Tesla Inc. TSLA and the plaintiffs who successfully contested CEO Elon Musk‘s massive compensation package recently clashed in court over a multibillion-dollar attorney fee.
What Happened: On Monday, Tesla asked a judge not to award billions of dollars in shares to the lawyers who challenged Musk's record pay package, portraying them as opportunists trying to benefit from the CEO's achievements, reported the Financial Times.
The hearing, which took place in the Delaware Court of Chancery, saw Tesla’s counsel and the shareholder’s attorney exchanging sharp remarks.
John Reed, a partner at DLA Piper who represents Tesla, described the fee request as a “real-life lawyer joke.” An expert witness for Tesla labeled the fee request as an “unjustifiable windfall.”
The hearing was the first in-court meeting since a June vote in which 72% of Tesla’s shareholders, excluding Musk and his brother Kimbal Musk, overwhelmingly approved the same pay package terms that Chancellor Kathaleen McCormick had rejected in January. Tesla argued that this vote is grounds for McCormick to reverse her previous decision.
The court is expected to hear arguments later this summer on how the June “ratification” vote affects the January ruling. Observers anticipate that McCormick will decide on the fee and ratification consequences in a single ruling later this year.
Greg Varallo, the lead plaintiff's attorney from Bernstein Litowitz, criticized Musk’s attempts since the January ruling to reinstate the pay plan as a "clown show." Varallo also revealed that his client, Richard Tornetta, a shareholder with fewer than 200 shares, has received death threats from Tesla supporters.
Why It Matters: The legal battle over Musk’s pay package has been a contentious issue for Tesla. The package, initially worth about $56 billion, was canceled by the court in January. However, the value of Tesla shares has since risen, making the package worth over $75 billion. The lawyers representing the shareholders have requested 29 million shares, now valued at over $7 billion.
Despite strong backing from small investors, recent declines in sales and stock prices have led to notable opposition. The pay package faces months of litigation before shares can be awarded to Musk, as reported in June.
The legal battle over Musk’s pay package has been a contentious issue for some time. Back in June, Gary Black, Managing Partner at Future Fund, criticized Delaware judges for what he termed “judicial activism” in the case. He argued that the judges were overstepping their roles by attempting to override the law.
Price Action: Tesla Inc.’s stock closed at $252.94 on Monday, up 0.56% for the day. In after-hours trading, the stock dipped slightly to $252.71. Year to date, Tesla’s stock has increased by $4.52, representing a 1.82% gain, according to data from Benzinga Pro.
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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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