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The
maker of electric vehicles called the fee request an
"unwarranted windfall" that works out to an hourly rate of
$10,690, one of the highest fee requests ever in Delaware's
Court of Chancery, a key venue for shareholder lawsuits.
The company wants Kathaleen McCormick, chief judge on the court,
to approve a fee of no more than $64 million.
The attorneys represented a Detroit police union pension plan
that sued Tesla's directors for excessive compensation during
2017 to 2020. Nearly all of the directors' compensation
comprised stock options and they only got paid if the stock
rose. In recent years it swelled 10-fold.
Elon Musk's $56 billion in compensation as Tesla's chief
executive was not part of this lawsuit. It is being challenged
separately.
The 2020 lawsuit settled in July with the directors agreeing to
return to Tesla $735 million as part of a $919 million
agreement. The directors said their pay was fair and they only
settled to remove the risk of litigation.
The attorneys want as their fee 25% of the settlement with the
12 directors, who include James Murdoch, son of media mogul
Rupert Murdoch, and Oracle co-founder Larry Ellison.
The case was brought as a so-called derivative lawsuit which
benefits the company, rather than shareholders directly.
Tesla argued the shareholder's attorneys exaggerated the value
of the settlement, and by extension their requested fee, by
pegging its value to the cost to directors rather than the
benefit to the company. Tesla estimated its benefit from the
deal was $295 million.
The difference in the two values boils down to the stock
options. At the time of the July settlement the options were
worth $458 million to the directors.
But the company cannot exercise the returned stock options.
Instead, Tesla said in court papers that the benefit of getting
the options back is reversing the accounting cost it recorded
when they were issued, which was around $20 million.
Musk is not contributing to the settlement and he did not
receive any money for his role on the board, according to a
court filing by the plaintiff.
(Reporting by Tom Hals in Wilmington, Delaware; Editing by
Noeleen Walder and David Gregorio)
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