In a legal battle against Musk’s $56 billion compensation plan, Tesla shareholders will go to court on Monday to claim that the corporation is “outlandish” for requesting an unprecedented amount of money for legal fees—more than $7 billion.
Investor Richard Tornetta filed the record fee request on behalf of three legal firms, including Bernstein Litowitz Berger & Grossmann, that handled his case. When Tornetta sued Musk in 2018 over his stock option compensation package, he had nine shares of Tesla. Tornetta eventually prevailed in the lawsuit in January when Musk’s stock option pay package was revoked.
According to court filings filed by Tornetta’s attorneys, the charge represents almost $7.2 billion at Tesla’s Friday stock price, or over $370,000 for each hour worked by the 37 attorneys, associates, and paralegals, some of whom typically bill as low as $275 an hour.
Nathan Chiu, a New Jersey-based Tesla stockholder, wrote to Chancellor Kathaleen McCormick in March stating, “The legal fees appear exceedingly disproportionate and outlandish,” as per a court document.
According to court filings, Chiu, the California Public Employees’ Retirement System, and over 8,000 Tesla investors have sent over 1,500 letters and concerns over the charge to the Delaware Chancery Court.
Monday’s hearing was rescheduled from McCormick’s regular courtroom to the building’s biggest chamber in order to accommodate the 47 lawyers from 19 different law firms who are presenting in the lawsuit along with prospective investors.
As a portion of the advantage they claim they gave Tesla when a judge revoked Musk’s compensation package and returned to Tesla over 266 million shares held for the stock options, Tornetta’s attorneys contend they are entitled to the charge. At Friday’s price of $251.82 a share, such stock would be valued at approximately $67 billion.
Attorneys for Tornetta claimed that, discounting punitive damages, it is the greatest judgment ever awarded by an American court. They claimed they should be compensated with a fee equivalent to 11% of that verdict—a sum that under Delaware legal precedent may be considered modest. They requested payment in the amount of 29 million shares of Tesla.
