‘Very wrong’: Elon Musk case sparks calls for reform after judge issues huge ruling on attorney fees

A Delaware judge’s ruling that plaintiff’s attorneys in a case against Elon Musk are entitled to hundreds of millions of dollars in legal fees has led to renewed calls to repair the damage on social media and from a legal expert who spoke to Fox News Digital.

Counselor Kathleen St. Jude McCormick He was ruled earlier this month That Musk is not entitled to a multi-billion dollar compensation package despite Tesla shareholders approving it. McCormick also declined hugely Fees requested by plaintiff’s attorneywho argued that they were entitled to legal fees in the form of Tesla stock worth more than $5 billion. However, McCormick ruled that the lawyers were entitled to $345 million in compensation.

The filing fee request was filed 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 United States.

Tornetta owned nine Tesla shares when he sued over the pay package that was originally approved by shareholders in 2018 before it was first invalidated by McCormick of the Delaware Court of Chancery in January. The fee request was approximately $7.2 billion based on Tesla’s stock price at the time and a rate of $370,000 per hour worked by a team of 37 attorneys, associates and paralegals — some of whom typically earn at least $275 per hour. According to documents submitted to the court by Tornita’s legal team.

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“Lawyers who did nothing but hurt Tesla want $6 billion.” Published on X In March in response to the initial request sought by the plaintiff’s lawyers. “criminal.”

The $345 million judgment represents, according to Reuters, “one of the largest fee awards ever in a securities case,” and the Associated Press reported that “the fee award is roughly half the current record $688 million in legal fees awarded in 2008 in 2008″. Lawsuits resulting from the collapse of Enron.

This massive ruling has led many to call for increased tort reform legislation to protect against unfair or unfair damages in lawsuits.

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“When consumer goods and services have to be priced to compensate lawyers at a rate of $17,692 per hour, something has really gone wrong in the American legal system,” Gordon Gray, executive director of the Pinpoint Policy Institute, told Fox News Digital.

“Policymakers need to act on behalf of their constituents to limit runaway harm.”

“In addition to the judicial insult, Delaware Judge McCormick ordered #Tesla shareholders to pay $345 million to plaintiff’s attorneys!” Ark Invest Founder and CEO Cathie Wood Published on X. “Plaintiff owns 9 shares of $TSLA. McCormick mocks the sense of fairness essential to our American judicial system.”

Billionaire hedge fund manager Bill Ackman said: “This decision and the payment of lawyers’ salaries is ridiculous.” Published on X. “We will see an exodus of American companies from Delaware.”

“This is obviously ridiculous,” venture capitalist Bill Gurley said Published on X. “If a plaintiff who owns 9 stocks actually makes a profit (without damage) that could result in $345 million in legal fees, every company in Delaware is at risk and will be targeted. Everyone should change their domicile as soon as possible. Take Lawsuits Derivative taking into account a completely new aircraft.”

“The vast majority of Tesla shareholders approved Elon’s corporate package in 2018 and have now re-approved it,” said David Sachs, the White House’s AI and cryptocurrency czar. Published on X In June. “It was struck down by an activist judge for nothing. Lawyers demanding billions in fees should get nothing.”

“It is incomprehensible to suggest that any financial benefit derived from this case could justify such exorbitant plaintiff attorney fees,” Tesla shareholder Liang Guo, of Fort Lee, New Jersey, told the judge. According to Bloomberg. “Instead of respecting shareholders’ wishes and rewarding the CEO’s hard work, the court appears to be rewarding lawyers who have done nothing for the company or shareholders,” shareholder Brian Lesher said.

Bloomberg reported that McCormick was “morally obligated” to ignore letters from shareholders, noting that Larry Hamermesh, a retired law professor with expertise in corporate disputes in Delaware, described the situation as “uncharted waters.”

“There is no clear guidance in the law for fees like this,” he said.

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“Musk’s companies are some of the most innovative and indispensable out there — from space travel to artificial intelligence to free speech to electric cars,” columnist Josh Hammer He wrote in the city magazine This month. “However, companies like his are viewed as lucrative targets by left-wing lawyers.

“But legal reform efforts are not just about one lawsuit, one CEO, or one billionaire. The goal is to address a broken system that increases costs for every American and threatens entrepreneurship. Voters have given Trump a mandate in the 2024 election.” Next year, he and Republicans in Congress must rein in left-wing lobbyists, protect consumers and businesses, and cut costs, and they will help drain one of the most gray areas in 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.”

Eric Revell of Reuters and Fox News Digital contributed to this report.