Public policy favors $7 billion fee award in Musk pay case, Tesla shareholder's lawyer says
Updates paragraphs 1, 4-5, 8-13 with arguments from Tesla and a shareholder's legal team
By Tom Hals
WILMINGTON, Delaware, July 8 (Reuters) - A record $7 billion in attorneys' fees for three firms that successfully challenged Elon Musk's $56 billion Tesla pay package provides an incentive for lawyers to hold corporate boards accountable, an attorney for a company shareholder told a Delaware judge on Monday.
For more than six hours, legal teams for the company and a shareholder sparred over how much to award to three law firms which represented RichardTornetta, who owned nine shares of Tesla when he sued over Musk's pay package in 2018.
The fee Tornetta has asked for on behalf of the firms equals around $7.3 billion at Tesla's Monday stock price and amounts to a rate of roughly $370,000 for every hour worked by the 37 lawyers, associates and paralegals, court documents submitted by Tornetta's lawyers showed.
John Reed, Tesla's lawyer, said on Monday that the fee petition never should have been filed.
"It looks like a real-life lawyer joke," he told Chancellor Kathaleen McCormick of the Court of Chancery.
The legal fee represents a cut of the value that the plaintiff's lawyers say was createdfor Tesla TSLA.O by a Delaware judge's January ruling that rescinded Musk's $56-billion pay package.
The firms that represented Tornetta include Bernstein Litowitz Berger & Grossmann.
Tornetta's attorney Greg Varallo said the shareholder's legal team was seeking far less than the law allows, which is up to 33% of the benefit to Tesla from the lawsuit.
He said the January ruling was the largest judgment ever by an American court, excluding punitive damages, and argued that Tornetta's lawyers should receive 11% of that judgment paid in the form of 29 million Tesla shares.
Varallo argued that a large fee award would encourage shareholder attorneys to try to protect small investors.
"If Delaware continues to perceive value in policing bad behavior, then narrowing incentives would be a very bad idea," Varallo said.
Reed countered that the January ruling destroyed value by sending Tesla's stock down as it created uncertainty about Musk's future at the company.
He asked McCormick to award as little as $13.6 million as a fee.
More than 8,000 Tesla stockholders have flooded the court with some 1,500 letters and objections over the fee, according to court documents.
The request vastly outstrips the current record fee in shareholder litigation of $688 million in an Enron class action, according to Stanford Law School.
The Musk case took a dramatic turn when Tesla shareholders in June voted to ratify Musk's pay, which Tesla has argued corrected the flaws in the 2018 process that McCormick identified in her ruling.
The company argues that Musk's pay package has been restored and that Tornetta's legal victory has been transformed into a loss.
McCormick will hear arguments about the legal impact of the ratification vote in the coming weeks.
McCormick may take weeks or months to rule on the legal fee. The Delaware Supreme Court is considering a $267 million fee request in a shareholder class action involving Dell Technologies and that decision could provide fee guidance.
Reporting by Tom Hals in Wilmington, Delaware; Editing by Aurora Ellis, Rod Nickel and Richard Chang
Relaterade tillgångar
Senaste nytt
Ansvarsfriskrivning: XM Group-enheter tillhandahåller sin tjänst enbart för exekvering och tillgången till vår onlinehandelsplattform, som innebär att en person kan se och/eller använda tillgängligt innehåll på eller via webbplatsen, påverkar eller utökar inte detta, vilket inte heller varit avsikten. Denna tillgång och användning omfattas alltid av i) villkor, ii) riskvarningar och iii) fullständig ansvarsfriskrivning. Detta innehåll tillhandahålls därför uteslutande som allmän information. Var framför allt medveten om att innehållet på vår onlinehandelsplattform varken utgör en uppmaning eller ett erbjudande om att ingå några transaktioner på de finansiella marknaderna. Handel på alla finansiella marknader involverar en betydande risk för ditt kapital.
Allt material som publiceras på denna sida är enbart avsett för utbildnings- eller informationssyften och innehåller inte – och ska inte heller anses innehålla – rådgivning och rekommendationer om finansiella frågor, investeringsskatt eller handel, dokumentation av våra handelskurser eller ett erbjudande om, eller en uppmaning till, en transaktion i finansiella instrument eller oönskade finansiella erbjudanden som är riktade till dig.
Tredjepartsinnehåll, liksom innehåll framtaget av XM såsom synpunkter, nyheter, forskningsrön, analyser, kurser, andra uppgifter eller länkar till tredjepartssajter som återfinns på denna webbplats, tillhandahålls i befintligt skick, som allmän marknadskommentar, och utgör ingen investeringsrådgivning. I den mån som något innehåll tolkas som investeringsforskning måste det noteras och accepteras att innehållet varken har varit avsett som oberoende investeringsforskning eller har utarbetats i enlighet med de rättsliga kraven för att främja ett sådant syfte, och därför är att betrakta som marknadskommunikation enligt tillämpliga lagar och föreskrifter. Se till så att du har läst och förstått vårt meddelande om icke-oberoende investeringsforskning och riskvarning om ovannämnda information, som finns här.
