Tesla Wins Cut to $70 Million Legal Fees in Director Pay Lawsuit

Tesla scored a legal victory on Friday after the Delaware Supreme Court significantly reduced the fees owed to shareholder lawyers who successfully sued the company’s directors for overpaying themselves.

The court ruled that Tesla must pay $70.9 million to the lawyers representing the Detroit firefighter and police pension fund that led the case — a 60 per cent reduction from the $176.1 million initially awarded by a Delaware Chancery Court judge.

The Supreme Court found that the lower court had overvalued the settlement when calculating legal fees. The decision comes amid growing criticism from professors and corporate lawyers regarding the size of legal fees in Delaware courts, including a $267 million award in 2024 in a case involving Dell Technologies. The Delaware Bar Association is reportedly preparing recommendations for lawmakers on potential reforms.

In the Tesla case, directors including Chair Robyn Denholm and James Murdoch agreed to return approximately $277 million in cash and millions in stock options to the company. Shareholder lawyers had valued the settlement at $919 million, which formed the basis for their original fee request.

Tesla was responsible for covering the legal fees because it benefited from the settlement. However, the Supreme Court ruled that the fees were inflated, noting that the intrinsic value of returned stock options should not have been included when assessing the settlement’s value to the company.

Elon Musk, the world’s richest person, was not part of the settlement and continues to defend his compensation in a separate lawsuit.

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