Tesla Shareholders Fight 'Outlandish' $7 Billion Legal Fee Demand Over Elon Musk's $56 Billion Pay Package

By Madz Dizon

Jul 08, 2024 06:55 PM EDT

Tesla Shareholders Fight 'Outlandish' $7 Billion Legal Fee Demand Over Elon Musk's $56 Billion Pay Package
Elon Musk, co-founder of Tesla and SpaceX and owner of X Holdings Corp., speaks at the Milken Institute's Global Conference at the Beverly Hilton Hotel,on May 6, 2024 in Beverly Hills, California.
(Photo : Apu Gomes/Getty Images)

Tesla shareholders are scheduled to attend a court hearing in Delaware on Monday, July 8, where they will argue against the request for $7 billion in attorneys' fees.

According Fox Business, the shareholders believe that this request is excessive and should be denied. The fees were requested by the legal team that challenged CEO Elon Musk's $56 billion pay package.

Tesla Shareholders Challenge $7 Billion Legal Fee Demand Over Elon Musk's Pay Package 

An investor named Richard Tornetta has made a significant fee request on behalf of the three law firms that represented him in a lawsuit against Musk's compensation plan. This plan is considered to be the largest among CEOs of publicly traded companies in the US.

In 2018, Tornetta took legal action against Musk's stock options pay package at Tesla. After a lengthy legal battle, Tornetta emerged victorious in January when the package was declared void.

According to court documents submitted by Tornetta's lawyers, the fee amounts to a rate of approximately $370,000 for every hour worked by the 37 lawyers, associates, and paralegals. Some of these individuals typically bill as little as $275 an hour.

According to court documents, the Delaware Chancery Court has received around 1,500 letters and objections from Nathan Chiu, a Tesla shareholder from New Jersey,  the California Public Employees' Retirement System, and over 8,000 Tesla stockholders regarding the fee.

Reuters reported that a hearing scheduled for Monday was relocated to a larger courtroom to accommodate the large number of attorneys and potential stockholders involved in the case.

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Delaware Courts Favor Higher Attorney Fees 

In contrast to federal courts, Delaware courts have taken a different approach by increasing the percentage of fees awarded to attorneys as a means of encouraging them to strive for larger recoveries.

Tornetta's legal team claimed that they could have reasonably requested up to 33% of the total value of Musk's compensation package.

The Musk case took a surprising twist when Tesla shareholders voted in June to approve Musk's pay. According to Tesla, this decision addressed the issues highlighted byc Chancellor Kathaleen McCormick  in her ruling on the 2018 process.

The company claims that Musk's compensation package has been reinstated and that Tornetta's legal triumph has now turned into a defeat. Tesla stated that the case did not bring any advantages to the company, and therefore, the shareholder lawyers should only be awarded a minimal amount of $13.6 million.

Several shareholders who have expressed their opposition to the request have chosen different methods to voice their concerns. While some have opted to write form letters to the judge, others have taken a more formal approach by hiring attorneys to file objections to the fee.

READ MORE: Forbes Names Elon Musk Biggest Loser as Net Worth Shrinks by $30 Billion in 2024 

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