Legal Fee Tracker: Billions on the line in fee fight over Musk pay
(Reuters) – It’s hard to overstate the stakes for the lawyers who persuaded a Delaware judge to void Tesla founder’s Elon Musk’s $56 billion pay package.
The size of the legal fee they are requesting is undoubtedly vast: more than 29 million Tesla shares, valued at $7.74 billion as of Thursday morning’s market opening. And so is the gulf between that sum and what Tesla – and many of its investors – think the lawyers may actually deserve for their work on behalf of a lone shareholder client.
“No one has identified a single instance of lawyers collecting that kind of money for a lawsuit. Ever,” Tesla argued in court papers, opens new tab ahead of a hearing on the fee earlier this week.
The car marker is asking instead for a fee award as low as $13.6 million for the plaintiff’s lawyers at Bernstein Litowitz Berger & Grossmann, Andrews & Springer, and Friedman Oster & Tejtel. The firms in January persuaded Chancellor Kathaleen McCormick to void Musk’s pay package, although the lawyers are still arguing about the effects of that ruling.
The lawyers’ fee request is about 25 times what Tesla identified as the record in Delaware – $304 million in attorney fees approved 2011 in shareholder litigation involving the Southern Peru Copper Corp.
Bernstein Litowitz’s Greg Varallo declined to comment. He argued during the hearing this week that a large award would encourage attorneys to protect small investors. He said McCormick’s judgment was the largest ever by an American court, and that the 11% share they are seeking is fair.
Lawyers for Tesla and Varallo’s co-counsel at Andrews & Springer and Friedman Oster & Tejtel did not immediately respond to a request for comment. McCormick’s ruling could take weeks or months.
The size of the fee request is also a moving target. Tesla’s fluctuating share price means the size of the fee bid grew by $300 million just in the days since the lawyers met in Delaware to argue about it on Monday.
It grew by about $2.3 billion since mid-June, when Tesla shareholders thumbed their nose at the Delaware court by voting to approve Musk’s pay package and move the company’s legal home to Texas.
More than 8,000 Tesla stockholders have flooded the court with some 1,500 letters and objections over the fee, according to case documents.
If awarded, the requested fees at their current value would amount to more than $390,000 for every hour worked by the 37 lawyers, associates and paralegals who litigated the case on behalf of Richard Tornetta, a former heavy metal drummer who owned just nine shares of Tesla when he sued, court documents showed.
It would not only dwarf past awards in Delaware. Outside the state, the biggest fee in a shareholder case was $688 million in awarded in 2008 for the legal team that obtained a $7.2 billion settlement in the Enron securities fraud case in Texas federal court.
The most recent $500 million-plus fee award came in an antitrust class action, when a judge approved $667 million for the plaintiffs firms that negotiated a $2.67 billion settlement with Blue Cross Blue Shield over insurance charges.
The lawyers behind the Blue Cross Blue Shield case at Boies Schiller Flexner, Hausfeld and other firms cleared a final hurdle in June, when the U.S. Supreme Court declined to take up the last appeal over the deal.
– In other legal fee news, an attorney known for filing hundreds of food and beverage labeling lawsuits must pay the legal fees of retailer Big Lots, which was accused of selling coffee with misleading labels.
A federal judge in Florida last week sanctioned Spencer Sheehan after finding he “flagrantly disregarded” the court’s rules by actively participating in the case without seeking permission as an out-of-state lawyer. The amount in fees and costs Sheehan will have to pay has been not determined yet.
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Source: REUTERS