But there may be one other group that might make a record profit: The legal team that successfully argued against Musk’s payout in a Delaware court earlier this yr is demanding a whopping $5.6 billion in stock-based legal fees –17 times the best fee in Delaware history.
“We recognize that the compensation sought is unprecedented… The amount of compensation sought is high because the value of the benefit that plaintiff’s counsel achieved for Tesla was enormous,” The plaintiff’s legal team wrote in a court document“We are ready to ‘eat our dishes’.”
Tesla shareholders will give Musk a solution later this week, but The opposing lawyers must wait until a hearing on July 8 until the Delaware Court of Chancery can approve or deny the requested fees.
Musk himself has spoken out strongly against the lawyers’ fee proposal. “The lawyers, who have done nothing but harm Tesla, want $6 billion. Criminal,” Musk previously wrote in a Post on his personal X account.
The lawyers demanding the $5.6 billion in fees represented plaintiff Richard Tornetta, a Tesla shareholder who filed a lawsuit against Musk’s compensation package in 2018which has previously obtained the consent of Tesla’s board of directors and 70% of the corporate’s shareholders.
It was structured in order that Musk could unlock certain stock rewards if he led the corporate to numerous milestones based on metrics resembling market cap. Under Musk’s leadership, Tesla exceeded those milestones faster than expected, reaching a market cap of $1 trillion in 2021. (It has since declined again, and stands at just over $551 billion today.)
But Delaware Treasurer Kathaleen McCormick sided with Tornetta earlier this yr, concluding that Musk’s pay package represented an “outrageous sum” and that the approval process was “deeply flawed.” This was partly because Tesla’s board included lots of Musk’s close friends and colleagues.
Tesla shareholders will determine this Thursday whether to overturn the Delaware court’s ruling. But whatever the final result, the plaintiff’s lawyers won the case and are actually demanding that they do their part. Although the fee they’re asking for is incredibly high in dollar terms, in percentage terms it’s well below what other litigators have been awarded – just 10% of the $56 billion they saved Tesla shareholders by invalidating Musk’s payout.
Last yr, the Delaware Court of Chancery awarded attorneys 27% of the $1 billion settlement amount from an M&A case with Dell, and in 2011 the lawyers 15% of the $2 billion damage The case goes back to the mining company Southern Peru Copper Corp.
Delaware courts reward lawyers who pursue complex cases into the late stages of litigation and achieve “real results,” Delaware Vice Chancellor J. Travis Laster said in approving the Dell trial lawyers’ fee request.
But even when the share is relatively low, the big impact of the judgment makes the lawyers’ request for fee increases extraordinary.
“The dollar amount requested in the fee application is unusual,” McCormick admitted in a court filing.
Even if Tesla shareholders vote to reinstate Musk’s pay package, there isn’t any guarantee he’ll actually get the cash. Corporate law is ambiguous about whether a shareholder vote is sufficient to overturn a court ruling, and Musk can have to return to court to get final approval for the cash. If shareholders don’t vote in his favor, analysts speculate Musk may pay less attention to Tesla and focus more on his other corporations.
“Elon is not a typical manager and Tesla is not a typical company,” said Tesla CEO Robyn Denholm. “So the typical way companies compensate key executives is not going to get Tesla results. To motivate someone like Elon, you need something different.”
