Attorneys who brought the lawsuit against a compensation package granted to Elon Musk by Tesla shareholders have been awarded $345 million in legal fees after the pay package was blocked a second time.
However, in an ironic twist that number is far lower than what lawyers were seeking for their own pay in the case which was more than double the amount awarded in Musk’s original pay package.
The legal team representing the shareholder bringing the case contesting Musk’s pay package had requested 29 million Tesla shares worth $5.6 billion, or, alternatively, $1 billion in cash as compensation for their efforts.
Notably, the $5.6 billion requested by the plaintiffs attorneys in the case is $3 billion more than Musk’s original pay package value.
The stock options initially granted to Musk by Tesla in 2018 were initially worth $2.6 billion, but had surged to $56 billion in value by January when Chancellor Kathaleen McCormick of Delaware's Court of Chancery blocked the package.
The $345 million awarded by McCormick to plaintiffs attorneys who brought the suit is approximately 6% of their initial request.
The sum was granted by McCormick after she ruled for a second time against the reinstatement of the pay deal that had passed overwhelmingly via Tesla shareholder approval on two occasions.
The ruling has raised eyebrows due to the massive sum awarded to the plaintiffs' legal team.
However, McCormick called the lawyer payout "an appropriate sum to reward a total victory."
The financial windfall for legal representatives has been highlighted by critics who have questioned the fairness of such a large payout, especially given the nature of the lawsuit, which centered on Musk's compensation package rather than any direct harm to Tesla or its shareholders.
"You asked if Elon Musk was overpaid. We want to ask if the plaintiff's lawyers are being overpaid," Tesla attorney John Reed said in a July hearing.
The ruling came after Tesla shareholders approved Musk’s pay package a second time, but McCormick found the vote to be invalid.
In the ruling McCormick called out the "extensive ties" between Musk and those who created the pay package and said the shareholder vote could not rectify a flawed process that led to the original approval in 2018.
"[A] stockholder vote standing alone cannot ratify a conflicted-controller transaction," McCormick said, according to Yahoo! News.
Despite the outcome, the legal battle appears to be far from over.
Tesla has vowed to appeal the ruling.
“A Delaware judge just overruled a supermajority of shareholders who own Tesla and who voted twice to pay @elonmusk what he’s worth,” Tesla said on X.
“The court’s decision is wrong, and we’re going to appeal.”
“This ruling, if not overturned, means that judges and plaintiffs’ lawyers run Delaware companies rather than their rightful owners – the shareholders.”
Musk also chimed in on X.
“Shareholders should control company votes, not judges,” Musk posted.
The case will likely move to Delaware's Supreme Court in the coming months. The lawsuit has already spanned several years.