Musk’s Tesla Board Pay Case Nets $176 Million Lawyer Fee (1)

Tesla Inc. must pay $176 million in legal fees to the shareholder attorneys who challenged four years of pay for its board of directors, including Elon Musk, a judge ruled Wednesday.

A Delaware judge signed off on a settlement worth up to $919 million, resolving the lawsuit by a pension fund that challenged the board’s compensation from 2017 to 2020, and awarded the fees to McCarter & English LLP, Fields Kupka & Shukurov LLP, and Bleichmar Fonti & Auld LLP. The ruling by Chancellor Kathaleen St. J. McCormick came the same day Musk formally appealed her landmark decision in a separate case last year voiding a record $56 billion CEO pay package given to the tech titan in 2018.

The settlement in the board pay case called for directors including Oracle Corp. founder Larry Ellison, Musk’s brother Kimbal, and a son of media mogul Rupert Murdoch to return stock and options worth up to $735 million and forgo three years of pay allegedly worth $184 million. McCormick, chief judge of Delaware’s Chancery Court, called the accord “more than reasonable.”

“This is a good settlement,” McCormick said in a bench ruling delivered by phone.

Both sides supported the settlement’s chief terms, but Musk, Tesla, and the other board members had fought a request for $230 million from the lawyers leading the litigation. McCormick largely rejected their argument that the amount would represent an unearned windfall. She did, however, agree on one point—awarding 24% of the returned stock and options alone, without taking into account the pay never received by the board in the first place.

“It’s really hard to quantify the benefit of compensation that was never awarded,” the judge said.

That reduction effectively slashed the legal fees from $230 million to $176 million. The earlier compensation case yielded a $345 million attorney payout, the largest ever in Delaware.

In addition to overseeing both pay cases, McCormick is the same judge who presided over litigation between Musk and the former Twitter Inc. after he tried to renege on his offer to buy the social media giant for $44 billion. He ultimately capitulated on the eve of trial.

The board pay lawsuit, filed by a Detroit police and firefighters retirement fund, involved shareholder derivative claims, which are technically filed on a corporation’s behalf against its leaders.

Tesla is represented by Bayard PA. Its board is represented by Richards, Layton & Finger PA and Cravath, Swaine & Moore LLP.

The case is Police & Fire Ret. Sys. of the City of Detroit v. Musk, Del. Ch., No. 2020-0477, 1/8/25.