A Delaware judge still wants to consider a $6-billion request in legal fees from lawyers who shot down Elon Musk’s multibillion-dollar pay package at Tesla regardless of the recent shareholder vote, court documents show.
“The process leading to the approval of Musk’s compensation plan was deeply flawed,” McCormick wrote in her ruling, pointing to a conflict of interest at Tesla’s board, which decides the pay plan and includes Musk’s brother as a member.
With the outcome, lawyers representing Richard Tornetta, the Tesla shareholder who objected to the compensation plan, argued that they provided a valuable service in getting Musk’s package rescinded. That value? About $6 billion worth of Tesla shares.
Musk, at the time, called the request “criminal.”
But Musk received some good news in June after shareholders voted to re-approve the CEO’s pay package and maintain the current board structure with Kimbal and James Murdoch.
The vote doesn’t immediately reinstate his pay plan, but it gives an additional boost to Tesla’s attorneys’ arguments.
Accordingly, Tesla’s defense team filed a motion on June 20 that argued the shareholder’s ratification vote vindicates Musk’s stock options award.
“Defendants contend that the consequences of the Ratification alter the course of this litigation and any relief that is potentially available (and relatedly, any attorneys’ fees that may be awarded to Plaintiff’s Counsel),” Tesla’s attorneys wrote.
Chancellor McCormick will have to decide on the fate of the package and whether the plaintiff’s attorneys do deserve about $6 billion in legal fees.
In response to Tesla’s defense team’s motion, McCormick wrote in a filing that she wants to hold a hearing on the legal fees without considering the shareholder vote since a separate meeting will be held to consider the impact of that vote.
“Given that we will hold a separate oral argument devoted solely to the questions raised by the stockholder vote, for the purposes of the July 8 hearing, the parties are instructed to argue the points at issue without regard to the stockholder vote,” McCormick wrote. “All arguments concerning the stockholder vote will be deemed preserved.”
James Park, a securities regulation expert at the University of California, Los Angeles, told Business Insider that the impact of the shareholder vote is crucial to consider the overall value of the litigation that struck down the pay in the first place.
“My only thought is that the defendant is correct that it would be difficult to evaluate the benefit of the litigation, which is necessary to evaluate the fee request, without considering the impact of the shareholder ratification vote,” he wrote in an email.
Park said that McCormick’s response likely indicates that she’s “preserving her options.”
Attorneys for Tesla and Tornetta, the plaintiff, did not respond to a request for comment.
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