The legal team of Tesla shareholder Richard Tornetta, who filed a legal challenge against Elon Musk’s 2018 CEO Performance Award, has settled their plaintiff’s fee request in Delaware Court. Tornetta’s legal team noted that they could adjust their proposed fee to just $73,948 an hour, which would amount to a cash award of about $1.44 billion.
Tornetta v. Musk became a high-profile case for the electric vehicle maker in January, when Delaware Court of Chancery Judge Kathaleen McCormick revoked Musk’s CEO performance award for 2018. For their work on the case, the legal team Tornetta’s argued that they should be awarded 29.4 million TSLA shares. Such an amount would be worth over $5 billion, or more than $200,000 an hour.
Tesla has argued against Tornetta’s legal team’s arguments. As noted in a Reuters According to the report, the electric vehicle maker argued that the Tesla shareholder’s legal team — which owned nine shares when it filed its complaint against Musk’s 2018 pay package — should only be paid about $13.6 million for their work. Longtime Tesla shareholder Amy Steffens has also secured legal counsel to challenge Tornetta’s attorneys’ $200,000-an-hour fee request.
In their latest filing, Tornetta’s legal team proposed an alternative way to look at fees for their work on the case. While the legal team rejected Tesla’s $13.6 million legal fee argument, and while attorneys still argued that the court should strongly consider awarding them over 29 million TSLA shares as payment, they noted that the Court could go for an alternative cash-based structure. Such a system would drop their hourly rate to $73,948 and result in a payout of about $1.44 billion.
$73,948 an hour is unacceptable and very inappropriate to ask for.
The ABA Rules of Professional Conduct, specifically Rule 1.5(a) states: “A lawyer shall not make an agreement for, charge, or collect an unreasonable fee or an unreasonable amount for expenses…”
In short,… https://t.co/kItq68oBAK
— Jade (@ImUsuallyRightTT) June 22, 2024
The following are portions of the filing from Tornetta’s attorneys.
“While Plaintiff’s counsel sincerely believes that the award sought is appropriate, meritorious and indeed conservative under Delaware law—the Action ultimately voided an ‘unfathomable’ $55 billion compensation package, the largest in history from multiple-Plaintiff’s counsel accepted the request the award, if granted, will be of record and subject to significant comment. If the Court was concerned by the size of the award sought and wanted a different approach, there are other alternatives available that address concerns expressed about “surprises.”
“Specifically, $35,000 an hour cannot be a ‘family’ because that hourly rate was awarded by this Court and affirmed by the Supreme Court over a decade ago in Southern Peru. Adjusted to today’s dollars, a rate of $35,000 an hour would be over $55,600 an hour. From this it follows, a fortiori, that for an essential verdict in the order of Southern Peruan award of at least $55,600/hour is not a “windfall.”
“Indeed, Tesla also argues that this Action created compensable value equal to Grant’s $2.3 billion GDFV calculation. But even using this low value estimate, the benefit obtained here by the Plaintiff was significantly higher than the $1.347 billion (prior interest) Southern Peru they benefit. Thus, a low cash price of approximately $1.0842 billion can be generated based on the inflation-adjusted assertion alone. Southern Peru Numbers.
“But any such price would be unfair low for two reasons. First, as noted in Plaintiff’s Opening Brief, this Court in Southern Peru—after advising plaintiff’s counsel to request a conservative fee given the ‘reality [that] their delays affected the remedy granted’—further reduced that requirement by one-third as a penalty for attorneys who took so long to pursue the case that a break was impossible. Second, the $51 billion benefit achieved here is roughly 38 times higher than the benefit achieved in Southern Peru.
“Adjustment for one third of the penalty assessed in Southern Peru—which applied to an already conservative 22.5% claim from that plaintiff—brings the inflation-adjusted price to $73,948/hour, which yields a fee of approximately $1.44 billion. Further adjustment to reflect the much higher result here is a matter of the Court’s discretion. Plaintiff’s counsel would submit that the exercise of the Court’s discretion to award a cash fee of approximately twice the inflation adjusted Southern Peru the hourly rate after the rebate is returned appropriately reflects the significantly greater benefit achieved here,” Tornetta’s lawyers wrote.
The takedown from Tornetta’s lawyers can be seen below (via Countryside).
gov.uscourts.delch.2018-0408-KSJM.387.0 by Simon Alvarez on Scribd
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