Tesla wins fee cut in Delaware director pay lawsuit
Tesla has persuaded Delaware’s highest court to sharply reduce the legal fees it must pay to shareholder lawyers after a successful lawsuit over excessive director compensation.
The Delaware Supreme Court ruled on Friday that Tesla should pay $70.9 million in legal fees, slashing by more than $100 million the $176.1 million award previously approved by a lower court. The decision marks a significant victory for the electric vehicle maker in a closely watched corporate governance case, News.Az reports, citing Reuters.
The lawsuit was brought by shareholders led by the Detroit firefighter and police pension fund, which accused Tesla’s directors of overpaying themselves. A Delaware Court of Chancery judge had earlier sided with the shareholders and approved a larger fee award to their lawyers.
In its ruling, the state’s top court said the lower court overestimated the value of the settlement when calculating legal fees. The Supreme Court found that the intrinsic value of certain stock options returned to Tesla should not have been included in assessing how much the company benefited from the settlement.
Under the agreement, Tesla directors, including chair Robyn Denholm and board member James Murdoch, agreed to return about $277 million in cash and millions of stock options to the company. Shareholder lawyers had valued the overall settlement at $919 million, forming the basis of their original fee request.
The ruling comes amid growing criticism in Delaware over soaring legal fees in shareholder cases. Professors and lawyers representing corporate boards have increasingly questioned large awards, including a $267 million fee approved in 2024 in a case involving Dell Technologies. Delaware’s bar association is now preparing recommendations for lawmakers on possible reforms.
Tesla was required to pay the legal fees because it benefited from the settlement. However, the Supreme Court said the final amount must better reflect the true economic value returned to the company.
Tesla CEO Elon Musk was not part of the settlement and continues to defend his own compensation package in a separate legal battle.
The decision is expected to have broader implications for how legal fees are calculated in high-stakes shareholder lawsuits in Delaware, the corporate home to many of America’s largest companies.
By Aysel Mammadzada
Similar news
