Attorneys in Tesla Lawsuit Seek $6B in Legal Fees

March 4, 2024 by Tom Ramstack
Attorneys in Tesla Lawsuit Seek $6B in Legal Fees
A Tesla electric vehicle emblem is affixed to a passenger vehicle Sunday, Feb. 21, 2021, in Boston. (AP Photo/Steven Senne)

WILMINGTON, Del. — Attorneys who succeeded in getting a Delaware court to void Elon Musk’s $55 billion compensation package from Tesla, Inc. on Friday asked the court for about $6 billion in legal fees. 

They want most of their money paid in Tesla stock, which would work out to $288,888 per hour for the three law firms.

They sued Musk on behalf of a Tesla shareholder who called the chief executive’s compensation excessive.

Musk responded Friday with a posting on his social media platform X saying, “The lawyers who did nothing but damage Tesla want $6 billion. Criminal.”

The law firms filed a motion with the Delaware Chancery Court that explained their requested legal fee by essentially saying they should share part of the large amount of money they saved Tesla shareholders.

The judge’s decision in January that canceled Musk’s 10-year compensation package resulted in the return to the electric vehicle automaker of 266 million 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 lawyers wrote in their motion.

The law firms said their fee request is about 11% of the judgment they won for shareholders. They added that the fee would be tax deductible for Tesla.

The three law firms are Bernstein Litowitz Berger & Grossmann and Friedman Oster & Tejtel, both based in New York, and Andrews & Springer of Wilmington, Delaware.

If Judge Kathaleen McCormick grants the motion, it would be the biggest attorney fee payout in history.

Earlier, while she oversaw the shareholder’s lawsuit against Musk, she called his compensation from Tesla “unfathomable.” He was to be paid in heavily discounted stock options.

The law firms’ motion for fees says, “We recognize that the requested fee is unprecedented in terms of absolute size.”

They added, “And here, the size of the requested award is great because the value of the benefit to Tesla that plaintiff’s counsel achieved was massive.”

Musk made similar arguments during the one-week trial of the civil lawsuit he lost. He said the compensation he sought was reasonable compared with the value he bestowed by starting the company in 2003 and managing it now.

Tesla is easily the most valuable U.S. automaker. Its market capitalization of $623 billion ranks it sixth among companies listed in the U.S. stock market. Tesla is worth almost 11 times more than General Motors Co. and 12 times more than Ford Motor Co.

Musk’s canceled compensation plan could have given him $10 billion for each $50 billion in increased market capitalization.

The biggest legal fee so far in U.S. history was the $688 million paid to lawyers in 2008 after they won a $7.2 billion settlement in a securities fraud case over the failure of Enron Corp.

Tesla retains a right to file motions to oppose the law firms’ proposed legal fees.

The civil lawsuit was Richard J. Tornetta et al. v. Musk et al. in the Court of Chancery of the state of Delaware.

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