Elon Musk could have $56 billion thanks to the results of Tesla’s annual meeting this Thursday, when automaker’s shareholders to vote on record CEO pay package for 2018.
But there is another group that could well score a record windfall: The legal team that successfully argued against Musk’s payment in a Delaware court earlier this year seeks a whopping $5.6 billion in share-based legal fees…17 times higher than the highest fees in Delaware history.
“We recognize that the fees requested are unprecedented…The amount of compensation requested is significant because the value of the benefit to Tesla obtained by plaintiff’s counsel was enormous,” the plaintiff’s legal team wrote in a court filing. “We are ready to ‘eat our cooking’.”
Tesla shareholders will give Musk a response later this week, but opposing lawyers will have to wait for a hearing scheduled for July 8 for the Delaware Court of Chancery to approve or deny the requested fee.
Musk himself has expressed his strong opposition to the lawyers’ fees proposal. “The lawyers who have done nothing but harm Tesla want $6 billion. Criminal,” Musk had already written in a post on his personal X account.
The lawyers seeking the $5.6 billion in fees represented plaintiff Richard Tornetta, a Tesla shareholder who filed a lawsuit in 2018 to protest Musk’s compensation packagewhich had previously received approval from Tesla’s board of directors and 70% of the company’s shareholders.
It was structured so that Musk would unlock certain stock awards if he guided the company to various milestones based on metrics such as market capitalization. Under Musk’s leadership, Tesla achieved these milestones faster than expected. reach $1 trillion in market capitalization by 2021. (It has since declined, reaching just over $551 billion today.)
But Delaware Chancellor Kathaleen McCormick sided with Tornetta earlier this year, concluding that Musk’s pay package was an “unfathomable sum” and that the approval process was “deeply flawed,” in part because Tesla’s board of directors includes many of Musk’s close friends and colleagues.
Tesla shareholders will decide this Thursday whether they want to overturn the Delaware court’s decision. But whatever the outcome, the plaintiff’s lawyers won the case and they are demanding their share of the meat. Although extremely high in dollar terms, the fees the lawyers asked for are far lower than what other lawyers got in percentage terms: only 10% of the $56 billion they saved Tesla shareholders by canceling Musk’s payment.
Last year, the Delaware Court of Chancery awarded lawyers 27% of the billion dollar settlement of a merger and acquisition case involving Delland in 2011 the lawyers won 15% of the $2 billion in damages arising from a case involving the mining company Southern Peru Copper Corp.
Delaware courts reward lawyers who pursue complex cases to the final stages of litigation and achieve ‘real results,’ Delaware Vice Chancellor J. Travis Laster said in approving attorneys’ fee request Dell litigants.
But even though the percentage is relatively modest, the monumental scale of the decision makes the request for attorney fees extraordinary.
“The amount requested in the fee request is unusual” McCormick conceded in court filing.
Even if Tesla shareholders vote to restore Musk’s pay package, there is no guarantee that he will actually get the money. Corporate law is unclear whether a shareholder vote is enough to overturn a court decision, and Musk may be forced to return to court to get final approval of the money. If the shareholders do not vote in favor, analysts have speculated that Musk may stop paying so much attention to Tesla and devote more time to his other businesses.
“Elon is not a typical executive, and Tesla is not a typical company,” Robyn Denholm, Chairman of the Board of Directors of Tesla, said. “So the usual way companies compensate their top executives will not drive results for Tesla. Motivating someone like Elon requires something different.
This story was originally featured on Fortune.com
