S&C secured another significant victory for Tesla, Inc. in the Delaware Supreme Court, which sharply reduced an attorneys’ fee award arising from a settlement in a derivative action challenging compensation paid to Tesla’s non-employee directors. S&C was brought in to handle the appeal. This marks S&C’s second major appellate victory for Tesla in the past five weeks. In December, S&C won a landmark ruling from the Delaware Supreme Court reversing the Chancery Court and reinstating the 10-year incentive compensation plan for Tesla’s CEO, Elon Musk.
In the most recent ruling, issued January 30, a unanimous en banc Supreme Court affirmed the Chancery Court’s approval of the underlying derivative settlement, which Tesla supported, but cut more than $100 million from the plaintiffs’ fee award.
The Delaware Supreme Court held that the intrinsic value of unexercised stock options returned by defendant directors as part of the settlement should not be included as a corporate benefit. After excluding these options, the Supreme Court reduced the fee award to approximately $71 million, an amount consistent with Tesla’s position on appeal and which the court described as reflecting a reasonable fee.
The S&C team representing Tesla in the litigation consisted of Morgan Ratner (who argued the appeal), Brian Frawley, Jeff Wall, Matthew Schwartz, Akash Toprani, Michael Lemanski, Tzvi Levitin, Will Weinberg, Renic Sloan, Kaitlyn Milinic and Eliot Peck.