Tesla has encouraged a Delaware judge to reject nearly $230 million in legal fees sought by lawyers following a case settled earlier this year over the company’s executive compensation.
In a request to Delaware Judge Kathaleen McCormick, Tesla asked that the $229 million in legal fees sought by shareholder lawyers be reduced to $64 million, Portal reported on Friday. The automaker reached a settlement in the case in July, with Tesla directors agreeing to repay over $735 million to the company related to stock option compensation from 2017 to 2020.
Attorneys have sought 25 percent of the total $919 million settlement for the lawsuit, which was originally filed in 2020. Tesla’s lawyers have responded that the shareholders’ legal teams inflated the value of the settlement and charged fees by linking the value to the cost to each director rather than to the company’s overall benefit.
Tesla said the fee was an “unjustified windfall” and recently noted that it would be up to $10,690 an hour for lawyers working on the case.
After arguing for about two hours Friday about the fee and attorney requests to approve the settlement, McCormick did not say when she planned to announce a decision. McCormick must also agree to the settlement, but it is not clear when she will do so.
The fees would be paid directly to attorneys at four law firms who worked on the case, including partners and associates at New York-based Bleichmar Fonti & Auld and Fields Kupka & Shukurov, both of which billed for over 10,000 hours of work on the case. Other law firms include McCarter & English in Wilmington, Delaware, and another attorney at Clark Hill in Lansing, Michigan. Both said they billed for hundreds of hours on the case.
At the hearing, Tesla shareholder Mike Levin pointed out that the directors would be held liable for damages as a group and that the settlement did not award specific damages to each director.
“We do not want a defendant — CEO Elon Musk — to pay part or all of the amount,” Levin said. “That would jeopardize any independence of the directors.”
The fee represents one of the highest fee requests ever filed in the Delaware Court of Chancery, where shareholder lawsuits like this one are often heard. The directors maintained they had received adequate compensation but settled to avoid further risk of litigation.
CEO Elon Musk also faces another challenge over his 2018 salary package of $56.
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