited from the return of Musk’s pay package, which the legal team said will result in the return to the carmaker of 266m shares.
“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,” the shareholder legal team said, noting the fee was also tax-deductible to Tesla.
The fee is being sought by attorneys who represented Richard Tornetta, a Tesla shareholder who sued Musk in 2018 over the pay package, which a Delaware judge nixed in January.
The three law firms are Bernstein Litowitz Berger & Grossmann and Friedman Oster & Tejtel, both based in New York, and Andrews & Springer of Wilmington.
The fee request must be approved by Kathaleen McCormick, the judge overseeing the case. She called Musk’s pay “unfathomable” in her January ruling.
Tesla, Musk’s attorney and Musk did not immediately respond to a request for comment.
The company may object to the fee, as it has a fee request in a similar case over the pay for its directors.
The largest settlements in shareholder cases occur in federal court, where the biggest fee was $688m in 2008 for the legal team that obtained a $7.2bn settlement in a securities fraud case over the failure of Enron Corp.
The Tesla fee request comes as the Delaware supreme court is considering an appeal against a $267m fee in a case that settled for $1bn involving Dell Technologies.
Delaware judges have said that pursuing cases deep into litigation, through depositions and toward trial, should get a higher percentage of the recovery to reflect the risk and effort. The Musk pay case went to a one-week trial.
Opponents of this approach argued that as settlements and judgments grow in size, attorneys should collect a declining percentage to avoid overcompensation.
The legal team said the requested fee worked out to about 11% of the judgment.
Musk’s pay package consisted of stock options that allowed him to purchase Tesla stock at heavily discounted prices and required him to hold the stock for five years. The legal team said they were seeking stock without restrictions on selling it.