Panelists Al Root and Jack Otter discuss how Tesla shareholders voted to reinstate a nearly $50 billion pay package on ‘Barron’s Roundtable.’
The team of lawyers who sued to void Tesla CEO Elon Musk’s $56 billion pay package have requested $6 billion in legal fees for their work, but their request may run afoul of a new court ruling that discourages judges from awarding “windfalls” in legal fees.
Chancellor Kathaleen McCormick of the Delaware Court of Chancery is currently weighing the legal team’s $6 billion fee request as well as whether Tesla shareholders’ vote to reinstate Musk’s pay package, which McCormick voided in January, was sufficient to reinstate the compensation plan.
The Delaware Supreme Court issued a ruling on Aug. 14 in an unrelated case that affirmed a $267 million fee for shareholders’ attorneys – though it warned that those types of paydays can “turn into a windfall.”
The justices’ warning was likely made in reference to the Musk case. Ann Lipton, a professor at Tulane Law School, told Reuters that the justices “are making it clear, to McCormick and anyone else, that certainly an extremely high fee, an eye-popping fee, a ‘wow’ fee, is appropriate, but there is a line where it’s simply past what is necessary to incentivize high-risk cases.”
TESLA INVESTORS CALL FOR JUDGE TO REJECT ‘OUTLANDISH’ $7 BILLION LEGAL FEE IN MUSK’S PAY CASE
A Delaware judge is weighing whether shareholders’ vote to reinstate Tesla CEO Elon Musk’s pay plan was valid, and what sort of fees plaintiffs’ attorneys should get. (Etienne Laurent/AFP via / Getty Images)
Lawyers for Tesla shareholder Richard Tornetta have worked on the case without pay since the suit challenging Musk’s compensation plan was filed in 2018 with the understanding that they would get part of the recovery.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| TSLA | TESLA INC. | 206.28 | +0.53 | +0.26% |
The fee would be paid by Tesla given that the shareholders brought the case for the company’s benefit, although Tesla’s board of directors urged shareholders to reinstate Musk’s pay package – which included no salary or bonus but awarded valuable stock options based on hitting performance targets.
The compensation package was valued at $56 billion when the judge voided the plan, though it fluctuates based on the stock price.
TESLA, OPPONENTS OF MUSK’S PAY PACKAGE, CLASH OVER RESOLVING COMPENSATION LAWSUIT
Tesla shareholders voted in June to reinstate Musk’s pay package. (Patrick Pleul/File/Pool via / Reuters Photos)
The shareholders’ legal team in March asked McCormick to approve what they called a “conservative” fee of 11% of the stock Musk would’ve received if they had won the case and kept the stock options at the center of the debate.
The request works out to 29 million shares, worth nearly $6 billion based on Wednesday’s closing price of $205.75. As an alternative, they offered to accept a cash fee of $1 billion. Tornetta’s attorneys argued that if the fee…
Read More: Lawyers who sued to void Musk’s Tesla pay plan unlikely to get ‘windfall’