The attorneys who on Friday declared Elon Musk’s $56 billion payout to be excessive demanded a record $6 billion legal fee, which would be paid for with shares of the electric vehicle manufacturer.
“In a document submitted to the Delaware Court of Chancery, the three legal firms acknowledged that the proposed fee is unparalleled with regards to its total magnitude.”
According to them, the charge equals $288,888 per hour.
Taking to his X platform, Musk denounced the request as “criminal,” writing that “the lawyers who did nothing but damage Tesla want $6 billion.”
Requests for comment from Tesla and Musk’s counsel were not immediately answered.
The business (TSLA.O) would reimburse the attorneys for shareholder Richard Tornetta, who filed a lawsuit against Musk in 2018 over the compensation package.
The manufacturer of electric vehicles is being requested to pay the fee since it profited from Musk’s pay package being returned, which the legal team stated will give the automaker a return of 266 million shares.
“This structure has the advantage of directly linking the award to the benefit created and avoids taking even one cent from Tesla’s balance sheet to pay fees,” the attorneys wrote, noting that Tesla would be able to deduct the amount from its taxes.
The case’s supervisory judge, Judge Kathaleen McCormick, who will determine the cost, described Musk’s compensation as “unfathomable” in her decision.
Given that it has a fee request in a related lawsuit regarding the compensation of its directors, the company may object to the fee.
Federal court has seen the greatest settlements in shareholder cases. The largest fee was $688 million in 2008 for the legal team that settled a securities fraud action worth $7.2 billion related to Enron Corp.’s collapse.
The Tesla charge request coincides with the Delaware Supreme Court’s consideration of an appeal pertaining to a $267 million fee in a Dell Technologies (DELL.N) case that resulted in a $1 billion settlement.
Judges in Delaware have stated that a larger portion of the recovery should be awarded to cases that are pursued all the way to trial, through depositions, and beyond, in order to account for the risk and work involved. A one-week trial was held in the Musk pay case.
As part of his compensation package, Musk received stock options that entailed a five-year hold period and allowed him to purchase Tesla stock at a steep discount. The legal team stated that they were looking for stock that could be sold without any limitations.
The three law firms that made up the shareholder’s legal team were Wilmington’s Andrews & Springer, New York’s Friedman Oster & Tejtel, and New York’s Bernstein Litowitz Berger & Grossmann.
