by Tom Hales
WILMINGTON, Delaware (Reuters) – A legal team that forced Tesla directors in July to return more than $700 million in damages to the automaker is seeking a day of their own with a hefty payout, alleging they overpaid themselves.
The attorneys want a judge to approve a $229 million payout, or $10,690 an hour, according to a Sept. 8 filing in Delaware Chancery Court.
The proposed payout award, if approved, would be the largest ever brought against the board by a shareholder suit. The sum will be split from lawyers for four companies who have been suing Tesla directors for several years challenging compensation payments from 2017 to 2020.
The legal settlement and settlement must be approved by a Delaware judge at a hearing scheduled for October.
The 12 directors, including James Murdoch and Larry Ellison, have agreed to pay $735 million in damages, set aside another $184 million, and agree to reform the way the board determines directors’ pay. Proceeds from the deal will be paid to Tesla and will indirectly benefit shareholders.
The law firms estimate the total value of the settlement at $919 million and are seeking 25 percent as a fee. They also want to spend about $1 million.
Both partners and other staff at the New York law firms of Bleichmar Fonti & Auld and Fields Kupka & Shukurov have each billed more than 10,000 hours on the case. McCarter and English attorneys and staff in Wilmington, Delaware and Ronald King, an attorney with the Clark Hill firm based in Lansing, Michigan, also billed hundreds of hours.
George Bauer of Bleichmar Co. declined to comment, and attorneys for the other firms did not immediately respond to requests for comment.
Courts evaluate fee claims by examining the need to reward risk and effort, preventing asymmetric headwinds that could erode confidence in the legal system, said David Page, founder of Legal Fee Consulting.
Page said it’s difficult to compare attorneys’ bills in different contingency fee cases, but he called Tesla’s plaintiffs’ requests “extraordinary” compared to the $2,000 hourly fees for Star’s corporate attorneys. Page ultimately said the court should evaluate the amount of the fee in light of the merits of the dispute.
Tela’s directors have not objected to the payment request but are expected to do so, according to a court filing by the plaintiffs’ lawyers.
Attorneys for the directors did not respond to requests for comment.
Delaware courts have upheld higher hourly rates. In the year In 2012, the Delaware Supreme Court upheld a $304 million settlement in a Southern Copper shareholder lawsuit involving $2 billion in damages. The rate was $35,000 an hour, and the defendants objected. The state’s highest court said judges should look at results, not hourly wages.
Delaware District Court Judge Kathleen McCormick, who is overseeing the Tesla case, has scheduled the hearing and payment for Oct. 13. Tesla shareholders have until Friday to file objections.
(Reporting by Tom Hales in Wilmington, Delaware; Editing by Amy Stevens and Margherita Choi)