Tesla CEO Elon Musk’s legal battle over a $55 billion bonus has taken a new turn as lawyers who successfully sued to stop the payout are now seeking $7.3 billion in legal fees. This potential payout, if approved by Delaware judge Chancellor Kathaleen McCormick, would be the largest in history, surpassing the $688 million in attorneys’ fees awarded in the Enron case in 2008.
During a hearing on July 8, the attorneys representing a Tesla shareholder argued that they should be compensated with 29 million Tesla shares, valued at over $7 billion at current trading prices. They claimed that this amount represents 11 percent of the money they saved Tesla by preventing Musk from receiving his bonus.
However, Tesla’s legal team strongly opposed this proposal, characterizing it as an “enormous, unjustified windfall” for the attorneys. They argued that the requested fee would equate to paying the lawyers between $288,000 and $370,000 per billing hour, which they considered exorbitant.
The legal battle began when a Tesla shareholder named Richard Tornetto, who owned nine shares of the company’s stock, sued to halt the compensation package. Tornetto argued that the package would dilute the value of shareholders’ stock by approximately 8 percent. Chancellor McCormick ruled in favor of Tornetto, stating that Musk’s influence over the Tesla board constituted a conflict of interest and rendered the compensation package unfair.
During the fee hearing, both sides presented arguments regarding the financial benefit Tesla derived from Tornetto’s lawsuit. The attorneys representing Tornetto claimed that revoking Musk’s compensation package resulted in a benefit of at least $51.5 billion for the company. They initially proposed a fee of 33 percent of this benefit but later adjusted it to 29 million shares of Tesla, valued at $5.6 billion on January 30, the day of the court’s ruling.
Tesla’s lawyers argued that halting Musk’s payout did not provide any actual benefit to the company. They also highlighted that the stock price experienced a significant decline in the first half of the year due to rumors surrounding Musk’s dissatisfaction with the lawsuit. Tesla’s market capitalization dropped by $15 billion after Chancellor McCormick’s ruling.
Importantly, Chancellor McCormick clarified that a June vote by Tesla shareholders to ratify Musk’s 2018 pay package for a second time would not influence the decision on attorney fees. This matter will be addressed in a separate hearing scheduled for early August.
In conclusion, the legal battle over Elon Musk’s $55 billion bonus has taken a new twist as lawyers seek a historic $7.3 billion in legal fees. The outcome of this case has significant implications not only for Tesla but also for the legal industry, as it could set a precedent for future high-stakes lawsuits. While both sides present compelling arguments, Chancellor McCormick’s decision will ultimately determine whether the attorneys who stopped Musk’s bonus will receive such a substantial payout.
