Tesla shareholders are set to face off against lawyers who won a lawsuit against Elon Musk’s $56 billion pay package, arguing that a record-breaking $7 billion legal fee is excessive and “outlandish.”
The lawsuit, initially filed by investor Richard Tornetta in 2018, challenged the legality of Musk’s compensation package, which was ultimately voided by a Delaware court in January 2023. Tornetta, who owned only nine Tesla shares at the time, is now seeking $7.2 billion in legal fees for himself and the law firms that represented him, arguing that they delivered a significant benefit to Tesla by recovering 266 million shares previously reserved for stock options.
However, numerous Tesla shareholders, including the California Public Employees’ Retirement System and individual investors, have filed objections to the exorbitant fee request. They argue that the fee, equivalent to around $370,000 per hour worked, is disproportionate and excessive, especially considering that shareholders subsequently voted to ratify Musk’s pay package in June 2023, effectively negating the original victory.
Tesla, aligning with the shareholders’ stance, claims the lawsuit ultimately resulted in no benefit for the company and is requesting a much lower fee of $13.6 million.
The legal battle is set to culminate in a hearing on Monday, where a Delaware judge will be tasked with deciding on the appropriate fee. This case has garnered significant attention due to its unprecedented fee request, potentially setting a precedent for future shareholder litigation. The judge’s decision will be closely watched, as it could influence the future of legal fees awarded in similar cases.