Wilmington, Delaware – On Monday, a Delaware judge heard arguments over a proposed $7 billion fee for three law firms that successfully contested Elon Musk’s $56 billion compensation from Tesla. This significant fee, representing $370,000 per hour for the legal team, is seen as a motivation for lawyers to hold corporate boards accountable, argued a shareholder’s attorney.
Richard Tornetta, who held nine Tesla shares when he filed the lawsuit in 2018, was represented by these firms. Tesla’s lawyer, John Reed, criticized the fee request, likening it to a “real-life lawyer joke.”
The fee request follows a January ruling by a Delaware judge that nullified Musk’s massive pay package, which Tornetta’s lawyers claim added substantial value to Tesla. Attorney Greg Varallo, representing Tornetta, argued the legal team sought less than the allowable 33% of the benefit to Tesla from the lawsuit, instead requesting 11% in Tesla shares, which translates to 29 million shares.
Varallo emphasized that a substantial fee would encourage lawyers to protect small investors and uphold corporate accountability. Conversely, Reed argued that the January ruling harmed Tesla by lowering its stock value and creating uncertainty about Musk’s future at the company. He suggested a much smaller fee of $13.6 million.
Thousands of Tesla shareholders have voiced objections to the fee, which surpasses the previous record of $688 million in the Enron class action. Despite Tesla shareholders voting in June to ratify Musk’s pay, which the company claims corrected the process flaws identified in the January ruling, the legal fee dispute continues.
Chancellor Kathaleen McCormick will consider the legal implications of this vote and may take months to decide on the fee. Meanwhile, the Delaware Supreme Court’s pending decision on a $267 million fee request in a Dell Technologies case could influence her ruling.
