How a Pivot to Plaintiffs’ Side Paid Off in Big Win Against Musk

Greg Varallo made his name defending corporations in Delaware shareholder lawsuits but he set a record after switching sides and going after Elon Musk‘s $56 billion pay package.

Varallo won a share of a $345 million fee by leading a trial team for Bernstein Litowitz Berger & Grossmann that challenged the executive pay package at Tesla Inc. The fee is the largest in Delaware Chancery Court history but only a fraction of the nearly $7 billion award lawyers sought.

Chancellor Kathaleen McCormick’s fee approval last week slaps an exclamation mark on a successful career change for Varallo, who launched a Delaware office for Bernstein Litowitz in 2019 after more than three decades practicing with the defense bar.

If the Musk ruling and fee withstand an expected appeal to the Delaware Supreme Court, it will add to a series of victories by the firm in Delaware since Varallo launched the office. They include wins for shareholders in cases involving Williams Cos., Columbia Pipeline Group Inc. and Mindbody Inc., and settlements with Madison Square Garden Entertainment Corp. and Paramount Global.

Varallo has handled more than a half dozen major trials since joining Bernstein Litowitz in 2019.

“It’s been all guns blazing ever since,” Varallo said in an interview. “There is nothing like Tesla. But we’ve had some exciting trials and some exciting wins.”

Varallo declined to discuss the Tesla case specifically, pointing to a firm statement that said it was “pleased” with McCormick’s decision.

Bold Move

The seeds of his bold career move were planted in 2017, when he was negotiating on behalf of 21st Century Fox Inc.'s $90 million settlement to resolve shareholder claims brought by Bernstein Litowitz stemming from allegations of sexual harassment against Fox News leader Roger Ailes.

A Philadelphia native who describes himself as a “blue-collar kid” and enjoys hunting and poker, Varallo made his career representing big companies such as Fox and Goldman Sachs in major shareholder litigation.

He spent 36 years at Richards, Layton & Finger, Delaware’s largest law firm, the last three as president, which is by tradition, a one-term gig. The former president then supports their predecessor and, as Varallo puts it, “sits quietly.” Supporting his predecessor wasn’t difficult.

“But I wouldn’t be that good at sitting quietly,” he said. “I don’t do that well.”

He got a shot at something new when a former professional adversary reached out.

Novel Negotiation

Varallo first worked across from Bernstein Litowitz partners Mark Lebovitch and Max Berger while representing Rupert Murdoch’s 21st Century Fox in a shareholder lawsuit related to its phone-hacking scandal in London. He was later hired by the company to defend the Delaware lawsuit stemming from accusations of Ailes’ sexual harassment.

Varallo asked the plaintiffs’ lawyers to negotiate a settlement before the case was even filed. It was an effort, he said, to prevent any victims of the alleged behavior from being forced to give depositions or testimony about the incidents. Lebovitch was open to the idea, Varallo said, and the $90 million settlement was filed in court the same day as the complaint.

“Mark kept the entire plaintiff bar at bay for a year, kept them from filing cases,” Varallo said. “It was an enormous benefit to the company for a whole lot of reasons, but it couldn’t have happened with anybody but BLB&G on the other side.”

About two years later, Lebovitch asked if Varallo would launch a Delaware office for his firm. Varallo was reluctant, citing his respect for his firm and the people he worked with.

But he was pushed to make the jump from an unexpected source.

Unexpected Advice

At an outdoor event in Palm Springs, California where he was inducted to the American College of Trial Lawyers, Varallo bumped into Henry Gutman, a since-retired Simpson Thacher & Bartlett partner he hadn’t seen in decades since they reviewed documents together as “young pups” at Cravath, Swaine & Moore.

Feeling reflective, Varallo told Gutman he was turning 60 the next day and had been presented with a career change. Gutman told him of a Japanese tradition where people reinvent themselves at age 60.

“My jaw is hitting the ground because I’m thinking about going to the other side, and here’s a guy who drops out of nowhere in a polo field, haven’t seen him in 30 years, and he’s giving me advice from Japan on how to reinvent myself,” Varallo said. “It was truly amazing.”

Gutman, now an adjunct professor at New York University Law School, didn’t respond to a request for comment.

Crossing Musk

The Tesla-Musk case was originally filed in 2018 by lawyers at Friedman Oster & Tejtel and Andrews & Springer, the other two firms who will split the massive fee. Details of the split are not public.

Varallo and his firm were brought into the case as trial counsel in 2021, after it had survived an initial motion to dismiss. Varallo’s highlight in the case was cross-examining Musk.

“When you try cases, the fun part is the cross,” Varallo said, noting plaintiff’s lawyers have more opportunities for cross examinations than defense attorneys. “So trials are a lot more fun than when you’re a defense lawyer.”

The 65-year-old said he intends to practice “no more than another couple of years.” Then he’ll do some teaching and writing.

He said his switch to plaintiff’s-side work has been a “hands down” success.

“As a defense lawyer I had to explain myself to insurance companies and take large deductions to get paid,” he said, referring to the fact that insurers often paid his bills. “And now I liberate large amounts of money from insurance companies.”