But there’s another group that could stand to make record profits: The legal team that successfully fought Musk’s payout in a Delaware court earlier this year is seeking a whopping $5.6 billion in share-based legal fees.17 times larger than the largest fee in Delaware history.
“We recognize that the fee requested is unprecedented… The amount of the award requested is large because the value of the benefit to Tesla that plaintiff’s counsel achieved was enormous,” The plaintiff’s legal team wrote in the lawsuit. “We are ready to ‘eat our food’.”
Tesla shareholders will give Musk an answer later this week, but opposing lawyers will have to wait until a hearing scheduled for July 8. The Delaware Chancery Court may approve or deny the required fees.
Musk himself strongly opposed the proposal for attorney fees. “Lawyers who have done nothing but damage Tesla are demanding $6 billion. Criminal,” Musk previously wrote in his message. publish to your personal account X.
Lawyers seeking $5.6 billion in fees represented plaintiff Richard Tornetta, a Tesla shareholder who filed a lawsuit in 2018 protesting Musk’s compensation packagewhich previously received approval Tesla Board of Directors and 70% of the company’s shareholders.
It was structured so that Musk could receive certain stock awards if he led the company to various milestones based on metrics such as market capitalization. Under Musk’s leadership, Tesla has surpassed these milestones faster than anyone expected, reaching a $1 trillion market capitalization by 2021. (It has since declined and today stands at just over $551 billion.)
But Delaware Chancellor Kathleen McCormick sided with Tornetta earlier this year, concluding that Musk’s pay package was an “incomprehensible amount” and his approval process was “deeply flawed,” in part because Tesla’s board includes many close friends. and Musk’s colleagues.
Tesla shareholders will decide to overturn the Delaware court’s decision this Thursday. But regardless of the outcome, the plaintiff’s lawyers won the case and are demanding their pound of meat. While the fees the lawyers are asking for are extremely high in dollar terms, they are significantly lower than what the other litigants received in percentage terms—just 10% of the $56 billion they saved Tesla shareholders by voiding Musk’s payouts.
Last year, the Delaware Court of Chancery awarded attorneys 27% of the $1 billion settlement in a mergers and acquisitions case involving Dell, and in 2011, lawyers earned 15% of $2 billion damage in a case involving the mining company Southern Peru Copper Corp.
Delaware courts reward attorneys who take complex cases late in litigation and get “real results,” Delaware Vice Chancellor J. Travis Luster said in approving Dell’s litigator fee application.
But even though the percentage may be relatively modest, the monumental scale of the decision makes the attorney’s fee claim extraordinary.
“The dollar amount requested in the levy petition is unusual,” McCormick admitted in the lawsuit..
Even if Tesla shareholders vote to restore Musk’s salary package, there is no guarantee that he will actually receive the money. Corporate law is unclear on whether shareholder votes are enough to overturn a legal decision, and Musk may need to go back to court to get final approval to receive the money. If shareholders don’t vote in his favor, analysts speculate that Musk may stop paying so much attention to Tesla and spend more time on his other companies.
“Elon is not a typical leader, and Tesla is not a typical company,” said Tesla Chairman Robin Denholm. “So the typical way companies compensate key executives will not lead to Tesla’s results. It takes something different to motivate someone like Elon.”