The legal team for the shareholder who sued to shut down Tesla CEO Elon Musk’s $56 billion pay package have upped their already record-breaking demands for compensation.
Tesla stockholder Richard Tornetta owned nine shares when he sued over Musk’s pay package in 2018, beginning a legal battle that ended in January when a Delaware state judge voided the deal. Tornetta is represented by three law firms, including New York-based Bernstein Litowitz Berger & Grossmann.
The team of 37 legal professionals has requested $7.2 billion in company shares at Tesla’s Friday stock price, according to court documents filed in Delaware. That’s the equivalent of about $370,000 per hour worked by the crew of lawyers, associates, and paralegals. Reuters first reported the updated fee request.
That’s a massive premium compared to the current record-holder, California-based Coughlin Stoia Geller Rudman & Robbins, which was closed in 2010. The firm won $688 million in legal fees for its work securing a $7.2 billion settlement in a securities fraud case over the failure of Enron in 2008.
The largest legal fee ever awarded in Delaware’s Chancery Court, where Tornetta’s lawsuit was filed, was $285 million in 2012 for a shareholder lawsuit against Americas Mining Corporation, according to Reuters.
Tornetta’s legal team is seeking more than 25 times that fee in the form of 29 million Tesla shares. The firms argue that they worked on contingency for more than five years, meaning that a loss would have meant they earned nothing for their work.
“ [T]he size of the requested award is great because the value of the benefit to Tesla that Plaintiff’s Counsel achieved was massive,” the lawyers wrote in court filings earlier this year.
Musk’s 2018 pay package allowed him to purchase 304 million shares at a little more than $23 a pop. The January ruling brought Tesla back some 266 million shares reserved for Musk’s stock options.
At Friday’s stock price of $251.82 a share, those shares would be worth $67 billion. Tesla stock is trading at about $256 per share as of Monday morning.
In March, when Tornetta’s lawyers had asked for the equivalent of $6 billion worth of Tesla stock, Musk called the fees requested “criminal.” Tesla’s lawyers have objected to the payment, writing in court filings that “importantly, undisputed market evidence confirms plaintiff achieved little to no discernible value for Tesla or its stockholders.”
An overwhelming majority of investors last month voted to re-approve Musk’s compensation plan during Tesla’s annual meeting, which the company claims “significantly impacts” the January ruling. More than 8,000 Tesla shareholders have issued letters and objections regarding the fee, including California Public Employees’ Retirement System, which did not vote in favor of Musk’s pay deal.
The judge presiding over the case and who initially ruled in favor of Tornetta, Chancellor Kathaleen McCormick, will hear arguments on Monday over the fees. Once she decides on the legal fees, the judge will deliver a final ruling in the case. From there, if she reinforces her earlier decision, Musk will have 30 days to appeal to the Delaware Supreme Court.
