In July, a legal team forced Tesla’s (TSLA.O) directors to repay more than $700 million to the manufacturer for allegedly overpaying themselves. Now, they want a big payoff.
According to a Sept. 8 filing in Delaware’s Court of Chancery, the lawyers want $229 million in fees, or $10,690 an hour.
The fee judgment would be among the biggest ever from a shareholder complaint against a board if approved. The money would go to lawyers from four firms that spent years fighting Tesla’s directors’ 2017–2020 pay.
A Delaware judge must approve the settlement and attorney costs in October.
The 12 director defendants, including James Murdoch and Larry Ellison, agreed to repay $735 million, forgo $184 million, and change how the board sets director pay. The derivative litigation settlement will benefit Tesla and its shareholders indirectly.
The law firms want 25% of the $919 million settlement amount as a fee. The request includes $1 million in expenditures.
Partners and other personnel from New York law firms Bleichmar Fonti & Auld and Fields Kupka & Shukurov invoiced over 10,000 hours. McCarter & English attorneys and personnel in Wilmington, Delaware, and Clark Hill attorney Ronald King in Lansing, Michigan, billed hundreds of hours.
Bleichmar attorney George Bauer declined to comment, and attorneys from the other firms did not react immediately.
David Paige, founder of Legal Fee Advisors, a consulting firm, said courts balance rewarding risk-taking and effort with preventing a disproportionate windfall that might damage the legal system’s faith.
Although comparing lawyers’ expenditures across contingency-fee cases is hard, Paige termed the Tesla plaintiffs’ request “extraordinary” compared to prominent corporate attorneys’ $2,000 hourly charges. Paige said the court must weigh the charge against the litigation’s benefits.
According to a court filing by the plaintiffs’ lawyers, the Telsa directors have not opposed the fee request but should.
The director’s attorneys did not respond to a request for comment.
Delaware courts raised hourly fees. The Delaware Supreme Court upheld a $304 million fee in a Southern Copper shareholder complaint with $2 billion in damages in 2012. The defendants contested the $35,000-an-hour cost. The state’s high court ruled justices should evaluate results, not hourly rates.
Delaware Court of Chancery judge Kathaleen McCormick will hold a hearing on Oct. 13 to approve the settlement and fee. Tesla stockholders can object until Friday.
