A recent decision by a Delaware judge has sparked calls for changes in the legal system after plaintiff lawyers in a case against Elon Musk were awarded $345 million in fees. This comes after a lawsuit over Musk’s massive pay package, which was approved by Tesla shareholders but later challenged in court.
Earlier this month, Chancellor Kathaleen St. Jude McCormick ruled that Musk’s compensation plan was not justified, despite shareholder approval. However, she denied a huge $7.2 billion fee request by the plaintiff attorneys. Instead, the judge awarded them $345 million.
Richard Tornetta, an investor who sued Musk over the pay package, represented the lawyers who worked on the case. Tornetta owned only nine Tesla shares but pushed for these enormous legal fees based on Tesla’s stock price.
Musk criticized the lawyers’ demands, saying their request was criminal and accusing them of doing damage to Tesla. The $345 million award is one of the largest in securities litigation, and many are now calling for reform to prevent excessive legal fees in lawsuits.
Some experts, like Gordon Gray from the Pinpoint Policy Institute, argue that the legal system has gone too far, with fees like these driving up consumer prices. Others, including well-known figures like investor Cathie Wood and hedge fund manager Bill Ackman, have expressed concern that such high fees could drive companies away from Delaware, where many U.S. companies are incorporated.
Tesla shareholders have also voiced frustration, questioning why the court would reward lawyers when most Tesla shareholders approved Musk’s compensation plan. Some believe the legal fees don’t reflect any real benefit to the company or its shareholders.
Legal experts suggest that this case highlights the need for broader legal reforms to curb the power of trial lawyers and reduce costs for businesses and consumers.