Panelists Al Root and Jack Otter discuss how Tesla shareholders voted to restore a nearly $50 billion pay package at Barron’s Roundtable.
Tesla shareholders will appear in a Delaware court on Monday to ask a judge to reject the “outlandish” request for $7 billion in attorneys’ fees to be paid by the company to the legal team that led the challenge. CEO of Elon Musk $56 billion pay package.
The request for the record fee was made by investor Richard Tornetta on behalf of three law firms representing him in the lawsuit against Musk’s compensation plan, which is believed to be the largest among US public company CEOs.
Tornetta owned nine Tesla shares when he sued over the pay package that was originally approved by shareholders in 2018 before being overturned by Delaware Court of Chancery Chancellor Kathaleen McCormick this January. Last month, Tesla shareholders voted to reinstate the compensation plan, although it remains suspended pending resolution of the case.
The fee request amounts to roughly $7.2 billion based on Tesla’s stock price on Friday and comes at a rate of $370,000 for each hour worked by the team of 37 attorneys, associates and paralegals — some of whom typically bill up to 275 dollars an hour, according to court documents filed by Tornetta’s legal team.
MUSK WON PACKAGE WITH THE VOTE OF SHAREHOLDERS, TESLA MAKES MONEY IN THE EYES OF THE COURT
Tesla shareholders are arguing that the demand for $7 billion in legal fees is excessive. (Richard Bord/WireImage/Getty Images)
“The statutory taxes seem grossly disproportionate and outlandish,” Nathan Chiu, a Tesla shareholder from New Jersey, wrote to Chancellor Kathaleen McCormick. Delaware Cancer Court in March, according to a court filing.
Chiu, said California Public Employees Retirement System and more than 8,000 Tesla shareholders have sent 1,500 letters and objections to the Delaware court regarding the requested legal fee, according to court documents.
The court moved a hearing scheduled for Monday from McCormick’s regular courtroom to the largest in the building to accommodate 47 attorneys from 19 law firms appearing in the case, as well as potential shareholders.
TESLA’S 2ND QUARTER DELIVERIES BETTER THAN EXPECTED
Shares of Tesla turned positive for the year last week after falling more than 20% year-to-date in recent months. (Joe Raedle/Getty Images/Getty Images)
Tornetta’s legal team argues they deserve the fee as compensation for the benefit they say Tesla received when the court voided Musk’s pay package — which would have returned Tesla about 266 million shares that had been reserved for options. of Musk’s stock. That stock would be worth about $67 billion at Friday’s price of $251.82 a share, though it was valued at $56 billion when the judge overruled the compensation package.
His lawyers say this is the largest verdict ever handed down by a US court, excluding punitive damages. They argue they should receive an 11% fee of that judgment and receive that compensation in the form of 29 million Tesla shares – although they say they would be justified in seeking up to 33% of the value of the pay package of Musk.
The fee request would far exceed the current record fee at shareholder litigation of $688 million in an Enron class action lawsuit, according to Stanford Law School.
TESLA INVESTORS LOOK FOR STOCKS; ROBOTAXIS BUZZ HOTES UP
Tesla CEO Elon Musk has moved to change the electric carmaker’s state of incorporation from Delaware to Texas in response to a court ruling that voided his pay package. (Frederic J. Brown/AFP via Getty Images/Getty Images)
Tesla argues that because the company’s shareholders voted in June to ratify Musk’s pay package, Tornetta’s initial legal victory has turned into a loss — so his lawsuit has not benefited Tesla or its shareholders and the team. Tornetta’s legal settlement should receive as little as $13.6 million.
Musk’s pay package, which has no salary or bonuses and is based on stock options granted in installments such as electric vehicle manufacturer achieves performance-based milestones.
The judge overturned it in January after finding that the company’s board of directors did not adequately disclose some directors’ close personal relationships with Musk or that the company was on pace to meet many of its performance-based goals.
GET FOX BUSINESS IN ALBANIA by clicking HERE
McCormick could take weeks or months to issue a decision in the case. The Delaware Supreme Court is currently hearing a $267 million fee request in a shareholder class action lawsuit involving Dell Technologies, and a ruling in that case could guide the Court of Chancery’s decision on Tesla’s fee request.
Reuters contributed to this report.