Delaware Judge Faces Monumental Decision in Tesla-Musk Case

Delaware Judge Faces Monumental Decision in Tesla-Musk Case

Federico Ramirez
2 min read

Delaware Judge Faces Monumental Decision in Tesla-Musk Case

A Delaware judge, Kathaleen St. J. McCormick, is deliberating over a historic decision regarding legal fees for lawyers who contested Elon Musk's 2018 Tesla pay package. The lawyers are seeking 29 million Tesla shares, valued at about $7.3 billion, or alternatively, $1.4 billion in cash. They argue that Musk's compensation was excessive and that their extensive work justifies the substantial fee.

The judge must also decide whether to reinstate Musk's pay package, previously voided due to board conflicts of interest, despite Tesla shareholders voting to re-ratify it. The lawyers claim the stock award benefits Tesla by preserving cash reserves and highlight their six years of unpaid work. Tesla's legal team, however, suggests capping the fee at $13.6 million.

The case has attracted significant attention, with over 8,000 Tesla shareholders voicing their opinions, many opposing the large fee. The judge's decision could impact Tesla's governance and set precedents for legal fees in similar corporate disputes.

Key Takeaways

  • Judge Kathaleen St. J. McCormick is facing a monumental decision regarding the legal fees in the Tesla-Musk case.
  • Lawyers are seeking 29 million Tesla shares, valued at $7.3 billion, as their legal fee.
  • Despite the previous voiding of Musk's pay package, Tesla shareholders voted 70% to reinstate it.
  • Attorneys argue that stock-based fees benefit Tesla by not affecting the company's cash flow.
  • Tesla's legal team advocates for a cap of $13.6 million for the legal fees.


The verdict on Tesla's legal fees could significantly impact the company's financial well-being and shareholder sentiment. The decision to award $7.3 billion in shares could potentially dilute shareholder value and strain Tesla's equity structure. On the other hand, a lower cap might discourage future litigation against corporate excesses. The outcome may not only influence Tesla's governance perception but also reshape legal fee norms in high-stakes corporate disputes.

Did You Know?

  • Stock-based Legal Fees:
    • Understanding Stock-Based Legal Fees: This compensation method entails lawyers receiving shares of the company they provided legal services to, rather than traditional cash payments. In this instance, the lawyers are advocating for 29 million Tesla shares, valued at $7.3 billion, as their legal fee. This approach can be advantageous for companies as it spreads the cost over time, safeguarding cash reserves, and aligning the interests of attorneys with the long-term performance of the company.
  • Re-ratification of Pay Package:
    • Understanding Re-ratification: This signifies the act of confirming or approving a previously made decision or agreement. In the case of Tesla, shareholders overwhelmingly voted to re-ratify Elon Musk's 2018 compensation plan, displaying their confidence in Musk's leadership and the potential benefits of his package to the company's future.
  • Conflicts of Interest Among Board Members:
    • Understanding Conflicts of Interest: This occurs when board members or individuals have competing interests that impair their ability to fulfill their responsibilities impartially. The voiding of Musk's pay package due to conflicts of interest among Tesla's board members suggests that their approval of the compensation plan may not have been entirely objective, thus raising concerns about the interests of the company and its shareholders.

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