The judge who voided Elon Musk’s massive Tesla pay package must decide whether to grant the lawyers who brought the case to trial a $7.3 billion fee.
This could be the largest legal fee in US history.
Attorneys from four firms argue that Musk’s 2018 compensation plan was excessive.
They seek 29 million shares of Tesla stock, valued at approximately $7.3 billion.
Musk’s legal team argues only a small fraction of that amount is justified.
Delaware Chancery Court Judge Kathaleen St. J. McCormick heard expert testimonies from both sides on Monday, July 8.
She isn’t expected to issue an immediate ruling.
She must first consider whether to reinstate Musk’s pay package after Tesla shareholders overwhelmingly re-ratified it.
The unprecedented case has drawn global attention, with over 8,000 Tesla shareholders sending letters to McCormick about her pay ruling and the fee request.
At the June annual meeting, over 70 percent of Tesla shareholders supported reinstating Musk’s pay plan and moving the company’s incorporation from Delaware to Texas.
When McCormick voided the pay plan in January, it was designed to grant Musk options to buy about 304 million shares, worth nearly $56 billion.
Despite a recent dip, Tesla shares have rebounded, boosting the value of the package to approximately $69 billion and restoring Musk as the world’s richest person.
Lawyers for Tesla shareholder Richard Tornetta, who challenged the pay plan, argued their stock-based compensation request benefits Tesla by not affecting its cash reserves.
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They pointed out that they’ve worked for over six years without pay, and they took significant risks in prosecuting the suit.
NYU law professor Robert Jackson testified that blocking Musk’s pay package benefited shareholders by preventing dilution and improving corporate governance.
However, University of Chicago law professor Daniel Fischel, testifying for Musk, argued there was no quantifiable benefit to shareholders and called the fee request an “unjustified windfall.”
If McCormick denies the stock-based fee, the plaintiff’s lawyers said they’d accept over $1.4 billion in cash.
Tesla’s legal team, however, insists any award should be capped at around $13.6 million.
They argue that the 29-million share request would make the lawyers one of Tesla’s largest non-institutional shareholders.
