The Multi-Billion Dollar Musk Law Fee Battle
Tom Borman, LawFuel Contributing Writer
There have been plenty of arguments about legal fees, but in the case of Elon Musk it was always going to be different and – wow! – different it is with the Delaware Court now facing a question about the Tesla legal fee – the largest legal fee ever in US litigation at $7 billion.
And that is a discounted fee, the winning lawyers have argued.
In a landmark case concerning executive compensation, the Delaware Court of Chancery judge who invalidated Elon Musk’s unprecedented Tesla Inc. compensation package now faces another critical determination: the appropriate remuneration for the plaintiff’s counsel.
The lawyers representing the shareholder plaintiff are petitioning for an award of 29 million Tesla shares, valued at approximately $7.3 billion, which would constitute the largest attorneys’ fee in U.S. litigation history.
The litigation, initiated by Richard Tornetta, a minority shareholder, challenged Musk’s 2018 compensation plan as excessive. Three law firms represented Tornetta.
Bernstein Litowitz Berger & Grossmann firm’s Greg Varallo (pictured) said the fee sought is in effect a discounted claim as they are legally entitled to 33 percent of the benefit to Tesla from the lawsuit.
The multi-billion-dollar fee amounts to amounts to a rate of about $370,000 for every hour worked by the 37 lawyers, associates and paralegals, the court documents show.
Following a favorable ruling in January, plaintiff’s counsel argue that their fee request, representing 11 percent of the judgment value, is justified given the case’s complexity and outcome. They argue that such an award would incentivize shareholder litigation to promote corporate governance accountability.
Tesla’s lawyersthat the fee petition is grossly disproportionate, advocating for an award as low as $13.6 million.
They argue that the January ruling negatively impacted Tesla’s market value and created uncertainty regarding Musk’s future involvement with the company.
The case has drawn significant attention, with over 8,000 Tesla stockholders submitting letters and objections regarding the proposed fee. The current record for shareholder litigation fees stands at $688 million from an Enron class action.
Complicating matters, Tesla shareholders recently voted to ratify Musk’s compensation package, potentially nullifying the court’s earlier decision. The legal implications of this ratification are pending further court deliberation.
Chancellor Kathaleen McCormick is expected to render a decision on the fee request in the coming weeks or months, potentially influenced by an impending Delaware Supreme Court ruling on a $267 million fee request in a separate shareholder action involving Dell Technologies.
