Tesla Shareholder's $1.44 Billion Claim: The Legal Battle Over Musk's Pay
The legal skirmish between Tesla shareholder Richard Tornetta and Elon Musk is escalating to new heights, as Tornetta's legal team has now adjusted their fee request concerning Musk’s 2018 CEO Performance Award. Initially vying for a staggering payout based on TSLA shares, the legal team has revised their claim to a hefty sum of $1.44 billion, translating to $73,948 per hour for their efforts.
The Origins of the Controversy
The saga began when Judge Kathaleen McCormick of the Delaware Court of Chancery decided to rescind Musk’s 2018 CEO Performance Award earlier this year. The repercussions of this decision were monumental for Tesla and its stakeholders, propelling Tornetta and his legal advisors into the spotlight. Initially, Tornetta's team sought an astronomical 29.4 million shares of TSLA, valued at over $5 billion, or an eyebrow-raising $200,000 per hour for their work.
However, Tesla has staunchly contested this sum. Referencing a report by Reuters, the electric vehicle giant argued for a more modest payment of $13.6 million to Tornetta’s legal team. This dispute has also rallied voices among Tesla’s retail shareholders. Notably, longtime Tesla shareholder Amy Steffens has recruited legal aid to push back against the hefty fee request from Tornetta’s camp.
Revised Calculations and Industry Standards
Tornetta’s legal team, however, remains undeterred. They have laid down an alternative fee structure to the court, proposing that if the shares aren't awarded, cash compensation could be another viable path. Calculated meticulously, the alternative fees, adjusted hourly to $73,948, amount to a total of $1.44 billion.
To lend credence to their demand, they pointed to historical precedents, specifically the Southern Peru case, where an hourly rate of $35,000 was endorsed by the court over a decade ago. Adjusted for inflation, this figure would now hover around $55,600 per hour. Drawing parallels, Tornetta's attorneys argue that achieving Tesla's $55 billion compensation package for Musk is unprecedented and, thus, warrants a hefty payment.
A Legal Precedence Debate
Interestingly, even when using Tesla's 'low-end' estimate that places a value on Musk’s rescinded compensation at $2.3 billion, Tornetta’s legal team posits that a fee of at least $1.0842 billion would be justified. Any lesser award, in their view, would be disproportionately low, considering the considerable amount of time and resources invested in the case versus the Southern Peru precedent.
In an assertive stance, Tornetta’s lawyers are advocating for a fair reevaluation. They emphasize that the almost $51 billion benefit derived from invalidating Musk’s award is exponentially greater than the Southern Peru case and thus justifiably warrants a higher fee structure. Adjusting the hourly rate to $73,948 - after factoring in the reduction penalties applied in the Southern Peru case - Tornetta’s lawyers seek a recalibrated award that appropriately reflects the significant outcomes they have achieved.
Broader Implications
As Tornetta’s legal team continues to make their case, the broader implications for corporate governance, especially in high-stakes compensation scenarios, remain significant. Legal experts and stakeholders alike are monitoring the development with keen interest, recognizing that the court’s final decision could set a new benchmark for future litigation involving executive compensations.
For now, Tesla and Tornetta’s legal teams remain locked in a contentious battle, each side fervent in their convictions. With the court's hearing date slowly approaching, only time will tell which party’s argument will prevail and how it will shape the corporate landscape moving forward.
View the detailed filing from Tornetta's lawyers on Scribd.