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Lawyers who declared Elon Musk’s pay excessive are seeking $6 billion in compensation

By Tom Hals

WILMINGTON, Delaware (Reuters) – Lawyers who dismissed Elon Musk’s $56 billion in damages as excessive are seeking a record $6 billion in compensation to be paid in the electric car maker’s stock, a filing showed. trial on Friday.

“We recognize that the relief sought is unprecedented in terms of absolute magnitude,” according to the filing with the Court of Chancery in Delaware by the three law firms.

According to the court, the fee amounts to an hourly rate of $288,888.

The compensation will be paid by Tesla to lawyers representing Richard Tornetta, a Tesla shareholder who sued Musk in 2018 over the pay package, which a Delaware judge overturned in January.

The electric vehicle maker is being asked to pay the compensation because it has benefited from the return of Musk’s pay package, which the legal team says will result in the automaker returning 266 million shares.

The fee request must be approved by Kathaleen McCormick, the judge overseeing the case. In her statement, she called Musk’s pay “unfathomable.”

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Tesla, Musk’s attorney and Musk did not immediately respond to a request for comment.

The company can object to the compensation because it has applied for compensation in a similar case regarding the remuneration of its directors.

“This structure has the advantage of tying the reward directly to the benefit created and prevents even one cent from being taken from Tesla’s balance sheet to pay fees,” the shareholders’ legal team said, noting that the compensation is also tax deductible for Tesla.

The largest settlements in shareholder lawsuits occur in federal court, and the largest was $688 million in 2008 for the legal team that reached a $7.2 billion settlement in a securities fraud case over Enron Corp.’s failure.

The request for Tesla compensation comes as the Delaware Supreme Court considers a $267 million appeal in a $1 billion case involving Dell Technologies.

Judges in Delaware have said that pursuing cases deep into litigation, through depositions and toward trial, should receive a higher percentage of recovery to reflect the risk and effort. Musk’s payroll case was given a one-week trial period.

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Opponents of this approach argued that as settlements and verdicts increase in size, attorneys should collect a decreasing percentage to avoid overcompensation.

The legal team said the compensation sought was approximately 11% of the judgment.

Musk’s pay package consisted of stock options that allowed him to buy Tesla shares at deeply discounted prices and required him to hold the shares for five years. The legal team said they are looking to acquire shares without restrictions on their sale.

The shareholder’s legal team consisted of three law firms, Bernstein Litowitz Berger & Grossmann and Friedman Oster & Tejtel, both based in New York, and Andrews & Springer of Wilmington.

(Reporting by Tom Hals in Wilmington, Delaware; Editing by Leslie Adler and Diane Craft)

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