Tesla Challenges $230 Million Legal Fee Request in Board Pay Lawsuit

Tesla Inc. has pleaded with a Delaware judge to reject the $230 million in legal costs that a group of shareholder attorneys has sought in exchange for resolving a director remuneration dispute. Tesla recommended a $64 million fine in its place. The manufacturer protested the fee request, referring to it as unexpected, as it is one of the highest fee requests in Delaware.

The chief judge, Kathaleen McCormick, listened to arguments over the fee and the settlement approval for around two hours. The lawyers defended a Detroit police pension fund that had filed a lawsuit against Tesla's board over what it deemed enormous compensation between 2017 and 2020. Nearly all of the directors' income was based on stock options, and they were only paid when the stock price rose, which increased dramatically in recent years.

It's crucial to note that Elon Musk's $56 billion salary as CEO of Tesla was not included in this lawsuit and is the subject of other legal challenges. The lawsuit was settled in July 2020 with the directors agreeing to pay Tesla $735 million as part of a $919 million deal. The directors insisted that their pay was reasonable and reached a settlement to lessen the possibility of a legal dispute.

Tesla's legal team argued that by connecting the settlement's value to the directors' costs rather than the benefit to the company, the shareholder counsel had artificially increased the settlement's value and, as a result, their sought fee. Tesla calculated that it would get $295 million from the agreement. The stock options are the main cause of the difference in these prices. The options were worth $458 million to the directors during the July settlement.

Tesla claimed that the main benefit of regaining the options is to reverse the roughly $20 million accounting expense incurred when they were first issued.The corporation should provide the options to the shareholders' legal team to exercise as part of their legal fee, according to Andrew Dupre, one of the shareholder attorneys, if they were of such little value to Tesla. The business, however, declined to do so. According to a court filing by the plaintiff, Elon Musk is not making a contribution to the settlement and hasn't received any compensation for his board membership

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