Lawyers who convinced a Delaware judge to nullify Elon Musk’s $56 billion pay package face high stakes. They are seeking a substantial legal fee: more than 29 million Tesla shares, valued at $7.74 billion as of Thursday’s market opening. Tesla and many investors believe the lawyers deserve far less than this amount for representing a single shareholder.
Tesla argued in court filings that no lawyers have ever received such a sum for a lawsuit. Instead, Tesla proposed a fee as low as $13.6 million for Bernstein Litowitz Berger & Grossmann, Andrews & Springer, and Friedman Oster & Tejtel, the firms responsible for persuading Chancellor Kathaleen McCormick to void Musk’s pay package in January. However, the exact impact of this ruling is still under debate.
Greg Varallo of Bernstein Litowitz declined to comment but argued during the recent hearing that a substantial award would incentivize attorneys to protect small investors. He justified their 11% share request as fair, noting that McCormick’s judgment marked a record in American courts.
Neither Tesla’s lawyers nor Varallo’s co-counsel from Andrews & Springer and Friedman Oster & Tejtel responded immediately to requests for comment. McCormick’s decision on the fee is expected in the coming weeks or months.
The size of the fee request remains fluid, influenced by Tesla’s fluctuating share price. Just since Monday’s arguments in Delaware, the fee bid has increased by $300 million. Since mid-June, it has surged by approximately $2.3 billion. This growth comes despite Tesla shareholders voting to approve Musk’s pay package and relocate the company’s legal headquarters to Texas, a move opposed by the Delaware court.
More than 8,000 Tesla stockholders have submitted objections regarding the fee, totaling some 1,500 letters, according to court documents. If granted at the current value, the requested fees would equate to over $390,000 per hour worked by the 37 lawyers, associates, and paralegals who handled the case on behalf of Richard Tornetta, a former heavy metal drummer and Tesla shareholder.
Such a fee award would not only surpass previous Delaware records but also exceed the largest fees awarded outside the state. For instance, in 2008, attorneys received $688 million for their role in the Enron securities fraud case, which settled for $7.2 billion in Texas federal court. Similarly, a recent antitrust class action resulted in a $667 million fee approval for firms negotiating a $2.67 billion settlement with Blue Cross Blue Shield over insurance charges.
In unrelated legal fee news, attorney Spencer Sheehan faces sanctions for his actions in a food and beverage labeling lawsuit against Big Lots. The judge in Florida found Sheehan violated court rules and will determine the fees and costs he must pay as a result.
