Legal teams for Tesla and a shareholder debated in court on Monday over a lawsuit challenging CEO Elon Musk’s pay package and a subsequent request for a record $7 billion legal fee. Two experts provided conflicting testimonies about the benefits created for Tesla by a Delaware judge’s January ruling that rescinded Musk’s $56 billion pay package. The shareholder, Richard Tornetta, owned nine Tesla shares when he sued in 2018 and is now pursuing the fee as a portion of the benefit allegedly conveyed to Tesla.
Tornetta’s lawyers argue that they deserve the fee as a cut of the benefit, which they claim is worth $51 billion in returned stock to Tesla. This amount represents around 266 million shares reserved for Musk’s stock options, voided by the court’s ruling. Robert Jackson, a former SEC commissioner, supported this valuation, while University of Chicago law professor Daniel Fischel countered that Tesla did not save any cash from the rescission, making the attorneys’ fees an “unjustified windfall.”
The court hearing revealed that more than 8,000 Tesla stockholders have filed some 1,500 letters and objections regarding the fee. Tornetta’s attorneys contended that the $7 billion request is a conservative 11% of the ruling’s value, in line with Delaware legal precedent and proposed that the fee be paid in the form of 29 million Tesla shares.
