Updated March 2nd, 2024 at 12:31 IST

Lawyers who voided Elon Musk's $56 billion compensation seek $6 billion fee

Acknowledging the magnitude of their request, the three law firms stated that the proposed fee represents an absolute record in terms of size.

Reported by: Business Desk
File photo of Elon Musk. | Image:AP
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Elon Musk compensation lawsuit: Lawyers responsible for challenging Elon Musk's $56 billion compensation package as excessive are now seeking an unprecedented legal fee totaling $6 billion, to be paid in stock from the electric car maker, according to a court filing submitted on Friday.

Acknowledging the magnitude of their request, the three law firms stated in the filing with the Court of Chancery in Delaware that the proposed fee represents an absolute record in terms of size.

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According to the court documents, the fee translates to an hourly rate of $288,888.

The requested fee is set to be paid by Tesla to the attorneys who represented Richard Tornetta, a Tesla shareholder who filed a lawsuit against Musk in 2018 challenging the validity of the pay package. A Delaware judge subsequently invalidated the compensation plan in January.

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The legal team argues that Tesla is obligated to cover the fee as it directly benefited from the cancellation of Musk's pay package, which is expected to result in the return of 266 million shares to the car manufacturer.

Approval for the fee request is pending Kathaleen McCormick, the judge presiding over the case, who previously characterised Musk's compensation as ‘unfathomable’ in her ruling.

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Tesla, Musk's legal representative, and Musk himself have not yet responded to requests for comment regarding the fee request.

The shareholder legal team justified the fee structure by highlighting its direct link to the benefits derived from Musk's pay package reversal, emphasizing that it does not deplete Tesla's balance sheet. Additionally, the fee is noted as being tax-deductible for Tesla.

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While the requested fee is unprecedented, it aligns with the principles upheld by Delaware judges, who advocate for higher fees in cases that progress to trial and litigation. Notably, the Musk pay case underwent a one-week trial.

Musk's compensation package primarily consisted of stock options, enabling him to purchase Tesla shares at significantly discounted prices and mandating a five-year holding period. The legal team clarified that they are seeking unrestricted stock as part of the fee.

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The shareholder's legal representation comprised three law firms: Bernstein Litowitz Berger & Grossmann and Friedman Oster & Tejtel, both headquartered in New York, and Andrews & Springer of Wilmington.

(With Reuters inputs.)

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Published March 2nd, 2024 at 09:34 IST