Latest / Elon Musk Podcast / Tesla Showdown: Shareholder's Legal Team Demands $1.44 Billion Fee for Musk Pay Case

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Tesla Showdown: Shareholder's Legal Team Demands $1.44 Billion Fee for Musk Pay Case · Elon Musk Podcast

• 0:01
  Hey everybody. Welcome back to the Elon Musk
• 0:04
  podcast. This is a show.
• 0:06
  Where we discuss the critical crossroads, the shape.
• 0:08
  SpaceX, Tesla X, The Boring Company, and Neuralink.
• 0:13
  I'm your host, Will Walden. The legal team representing
• 0:17
  Tesla shareholder Richard Tornetta has adjusted their
• 0:20
  demand for legal fees in the case against Elon Musk's 2018
• 0:25
  CEO Performance Award. Initially, Tornetta's team
• 0:29
  sought an award amounting to 29.4 million Tesla shares valued
• 0:34
  over $5 billion. They have now proposed an hourly
• 0:38
  rate adjustment to $73,948, leading to a total fee of
• 0:44
  approximately $1.44 billion. Now the Tornetta Verse Must case
• 0:50
  gained prominence in January when Judge Kathleen McCormick of
• 0:54
  the Delaware Court of Chancery an old Musk's 2018 CEO
• 0:59
  performance award. Tornetta's lawyers argue that
• 1:02
  their substantial effort justifies their proposed
• 1:05
  compensation. Initially, they requested a fee
• 1:07
  based on 29.4 million Tesla shares, which would equate to
• 1:11
  more than $200,000 per hour. And Tesla has contested the fee
• 1:16
  request, proposing a much lower fee of $13.6 million for
• 1:21
  Tornetta's league team. Now, Tesla's position was
• 1:24
  supported by Amy Steffens, a longtime Tesla shareholder who
• 1:27
  also secured legal counsel to oppose the $200,000 hourly fee
• 1:32
  suggested by Tornetta's lawyers. In the revised filing,
• 1:35
  Tornetta's legal team offered an alternative perspective on the
• 1:39
  fee structure. While rejecting Tesla's $13.6
• 1:42
  million proposal. They suggested a cash based
• 1:45
  alternative that would equate to an hourly rate of $73,948,
• 1:50
  totaling around $1.44 billion. This rate is a significant
• 1:55
  reduction from the initial proposal, but still reflects
• 1:57
  their extensive work on the case.
• 2:00
  Tornado's lawyers provided a detailed argument supporting
• 2:03
  their fee request. They cited historical
• 2:06
  precedents, such as a southern Peru case where $35,000 an hour
• 2:10
  rate was awarded over a decade ago.
• 2:12
  Adjusting for inflation, this rate would be over $55,000 per
• 2:17
  hour today, which they argue justifies the revised rate of
• 2:20
  $73,948 per hour now. The lawyers argued that even
• 2:25
  Tesla's own estimates indicated a significant commensable value
• 2:30
  estimated at 2.3 billion. Using these estimates, they
• 2:34
  calculated that a low end cash award should be around 1.0842
• 2:40
  billion based on the affirmed inflation adjusted southern Peru
• 2:43
  numbers. They noted that this would still
• 2:46
  be lower than what they believe is fair compensation now.
• 2:49
  The attorneys pointed out that the Southern Peru case involved
• 2:51
  penalties that reduce the final award, and in this case, the
• 2:55
  court penalized the plaintiff's council by reducing their fee
• 2:58
  request by 1/3 due to delays, and Tornado's lawyers argued
• 3:02
  that without such penalties, their justified rate would
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  indeed be around $73,948 per hour.
• 3:09
  Now, Tesla has responded by seeking to delay the July
• 3:12
  hearing schedule to determine the legal fees, arguing that a
• 3:16
  recent shareholder vote approved Musk's pay package it that
• 3:20
  impacts the case, and Tesla's attorneys filed a request to
• 3:24
  delay the hearing, citing the June 13th decision by
• 3:27
  shareholders as significantly affecting the remaining issues.
• 3:31
  Now, Greg Varallo, representing Tornetta, countered that Tesla's
• 3:37
  attempt to re litigate the approval process for Musk's pay
• 3:40
  package lacks legal basis and should not delay the
• 3:43
  proceedings. He asserted that the shareholder
• 3:45
  vote has no legal effect after the court's judgement on the
• 3:48
  merits. Now, Varello emphasized that the
• 3:51
  court should move forward with the determining of the fee award
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  for Tornado's legal team, arguing that they deserve
• 3:56
  billions of Tesla stock for their successful challenge.
• 4:00
  Delaying the hearing would postpone the final judgement and
• 4:02
  potential appeal process. Now, Judge McCormick previously
• 4:06
  annulled Musk's pay package, finding undisclosed conflicts of
• 4:09
  interest among Tesla's board members, and Mccormick's
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  upcoming ruling on the legal fees will finalize the case and
• 4:15
  allow Musk to appeal to the Delaware Supreme Court.
• 4:19
  Now, Musk has reacted to the court's decision by threatening
• 4:21
  to pull his company's legal incorporations out of Delaware
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  and calling for a new proxy vote to move Tesla's corporate home
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  to Texas. Now, Texas people and Tesla
• 4:32
  shareholders voted overwhelmingly in favor of this
• 4:35
  move. So Tesla's moving to Texas and
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  Musk's called Relocate Tesla's corporate home and encourage
• 4:42
  other businesses to leave Delaware reflects his
• 4:44
  dissatisfaction with the state's legal decisions.
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  Delaware's Chancery Court is known for its expertise in
• 4:49
  corporate litigation, housing more than 70% of Fortune 500
• 4:53
  companies. And despite the shareholder vote
• 4:56
  approving Musk's pay package, Elon still faces legal
• 5:00
  challenges and overturning the Delaware court's decision.
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  The court's ruling voided his 2018 pay package, which he must
• 5:07
  now appeal to secure. The resolution of this case will
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  have considerable financial implications for both Musk and
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  the legal teams involved. The final determination of legal
• 5:17
  fees will set a precedent for future corporate litigation and
• 5:21
  executive compensation cases. The ongoing legal battle
• 5:25
  highlights the complexities of executive compensation and
• 5:28
  corporate governance, emphasizing the role of
• 5:30
  shareholder oversight and corporate decision making.
• 5:33
  The outcome will be closely watched by legal experts and
• 5:36
  corporate stakeholders. And if you have any stock in
• 5:39
  Tesla, be sure to watch this. See how this turns out.
• 5:43
  Because if Elon and company move everything to Texas, it could
• 5:48
  change everything. And remember, Elon threatened to
• 5:51
  pull away from Tesla if he didn't get his pay package.
• 5:56
  He said he'd take his ball and go someplace else and go play
• 5:59
  other places and he might not be able to do XAI or other things
• 6:04
  because of this pay and the AI for Tesla.
• 6:09
  Well, some of it uses technology from XAI.
• 6:13
  So Elon was gonna take that away.
• 6:15
  I, I don't know. It does it seem like a bratty
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  move? If you, you know, what do you,
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  what do you think? It seems like a a move that
• 6:23
  almost a threat to shareholders that didn't approve of them
• 6:28
  moving to Texas. He just said, hey, I'm gonna
• 6:32
  take all this money or I'm gonna take everything else.
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  So that's up to you to decide, whatever you think.
• 6:39
  And I think he's he should get the money because he did manage
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  to get through all of the bullet points that he had to do.
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  He had to achieve certain things, certain milestones and
• 6:50
  he achieved them all with flying colors.
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  So I think he should be getting the award for that money.
• 6:57
  How? As the case progresses, the
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  Delaware court's decisions will influence not only Tesla's
• 7:01
  corporate structure but also the broader landscape of executive
• 7:04
  compensation disputes. The legal principles established
• 7:07
  in this case will guide future shareholder actions and
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  corporate governance practices. But ultimately, the court's
• 7:14
  final judgment will determine the appropriate compensation for
• 7:17
  Tornado's legal team and the validity of Musk's 2018 pay
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  package. The decision will shape the
• 7:23
  future of executive compensation litigation for Tesla and Elon
• 7:28
  Musk. Hey, thank you.
• 7:35
  So much for listening today. I really do appreciate your.
• 7:38
  Support if. You could take a second and hit
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  the subscribe or the follow button on whatever podcast
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• 7:44
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  tremendously and you'll never miss an episode.
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  get you caught up quickly. And please, if you want to
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  support the show even more, go to patreon.com slash.
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  Stage 0. And please take care of
• 8:02
  yourselves and each other, and I'll see you tomorrow.