Winning lawyers in Elon Musk’s $56bn pay dispute in line for fee bonanza

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The lawyers who represented victorious Tesla shareholders may be in line for a record-breaking payout worth hundreds of millions, or even billions, of dollars after a Delaware court on Tuesday voided a $56bn pay package for Elon Musk.

Lawyers told the Financial Times that Bernstein Litowitz Berger & Grossmann, the law firm that led the representation of investors challenging the pay plan, could ask that the Delaware Court of Chancery pay them up to one-third of the “benefit conferred” by the ruling — in other words, how much value was restored to shareholders.  

How much that is will be up to the court. When it was initially awarded to Musk, the stock-based incentive package at issue was valued at $2.6bn. But that ballooned to $55.8bn after the electric-car maker hit financial performance and share price targets set out in the deal. One lawyer said the court’s calculation of the benefit conferred to other shareholders could ultimately be based on a figure between those two book ends.

The decision on the pay package must also be sound enough to survive any appeal Tesla may take to the Delaware Supreme Court.

“There’s never been a judgment of this size so we are in somewhat uncharted territory,” said another prominent Delaware litigator not affiliated with the case. “And they will probably make a somewhat more modest ask for optics reasons. But I’d be stunned if they didn’t ask for a fee, in whatever form, worth multiple billions of dollars.” 

Greg Varallo, the lead lawyer at Bernstein Litowitz representing the shareholders, said it could be a few weeks before his side submitted its fee request but declined to comment on what figure they will request.

In the US, plaintiffs’ lawyers often take most or all of their fees from a portion of a settlement or judgment, a so-called contingency arrangement.

Lawyer fee awards have…