Tom Hulse
WILMINGTON, Delaware (Reuters) – Lawyers who on Friday tossed Elon Musk’s $56 billion settlement as excessive sought a record $6 billion settlement, to be paid in shares of the electric car maker.
“We acknowledge that the fees requested are unprecedented in absolute amount,” the three law firms said in a filing in the Delaware Chancery Court.
The hourly wage is $288,888, they said.
Musk called the request “criminal,” posting on his X platform that “lawyers who have done nothing but damage Tesla (NASDAQ:) are demanding $6 billion.”
A lawyer for Tesla and Musk did not immediately respond to requests for comment.
The company will pay lawyers who represented Richard Tornetta, a shareholder who sued Musk in 2018 over a pay package that a Delaware judge rejected in January.
The electric vehicle maker is being asked to pay the fee because it benefited from the return of Musk’s royalties, which the legal team says will result in 266 million shares being returned to the automaker.
“The advantage of this structure is that it directly ties the fee to the benefit generated and avoids deducting even one cent from Tesla’s balance sheet to pay the fee,” the lawyers wrote, adding that the fee would not be taxable to Tesla.
Judge Kathleen McCormick (NYSE:), who is overseeing the case and will decide the fee, called Musk’s salary “incomprehensible” in her decision.
The company may object to the payment of remuneration because it has a request for remuneration in a similar case in respect of the salaries of its directors.
The largest shareholder settlements have been reached in federal court. The largest settlement was $688 million in 2008 for the legal team that won a $7.2 billion settlement in a securities fraud case related to the bankruptcy of Enron Corp.
The request for Tesla’s fees comes as the Delaware Supreme Court is considering an appeal of a $267 million fee in a case that included a $1 billion settlement involving Dell Technologies (NYSE:).
Delaware judges have said that handling cases at trial, through depositions and before trial, should provide a higher recovery rate to reflect risk and effort. The Musk salary case was heard in a week-long trial.
Opponents of this approach argue that as settlements and judgments increase in size, attorneys should collect less interest to avoid overcompensating. The legal team said the requested fee was about 11% of the judgment.
Musk’s compensation package consisted of stock options that allowed him to buy Tesla shares at significantly reduced prices and required him to hold the shares for five years. The legal team said they wanted the shares with no restrictions on how they could be sold.
The shareholder’s legal team included three law firms: Bernstein Litowitz Berger & Grossmann and Friedman Oster & Tejtel, both based in New York, and Andrews & Springer, based in Wilmington.