Elon Musk has responded to lawyers in the recent Delaware case regarding his Tesla compensation package, after the attorneys this week requested legal awards of 29 million Tesla shares — worth almost $6 billion.
Musk’s pay package at Tesla was rejected in late January by Judge Kathaleen McCormick of the Delaware Court of Chancery, as part of a 2018 case brought forward by shareholder Richard Tornetta. Following the decision to void Musk’s $55.8 billion compensation package just over a month ago, Tornetta’s lawyers argued in a filing on Friday that they deserve over 29 million Tesla shares as their legal fees, worth around $5.95 billion at the company’s current valuation (via Bloomberg).
In the filing, the lawyers also explained why they requested the fee in Tesla stock instead of cash.
“We are prepared to ‘eat our cooking,’” Tornetta’s lawyers wrote. “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. It is also tax-deductible by Tesla.”
Tornetta’s case was brought to the court on behalf of shareholders, so roughly 267 million Tesla shares that would have been a part of Musk’s pay package are now expected to be returned to the company, according to the filing.
Tulane University Corporate Law Professor Ann Lipton says the legal team’s payout could be the largest attorney fee ever requested, at least that she’s familiar with.
“Now, to be fair, the case involved the largest compensation award ever to an executive,” Lipton added to Bloomberg.
“I assume the plaintiffs’ attorneys figured if they sought $6 billion in cash in fees it could cripple Tesla,” she says. “Since the case involved a stock award to Musk, they thought it would be appropriate to ask for the fee in shares so it wouldn’t be as rough for Tesla shareholders. That makes a lot of sense to me.”
Following the filing, multiple Tesla executives responded, including Musk himself.
In a flurry of posts on X on Saturday, Musk criticized the request, calling it “utterly disgraceful,” “ironic,” “criminal,” and saying that the the lawyers were “evil” in two separate replies. You can see just a couple of his posts below.
The lawyers who did nothing but damage Tesla want $6 billion. Criminal. https://t.co/JI6eQPTxQ2
— Elon Musk (@elonmusk) March 2, 2024
The system is broken.
Best to get out of Delaware as soon as possible possible.
— Elon Musk (@elonmusk) March 2, 2024
Rohan Patel, Tesla’s Vice President of Public Policy and Business Development, also responded to the reports, noting that he believed other employees at the company would be “equally disgusted” by the news.
Nearly every single @Tesla employee is an owner/shareholder of the company. Tens of thousands of them have had a life-changing experience as a result of the company/stock growth. Some truly inspiring stories…our employees work very hard and are positively changing multiple… https://t.co/gB9WlVlTG2
— Rohan Patel (@rohanspatel) March 2, 2024
After Judge McCormick’s decision to void Musk’s compensation package, made on January 30, the multi-company executive has motioned to move the incorporations of SpaceX, The Boring Company and Neuralink out of Delaware, and he’s expected to do the same with Tesla.
Musk has also been outspoken since the decision, noting that Tesla plans to appeal the decision and pointing to how much the lawyers representing Tornetta could profit from this trial. In response to an early February report, Musk said it was “so deeply and utterly wrong that a law firm that harmed Tesla could stand to gain billions.”
THIS TIME LAST YEAR:
Elon Musk’s lawyers to make closing arguments in CEO’s pay package case
What are your thoughts? Let me know at zach@teslarati.com, find me on X at @zacharyvisconti, or send your tips to us at tips@teslarati.com.
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