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Tesla has claimed in a court filing that a proposed $5.2 billion award for lawyers who successfully challenged Elon Musk’s pay package amounted to “the highest hourly rate in history” and that they are only worth $13.6 million. of dollars.
In January, a Delaware court struck down a proposed $56 billion pay package for Musk, saying it had been improperly approved by the automaker’s board of directors and had defrauded shareholders.
After the ruling, Greg Varallo, lead counsel at the plaintiffs’ law firm, Bernstein Litowitz, requested an award of approximately 29 million Tesla shares.
He argued that receiving that portion of the roughly 267 million net shares Musk would otherwise have received was in line with recent Delaware precedents that guide how much of the “vested benefit” lawyers keep to shareholders.
Tesla said in its filing Friday that the purported benefits of the original ruling were “therapeutic or unquantifiable.” He noted that the requested damages, which were initially valued at $5.6 billion, would be 17 times larger than any fee in Delaware’s legal history and equal to the state’s entire 2024 budget.
The company also estimated that the sum was equivalent to $288,000 an hour and, together, would make Bernstein Litowitz and two law firms backing him one of Tesla’s top three shareholders.
The “justification for this extraordinary request defies established Delaware jurisprudence, guts basic economics, and seeks to completely evade the equity controls this court imposes on fees,” the company’s attorneys wrote in a court filing Friday.
“This case did not require Herculean efforts that could justify the highest hourly rate in history by many orders of magnitude,” the document said.
It is the last salvo in tesla broader campaign to discredit and overturn the judge’s decision. Two votes will be held next week at its annual meeting. The first seeks the support of shareholders to restore the award of 56,000 million dollars and the second would transfer the company’s domicile from Delaware to Texas.
In the moment of MuskIn the 2018 wage settlement, Tesla took a $2.3 billion accounting charge for the package. Tesla argued that this could be considered the maximum benefit conferred on shareholders, citing other legal precedents to arrive at the much lower figure of $13.6 million.
Several small shareholders have also filed “friends of the court” filings lobbying against Varallo’s landmark request. Varallo declined to comment.
In Delaware, attorneys typically have to convince a court how much value they added after the case was concluded to determine their fees.
The outcome of the vote at next week’s Tesla shareholder meeting is far from certain, and Musk’s future may be at stake. If he loses, his ownership will still be 13 percent, compared to more than 20 percent if the prize is awarded. The billionaire, who also runs SpaceX and social media platform
Tesla president Robyn Denholm has said it needs to scale “Mount Everest” to win votes, particularly for rejoining Texas, which has a higher threshold for success.
To make the task more difficult, influential proxy advisors Institutional Shareholder Services and Glass Lewis have urged investors to vote against the “excessive” and “outsized” pay reward. Furthermore, many of Tesla’s international shareholders have discovered that difficult or impossible vote.