Lawyers who stopped Elon Musk's "excessive" $56 billion Tesla pay ask for $6 billion fee

[midian182]

A hot potato: In a move that some might call hypocritical, the lawyers who stopped Elon Musk's $56 billion Tesla pay package by successfully arguing it was excessive are now asking to be paid the equivalent of $6 billion in the EV giant's stock. According to a court filing, that works out at an hourly rate of $288,888.

More than five years after shareholder Richard Tornetta filed suit against Tesla over claims it breached its fiduciary duty by unjustly enriching its CEO to the tune of $56 billion, a Delaware judge voided Musk's pay package in January.

In a court filing last week, lawyers from the three law firms that represented Tornetta – Bernstein Litowitz Berger & Grossmann, Friedman Oster & Tejtel, and Andrews & Springer – wrote "We recognize that the requested fee is unprecedented in terms of absolute size."

The lawyers argue that Tesla is being asked to pay the massive fee because it will benefit from the return of Musk's compensation, which they claim will result in 266 million shares being returned to the company.

Tesla's share price since early 2022

"This structure has the benefit of linking the award directly to the benefit created and avoids taking even one cent from the Tesla balance sheet to pay fees," the shareholder legal team said, adding that the fee was tax-deductible for Tesla.

Lawyers wrote in their filing that they believed they could have fairly asked for a third of the "benefit conferred" from Musk's canceled $56 billion pay award, based on past precedent. They noted that a Delaware case from 2012 saw lawyers awarded nearly $300 million, or 15% of the shareholder recovery, whereas they are willing to accept 11%.

Kathaleen McCormick, the judge who denied Musk's Tesla pay package for being excessive, must approve the lawyers' fee request. The Guardian notes that Tesla may also object, as it did to a fee request in a similar case over the pay for its directors.

If the lawyers get their way, they will receive just over 29.4 million shares, making them one of Tesla's top ten shareholders. They described the request as "conservative" under Delaware law, which they say entitles them to 33% of the "quantifiable conferred benefit."

It was also noted that the lawyers worked on a contingency basis, having been paid nothing for their six years of work and risked receiving nothing if they lost. They are also asking for an expense reimbursement of $1.1 million.

Elon Musk responded to the news of the requested fee with a post on X/Twitter that read: "The lawyers who did nothing but damage Tesla want $6 billion. Criminal."

The lawyers who did nothing but damage Tesla want $6 billion. Criminal. https://t.co/JI6eQPTxQ2

– Elon Musk (@elonmusk) March 2, 2024

The previous highest fee awarded in a shareholder case in federal court was the $688 million granted in 2008 to the legal team that secured a $7.2 billion settlement in the Enron securities fraud case.

Musk is expected to appeal McCormick's pay package ruling. He is also moving his companies out of the state of Delaware in retaliation.

In other news, a law firm was rebuked by a judge last month for using ChatGPT to calculate lawyers' fees at an "excessive" $600 per hour.

Permalink to story.

https://www.techspot.com/news/102112-lawyers-who-stopped-elon-musk-excessive-56-billion.html

 

[toooooot]

Sincere thanks should be enough.
I am not sure I understand what they worked on for 6 years?
Don't they have a salary or something?
Or did Musk request 56 billion every year within the last 6 years?

 

[Bobbydpue]

"Elon Musk responded to the news of the requested fee with a post on X/Twitter that read: "The lawyers who did nothing but damage Tesla want $6 billion. Criminal."" This from the guy who tanked the value of Twitter before he was forced to go through with the deal he proposed.

"Sincere thanks should be enough.
I am not sure I understand what they worked on for 6 years?
Don't they have a salary or something?
Or did Musk request 56 billion every year within the last 6 years?"

I read the article and both of your questions are answered with just reading the article:

"More than five years after shareholder Richard Tornetta filed suit against Tesla over claims"
"It was also noted that the lawyers worked on a contingency basis, having been paid nothing for their six years of work and risked receiving nothing if they lost."

Do you know how law works in the US? Tons of paperwork, including requests for information as part of discovery. I'm not law professional, but It's all a lot more time consuming that I had thought.

 

[The Talking Tech]

I say...sue him.

 

[Endymio]

Do you know how law works in the US? Tons of paperwork, including requests for information as part of discovery. I'm not law professional, but It's all a lot more time consuming that I had thought.

Even using their own figures for the time the law firm spent, this works out to a pay of $305,000 per hour. Per hour. And -- despite claims they "helped Tesla shareholders" -- the price of Tesla stock dropped the moment word of this ruling hit the news.

Oh, and this fee doesn't include their expenses either. Those are billed separately.

"More than five years after shareholder Richard Tornetta filed suit against Tesla"

Tornetta, you mean the thrash metal drummer who owned less than 0.000001% of Tesla stock? The vast majority of Tesla shareholders approved the pay package, both when first voted upon, and repeatedly, in the years since.

 

[Uncle Al]

Just follow Cesar's advice .... "Kill All The Lawyers" ...... then give the surviving one's $250 an hour and tell them to go home ....

 

[trieste1s]

This is the endgame of legal America. Truly the decline of empire.

 

[erickmendes]

If someone save your life give him a kidney so you are even

 

[MyIOnU]

Thing that you think only happens in Communist Countries !!!

 

[Bobbydpue]

Even using their own figures for the time the law firm spent, this works out to a pay of $305,000 per hour. Per hour. And -- despite claims they "helped Tesla shareholders" -- the price of Tesla stock dropped the moment word of this ruling hit the news.

Oh, and this fee doesn't include their expenses either. Those are billed separately.


Tornetta, you mean the thrash metal drummer who owned less than 0.000001% of Tesla stock? The vast majority of Tesla shareholders approved the pay package, both when first voted upon, and repeatedly, in the years since.

"And -- despite claims they "helped Tesla shareholders" -- the price of Tesla stock dropped the moment word of this ruling hit the news."

If the CEO isn't getting $56 Billion where do think some of that money is going to go? To the shareholders. Have you not read anything about this? The board of directors never should have offered the CEO more than double the money the company has ever made. They have a responsibility to ensure the company makes money for the shareholders and not just the CEO and the board.

Shareholders didn't vote and wouldn't normally vote on CEO compensation, that was the board of directors, which again are the ones with legal responsibility to ensure shareholders make money.

"Instead of giving you a $100,000 dividend how about we give it to the CEO instead?"

Who would agree to that?

Why are you making such wild claims that aren't even close to being true?

 

[RandomWAN]

This from the guy who tanked the value of Twitter before he was forced to go through with the deal he proposed.

The Twitter board and management tanked the value of Twitter. The company was already overvalued and the value further ballooned with Musk indicating interest in purchase. Then during the finacial investigation prior to purchase it became apparent that Twitter had been 'cooking the books' and lying about users, activity, and bot levels on the platform.

Musk was essentially legally blackmailed into paying the original offering price for the company after it had been made apparent that Twitter was dirty and the actual value did not meet that of the original offer. The value of Twitter was already well below what he was forced to pay before he even took charge.

 

[Endymio]

If the CEO isn't getting $56 Billion where do think some of that money is going to go?

"That money" didn't exist until Musk created it. He became CEO when the company was effectively bankrupt and had produced less than one *dozen* vehicles total. When he accepted that pay package, he agreed to work for zero salary for ten full years -- an entire decade -- on one condition. If he doubled the (then) value of the company from $50 billion to $100B, he'd earn 1% of that increase. Every further such increase would earn him additional equity. But if he didn't do this -- he'd work for free for those ten years.

Musk did what everyone said was impossible -- he took the company to a value of one TRILLION dollars, against a huge field of entrenched competition: century- international conglomerates all entering the EV market against him. And he did it in not 10 years, but under four years. Shareholders who voted on that package saw every $1K they invested transform into $12,000. They all became rich, literally overnight.

"Instead of giving you a $100,000 dividend how about we give it to the CEO instead?"

Who would agree to that?

This absurd statement more than anything demonstrates how little you understand this situation. Tesla didn't pay Musk anything. Not one penny. This $56B is coming from additional equity -- they're printing additional shares, at zero cost to the bottom line, and granting them to Musk.

One point often lost here is that, had they paid Musk a traditional, but much smaller salary, that WOULD have impacted their bottom line. It would have taken tens of millions of dollars away from R&D, sales and marketing. In those early days of Tesla, a salary like that very well may have made the difference between success and failure.

 

[sdms96825]

Just follow Cesar's advice .... "Kill All The Lawyers" ...... then give the surviving one's $250 an hour and tell them to go home ....

Cesar? Caesar? Do you mean the dog whisperer Cesar Millan?
Actually, the line was said by D*ck the Butcher (great name for a character) in Shakespeare's Henry VI.

 

[Thanthan]

Tesla is the gift that keeps on giving… now we just need Toyota to be the ones to get a battery breakthrough first and I will have gotten enough laughs from this particular American company.

 

[trieste1s]

Tesla is the gift that keeps on giving… now we just need Toyota to be the ones to get a battery breakthrough first and I will have gotten enough laughs from this particular American company.

Toyota isn't going down the EV route, is it?
They've married EV and ICE tech in a really powerful way so far.

 

[Bobbydpue]

The Twitter board and management tanked the value of Twitter. The company was already overvalued and the value further ballooned with Musk indicating interest in purchase. Then during the finacial investigation prior to purchase it became apparent that Twitter had been 'cooking the books' and lying about users, activity, and bot levels on the platform.

Musk was essentially legally blackmailed into paying the original offering price for the company after it had been made apparent that Twitter was dirty and the actual value did not meet that of the original offer. The value of Twitter was already well below what he was forced to pay before he even took charge.

Twitter was given an unsolicited offer to buy them by Elon Musk, who was offering well more than they were worth at the time and waved due diligence, which is part of an acquisition where the buyer collects data on the company to ensure what they are buying is exactly what they think it is. Whatever you typed is fiction. Some time after Twitter accepted the offer Elon got cold feet and tried to back out on a deal he proposed. While he was trying to back out of the deal, again he proposed, he kept bashing them on their own platform which reduced their stock value.

Whatever Twitter had done before Elon offered to buy without due diligence is irrelevant, because Elon waved the process that gathers information on the company to find any funny business. He did so to make the deal too good to pass up, which Twitter didn't pass on. Before the offer, Elon publicly stated Twitter was overrun by bots, and he could get rid of them, then after the deal, which again he proposed, he acted surprised by the number of bots on the platform. How odd.

So no, Elon tanked the value of Twitter before he was forced to go through a deal *he proposed*, and he has continued to reduce the value of the company after taking it over. Your opinion about how everything went down seems to be based on how you feel rather than actual events.

 

[Bobbydpue]

"That money" didn't exist until Musk created it. He became CEO when the company was effectively bankrupt and had produced less than one *dozen* vehicles total. When he accepted that pay package, he agreed to work for zero salary for ten full years -- an entire decade -- on one condition. If he doubled the (then) value of the company from $50 billion to $100B, he'd earn 1% of that increase. Every further such increase would earn him additional equity. But if he didn't do this -- he'd work for free for those ten years.

Musk did what everyone said was impossible -- he took the company to a value of one TRILLION dollars, against a huge field of entrenched competition: century- international conglomerates all entering the EV market against him. And he did it in not 10 years, but under four years. Shareholders who voted on that package saw every $1K they invested transform into $12,000. They all became rich, literally overnight.


This absurd statement more than anything demonstrates how little you understand this situation. Tesla didn't pay Musk anything. Not one penny. This $56B is coming from additional equity -- they're printing additional shares, at zero cost to the bottom line, and granting them to Musk.

One point often lost here is that, had they paid Musk a traditional, but much smaller salary, that WOULD have impacted their bottom line. It would have taken tens of millions of dollars away from R&D, sales and marketing. In those early days of Tesla, a salary like that very well may have made the difference between success and failure.

How was a brand-new company with no manufacturing effectively bankrupt? Going through rounds of investment isn't "effectivity bankrupt" it's how companies work. No car company makes money until they manufacture and sell cars. Elon was chairman of the company starting in 2004 and he became CEO in 2008 the same year they started selling their cars.

I never once mentioned Elon's performance as a CEO that wasn't argued at all. I did some digging and shareholders did vote on the compensation package, but it was only for $2.6 Billion at the time in 2018, shareholders did not approve a compensation package worth $56 Billion. So, you are right about shareholders voting on his compensation package, but wrong about voting for him to get such a large compensation package.

"Tesla didn't pay Musk anything." Shares have monetary value.

"they're printing additional shares, at zero cost to the bottom line, and granting them to Musk."
Share dilution is a process that occurs when a company issues additional shares of its stock, resulting in a decrease in the ownership percentage of existing shareholders. By "printing" more shares and giving them to Musk they are reducing the value of the shares owned by the shareholders and reducing the amount of the company they own.

Since you're defending Elon's compensation, why did Tesla lose the lawsuit?

 

[erickmendes]

Thing that you think only happens in Communist Countries !!!

Why?

 

[Endymio]

Twitter was given an unsolicited offer to buy them by Elon Musk, who was offering well more than they were worth at the time

Um, *every* buyout offer ever made in history is for more than the company's worth at the time. Do you not know how the process works? Why would a person sell their shares to a private buyer for less than they could get on the open market?

Elon waved the process that gathers information on the company to find any funny business.

No again. Fraud and intentional misrepresentation are specifically excluded from due diligence. These issues are rarely uncovered until the merger or acquisition completes, even when due diligence occurs -- the case of H.P. and Autonomy comes to mind. Finally, under Delaware corporate law (and most other states), there is an "affirmative duty to disclose information" when one party in such as a transaction has made a "partial or ambiguous statement" even without intentional fraud.

While [Musk] was trying to back out of the deal, again he proposed, he kept bashing them on their own platform which reduced their stock value.

Musk "bashing" Twitter didn't reduce their value. What reduced their value was the fact that they had been drastically inflating their user figures. You're likely not aware that Twitter -- a mere three *days* after Musk's tender offer -- restated YEARS of user data downward in an SEC filing. Then, of course, what hurt Twitter even further was the Leftist campaign to force advertisers to boycott the platform, based on false claims of "increased hate speech" on the platform.

 

[Endymio]

How was a brand-new company with no manufacturing effectively bankrupt?

LOL, Is this a serious question? When your debits exceed your assets, you're bankrupt. Accounting 101. Twitter had taken money from customers for pre-orders on its first vehicle, the $100K+ Roadster, spent that money, and still didn't have the vehicles. You're confusing the state of bankruptcy with the legal process of declaring bankruptcy.

I did some digging and shareholders did vote on the compensation package, but it was only for $2.6 Billion at the time in 2018, shareholders did not approve a compensation package worth $56 Billion.

Oops again! That's the same compensation package they voted on. From the very first day, the details of that plan included TWELVE tranches based on company stock price growth.

"Tesla didn't pay Musk anything." Shares have monetary value.

Tesla the company didn't pay Musk anything. Do you not understand the difference between equity and capital? If a firm has $50M in hard assets and it pays the CEO $50M, it's broke. If it grants the CEO share options, then it still has every cent of that $50M, and can use it to pay salaries, production costs, etc.

 

[erickmendes]

Then, of course, what hurt Twitter even further was the Leftist campaign to force advertisers to boycott the platform, based on false claims of "increased hate speech" on the platform.

So hate speech is not increasing on twitter?

 

[RandomWAN]

So hate speech is not increasing on twitter?

Hate speech isn't a thing. It's a wholly subjective term that is most often used to describe speech that some people don't like, regardless of what is being said.

There's just "speech" (in this case, written word) that is the projection of an idea or information. People label it with that pejorative when it's an statement they can't argue against or an inconvenient truth.

 

[erickmendes]

Hate speech isn't a thing. It's a wholly subjective term that is most often used to describe speech that some people don't like, regardless of what is being said.

There's just "speech" (in this case, written word) that is the projection of an idea or information. People label it with that pejorative when it's an statement they can't argue against or an inconvenient truth.

Well I don't agree... or we are not talking about the same concept...

"In common language, “hate speech” refers to offensive discourse targeting a group or an individual based on inherent characteristics (such as race, religion or gender) and that may threaten social peace."

Ok I take that from the first Google result, but it sums up what I understand as hate speech.

 

[Kashim]

Then, of course, what hurt Twitter even further was the Leftist campaign to force advertisers to boycott the platform, based on false claims of "increased hate speech" on the platform.

Ah yes, everything always comes down to a so called "Leftist campaign" to boycott something, doesn't it? Because we now live in a world where companies must buy advertising on your social media platform no matter how vile the user base becomes and how much hate speech and other nasty things it has going on. If you buy advertising on a platform you must do so in perpetuity even if it turns into a Right-wing ultra-MAGA hate speech platform rife with conspiracy theories, misinformation, propaganda, etc. If you dare to pull your advertising dollars from such a platform then it must be because of a Leftist campaign to "cancel" or silence conservative voices. (For a group constantly crying about being silenced conservatives sure make a lot of noise all over the internet.)

Oh, and your assertion that increased hate speech on Musk's platform is a false claim, that's just laughable.

 

[liljom]

The solution is simple. Let's sue the lawyers. This next team will ask for approx 10th of the dodged money (600M), then you hire another team, again lowering the costs to about 10th, until you get to a reasonable number. Welcome