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A Delaware judge’s ruling that plaintiff attorneys in a case against Elon Musk were entitled to hundreds of millions of dollars in legal fees has prompted renewed calls for tort reform on social media and from a legal expert who spoke to Fox News Digital.
Chancellor Kathaleen St. Jude McCormick ruled earlier this month that Musk is not entitled to receive a multibillion-dollar compensation package even though Tesla shareholders had approved it. McCormick also rejected a massive fee request by plaintiff attorneys, who argued that they were entitled to legal fees in the form of Tesla stock valued at more than $5 billion. However, McCormick did rule that the attorneys were entitled to a fee award of $345 million.
The record fee request was made by investor Richard Tornetta on behalf of the three law firms that represented him in the lawsuit against Musk’s compensation plan, which is believed to be the largest among CEOs of publicly traded companies in the U.S.
Tornetta owned nine shares of Tesla when he sued over the pay package that was originally approved by shareholders in 2018 before it was first voided by McCormick of the Delaware Court of Chancery in January. The fee request amounted to roughly $7.2 billion based on Tesla’s stock price at the time and amounted to a rate of $370,000 for every hour worked by the team of 37 lawyers, associates and paralegals — some of whom typically bill as little as $275 an hour, according to documents submitted by Tornetta’s legal team to the court.
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A judge awarded $345 million in lawyer fees related to Tesla CEO Elon Musk’s compensation dispute. (Getty Images)
“The lawyers who did nothing but damage Tesla want $6 billion,” Musk posted on X in March in response to the initial ask that the plaintiff attorneys were seeking. “Criminal.”
The $345 million judgment, according to Reuters, represented “one of the largest fee awards ever in securities litigation,” and The Associated Press reported that the “fee award amounts to almost exactly half the current record $688 million in legal fees awarded in 2008 in litigation stemming from the collapse of Enron.”
The massive judgment has caused many to call for increased tort reform legislation to guard against egregious or unfair damages in lawsuits.
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Elon Musk, CEO of Tesla, raises a glass at the Atreju convention in Rome on Dec. 16, 2023. (Alessia Pierdomenico/Bloomberg via Getty Images)
“When consumer goods and services have to be priced to compensate lawyers at an hourly rate of $17,692, something has gone very wrong indeed with America’s legal system,” Gordon Gray, executive director of Pinpoint Policy Institute, told Fox News Digital.
“Policymakers need to act on behalf of their constituents to curtail runaway torts.”
“Adding judicial insult to injury, Delaware Judge McCormick has ordered #Tesla shareholders to pay the plaintiff’s lawyers $345 million!” Ark Invest founder and CEO Cathie Wood posted on X. “The plaintiff owned 9 shares of $TSLA. McCormick is making a mockery of the sense of fairness essential to our American judicial system.”
“This decision and the payola for lawyers is absurd,” billionaire hedge fund manager Bill Ackman posted on X. “We are going to see a migration of Corporate America from Delaware.”
“This is clearly absurd,” venture capitalist Bill Gurley posted on X. “If a plaintiff w 9 shares that actually made money (no harm) can lead to a $345mm legal fee, every company in Delaware is at risk and will be targeted. Everyone should change domicile as soon as possible. Takes derivative suits into a whole new plane.”
“The vast majority of Tesla shareholders approved Elon’s comp package in 2018 and have re-approved it now,” incoming White House AI and crypto czar David Sacks posted on X in June. “An activist judge voided it for nothing. The trial lawyers who are asking for billions in fees should get nothing.”
Elon Musk, right, and President-elect Trump. (Brandon Bell/Getty Images / Getty Images)
“It is unfathomable to suggest any financial benefit derived from this case could justify such exorbitant fees for plaintiff attorneys,” Tesla shareholder Liang Guo of Fort Lee, New Jersey, said to the judge, according to Bloomberg. Shareholder Brian Lecher said, “Instead of honoring the wishes of shareholders and rewarding the hard work of the CEO, it seems that the court is rewarding lawyers who did nothing for the company or shareholders.”
Bloomberg reported that McCormick is “ethically bound” to ignore letters from the shareholders, noting that Larry Hamermesh, a retired law professor well versed in Delaware corporate disputes, called the situation “uncharted waters.”
“There’s no clear guidance in the law for a fee like this,” he said.
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“Musk’s firms are some of the most innovative and indispensable out there—from space travel to artificial intelligence to free speech to electric vehicles,” columnist Josh Hammer wrote in the City Journal this month. “Yet companies like his are seen as lucrative targets by left-wing trial lawyers.
“But legal-reform efforts aren’t just about one lawsuit, one CEO, or one billionaire. The point is to remedy a broken system that is raising costs on every American and threatening entrepreneurship. The voters handed Trump a mandate in the 2024 election. Next year, he and Republicans in Congress must rein in the left-wing trial-lawyer lobby, protect consumers and businesses, and lower costs. If they succeed, they will help to drain one of the murkiest parts of the Washington, D.C., swamp.”
In a statement to Fox News Digital, a spokesperson for the Delaware Court of Chancery said, “The Court’s written ruling speaks for itself. We have no further comment.”
Reuters and Fox News Digital’s Eric Revell contributed to this report.
