In a twist that reads like a financial thriller, lawyers who torpedoed Elon Musk’s colossal $56 billion pay package from Tesla have now set their sights on a staggering $5.6 billion in company stock as legal fees.
This legal saga, unfolding in the chambers of the Delaware Chancery Court, pits the electric vehicle titan’s legal team against attorneys who represented Tesla shareholders, challenging the legality of Musk’s earnings. The legal maneuver, if sanctioned by Judge Kathaleen St. Jude McCormick, would mark an unprecedented legal fee award, eclipsing the previous record set by Enron’s class-action lawsuit in 2008 by a significant margin.
This legal battle traces its roots back to 2018, when Richard Tornetta, voicing concerns over Musk’s influence on Tesla’s board members, brought a lawsuit against the EV giant. The crux of Tornetta’s argument was that Musk’s pay package, which could have nearly doubled his stake in Tesla, was a result of non-independent sham negotiations. Fast forward to January, when Judge McCormick ruled the pay package illegal, siding with the shareholders’ arguments and challenging the integrity of the compensation agreement.
The attorneys’ request for legal fees, constituting approximately 11% of the ill-fated compensation package, is predicated on their assertion of having worked on a purely contingency basis for over five years. This commitment, as they argue, culminated in a ‘massive’ benefit to Tesla, warranting the record-breaking fee request. Beyond the legal fees, the attorneys are also seeking an additional $1.1 million in expenses, further inflaming the contentious financial drama.
Elon Musk’s response to the lawyers’ audacious demand was swift and scathing. Taking to X, Musk denounced the request as ‘criminal,’ underscoring the palpable tension between Tesla’s leadership and the legal team representing Tornetta. This legal entanglement showcases the high stakes and complex dynamics at play in corporate governance and compensation practices, especially within high-profile tech giants like Tesla.
The Delaware court’s upcoming decision on the legal fees will not only shape the financial outcomes for the involved parties but also potentially set a new benchmark for legal fee awards in corporate litigation. With the possibility of an appeal by Tesla and Musk still on the table, the saga is far from over. As the legal and financial communities watch closely, the outcome of this case may herald a new era in how corporate pay packages are negotiated and contested in the courts.
The legal skirmish over Elon Musk’s pay package and the subsequent demand for a historic legal fee underscores the intricate dance between corporate ambition and legal accountability. As Tesla and its legal adversaries await the judge’s deliberation, the case serves as a potent reminder of the profound impacts litigation can have on corporate strategy and the importance of governance structures that safeguard shareholder interests.
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Lawyers who argued Elon Musk pay package was illegal want $5.6 billion in Tesla stock – CBS San Francisco (cbsnews.com)
Lawyers who argued Elon Musk pay package was illegal want $5.6 billion in Tesla stock
Lawyers who successfully argued Musk pay package was illegal seek $5.6 billion in Tesla stock
