Regarding costs, attorneys are not renowned for their humility in the realm of high-stakes litigation. The most recent instance? For their efforts, the legal teams that challenged Elon Musk’s $56 billion compensation package for Tesla are now asking for an astounding $7.2 billion. For their labor, this comes out to an astounding $370,000 every hour.
Richard Tornetta, a shareholder in Tesla, sued Musk because he thought Musk was being offered an excessive remuneration package. Three legal companies joined the complaint in an effort to overturn Musk’s enormous compensation package. A judge did invalidate the record-breaking compensation package earlier this year, but in June, Tesla shareholders decided to restore it.
The law firms representing Tornetta claim that their extensive five-year effort, involving 37 lawyers, associates, and paralegals, was pivotal in preventing Musk from diluting the stock held by other investors. They argue that their work warrants payment in Tesla shares—29 million shares, to be exact—currently valued at over $7 billion.
In a recent Delaware court hearing, Tornetta’s lawyers and those defending Musk presented their cases to Chancellor Kathaleen McCormick of the Court of Chancery. John Reed, representing Tesla, called the fee request a “real-life lawyer joke” and proposed a more modest fee of $13.6 million instead.
The case has sparked considerable shareholder ire, with over 8,000 Tesla investors flooding the court with 1,500 letters and objections to the proposed $7.2 billion fee. Tesla’s legal team argues that since shareholders re-ratified Musk’s pay package, Tornetta’s lawsuit has not ultimately benefited Tesla or its shareholders.
The highest lawyer fee ever awarded in shareholder litigation in the U.S. was $688 million, from an Enron class action lawsuit. Whether Tornetta’s lawyers will surpass this record remains to be seen, as Chancellor McCormick will deliberate on the matter in the coming weeks or months. The outcome will determine if the lawyers’ astronomical fee demand is granted or curtailed.
