Delaware’s top court cut more than $100 million Friday from the payday for shareholder attorneys who reached a settlement with Tesla Inc. in a challenge over four years of compensation for the electric vehicle-maker’s directors.
The decision by the state’s elite trial-level business court to award $176 million to a pension fund’s law firms decision “erred by including in its financial benefit analysis the intrinsic value” of options being returned by Tesla’s board, Chief Justice Collins J. Seitz Jr. said in an opinion for the state supreme court’s full five-member panel.
The justices set the fee award at $70.9 million while also upholding the lower court’s approval of the settlement
The Delaware Chancery Court had awarded $176 million to the attorneys for a pension fund that settled their derivative lawsuit challenging pay from 2017 to 2020 for directors including CEO Elon Musk, Oracle Corp. founder Larry Ellison, Musk’s brother Kimbal, and a son of media mogul Rupert Murdoch.
Tesla’s board must return stock and options valued up to $735 million and forgo three years of pay worth $184 million. The high court wasn’t asked to consider the fairness of the settlement nor the transactions that prompted the litigation.
Tesla said during oral argument that a roughly $70 million fee award would have been appropriate.
Exceeding the Budget
Justice Karen L. Valihura noted during the Oct. 29 arguments that the fee was $60 million more than the Delaware judiciary’s budget last year “for a case that settled midstream.” The pension fund said the settlement was one of the largest ever reached in Delaware, and the Chancery Court didn’t award the full $230 million requested.
Nine-figure lawyer paydays got a cautious approval from the state’s high court last year when it affirmed a $267 million award for lawyers who reached a $1 billion settlement over a contentious stock conversion at Dell Technologies Inc.
Tesla is represented by Sullivan & Cromwell LLP, DLA Piper LLP (US) and Bayard PA. Musk and other Tesla directors are represented by Richards, Layton & Finger PA and Cravath, Swaine & Moore LLP. The Police and Fire Retirement System of the City of Detroit is represented by Akerman LLP, Bleichmar Fonti & Auld LLP and Fields Kupka & Shukurov LLP.
The case is In re Tesla, Inc. Dir. Comp. S’holder Litig., Del., No. 53,2025, opinion 1/30/26.
