The legal team that challenged Tesla CEO Elon Musk’s record-breaking pay is now seeking to get its a refund — a record $7.3 billion in legal fees.
They were 37 attorneys, associates and paralegals help represent Tesla shareholder Richard Tornetta, who defendant electric vehicle maker, regardless that Musk had offered $56 billion in compensation. Tornetta won in a Delaware court in January, and Delaware judge Kathaleen McCormick threw out the compensation package.
In response, Tesla held one other shareholder vote in June and argued that Musk’s compensation was “not about the money” but relatively was designed to maintain his attention on the company.
Shareholders finally voted in favor of the compensation plan and an additional resolution to maneuver Tesla’s legal headquarters from Delaware to Texas.
On Monday, McCormick spoke with each Tornetta and Tesla’s legal team about requesting reimbursement of legal fees.
Tornetta’s attorneys presented arguments and expert testimony to indicate why they deserved $7.3 billion in legal fees, made up solely of Tesla stock. At Monday’s stock price, that’s about $370,000 for each hour worked.
Their rationale was just like the one Tesla gave for Musk’s compensation: it isn’t just about the money, but about incentives for future behavior.
“If Delaware continues to see value in policing bad behavior, then the incentives will narrow.” [for attorneys] “That would be a very bad idea” – Bernstein Litowitz Berger & Grossman partner Greg Varallo he said.
Instead of the usual 33% fee rebate that Delaware allows, the attorneys said they are looking for a smaller 11% of Tesla shares that may have gone to Musk had a judge not invalidated his compensation. They said they wanted a “piece of the value pie” they “created.”
“We fought against the best,” Varallo said. he said“Tesla litigation is never easy. There are companies that play by the rules every day, and then there are companies like Tesla.”
Tesla attorney John Reed told McCormick that the fee request “looks like a real legal joke.”
Elon Musk. (Photo: Scott Olson/Getty Images)
Reed said the January ruling sent Tesla shares tumbling and forged doubt on Musk’s future at the electric vehicle company. Although Tesla shares fell after January, the electric vehicle maker rose overall from January at the time of this writing.
Reed demanded that Tornetta’s attorneys be paid $13.6 million.
Court documents show greater than 8,000 Tesla shareholders have sent letters and objections to the court asking for legal fees.
If approved, the legal fees could be the highest in U.S. corporate history and would exceed $688 million awarded in 2008 in a class motion lawsuit against Enron.