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Tesla shareholders are set to appear in court to dispute a $1.44 billion attorney fee request related to CEO Elon Musk's invalidated $56 billion compensation plan. The fee demand, initially $7.2 billion, has sparked significant controversy among investors.
Tesla Shareholders Challenge $7.2 Billion Legal Fee Request Following Invalidation of Musk’s Compensation Plan
As part of the case in which a Delaware judge invalidated CEO Elon Musk's $56 billion compensation plan earlier this year, Tesla shareholders are scheduled to appear in court this week to contest counsel requests for billions in legal fees.
In January, Delaware Judge Kathaleen McCormick invalidated Musk's compensation plan from 2018, which shareholders had previously authorized. This decision was made as part of a case with shareholder Richard Tornetta. Tornetta's attorneys, Bernstein Litowitz Berger & Grossmann, and two other law firms, subsequently requested approximately 29 million Tesla shares as legal fees, valued at roughly $7.2 billion at Tesla's Friday stock price.
According to a report from Reuters, Tesla shareholders are scheduled to attend a court hearing on July 8 to contest the attorney fees. As detailed in court documents, the initial fee requests represented a record-high legal fee demand, bringing pay rates to approximately $370,000 per hour for all 37 attorneys and other professionals involved.
“The legal fees appear exceedingly disproportionate and outlandish,” wrote Nathan Chiu, a New Jersey-based shareholder, to Judge McCormick in a March filing.
Tesla Shareholders, Including Major Funds, Object to $1.44 Billion Legal Fee Request in Court
According to court documents, the California Public Employees' Retirement System and over 8,000 Tesla shareholders are among the other shareholders who have submitted over 1,500 letters and objections to the fee.
Teslarati reported that the legal team's request was reduced to $1.44 billion last month, equating to over $200,000 per hour of labor on the case. Court documents also indicate that confident case attorneys, associates, and paralegals typically charge as little as $275 per hour.
The case involving Tornetta, who held nine Tesla shares at the time of the initial litigation in 2018, commenced in 2022 and concluded in January when McCormick ruled in favor of the shareholder.
Musk described the request as "criminal," "ironic," and "utterly disgraceful" in March following the initial reports about the fee. He also referred to the attorneys as "evil" twice.
Last month, Tesla shareholders ratified the previously authorized compensation plan and voted to relocate the company's incorporation from Delaware to Texas.
Photo: Microsoft Bing
