Public policy favors $7 billion fee award in Musk pay case, says Tesla shareholder’s lawyer

WILMINGTON, Delaware, July 8 (Reuters) – A record $7 billion in legal fees for three firms challenging Elon Musk’s $56 billion Tesla pay package is giving lawyers an incentive to hold company boards accountable. That’s what a lawyer for a company shareholder told a Delaware judge on Monday.
The company’s legal teams and a shareholder argued for more than six hours over how much compensation to award to three law firms representing Richard Tornetta, who owned nine Tesla shares when Musk sued over his pay package in 2018.

The fee Tornetta is seeking on behalf of the firms equates to about $7.3 billion based on Tesla’s stock price on Monday, and approximately $370,000 for every hour worked by 37 attorneys, partners and paralegals, according to court documents filed by Tornetta’s attorneys. It corresponds to a dollar rate.
Tesla’s lawyer, John Reed, said in a statement on Monday that the fee request should never have been made.
“It sounds like a real-life lawyer prank,” he told Chancellor Kathaleen McCormick.

The attorney’s fee represents a portion of the value that plaintiff’s lawyers say has been created for Tesla (TSLA.O), opens new tab A Delaware judge’s January ruling overturning Musk’s $56 billion pay package.
Bernstein Litowitz Berger & Grossmann is among the firms representing Tornetta.
Tornetta’s attorney, Greg Varallo, said the shareholders’ legal team is seeking up to 33 percent of Tesla’s profits from the case, far less than the amount allowed by law.

Stating that the decision given in January was the largest decision made by an American court, excluding punitive damages, Tornetta’s lawyers argued that 11 percent of the decision should be paid in the form of 29 million Tesla shares.
Varallo argued that a large fee award would encourage shareholder lawyers to protect small investors.
“If Delaware continues to think it’s valuable to police bad behavior, narrowing incentives would be a very bad idea,” Varallo said. said.

Reed, on the other hand, said that the decision taken in January caused Tesla shares to lose value because it created uncertainty about Musk’s future in the company.
He asked McCormick to award at least $13.6 million in fees.
More than 8,000 Tesla shareholders filed nearly 1,500 letters and objections to the fee issue, according to court documents.
According to Stanford Law School, the request greatly exceeds the current record fee of $688 million sought in the Enron class-action lawsuit.
The Musk case took a dramatic turn when Tesla shareholders approved Musk’s salary in June. Tesla argued that this decision corrected the flaws in the 2018 process that McCormick identified in his decision.
The company argues that Musk’s salary package was returned and Tornetta’s legal victory was turned into a loss.
McCormick will hear arguments on the legal impact of the confirmation vote in the coming weeks.
It could take weeks or months for McCormick to decide on legal fees. The Delaware Supreme Court is considering a $267 million fee request in a shareholder class action lawsuit involving Dell Technologies, and this decision may provide fee guidance.

Author: Engload