Tesla shareholders are set to head to court this week to fight against attorney requests for billions in legal fees, as part of the case in which a Delaware judge voided CEO Elon Musk’s $56 billion compensation plan earlier this year.
Delaware Judge Kathaleen McCormick voided Musk’s previously shareholder-approved compensation plan from 2018 in January, as part of a case with shareholder Richard Tornetta. Tornetta’s attorneys, Bernstein Litowitz Berger & Grossmann and two other law firms, went on to request around 29 million Tesla shares as legal fees, worth roughly $7.2 billion at Tesla’s Friday stock price.
Tesla shareholders are headed to a court hearing for the case on Monday to argue against the attorney fees, as detailed in a report from Reuters. The initial fee requests represented a record-high legal fee demand, roughly bringing pay rates to around $370,000 per hour for all 37 lawyers and other professionals involved, as detailed in court documents.
Tesla starts taking steps to battle Delaware Judge’s Elon Musk pay ruling
“The legal fees appear exceedingly disproportionate and outlandish,” wrote Nathan Chiu, a New Jersey-based shareholder, to Judge McCormick in a March filing.
Other involved shareholders include the California Public Employees’ Retirement System and more than 8,000 Tesla shareholders, who have altogether filed more than 1,500 letters and objections to the fee, court documents show.
Last month, the legal team last month adjusted its request to just $1.44 billion, still representing over $200,000 per hour worked on the case. Court documents also note that some of the attorneys, associates, and paralegals involved in the case bill as low as $275 an hour normally.
The case involving Tornetta, who had nine Tesla shares at the time of the initial lawsuit in 2018, began in 2022, culminating in January when McCormick ruled in favor of the shareholder.
In March, following initial reports about the fee, Musk called the request, “utterly disgraceful,” “ironic,” and “criminal,” even going on to call the lawyers “evil” on two separate occasions.
The system is broken.
Best to get out of Delaware as soon as possible possible.
— Elon Musk (@elonmusk) March 2, 2024
Tesla ratified the previously approved compensation plan in a shareholder’s meeting last month, along with officially voting to move the company’s incorporation from Delaware to Texas.
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