Tesla Wins Court Battle, Slashing Legal Fees by $100M

Tesla Secures Major Fee Reduction in Lawsuit

The Delaware Supreme Court has significantly reduced the legal fees Tesla must pay in a lawsuit concerning director compensation. The court slashed the awarded fees by over $100 million, a major victory for the electric vehicle manufacturer.

Case Overview and Court's Rationale

The ruling orders Tesla to pay $70.9 million to shareholder lawyers, a 60% reduction from the initial $176.1 million awarded by a lower court. The Supreme Court determined the original fee was inflated because it improperly included the intrinsic value of returned stock options when calculating the total settlement value. The shareholder lawyers had initially valued the settlement at $919 million.

Broader Implications for Corporate Litigation

This decision arrives amid growing scrutiny over substantial legal fee awards in Delaware's corporate courts. It may signal a trend toward more conservative fee calculations in shareholder derivative suits. The outcome benefits Tesla by reducing a significant liability and sets a precedent that could influence future corporate litigation in the state.

Summary

Tesla's successful appeal results in a substantial financial saving and highlights ongoing debates about legal fee structures in Delaware. The market will watch to see if this ruling affects the frequency or nature of future shareholder lawsuits against corporate boards.

FAQ

Q: How much did the court reduce Tesla's legal fees by?
A: The fees were reduced by more than $100 million, from an initial $176.1 million down to $70.9 million.

Q: Why were the legal fees reduced?
A: The Delaware Supreme Court found that the settlement's value was over-inflated by incorrectly including the intrinsic value of returned stock options.

Q: Who was involved in the original settlement?
A: Directors including Chair Robyn Denholm and James Murdoch agreed to return cash and stock options. CEO Elon Musk was not part of this settlement.

Source: Investing.com