Tesla Wins $100 Million Cut in Legal Fees in Board Pay Pact (1)

Delaware’s top court cut more than $100 million Friday from the payday for shareholder attorneys who reached a settlement with Tesla Inc. in a challenge over four years of compensation for the electric vehicle-maker’s directors.

The decision by the state’s elite trial-level business court to award $176 million to a pension fund’s law firms decision “erred by including in its financial benefit analysis the intrinsic value” of options being returned by Tesla’s board, Chief Justice Collins J. Seitz Jr. said in an opinion for the state supreme court’s full five-member panel.

The justices set the fee award at $70.9 million while also upholding the lower court’s approval of the settlement. “As we measure it, $71 million reflects a reasonable fee for counsel’s efforts and does not result in a windfall,” Seitz wrote.

The Delaware Chancery Court had awarded $176 million to the attorneys for a pension fund that settled their derivative lawsuit challenging pay from 2017 to 2020 for directors including CEO Elon Musk, Oracle Corp. founder Larry Ellison, Musk’s brother Kimbal, and a son of media mogul Rupert Murdoch.

Tesla’s board must return stock and options valued up to $735 million and forgo three years of pay worth $184 million. The high court wasn’t asked to consider the fairness of the settlement nor the transactions that prompted the litigation.

The returned options’ value of $458 million “was needed to calculate how many options to return,” but neither Tesla nor the directors agreed to including that value “in the financial benefit for purposes of awarding fees,” Seitz said.

Tesla said during oral argument that a roughly $70 million fee award would have been appropriate.

Exceeding the Budget

Justice Karen L. Valihura noted during the Oct. 29 arguments that the fee was $60 million more than the Delaware judiciary’s budget last year “for a case that settled midstream.” The pension fund said the settlement was one of the largest ever reached in Delaware, and the Chancery Court didn’t award the full $230 million requested.

Nine-figure lawyer paydays got a cautious approval from the state’s high court last year when it affirmed a $267 million award for lawyers who reached a $1 billion settlement over a contentious stock conversion at Dell Technologies Inc.

Last monthTesla succeeded in getting Delaware’s top court to pare back a $345 million fee awarded in a challenge to Elon Musk’s record-setting CEO pay package. Investor Richard Tornetta’s attorneys had argued that fee reflected the benefit created by his litigation—rescission of the largest pay package in human history.

The justices cut that fee award down to no more than $54.5 million when they restored the compensation deal to the world’s richest person. They also sought to keep the fee question from returning to the Chancery Court, saying in a per curiam opinion, “Although we would ordinarily remand for a reassessment of fees, we make an exception based on the length of this litigation and not to burden the Court of Chancery, which has devoted enormous time and attention to this case over many years, at great personal sacrifice.”

Tesla is represented by Sullivan & Cromwell LLP, DLA Piper LLP (US) and Bayard PA. Musk and other Tesla directors are represented by Richards, Layton & Finger PA and Cravath, Swaine & Moore LLP. The Police and Fire Retirement System of the City of Detroit is represented by Akerman LLP, Bleichmar Fonti & Auld LLP and Fields Kupka & Shukurov LLP.

The case is In re Tesla, Inc. Dir. Comp. S’holder Litig., Del., No. 53,2025, opinion 1/30/26.