Delaware Court Cuts Tesla Lawsuit Legal Fees by 60%

Key Ruling Summary

The Delaware Supreme Court delivered a significant victory to Tesla, reducing the legal fees owed in a shareholder lawsuit by over $100 million. The court slashed the award from $176.1 million to $70.9 million, a decrease of approximately 60%.

Case Background and Context

The lawsuit, led by a Detroit pension fund, successfully argued that Tesla's directors had overpaid themselves. The settlement involved directors returning about $277 million in cash and stock options to the company. Lawyers for the shareholders had valued this settlement at $919 million to justify their original fee request.

Impact on Corporate Litigation

The court's decision hinged on the valuation of the settlement. It ruled that the initial calculation was inflated because it improperly included the intrinsic value of the returned stock options. This ruling comes amid increasing debate over large legal fee awards in Delaware, a key hub for corporate law.

Final Outlook

This landmark decision sets a precedent for how legal fees are calculated in shareholder derivative suits, particularly those involving non-cash settlements like stock options. It signals a more conservative approach from Delaware courts, potentially impacting future fee requests in similar corporate cases.

FAQ

Q: Why were Tesla's legal fees reduced?
A: The Delaware Supreme Court determined the settlement's value was improperly inflated by including the intrinsic value of returned stock options, which led to a lower fee calculation.

Q: How much money did Tesla save from this ruling?
A: Tesla saved approximately $105.2 million, with the required payment being reduced from $176.1 million to $70.9 million.

Source: Investing.com