Lawyers suing Tesla board demand $10k per hour.
Legal Team Seeks $229 Million in Fees from Tesla Directors
A legal team that successfully compelled Tesla’s directors to return over $700 million in compensation to the automaker is now seeking a massive payday for themselves. According to a filing in Delaware’s Court of Chancery, the lawyers are requesting $229 million in fees, which amounts to an astonishing $10,690 per hour.
If approved, this fee award would be one of the largest ever resulting from a shareholder lawsuit against a board. The money would be distributed among lawyers from four firms who spent years building a case against the excessive compensation paid to Tesla’s directors from 2017 to 2020.
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The approval of both the legal fee and the settlement rests in the hands of a Delaware judge, with a hearing scheduled for October.
The 12 director defendants, including James Murdoch and Larry Ellison, have already agreed to return $735 million in compensation and forgo an additional potential $184 million. They have also committed to revamping the board’s approach to determining director pay. The settlement funds will indirectly benefit Tesla’s shareholders, as this is a derivative lawsuit.
The law firms estimate the total value of the settlement at $919 million and are seeking 25 percent of that as their fee. Additionally, they are requesting approximately $1 million to cover expenses.
Partners and staff from the law firms of Bleichmar Fonti & Auld and Fields Kupka & Shukurov, along with McCarter & English and Clark Hill, have dedicated countless hours to this case. However, representatives from these firms have either declined to comment or not responded to requests for comment.
David Paige, founder of Legal Fee Advisors, explains that courts review fee requests by considering the need to reward risk-taking and effort while avoiding excessive windfalls that could undermine confidence in the legal system. He describes the Tesla plaintiffs’ request as “extraordinary” compared to the typical hourly rates of top corporate attorneys, which usually cap at around $2,000. Ultimately, the court will need to assess the fee’s size in relation to the litigation’s benefit.
While the Tesla directors have not yet objected to the fee request, it is expected that they will do so, according to a court filing by the plaintiffs’ lawyers. Attorneys representing the directors have not provided any comments at this time.
Delaware courts have previously approved higher hourly rates. In a 2012 case involving a Southern Copper shareholder lawsuit and $2 billion in damages, the Delaware Supreme Court upheld a $304 million fee, which equated to $35,000 per hour. The defendants had opposed this fee, but the state’s high court emphasized that the outcome achieved should be the focus, rather than the hourly rate.
The Delaware Court of Chancery judge overseeing the Tesla case, Kathaleen McCormick, has scheduled a hearing on October 13 to review and approve the settlement and fee. Tesla shareholders have until Friday to file any objections.
What law firms are leading the lawsuit brought by shareholders on behalf of Tesla?
Lawsuit brought by shareholders on behalf of the company itself.
The legal team, led by the law firms Grant & Eisenhofer, Kessler Topaz Meltzer & Check, and Pomerantz LLP, argue that their efforts were instrumental in holding the Tesla directors accountable for their excessive compensation. They spent years building a strong case, conducting extensive research and investigations, and engaging in legal battles to ensure justice for the shareholders.
If their requested fee of $229 million is approved, it would mark a significant milestone in the legal industry and highlight the massive sums involved in high-stakes shareholder litigation. With over 21,400 hours of work put into the case, the lawyers’ proposed fee of $10,690 per hour reflects the complexity and intensity of the legal battle they fought on behalf of Tesla’s shareholders.
It is worth noting that the defendants, including high-profile individuals like James Murdoch and Larry Ellison, have already agreed to return a substantial amount of their compensation. This indicates their recognition of the impropriety of their pay and a commitment to reforming the board’s approach to determine director remuneration.
While the legal team seeks a substantial payout for their efforts, it is important to consider the potential benefits and impact of their work. By securing the return of over $700 million to Tesla, they have taken a significant step in ensuring accountability and fair treatment for shareholders. The settlement funds will ultimately benefit the company and its shareholders, contributing to the stability and reputation of Tesla as a leading automaker.
The approval of both the requested legal fee and the settlement itself ultimately lies in the hands of a Delaware judge, who will weigh the merits of the case and the effort expended by the legal team. A hearing has been scheduled for October, where the final decision will be made.
This case highlights the crucial role that legal teams and shareholder lawsuits play in holding corporate directors accountable for their actions. It also underscores the need for robust corporate governance practices and transparency in determining director pay. As companies continue to face scrutiny over excessive compensation practices, legal battles like this one serve as a reminder that shareholders have the power to demand accountability and fair treatment from corporate boards.
In conclusion, the legal team seeking a $229 million fee from Tesla’s directors highlights the significant work and effort involved in holding the directors accountable for their excessive compensation. The approval of this fee would mark a milestone in the legal industry and underscore the importance of shareholder lawsuits in ensuring corporate governance and fairness. The final decision lies with a Delaware judge, and the hearing scheduled for October will determine the outcome of this case. Ultimately, the settlement funds will indirectly benefit Tesla’s shareholders, contributing to the stability and reputation of the company.
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