The lawyers who took on Tesla and Elon Musk wanted $5.6 billion for winning the case. In a lawsuit about excessive pay, ‘That was a bold ask,’ said the judge.
A Delaware court judge this week denied Tesla CEO Elon Musk’s bid to reinstate his pay package, now valued at $100 billion.
But there was another denial issued: The lawyers who successfully argued that Musk’s pay was illegal and should be rescinded wanted $5.6 billion for their efforts. The judge didn’t quite bite.
However, they fared slightly better than Musk. Delaware Chancellor Kathaleen McCormick awarded plaintiffs attorneys from three law firms $345 million in cash or Tesla shares, down from the $5.6 billion the law firm initially sought for bringing the successful challenge. The three firms include Bernstein Litowitz Berger & Grossman LLP; Andrews & Springer LLC; and Friedman Oster & Tejtel PLLC.
In a statement, Bernstein Litowitz Berger & Grossman said they were pleased with the ruling and the attorneys’ fee resolution. “We hope that the Chancellor’s well-reasoned decision will end this matter for the shareholders of Tesla. However, if defendants choose to further delay implementation of this judgment by appealing it, we look forward to the privilege of defending the Court’s thoughtful and well-grounded opinions on appeal to the Delaware Supreme Court.”
In granting the fee petition in part, McCormick wrote that the methodology used by the firms was “sound.” But applying a percentage of the value achieved in rescission of a $55.8 billion compensation package results in “an eye-popping figure,” McCormick wrote. Lawyers for Tesla had argued for $54.5 million.
“The fee award here must yield in this way, because $5.6 billion is a windfall no matter the methodology used to justify it,” she wrote.
In calculating the fees for the plaintiff’s counsel, McCormick noted that their time and efforts were substantial. Lawyers logged 19,499.95 hours, conducted an investigation, document discovery, and took 17 depositions, among other work. “Plaintiff faced some of the best law firms in the country, who put Plaintiff through their paces,” wrote McCormick. They also faced a “massive contingency risk.”
The reward represents a 25.3 multiplier of the hours the lawyers worked, she wrote.
“Plaintiff’s counsel’s standing and ability support the fee,” McCormick said in her opinion. “They are experienced stockholder advocates who have secured some of the largest recoveries in the court’s history and successfully taken high-stakes cases through trial and appeal.”
