Tesla Urges Rejection of $5.6 Billion Legal Fee in Musk Pay Case

Tesla Inc. urged a Delaware judge to reject an unusual proposal by the lawyers who defeated Elon Musk’s $56 billion compensation package and now want their legal fees paid with about $5.6 billion of stock in the electric-car maker.

Instead, Tesla argued in a court filing late Friday that the lawyers should be entitled to just $13.6 million after successfully challenging the company’s decision to award Musk what would have been the largest executive payout ever.

“This case did not require the Herculean efforts that might justify the highest hourly rate in history by many orders of magnitude,” Tesla lawyers said in the filing.

The fight over legal fees is one of the lingering issues to be resolved before Delaware Chancery Judge Kathaleen St. Jude McCormick can finalize her decision voiding Musk’s record-setting compensation award. Once the case is finalized, Musk will have 30 days to decide whether to appeal.

Lawyers for shareholder Richard Tornetta, who brought the lawsuit, argued that they should receive more than 29 million Tesla shares as compensation from the company rather than cash. They argued that the unique plan would link their award directly to the benefit created in challenging the Musk stock award without taking money off Tesla’s balance sheet.

Tesla’s team rejected that argument, saying it “defies established Delaware case law, mangles basic economics, and seeks to evade entirely the fairness checks this court imposes on fees.”

McCormick is scheduled to rule on appropriate legal fees on July 8.

The dispute comes less than a week before Tesla shareholders are scheduled to consider approving Musk’s massive pay package again — plus a proxy vote about whether the company should move its corporate home from Delaware to Texas.

Both votes are scheduled to occur during Tesla’s annual meeting on June 13. One shareholder has sued to challenge the proposals, arguing that the company is violating its corporate charter in its management of the proceedings.

Read More: Tesla Vote Won’t Guarantee Musk Gets His $56 Billion Pay Package

The case is Tornetta v. Musk, 2018-0408, Delaware Chancery Court (Wilmington).

--With assistance from Jef Feeley.

To contact the reporter on this story:
Madlin Mekelburg in Austin at mmekelburg@bloomberg.net

To contact the editors responsible for this story:
Misyrlena Egkolfopoulou at megkolfopoul@bloomberg.net

Steve Stroth, Peter Jeffrey

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