Attorneys for Tesla Inc. have urged the Delaware Supreme Court to significantly reduce the $176.2 million class attorney fee awarded in a high-profile shareholder lawsuit concerning director compensation rollbacks. Tesla’s legal team contends that the fee far exceeds the fair value given the disputed $735 million in savings secured from adjustments to director cash and stock option awards.
In a brief filed late Friday, Tesla proposed an alternative fee range between $68.4 million and $70.9 million, substantially lower than the $230 million initially sought by stockholders based on early estimates of $919 million in corporate benefits.
The fee dispute traces back to January, when Chancellor Kathaleen St. J. McCormick of Delaware Chancery Court trimmed the original fee request by attorneys representing the Police and Fire Retirement System of the City of Detroit to $176 million. This award reflected estimated savings of $734 million to Tesla from combined director stock, options, and cash concessions.
Tesla’s counsel argues that the maximum justified fee should be capped at $70.9 million, representing roughly 24% of the company’s litigation benefit, which they peg at no more than $295.5 million. They emphasize that the cancellation of stock options primarily generates accounting savings rather than actual cash inflows, further reducing the fee’s justification.
The case, which ranks among the largest derivative settlements in Delaware’s Court of Chancery history, involves current and former Tesla board members including Kimbal Musk and James Murdoch. These members agreed to return the equivalent of $735 million in past compensation and to forgo future payments from 2021 to 2023, with oversight from an independent consultant.
Tesla’s brief also criticizes the lower court for failing to consider precedent from the 2024 In re Dell Technologies, Inc. case, where $266.7 million was awarded to attorneys following a $1 billion settlement after extensive litigation. Tesla highlights that the current case involved fewer motions, far less discovery, and no completed expert discovery, making the awarded fee disproportionately large.
The underlying shareholder lawsuit, filed in 2020, challenged the company’s director compensation packages, which in 2018 averaged $8.7 million — reportedly more than 29 times the S&P 500 average.
The case, In re: Tesla Inc. Director Compensation Stockholder Litigation (Nos. 52 and 53, 2025), is pending before the Supreme Court of the State of Delaware.
For further information:
