The Delaware Supreme Court handed Tesla a victory on Friday, slashing by more than $100 million the legal fees owed to shareholder lawyers who successfully sued directors at Elon Musk‘s electric car company for overpaying themselves.
The court said Tesla must pay $70.9 million to lawyers who represented the Detroit firefighter and police pension fund that led the case, 60% less than the $176.1 million awarded by a Delaware Chancery Court judge.
Friday’s decision said the judge overvalued the settlement when determining the fee.
The decision came at a time of increasing criticism from professors and lawyers who represent corporate boards over legal fees in Delaware courts, including a $267 million award in 2024 in a case involving Dell Technologies DELL.N .
Delaware’s bar association is preparing recommendations for state lawmakers on possible changes.
In the Tesla case, directors including Chair Robyn Denholm and James Murdoch agreed to return about $277 million in cash and millions of stock options to the company.
Lawyers for the shareholders valued the settlement at $919 million, which was the basis for their fee request.
Tesla was responsible for the fees because it benefited from the settlement.
But the state Supreme Court said the fees were inflated because the intrinsic value of the returned stock options should have been excluded when assessing the value of the settlement to the company.
Musk, the world’s richest person, was not part of the settlement and has defended his record compensation in a separate lawsuit.
(Reporting by Tom Hals in Wilmington, Delaware; Editing by Matthew Lewis)
Photo: Elon Musk
Topics
Lawsuits
Tesla
Delaware
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