- Tesla shareholders will appear in court to contest a $7.2 billion attorney fee request which is deemed outlandish and absurd.
- This unprecedented fee request has sparked widespread outrage among shareholders sending ten thousand letters showing objection.
OUR TAKE
Tesla’s latest drama in court isn’t just another legal battle, rather it defies any semblance of reason. As Tesla grapples with its market position and technological advancements, this legal play diverts attention and resources. This request, if it is passed, may be viewed as a slap in the face to every Tesla shareholder.
–Ashley Wang, BTW reporter
What happened
Tesla shareholders will be in court on Monday to contest a $7.2 billion attorney fee request, which is deemed “outlandish”. This unprecedented demand stems from a legal win by investor Richard Tornetta, who prosecuted Elon Musk’s $56 billion pay package of stock options in 2018. Tornetta’s legal team, which includes Bernstein Litowitz Berger & Grossmann, finally achieved a significant win in January when Musk’s pay package was voided, potentially saving Tesla around 266 million shares worth approximately $67 billion.
Tornetta’s attorneys argue that the fee, equivalent to 11% of the judgment, is justified given the significant financial benefit returned to Tesla. They claim it is a conservative percentage based on Delaware legal precedent. However, Tesla refutes that Tornetta’s legal victory no longer benefits the company as shareholders ratified Musk’s pay package in June which corrected the flaws identified in the 2018 process. Tesla ultimately states the attorneys’ fee should be reduced to $13.6 million.
Also read: Why I love Tesla so much more than BYD – a (strong) personal opinion
Also read: What’s gone wrong at Tesla?
Why it’s important
The $7.2 billion fee request, amounting to a rate of about $370,000 per hour for the 37 lawyers involved, has sparked widespread outrage among Tesla shareholders. The Tesla shareholder Nathan Chiu, the California Public Employees’ Retirement System, and over 8,000 stockholders have voiced their objections by writing about 1,500 letters to the Court. Due to the intensive attention, the upcoming hearing will be moved to the largest courtroom to accommodate 47 attorneys and numerous stakeholders, highlighting the scale and contentiousness of the dispute.
The legal battle is closely watched by the public because it is a test of the limits of attorney fees in shareholder litigation. The Delaware Supreme Court’s pending decision on a $267 million fee request in a Dell Technologies shareholder class action might also influence the outcome.
