Lawyers who voided Elon Musk's pay as excessive want a $6 bln fee (updated)

Portland General Electric Co

01/03/2024 23:45

(Adds background and details from the filing; new from
paragraph two)
    By Tom Hals
       WILMINGTON, Delaware, March 1 (Reuters) - 
    The lawyers who voided Elon Musk's $56 billion compensation
as excessive are seeking a record legal fee worth $6 billion,
payable in the electric car maker's stock, according to a Friday
court filing.
        "We recognize that the requested fee is unprecedented in
terms of absolute size," said the filing with the Court of
Chancery in Delaware by the three law firms.
  
        The fee works out to an hourly rate of $288,888,
according to the court filing.
  
        The fee will be paid by Tesla  TSLA.O  to attorneys who
represented Richard Tornetta, a Tesla shareholder who sued Musk
in 2018 over the pay package, which a Delaware judge nixed in
January. 
        The electric vehicle maker is being asked to pay the fee
because it benefited from the return of Musk's pay package,
which the legal team said will result in the return to the
carmaker of 266 million shares.
  
        The fee request must be approved by Kathaleen McCormick,
the judge overseeing the case. She called Musk's pay
"unfathomable" in her ruling.
  
        Tesla, Musk's attorney and Musk did not immediately
respond to a request for comment.
  
        The company may object to the fee, as it has a fee
request in a similar case over the pay for its directors. 
  
        "This structure has the benefit of linking the award 
directly to the benefit created and avoids taking even one cent
from the Tesla balance sheet to pay fees," said the shareholder
legal team, noting the fee is also tax-deductible to Tesla.
  
        The largest settlements in shareholder cases occur in
federal court and the biggest fee was $688 million in 2008 for
the legal team that obtained a $7.2 billion settlement in
securities fraud case over the failure of Enron Corp.     
  
        The Tesla fee request comes as the Delaware Supreme
Court is considering an appeal of a $267 million fee in a case
that settled for $1 billion involving Dell Technologies
 DELL.N .
        Delaware judges have said that pursuing cases deep into
litigation, through depositions and toward trial, should get a
higher percentage of the recovery to reflect the risk and
effort. The Musk pay case went to a one-week trial.
  
        Opponents of this approach argued that as settlements
and judgments grow in size, attorneys should collect a declining
percentage to avoid overcompensation. 
  
        The legal team said the requested fee worked out to
about 11% of the judgment. 
  
        Musk's pay package consisted of stock options that
allowed him to purchase Tesla stock at heavily discounted prices
and required him to hold the stock for five years. The legal
team said they are seeking stock without restrictions on selling
it.
  
        The shareholder's legal team comprised three law firms,
Bernstein Litowitz Berger & Grossmann and Friedman Oster &
Tejtel, both based in New York, and Andrews & Springer of
Wilmington.
  

 (Reporting by Tom Hals in Wilmington, Delaware; Editing by
Leslie Adler and Diane Craft)
 ((thomas.hals@thomsonreuters.com; +1 610 544 2712; Reuters
Messaging: thomas.hals.thomsonreuters.com@reuters.net))