Lawyers in the lawsuit brought by Richard Tornetta against Tesla’s board might make big money soon.
Writing about last month’s decision by a Delaware court to dismantle the basis on which Elon Musk has been paid over the last few years by Tesla, I noted this:
In 2018, however, Richard Tornetta, who held nine shares in Tesla, sued the company’s board (some defendants were later dropped). To the Guardian, this former heavy metal drummer was “ an unlikely opponent,” but:
“Many law firms that represent shareholders keep a stable of investors they can work with to bring cases, says Eric Talley, who teaches corporate law at Columbia Law School. . . . The plaintiff signs paperwork to file the lawsuit and then generally gets out of the way, says Talley. The investors do not pay the law firm, which takes the case on contingency, as the lawyers did in the Musk case.”
I have no idea whether that was Tornetta’s arrangement (the Wall Street Journal came up with a similar theory), but his lawyers will cash in (they may make billions ).
The lawyers who voided Elon Musk’s $56 billion compensation as excessive on Friday sought a record a $6 billion legal fee, payable in the electric car maker’s stock.
“We recognize that the requested fee is unprecedented in terms of absolute size,” the three law firms said in a filing with the Court of Chancery in Delaware.
The fee works out to an hourly rate of $288,888, they said.
As mentioned above the lawyers are asking to be paid in Tesla stock. They claim that this 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.” For lawyers purportedly acting in the interests of shareholders to ask for $6 in billion in cash might also have been a touch tactless. . . .
Nevertheless, if the lawyers are successful in their claim, they will, by taking shares, have been given a slice of the Tesla “pie.” That represents a notional cost to Tesla’s other shareholders, who are also faced with the problem of how to keep Musk incentivized. Time will tell how this works out.
Reuters reminds its readers that the presiding judge in the Delaware case referred to Musk’s pay as “unfathomable.” This was despite the fact that Tesla’s shareholders themselves seemed perfectly capable of fathoming it, although the judge suggested that this might have because they were “starry-eyed” about Musk. Nothing patronizing about that!
I wonder what she will she make of this claim.
As for Musk, he’s tweeting that his compensation for achieving the “impossible” goals he had to meet in order to be paid under the original deal is now “zero.”
Meanwhile, in news that is not strictly relevant, yet is not entirely irrelevant either, NASA reports that:
An international crew of four reached orbit following a successful launch to the International Space Station at 10:53 p.m. EST Sunday from Launch Complex 39A at NASA’s Kennedy Space Center in Florida. NASA’s SpaceX Crew-8 mission is the agency’s eighth commercial crew rotation mission with the company to the space station.
For their part, I’d guess that the plaintiff’s lawyers enjoyed a good dinner.