A fee award for the shareholder attorneys who challenged four years of pay for
It’s the second time this month that Tesla has argued that the state’s elite trial-level business court granted an excessively generous fee award to attorneys representing shareholders challenging compensation decisions, including the record-setting pay package it offered to CEO
Tesla wants the high court to trim a $176 million award to roughly $70 million for the attorneys for the pension fund that settled their derivative lawsuit challenging pay from 2017 to 2020 for directors including Musk, Oracle Corp. founder
“This is an extraordinary fee award for what was an ordinary amount of litigation,” said Tesla’s attorney, Morgan Ratner of Sullivan & Cromwell LLP.
Justice Karen L. Valihura noted the fee awarded by the Delaware Chancery Court was $60 million more than the Delaware judiciary’s budget last year “for a case that settled midstream.”
“Do we have to be concerned about the public’s perception of the size of these fees as a matter of acceptability of corporate governance and our oversight of it?” she asked the pension fund’s attorney, Andrew Dupre of Akerman LLP.
“Let me first forcefully argue that the Delaware judiciary’s budget should be increased,” he replied.
Net Benefit
The Tesla accord was one of the three largest ever reached in Delaware, and the Chancery Court applied the correct standards even as it substantially cut the attorneys’ original $230 million fee award request, he said. “This is a Goldilocks case. It is correct as a matter of both size and lodestar.”
Under the terms of the settlement, Tesla’s board must return stock and options valued up to $735 million and forgo three years of pay worth $184 million. The high court’s full five-member panel wasn’t asked to decide the fairness of the deal or the transactions that prompted the litigation.
The Chancery Court erred when it calculated the net benefit to the company based on the value of the options the directors were giving up, Ratner said. “They are not an asset on the balance sheet the way that cash is.”
“How about the argument that if we don’t consider the investor-level benefits, it will discourage derivative cases from being brough?” Chief Justice Collins J. Seitz asked her.
The pension fund didn’t argue for investor-level benefits, Ratner said. “Treating investor-level benefits as the source of the number here is pretty hard to square with how this court has talked about derivative suits.”
Musk and the directors asked the justices to affirm the settlement over the objections of one investor, Michael Levin, who writes “The Activist Investor” newsletter. Neither the directors nor Levin argued Wednesday before the justices.
Rare Awards
Nine-figure lawyer paydays are uncommon, but not unheard-of, in Delaware. The high court cautiously approved them last year when it affirmed a $267 million award for lawyers who reached a $1 billion settlement over a contentious stock conversion at Dell Technologies Inc.
The Chancery Court ignored the justices’ warning about the public perception of windfalls in megafund cases, Ratner said. “This is a windfall any way you slice it,” she said.
In a separate appeal seeking the restoration of a record-setting CEO pay package for the world’s richest person, Tesla asked the high court to cut a $345 million fee award to attorneys for investor Richard Tornetta.
Tornetta’s attorneys argued Oct. 15 that the fee was appropriate, given the size of the benefit created by his litigation—rescission of the largest pay package in human history. Tesla’s attorney proposed a $54 million fee award as an appropriate alternative, if the justices uphold the Chancery Court’s rejection of Musk’s pay package and its June 2024 ratification by Tesla shareholders.
“No matter what, this court should take the fees down,” Jeffrey Wall of Sullivan & Cromwell LLP said then.
The fee awards in the board compensation case and the dispute over Musk’s CEO pay were both ordered by the same judge, Chancellor Kathaleen St. Jude McCormick.
Tesla is also represented by DLA Piper LLP (US) and Bayard PA. Musk and other Tesla directors are represented by Richards, Layton & Finger PA and Cravath, Swaine & Moore LLP. The Police and Fire Retirement System of the City of Detroit is also represented by Bleichmar Fonti & Auld LLP and Fields Kupka & Shukurov LLP.
The case is In re Tesla, Inc. Dir. Comp. S’holder Litig., Del., No. 53,2025, oral arguments 10/29/25.
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