Delaware Supreme Court Reduces Legal Fees in Tesla Director Compensation Case
The Delaware Supreme Court delivered a significant win for Tesla on Friday, reducing the legal fees owed to shareholder lawyers by over $100 million. This decision stems from a lawsuit against directors at Elon Musk‘s electric vehicle company, which accused them of excessive self-compensation.
The court ruled that Tesla is required to pay $70.9 million to the attorneys representing the Detroit firefighter and police pension fund, which spearheaded the case. This amount is a substantial decrease from the $176.1 million awarded by a Delaware Chancery Court judge.
In its ruling, the Supreme Court noted that the lower court had overvalued the settlement when calculating the legal fees. This decision arrives amid growing scrutiny from legal scholars and corporate board representatives regarding the high legal fees often seen in Delaware courts. Notably, a $267 million award was issued in 2024 in a case involving Dell Technologies DELL.N.
In the Tesla case, directors, including Chair Robyn Denholm and James Murdoch, agreed to return approximately $277 million in cash along with millions in stock options to the company.
The lawyers for the shareholders had valued the settlement at $919 million, which formed the basis for their fee request. Tesla was deemed responsible for these fees due to the benefits it received from the settlement.
However, the state Supreme Court determined that the fees were inflated, as the intrinsic value of the returned stock options should not have been included when assessing the settlement’s value to the company.
It is worth noting that Musk, the world’s richest individual, was not part of the settlement and has defended his substantial compensation in a separate lawsuit.
(Reporting by Tom Hals in Wilmington, Delaware; Editing by Matthew Lewis)
Photo: Elon Musk
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The Delaware Supreme Court delivered a significant win for Tesla on Friday, reducing the legal fees owed to shareholder lawyers by over $100 million. This decision stems from a lawsuit against directors at Elon Musk‘s electric vehicle company, which accused them of excessive self-compensation.
The court ruled that Tesla is required to pay $70.9 million to the attorneys representing the Detroit firefighter and police pension fund, which spearheaded the case. This amount is a substantial decrease from the $176.1 million awarded by a Delaware Chancery Court judge.
In its ruling, the Supreme Court noted that the lower court had overvalued the settlement when calculating the legal fees. This decision arrives amid growing scrutiny from legal scholars and corporate board representatives regarding the high legal fees often seen in Delaware courts. Notably, a $267 million award was issued in 2024 in a case involving Dell Technologies DELL.N.
In the Tesla case, directors, including Chair Robyn Denholm and James Murdoch, agreed to return approximately $277 million in cash along with millions in stock options to the company.
The lawyers for the shareholders had valued the settlement at $919 million, which formed the basis for their fee request. Tesla was deemed responsible for these fees due to the benefits it received from the settlement.
However, the state Supreme Court determined that the fees were inflated, as the intrinsic value of the returned stock options should not have been included when assessing the settlement’s value to the company.
It is worth noting that Musk, the world’s richest individual, was not part of the settlement and has defended his substantial compensation in a separate lawsuit.
(Reporting by Tom Hals in Wilmington, Delaware; Editing by Matthew Lewis)
Photo: Elon Musk
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