Tesla disputes $230M attorney fee stemming from board pay lawsuit

Tesla (NASDAQ:) urged a Delaware judge Friday to deny a $230 million legal fee claim made by a group of shareholder lawyers who secured a settlement in a dispute over director compensation.

The electric vehicle manufacturer, has referred to this fee request as an “unwarranted windfall”, emphasizing that it equates to an hourly rate of $10,690, one of the highest ever seen in Delaware’s Court of Chancery, which is a critical location for shareholder litigation.

The company is seeking approval from Chief Judge Kathaleen McCormick for a fee not exceeding $64M.

Elon Musk’s $56 billion in compensation as Tesla’s CEO was not part of the lawsuit and is being challenged separately.

The 2020 lawsuit was settled in July, with the directors consenting to reimburse Tesla $735M as part of a larger $919M deal.

The directors maintained that their remuneration was just and that they opted for a settlement solely to eliminate the possibility of legal proceedings.

The legal representatives are seeking 25% of the settlement amount involving the 12 directors, among whom are James Murdoch, the son of media tycoon Rupert Murdoch, and Larry Ellison, co-founder of Oracle (NYSE:).

Tesla argues that the attorneys for the shareholders inflated the worth of the settlement, and consequently their requested fee, by linking it to the expense incurred by the directors, rather than the advantage gained by the company. Tesla estimates its benefit from the deal was $295M.

The difference between the two values mainly stems from stock options. At the time of the settlement in July, the options were appraised at $458M for the directors.

However, the company clarified in legal documents that they cannot exercise the stock options that were returned. Rather, the company highlighted that the advantage of reclaiming the options lies in reversing the accounting cost it originally recorded during their issuance, an amount estimated to be around $20M.

Elon Musk is not contributing to the settlement and did not receive any money for his role on the board, according to a court filing by the plaintiff.

Shares of TSLA are down 2.99% in afternoon trading Friday.