Lawyers have petitioned a Delaware judge to grant them Tesla stock valued at nearly $6 billion as compensation for successfully arguing against CEO Elon Musk’s 2018 pay package.
If approved, this fee would shatter records for attorney compensation, far surpassing the $688 million awarded to lawyers involved in Enron-related class actions in 2008.
Their victory came after convincing the Delaware chancery court to invalidate Musk’s $56 billion pay package, with the judge ruling that Tesla’s board failed to demonstrate its fairness to shareholders. In their petition for fees and expense reimbursement, the attorneys emphasized the substantial value they brought to Tesla shareholders, representing investor Richard Tornetta, who initiated the lawsuit.
The lawyers are requesting just over 11% of the Tesla shares allocated to Musk, totaling slightly more than 29.4 million shares. With Tesla’s stock closing at $202.64 per share on Friday, the fee would amount to approximately $5.96 billion. Opting for payment in Tesla shares, they emphasized their commitment to the case’s outcome and its direct link to benefiting shareholders, while also highlighting the tax benefits and tradeability of the shares compared to Musk’s stock options.
Despite considering the $6 billion request as “conservative” under Delaware law, which entitles them to 33% of the conferred benefit, the lawyers opted for a lower percentage. They underscored their contingency arrangement, emphasizing that they would have received nothing if unsuccessful, and highlighted the substantial time and resources invested in litigating the case over six years.
Lead counsel Greg Varallo, representing the plaintiffs, did not immediately respond to requests for comment. Musk and Tesla representatives also remained silent. The lawyers detailed their extensive involvement in the case, collectively logging nearly 19,500 hours, equating to an hourly rate of $305,550 for the proposed award. However, they downplayed the significance of hours worked, emphasizing Delaware’s aim to incentivize efficient litigation.
In addition to the stock award, the lawyers seek an expense reimbursement of $1.1 million. Musk’s pay package, labeled the largest ever disclosed in corporate America by Delaware Chancery Court Judge Kathaleen McCormick, was deemed flawed due to Musk’s influence in the process and the board’s reliance on him.
Musk intends to appeal the ruling, indicating his plans to relocate Tesla’s incorporation to Texas.
