Lawyers Who Got Musk Pay Struck Down Seek $5.6 Billion in Tesla Stock

Lawyers for a Tesla shareholder who helped scuttle Elon Musk’s $55.8 billion compensation package asked a Delaware court on Friday to approve legal fees worth about $5.6 billion.

It would be a record-breaking payday for the attorneys if approved. Instead of cash, the attorneys asked to be paid almost entirely in Tesla stock, a rare request from lawyers on the winning side of a verdict.

Chancellor Kathaleen McCormick’s January decision to strike down Musk’s pay package at Tesla was the largest verdict in the history of the Delaware Chancery Court.

McCormick ordered Musk, Tesla’s chief executive, to return the stock options he received under his 2018 compensation package, which the company had valued at a maximum of $55.8 billion.

The judge sided with Tesla shareholder Richard Tornetta, who alleged that the board of directors breached their fiduciary duties to investors in approving the compensation.

It is now up to McCormick to figure out how much returning the compensation package would be worth to Tesla—and, relatedly, how much of that pie attorneys should receive in the form of fees.

In Friday’s filing to the court, the shareholder’s attorneys asked for more than 29 million shares in Tesla and an additional $1 million to cover expenses. The ultimate value of the fees could go up or down depending on Tesla’s stock price.

Musk’s 2018 pay deal consists of more than 300 million stock options and has fully vested, but the billionaire hasn’t exercised any of the options.

“We are prepared to ‘eat our cooking,’” the plaintiff’s lead attorney Greg Varallo wrote in Friday’s filing. “This structure has the benefit of linking the award directly to the benefit created and avoids taking even 1 cent from the Tesla balance sheet to pay fees.”

“We recognize that the requested fee is unprecedented in terms of its absolute size,” he said in the filing. “The size of the requested award is great because the value of the benefit to Tesla that plaintiff’s counsel achieved was massive.”

Varallo is head of the law firm Bernstein Litowitz Berger & Grossmann. Friedman Oster & Tejtel also represented the plaintiffs.

Neither Tesla nor its attorneys immediately responded to requests for comment.

Write to Erin Mulvaney at [email protected] and Rebecca Elliott at [email protected]