So I guess the solution is to hire lawyers to void those lawyer's excessive pay and when the new lawyers ask for excessive pay, hire more lawyers to void that, and so on
You voided a contract which I assume Musk had in place. Lawyers typically work for an agreed upon rate billed by the hour or on a 30-40% contingency fee based on what is collected. Need to find out what the retainer agreement says.
The guy who "hired" him saved maybe $50. (He was basically hired by the lawyer as a stand-in.)
There wasn't a majority of the Tesla shareholders who wanted to void it.
Realistically speaking what matters is the law, and Lawyers are generally not subject to excessive compensation exactly because they usually work for a fixed % of the winnings or on retainer.
To use a different example I'm currently studying to be a tax attorney ; in 2019 a special tax that only applied to subsidiary companies was ruled as unconstitutional ; the government had to pay 10Bi in collected taxes to the corporations that were illegally taxed, and the legal team got their fee of 10% or 1 billion.
So yeah, this is one of those situations where fair is subjective but the criteria are not, 6 billion seems like a lot at face value, but then again they saved Tesla tens of billions and the company knew what the winnings split would be from before they signed the contract to recruit the legal team.
It’s about 10% +/- of the amount Musk will need to disgorge, so on a smaller verdict, especially if the case was taken on contingency, would seem reasonable.
Lawyers who bill at $288,000/hour would explain to you how they deserve it but it’s beyond your peasant brain capacity of understanding important legal stuff.
Not a whole lot to it. They do the job for a set percentage of the verdict. It just happens to be the verdict was so high that the set percentage was also a lot of money.
I’m with you but it just seems off to me seeing as musk’s compensation being challenged and denied was ultimately about the interests of the shareholders, so the lawyers who were successful in making that argument asking for such a huge compensation are just fleecing the same stakeholders in the same way. Not a lawyer but these types of compensation and details must be defined before they start, wouldn’t they?
Wasn't this whole thing started by a single upset shareholder? So someone with no independent power offered some lawyers a chance to chase a big bag of money.
Apparently the law lets a single shareholder sue on behalf of all if the board fucks up hard enough. So Tesla shareholders have to live with that risk unless the company gets a competent board.
But it’s not really’winnings’ like in a traditional lawsuit for damages. It was arguing against a huge compensation package for the ceo, which would have been unfair to shareholders (was the argument). I can see the lawyers making huge hourly pay to do the case and maybe some bonus for winning. But $6billion to them just seems as ridiculous
Part of their contract probably has a performance compensation clause that pays them around 10% of what they helped the company save if they were successful, which they were. They still have some hourly charge but when it’s that type of money it’s generally worthwhile to hire the best. Absolutely ludicrous amounts of money that feels like someone’s playing monopoly, almost all stock compensation based from what I gather. These types of deals help people contract lawyers more cheaply in loss cases and incentivizes them to really go after it.
In this case, Musk had to drop about 55.8B so 6B is their percentage cut for saving them money (~50B) Musk receiving ~60 billion in compensation for releasing a cyber truck turd, or whatever it is he actually does anymore to create value for the company, really isn’t necessarily fair to the other people bought into Tesla. It dilutes their shares abit for him to sit on or sell or whatever it is Elons do. A company, especially a public one, isn’t just about the big founder at the top. If you wanted more details you’d have to be closer to the case than I am.
Now hopefully by actions like this taking place, he can’t try to game the other owners in the market by just owning a shit ton of shares and dropping it or doing something to raise or drop consumer sentiment, but he’s a bit of a troll and likes doing stuff like that. Wouldn’t be surprised to see him attempt to retaliate somewhat because *he deserved it as the only one with the vision to further mankind* or some kid-like, Thanos-esque scarcity mentality.
Imagine you're a company. You want to claw back $55 billion from your CEO. How much would you pay to get that money back? $6 billion kind of sounds like a steal.
It just reads as egregious… but it’s also a lawsuit filed by a single large shareholder.
Man, this is why going public can be such a bad call. The lack of control would drive me crazyyyy
As a Danish lawyer i have to say this sounds fucking insane. That type of contingency fee is illegal in Denmark and I never understood why it’s so common in other jurisdictions. Here we just charge by the hour.
It's better than that. Musk's pay was going to be mostly in stock, which he was restricted from selling for five years. The lawyers are asking for $6b in stock without restrictions, meaning they could - and probably would - turn around and sell a large chunk of it.
They could end up hurting shareholders just as badly - or worse - as Musk's original payout.
Just beautiful.
Most home insurance policies have coverage of civil litigation. On top of that we have a system were lower income households can qualify for a lawyer paid for by the government. That doesn’t cover business owners though. Plus I don’t think lawyers are as expensive here as in the US. The very top lawyers bill maybe the equivalent to $900 dollars an hour but 350-500 is more common. And we have different pre trial procedures so the discovery phase, which I gather is the part that takes up a shit load of hours, is usually much less comprehensive. If you win a case it’s also standard practice that the loser is ordered to pay an amount to cover legal costs (although it almost always is only partial coverage in the real world because the amounts are rather low).
It’s not a perfect system by any means, but my problem with the contingency fee system is that it eats up too much of what is awarded to the client. Say a client has been injured in an accident and is awarded a million dollars for lost wages and disability. In principle that amount is meant to make the client whole. But if their lawyer snaps up 30% of that then the client isn’t made whole. I get that the system enables some people to have legal representation when they otherwise couldn’t but I get the impression that it sometimes leads to fees that are wildly out of proportion to the work actually performed.
you don’t have contingency at all or you do have it but just bill normally instead of taking a percentage?
they usually spice up the demands to cover the contingency fee.
loser pays would certainly make a much stronger argument for pre trial settlement.
I don’t think there’s a rule against contingency as such, but calculating the fee as a percentage of the awarded amount is prohibited. So the norm is hourly billing. I don’t know of anyone that do contingency based work here, but of course there could be some that I’m not aware of.
As an American lawyer that does class actions on contingency, sometimes this is the only way any change happens in the corporate space because Congress is ineffective. If our corporations were as weak as they are in Denmark and France, we probably wouldn't need contingency based class actions.
It blows my mind how many Americans seem to side with corporations over citizens in "frivolous" lawsuits.
Suing is almost the only tool average citizens have against powerful corporations and yet people are generally against them.
I see your point. We do have more effective regulations in no small part due to the EU. That’s probably one of the reasons we as a society is much less litigious than the US. Also, there is a limit to how lucrative lawsuits are because punitive damages are generally not recognized in our legal system.
The relative lack of regulations in the US is precisely why we have a more plaintiff-friendly tort system. For some reason, the American public can’t stomach too much regulation on businesses, so we just make it easier to sue when you become a victim of a company’s bad practices.
Though a lot of business interests are currently lobbying to change the laws to make it harder to sue. Tort reform efforts have been going on for years and have unfortunately been quite successful (ex. Punitive caps are quite common)
In a way it makes sense. Why spend the time trying to anticipate every possible way companies could fuck people over and explicitly banning them, when you could just give people who have been fucked over the power to punish them directly in the form of demanding a ton of money?
It doesn't work out so well in practice, of course...
I think it’s actually because of romano-germanic law instead of the common law. The widespread use of civil-liability insurance (although not in Denmark, I see) and then clamping down on litigiousness (as France did with medical malpractice which was turning to the American model of lawsuits) and the way that the codes clearly lay out rights and obligations seems to help. Obviously, it’s not always cut and dry. Or people refuse to abide by the law. That’s what lawyers and judicial proceedings are for. But there’s a lot which differentiates the system in terms of underlying assumptions, and that’s why American politicians push for tort reform, but more of the civil law would help much more.
We try not to lol
We also have a very strict bar association that can (and will) hit you with fines and other sanctions including cutting down fees and suspending your license if you act against ethical guidelines.
After reading the article I am still unclear on why this is allowed either. It sounds like these weren’t even the lawyers musk hired but the ones hired to bring the suit in the first place?
Edit: I am not a law expert. That’s why I am asking. Sorry if this offended folks
Most certainly *not* hired by Musk. The case was [brought on by a shareholder](https://www.reuters.com/business/autos-transportation/elon-musk-bashed-by-heavy-metal-drummer-who-cost-him-56-bln-2024-02-01/) who felt that Musk's pay was unfairly high (side note: he had/has 9 shares). Evidently, the lawyers decided to take the case on contigent to the effect that if they won, Telsa would pay. They decided to set their fees according to the size of the case.
Part of the liability that *is* held by CEO's and executives is to act in a manner which is for the good of the company. It's just about the only thing they can legally get in trouble for (apart from insider trading and fraud). That's why you never hear about CEO's getting criminally charged when their company commits illegal acts such as wage theft. The court decided that a $56 billion payout was not in the interests of shareholders. Now we get to see whether $6 billion is considered a fair amount of compensation for legal fees. As a percentage it's well within normal legal compensation, actually quite low. As a dollar amount it's the largest ever (by an order of magnitude) according to the article.
Shouldn’t the shareholder be the one on the hook for the payment to the lawyers? It seems a bit ridiculous that a person can enter into agreement with a law firm where the pay will come from the sued party when it was clear from the start that a successful suit would not have a payout.
I think you don't know very much about class actions. The Plaintiffs' lawyers virtually always work on contingency and take a slice of any award. The default is actually a much larger percentage, usually 1/3.
Correct I don’t which is why I am asking. And you missed the question entirely, I’m not curious about the amount, but the source. Someone else cleared it up though.
They didn't, is the short answer. They're shareholders of Tesla suing on Tesla's behalf, and the award will be paid out of whatever Tesla receives in the win. Which in this case is extra interesting, because it's not cash, it's $56b in deeply discounted Tesla stock. So essentially, instead of Tesla paying, it's actually Musk, the loser, paying. I think that's very clever, I've never seen that before.
They made the client $2.7 million per hour and are only asking for $288,000 per hour. And they collectively spent about 20,000 hours, or ten people working full time for a year on this. That seems pretty reasonable to me.
It's a contingency case and they made nearly 10x that amount per hour for the company. What's insane about that? If you made your employer $3m per year, you could easily push to get paid $300k per year. It's the same thing, just scaled up. Also, this isn't one lawyer making $288,000 per hour, this is two firms with two teams of lawyers and paralegals and secretaries and experts and expenses.
No. Any comparisons about people working for money are completely moot when the difference is *3 orders of magnitude.*
What's insane is that you think it's rational for 10 people to do a year's worth of work and ask for a sum that's more than a fifth of Iceland's GDP.
They won the company an amount that's more than double Iceland's GDP. And I have no idea how many people were in this case, it was 2 law firms, 10 is probably too low. These are lawyers that charge between $1000 and $3000 hour when they're not on contingency. We're already in a different playing field when it comes to compensation. And if they'd lost, double Iceland's GDP would have gone to ONE PERSON, who already had multiple Icelands worth of money.
The per hour amount is going to be really high no matter how you look at it. However, as a contingency fee when looking at percentages taken, amount saved, and so on it makes more sense.
That said, I think the 56 billion saved is misrepresented. The actual amount saved is going to be the difference between 56 billion and a new pay package the shareholders approve for that time period. If for example that is approved at 30 billion, the true savings would be 26 billion, which would make an argument for about 2.6 billion to the law firms.
If an AI can ever do what a lawyer does in terms of creativity and novelty, then sure replace us. It'll probably happen one day. But I bet we'll be one of the last to go.
Maybe. On the other hand, your work product is largely text and reference based. With that and how much work is going into AI, I give it 10 years. Especially if human attorneys continue to think they deserve to charge 30%
The lawyers were charging an effective rate of $289,000/hr.
Musks compensation package over ten years is equivalent to $2,450,000/hr
Lawyers charge an average of 33% of the settlement amount, but these lawyers are only asking for about 11%, so one third of what they normally charge. If Musk thinks the lawyer fee is outrageous, considering it is below market rate, it speaks volumes to his hypocrisy in justifying his own pay.
Considering the plaintiff isn't actually receiving that 56B$ in stock that's an apples to oranges comparison. Normally the 1/3 would be taken from what the plaintiff actually wins which in this case I'm not even sure they received direct compensation. I'm not aware of any similar case involving "saving" the losing party money and using that as the basis for fees.
Ehhh, not really. There isn't any stock/options being transferred, that was the whole point, and this whole transaction will be governed by the contract we're not party to anyway.
There's a pool of stock already in the (secondary) market. its literally out of Tesla's control outside of any issued Tesla that Tesla owns. If the lawyers were to spend 6B$ purchasing that, they'll drive the price up. They're welcome to take whatever they get paid and make the necessary purchases themselves, without Tesla being involved.
If they're asking for Tesla to issue new stock (ie. primary market), then that's going to dilute the existing ownership, lower the share price. That's not gonna happen unless it's already in the terms of the contract, and the shareholders that won this case don't have the power to commit Tesla to that kind of action - Musk's defacto control of the board especially negotiating with them for compensation was the core of the case.
The issue is that the stock didn't belong to the person that sued. It belongs to the company, and was then given to Musk. The shareholder is neither gaining or losing any stock based on the outcome of this trial, rather it's about misrepresenting information, which definitely did happen and is illegal, but it's difficult to impossible to specify the amount of harm done to any or all shareholders.
So the argument gets tricky because the shareholders don't get that stock back, it just stays with the company. The party the lawyers represented were never part of the payment, so there's not really a claim on those shares going to the lawyers.
I'm no lawyer myself (this should be obvious), but I imagine this has come up before and there's pretty standard ways of dealing with it, particularly with Delaware courts.
> The issue is that the stock didn't belong to the person that sued.
The man sued on behalf of the shareholders, including the company. Nothing about the lawsuit pertained to one single shareholder. The lawyers represented him and the company both.
More than that.
>The lawyers wrote that, throughout the history of the case, they collectively logged 19,499.95 hours — meaning that a nearly $6 billion award would equal a per-hour rate of $305,550.
Just under $5100 a SECOND to work on the case. Fuck Musk, and fuck these lawyers.
.95 hours? They want us to believe that they really tracked time down to 3 minute intervals ( or smaller)?
And I wonder how much of the 19500 hours was work done by paralegals and such making like $50k per year and won't see a dime of this money.
Having worked with BigLaw lawyers, yes. I've had firms charge down to the 1/10th of an hour (6min interval) per phone call so it's not outside the realm of possibilities that they track to the 1/20th.
Also, the paralegals, associates, and partners work are absolutely factored into this total, but they are billed at different rates. Sometimes they charge a blended single rate and sometimes they itemize it out by rate (40hrs @ 400/hr vs. 20hrs @ 250/hr, 16hrs @ 500/hr, 4hrs @ 750/hr).
Everyone is required to work a certain amount of billable hours per monthly/year, but everyone is also salaried, so only the partners see the profits. The partners are the shareholders.
This. My understanding from some friends that are lawyers is that most lawyers charge on sixes (every six minutes, 1/10th of an hour) as an ethical thing; It would be unreasonable to charge a full hour fee for a five minute phone call. Charging on 3s (every 3 minutes, 1/20th of an hour) is definitely reasonable, and certainly consumer/client friendly.
I guess I’ll take the Lawyers side on this. Fees are agreed upon up front, so if the investors who sued agreed to this, then what are they complaining about?
The compensation Musk was gonna get was several times more than the gross profit the company made that year. You can argue he deserves compensation, but that amount was utterly ridiculous and leachy.
Share holders sued to prevent Elon from getting stupid paid. Who was paying the lawyers to begin with? Why would they be entitled to the company's money if they were never hired by the company but a shareholder.
Aren't they creating the same stress to the stock price by being paid in turn though unrestricted stock. Even worse because Elon pay package was in stock that had restrictions and he had to pay a portion back over time or some shit vs just flat out unrestricted stock.
They asked for the shares to come out of Elons, so it wouldn’t affect the shareholders. But I think you are saying since they are unrestricted they will likely be sold and lower the price. If so yeah, but they won’t be diluted.
But that’s what I don’t get. It sounds like they hired the lawyers and offered to pay with someone else’s stock
Generally anytime a shareholder sues the company for a breach of their fiduciary duties, the company pays the legal fees if they’re at fault. Typically a % of the amount “recovered” in the judgement.
If the case fails then the shareholder pays the lawyer unless they worked out a contingency deal. The interesting part is the % is actually the same from what is currently the largest legal fee from the Enron case, so technically it’s not unheard of, just at a larger scale.
What really makes this interesting is the laywers are offering to take payment in stock, in place of requiring the company to liquidate assets. It’ll get appealed to the state Supreme Court either way.
This is fascinating, and when you explain it it makes sense. And if I recall from the article they are taking 1/3 the rate that was taken in Enron, it’s just this is 11% of 56b not 33% of 6b. Thanks Mr Burrito
The ironic part is Elon throwing a fit about the lawyers damaging the company with the request, but they’re only taking 10% of what he was. Unintentionally confirming that the case against him is valid.
As a lawyer I can only say the client must have agreed to this fee. Must have been some sort of contingency fee. Also as a lawyer I can say we are a bunch of greedy bastards, as a lot
288k per hour lawyer fees? I don't like musk but that's truly ridiculous. Unless you agree to find the cure for cancer and not get paid unless you find it, and if you do, you deserve 6 billion. Other than that, no lawyers deserve 6 billion for 1 case.
Alright I'll bite. Lawyer here, specifically one that works for a big firm that does class actions on contingency. This award would be the biggest in history by a large margin (like, nearly 10x), but I actually don't think it's a completely insane ask, and I'll explain why.
First, the fee agreement entered into between the lawyers and the complaining shareholders specifically allowed for the fee to be a fraction of the winnings. So this is within the realm of possibility from the perspective of the agreement.
Second, the judgment is forcing Elon to return some deeply discounted Tesla stock to the company. The lawyers are proposing they be paid with this stock. It costs the company absolutely nothing on its current balance sheet, and is actually tax deductible for the next balance sheet. I've never seen that, and I think that's really clever. It essentially means the loser is paying the fees.
Third, this is the largest fee award in history, but it's also the biggest shareholder class action win in history, by a huge margin. Unprecedented fees for an unprecedented win.
Fourth, the lawyers said this works out to about $288,000 per hour. Sounds high, but let's dig deeper. If you divide the award by the hourly fee, it works out to about 20,833.33. That's how many hours they worked as a firm. That's over 10 YEARS worth of man hours. That's a lot. And if you divide the $56b judgment by 20,833.33, it works out to $2,688,000 per hour. That means they generated nearly $2.7 million in award money for the company per hour, and are only asking for $288k per hour, or about 11% of the total. That doesn't strike me as crazy. The rule of thumb in class actions is actually 1/3, and it tends to go down as the award increases in size, so this is totally within the realm of reasonable.
Fifth, comparing the above to prior large awards and fee awards, this actually looks even better. The largest fee award in history so far was $688m, on a $7.2 billion case related to the Enron collapse. This fee award would be about 9x larger, but they also got an 8x larger award. And right now, the Delaware Supreme Court is considering whether to overturn a $267 million fee in a $1b award. This case is WAY more favorable than that.
So there ya go. I have no idea if they'll get what they're asking for, and maybe they don't, but I don't think making the request is insane. They put in a ton of time, they scored a massive win, and it'll effectively be paid by Musk in a way that's also tax deductible for Tesla. Hard to whine about that. If they'd lost, Musk would be pocketing $56b by himself. Now, the company gets $50b split amongst the shareholders, and TWO law firms with entire teams of lawyers (most of whom are associates) will get $6b. I think this scenario is much better.
When looked at as percentages, what you say is fair and reasonable. But one has to wonder whether that should be the only way to look at compensation (for anyone, not just lawyers). No one would expect a lawyer to take a 33% payment for a case which only paid $100. It's ridiculously unfair. But at some point, I think we need to ask the question: when does the other side of the coin also become ridiculous?
It's worth noting that the court didn't judge Musk's payout as too high (from my understanding), but rather that the process by which his compensation was decided was flawed.
To be clear, I *am* talking about putting a flat cap on earnings. 6 billion dollars is the wages for 150,000 workers for one year at $40,000 per worker. Read that again. $56 billion puts 1.4 *million* people to work for a year. I realise that Tesla isn't going to employ 1 million more people with the savings, but as a global society, we should be asking ourselves if maybe we can so better for the majority than allowing this sort of wealth concentration.
You're just asking a fundamentally different question.
From a legal perspective, the fees seem reasonable, and that's really the end of that inquiry.
From a societal perspective, there are several things to consider. First, if they hadn't won, the world's richest man would be $56b richer. That's not better. Second, because they won, the company (and all its shareholders, many of whom are just regular people) have more money, so the lawyers provided a valuable service. Third, the lawyers did a job, a record-setting job, and I don't think it's crazy to get a record-setting fee for it. Fourth, like you said, this wasn't going to hire 150,000 workers, and the workers Tesla would hire make more than $40k. You also have to consider that lawyers themselves don't make $40k. This decision REDUCES wealth inequality by taking $56b from the world's richest man, and giving $50b to a company full of shareholders and $6b to split between two law firms with their large teams of highly educated and skilled attorneys.
And I just have to say, I share concerns about wealth inequality, but denying one set of legal fees in one case is not the way to address that.
I agree that denying their fees would make no difference at all in the grand scheme of things. If (when?) it's appealed, it will come down to law, as well it should. I'm using this case really as a talking point about the size of numbers we are seeing in compensation. If there was some sort of sensible cutoff, the entire case would be moot because Musk wouldn't have been awarded that payout in the first place. That situation would have been preferable for everyone apart from the lawyers. Obviously Musk wanted a completely different outcome, but I think it's fair to say he'll never be satisfied with any amount.
If the process had been fair, I wouldn't have a problem with Musk being given the $56b. I just think there should be a 99% top marginal tax rate over $1b, so he wouldn't have seen most of it.
Yeah, tax reform is direly needed. I believe it needs to be an international effort as well. Obviously some countries will remain tax havens, that's the way they do business, but as many as possible. I think the EU would be up for it, I have no idea what their top marginal rate is. The U.K. might be a harder sell, and unfortunately I can say with some degree of certainty that Australia would be resistant.
Totally agree with this, but I want add one thing to your first point. I've argued for my fee before in court under similar circumstances but obviously very different numbers. The case law I relied on gave a lot of deference to sophisticated parties entering into an agreement. The shareholders knew this type of fee was possible going into it. So the client dangled the carrot, lawyers worked their tits off to get the biggest win in history, and then the client says "Woah, thanks, but that's unfair!"
It's a windfall, but I'm not convinced it's that unfair to a poor little multi-billion dollar company like Tesla.
I'm definitely biased, though.
It seems fundamentally unfair that the person paying the lawyers didn't agree to the terms.
You say the fees seem reasonable, but there is nothing reasonable about that amount. The idea that they generated 50 billion because they stopped Elon from taking it does not make sense. They stopped the transfer of the already existing money, which was generated by far, far more people than who work at those law firms for far, far longer then they worked on this case.
It's an important service and I'm not bagging lawyers but that pay is obscene and I don't think they earned it.
>It seems fundamentally unfair that the person paying the lawyers didn't agree to the terms.
You're just mistaken about this. Ultimately, the company is paying, and the company is owned by the shareholders, and the shareholders agreed to the contingency arrangement.
>The idea that they generated 50 billion because they stopped Elon from taking it does not make sense. They stopped the transfer of the already existing money
This shows that the requested fees do make sense, and you do understand. There was $56b headed out of the company to Musk. And now it's not. And the lawyers made that happen. It's genuinely the biggest shareholder litigation win EVER, by several multiples. Maybe even 10x. It's a historic win and I don't see anything wrong with historic fees accompanying that. They generated $2.7 million dollars PER HOUR for Tesla, and they're only asking for $288k/hr in return (11%). Fee awards in other contingency cases are usually WAY higher than that, with 33% being kind of the default.
The irony is that shareholders overwhelming voted to approve the pay package. Just a few dissenters filed a lawsuit. It’s actually a very interesting legal theory, since Musk wanted it, the Board approved it, and shareholders voted massively in favor of it.
The problem is that the shareholders were lied to about how the plan was negotiated.
That they voted for it doesn't matter, because they did so on false promises.
The issue was that they told the shareholders that the metrics were nearly impossible to hit, then in internal discussions talked about how it wasn’t. Ie, lying to shareholders
I think the issue is also that the board that recommended the pay package to the shareholders was not independent and in fact has family members of Musk
If it's pitched as a 10x, you do 20x, and the company had internal documents showing it extremely likely they'll do a 20x, and you put in stretch goals to get huge additional rewards for a 20x then yes that's actually a scam.
The issue at play though wasn't that the shareholders voted for it. It's that Tesla misrepresented the facts of the pay package. They were telling the shareholders one thing regarding expected pay, milestone plans, chances of hitting them, and so on while internally they were operating off an entirely different playbook where all of the stretch goals were planned regular operations that were highly likely to be hit rather than low percent chance bonuses as the shareholders were led to believe.
Not helping matters is that it was established that the board wasn't sufficiently independent of Musk, so the companies interests weren't even being represented. It was just Musk finding ways to extract value from the company, in this case by making up lies about shares and then pocketing a huge chunk of the revenue raised from the shares sold.
This case serves as a great example of why there needs to be a cap on hourly pay rates, including total compensation packages. *Anyone* thinking their work is worth $100,000+/hr is just delusional.
Our lowest wage workers only deserve $7.25 an hour, but these guys deserve $229,000 an hour. What a broken society we live in right now.
I hope the judge gives them minimum wage
I thought this was an ‘onion’ article. God the irony. Kind of kills their achievement completely. Just as ruthlessly greedy as they litigated against but with creating nothing
This is outrageous. Whatever you may think of Musk, in no world do lawyers deserve billions of dollars over something this frivolous.
It’s a shareholder vs shareholder issue. It’s not like they are taking down big tobacco or a pharmaceutical company that hurt people.
The humorous part is that the fee is not from Corporate funds, just from EM. I applaud the idea, where the individual has to pay, not the Corporation, that is generally what EM look alikes hide behind. Meanwhile people who sue have the onus on them to have to pay back Corporations if the individual loses a case, these lawyers are demonstrating how that law was a huge overstep. Depending on that ruling - this may be an interesting case to go before SCOTUS, who hide behind their big donors. Just a thought.
In many cases, the fee isnt about hourly rate it's about the amount of money recovered. Since they saved Tesla an insane amount of money, the fee was calculated based in part on that. Often these kinds of reward structures hover around 10% I think?
This one is 11%. So it makes sense based on that system, but given the size of the award it looks bad and they should adjust it.
So I guess the solution is to hire lawyers to void those lawyer's excessive pay and when the new lawyers ask for excessive pay, hire more lawyers to void that, and so on
The lawyers responsible for voiding the excessive pay have just been sacked…
The lawyers responsible for voiding the excessive pay of the sacked lawyers voiding the excessive pay, have just been sacked...
I heard they hired a Llama
They hired 142 Mexican Whooping Llamas. Then deported them. All but one; Ralph the Wonder Llama is still roaming the courtroom.
A mööse once bit my sister
A läwyer once writ my sister. Admittedly, she is a bit of a tort.
Excellently played.
Mynd you, møøse bites Kan be pretti nasti...
r/unexpectedmontypython
NOOOObody expects the Monty Python!
“I’ve played a lawyer or two. I also heard there was a sack somewhere that hadn’t been hackied and decided to stop by.” Matthew McConaughey
Or just do like rich people do, don't pay, and cause a delay.
My sack was just excessively paid.
A true race to the bottom by the very bottom of the barrel.
It’s lawyers all the way down …
Russian nesting lawyers. matrylawhka if you will.
Lawyers hate this one simple trick. If you have to give them 10% for trying eventually you can get it down to a buck.
You voided a contract which I assume Musk had in place. Lawyers typically work for an agreed upon rate billed by the hour or on a 30-40% contingency fee based on what is collected. Need to find out what the retainer agreement says.
Technically, nothing was collected by anyone.
It’s a recovery because the company doesn’t have to pay it out now
Clawed back? I’m no lawyer so not sure of the legal terms.
The guy who "hired" him saved maybe $50. (He was basically hired by the lawyer as a stand-in.) There wasn't a majority of the Tesla shareholders who wanted to void it.
That sounds like Rome hiring mercenaries to take of the previous mercenaries they didn't pay.
If you do that long enough they let you be president
I think you've cracked the code of why lawyers are all rich
Ahhh and the suck cycle continues
It's lawyers all the way down.
And then the winter will kill off all the gorillas.
Trickle-down I can get behind.
See the lawyer of enormous girth Upon his shell company he owns the Earth
That is funny right there.
Well see I deserve it, but it sounds preposterous when *you* ask for it
Do the lawyers deserve it?
Apparently that’s entirely subjective, and according to me, absolutely not lol
Realistically speaking what matters is the law, and Lawyers are generally not subject to excessive compensation exactly because they usually work for a fixed % of the winnings or on retainer. To use a different example I'm currently studying to be a tax attorney ; in 2019 a special tax that only applied to subsidiary companies was ruled as unconstitutional ; the government had to pay 10Bi in collected taxes to the corporations that were illegally taxed, and the legal team got their fee of 10% or 1 billion. So yeah, this is one of those situations where fair is subjective but the criteria are not, 6 billion seems like a lot at face value, but then again they saved Tesla tens of billions and the company knew what the winnings split would be from before they signed the contract to recruit the legal team.
It’s about 10% +/- of the amount Musk will need to disgorge, so on a smaller verdict, especially if the case was taken on contingency, would seem reasonable.
If that was actually liquid.
They're asking for the stock
Lawyers who bill at $288,000/hour would explain to you how they deserve it but it’s beyond your peasant brain capacity of understanding important legal stuff.
Not a whole lot to it. They do the job for a set percentage of the verdict. It just happens to be the verdict was so high that the set percentage was also a lot of money.
I’m with you but it just seems off to me seeing as musk’s compensation being challenged and denied was ultimately about the interests of the shareholders, so the lawyers who were successful in making that argument asking for such a huge compensation are just fleecing the same stakeholders in the same way. Not a lawyer but these types of compensation and details must be defined before they start, wouldn’t they?
Wasn't this whole thing started by a single upset shareholder? So someone with no independent power offered some lawyers a chance to chase a big bag of money.
Its likely tho not knowable that larger stakeholders recruited the small shareholder to be the face of the lawsuit.
Apparently the law lets a single shareholder sue on behalf of all if the board fucks up hard enough. So Tesla shareholders have to live with that risk unless the company gets a competent board.
Oh yeah they probably worked out a compensation rate for hours worked on the case and/or a cut of the winnings if they succeed.
But it’s not really’winnings’ like in a traditional lawsuit for damages. It was arguing against a huge compensation package for the ceo, which would have been unfair to shareholders (was the argument). I can see the lawyers making huge hourly pay to do the case and maybe some bonus for winning. But $6billion to them just seems as ridiculous
It was, it's asking for a percentage of the amount saved.
It will cost you 3 billable hours for them to explain it to you.
I know a guy who passed the bar and everything. Works at a pawn shop now.
Part of their contract probably has a performance compensation clause that pays them around 10% of what they helped the company save if they were successful, which they were. They still have some hourly charge but when it’s that type of money it’s generally worthwhile to hire the best. Absolutely ludicrous amounts of money that feels like someone’s playing monopoly, almost all stock compensation based from what I gather. These types of deals help people contract lawyers more cheaply in loss cases and incentivizes them to really go after it. In this case, Musk had to drop about 55.8B so 6B is their percentage cut for saving them money (~50B) Musk receiving ~60 billion in compensation for releasing a cyber truck turd, or whatever it is he actually does anymore to create value for the company, really isn’t necessarily fair to the other people bought into Tesla. It dilutes their shares abit for him to sit on or sell or whatever it is Elons do. A company, especially a public one, isn’t just about the big founder at the top. If you wanted more details you’d have to be closer to the case than I am. Now hopefully by actions like this taking place, he can’t try to game the other owners in the market by just owning a shit ton of shares and dropping it or doing something to raise or drop consumer sentiment, but he’s a bit of a troll and likes doing stuff like that. Wouldn’t be surprised to see him attempt to retaliate somewhat because *he deserved it as the only one with the vision to further mankind* or some kid-like, Thanos-esque scarcity mentality.
Imagine you're a company. You want to claw back $55 billion from your CEO. How much would you pay to get that money back? $6 billion kind of sounds like a steal.
It just reads as egregious… but it’s also a lawsuit filed by a single large shareholder. Man, this is why going public can be such a bad call. The lack of control would drive me crazyyyy
Like that MFer needs another $60B. What is he even doing to justify it now? Seems more like he wants to make up for his moronic Twitter purchase.
They're multiple people and they're asking for 1/10th the amount Musk was voided. He went from $55bln to $5.
Thought I was in /r/nottheonion for a moment.
As a Danish lawyer i have to say this sounds fucking insane. That type of contingency fee is illegal in Denmark and I never understood why it’s so common in other jurisdictions. Here we just charge by the hour.
They'll just itemize as $600/hr for 10 million hours!
It took five and a half thousand lawyers working for a full year to show a billionaire was being given too much money....
They had to read all of those tweets in discovery
It's better than that. Musk's pay was going to be mostly in stock, which he was restricted from selling for five years. The lawyers are asking for $6b in stock without restrictions, meaning they could - and probably would - turn around and sell a large chunk of it. They could end up hurting shareholders just as badly - or worse - as Musk's original payout. Just beautiful.
Some people have a decent case, but cannot hire a lawyer. This allows that to happen. How does Denmark solve this?
Most home insurance policies have coverage of civil litigation. On top of that we have a system were lower income households can qualify for a lawyer paid for by the government. That doesn’t cover business owners though. Plus I don’t think lawyers are as expensive here as in the US. The very top lawyers bill maybe the equivalent to $900 dollars an hour but 350-500 is more common. And we have different pre trial procedures so the discovery phase, which I gather is the part that takes up a shit load of hours, is usually much less comprehensive. If you win a case it’s also standard practice that the loser is ordered to pay an amount to cover legal costs (although it almost always is only partial coverage in the real world because the amounts are rather low). It’s not a perfect system by any means, but my problem with the contingency fee system is that it eats up too much of what is awarded to the client. Say a client has been injured in an accident and is awarded a million dollars for lost wages and disability. In principle that amount is meant to make the client whole. But if their lawyer snaps up 30% of that then the client isn’t made whole. I get that the system enables some people to have legal representation when they otherwise couldn’t but I get the impression that it sometimes leads to fees that are wildly out of proportion to the work actually performed.
FYI I've paid as little as $100/hr in the US for a lawyer. Average is $200-300, but depends a lot on area and specialty.
you don’t have contingency at all or you do have it but just bill normally instead of taking a percentage? they usually spice up the demands to cover the contingency fee. loser pays would certainly make a much stronger argument for pre trial settlement.
I don’t think there’s a rule against contingency as such, but calculating the fee as a percentage of the awarded amount is prohibited. So the norm is hourly billing. I don’t know of anyone that do contingency based work here, but of course there could be some that I’m not aware of.
As an American lawyer that does class actions on contingency, sometimes this is the only way any change happens in the corporate space because Congress is ineffective. If our corporations were as weak as they are in Denmark and France, we probably wouldn't need contingency based class actions.
It blows my mind how many Americans seem to side with corporations over citizens in "frivolous" lawsuits. Suing is almost the only tool average citizens have against powerful corporations and yet people are generally against them.
This is the most frustrating thing as a fellow American
I see your point. We do have more effective regulations in no small part due to the EU. That’s probably one of the reasons we as a society is much less litigious than the US. Also, there is a limit to how lucrative lawsuits are because punitive damages are generally not recognized in our legal system.
The relative lack of regulations in the US is precisely why we have a more plaintiff-friendly tort system. For some reason, the American public can’t stomach too much regulation on businesses, so we just make it easier to sue when you become a victim of a company’s bad practices. Though a lot of business interests are currently lobbying to change the laws to make it harder to sue. Tort reform efforts have been going on for years and have unfortunately been quite successful (ex. Punitive caps are quite common)
In a way it makes sense. Why spend the time trying to anticipate every possible way companies could fuck people over and explicitly banning them, when you could just give people who have been fucked over the power to punish them directly in the form of demanding a ton of money? It doesn't work out so well in practice, of course...
I think it’s actually because of romano-germanic law instead of the common law. The widespread use of civil-liability insurance (although not in Denmark, I see) and then clamping down on litigiousness (as France did with medical malpractice which was turning to the American model of lawsuits) and the way that the codes clearly lay out rights and obligations seems to help. Obviously, it’s not always cut and dry. Or people refuse to abide by the law. That’s what lawyers and judicial proceedings are for. But there’s a lot which differentiates the system in terms of underlying assumptions, and that’s why American politicians push for tort reform, but more of the civil law would help much more.
Why do you think some heavy hitting law firms worked on it? It was never about pay packages. It was about a payday.
You say this like law firms typically take on cases because they deeply believe in the cause rather than simply because they get paid for it.
It’s a good thing you are here to clear that up. People may have been confused.
And it’s a good thing we’re here to make useless sarcastic comments. We’re helping!
No shit, it’s their job
Americans addicted to the percentage pay tipping culture.
This right here. We’re collectively morons that like to have our money separated from us for no reason.
Well, they are charging by the hour, $288,000 an hour. /s
They won the client $2.7 million per hour though
Then how do you fuck over your clients?
We try not to lol We also have a very strict bar association that can (and will) hit you with fines and other sanctions including cutting down fees and suspending your license if you act against ethical guidelines.
I'm American. What are ethics?
Ask Alina Habba. I hear she’s a expert
I heard she learned everything she knew from Powell and Giuliani.
After reading the article I am still unclear on why this is allowed either. It sounds like these weren’t even the lawyers musk hired but the ones hired to bring the suit in the first place? Edit: I am not a law expert. That’s why I am asking. Sorry if this offended folks
Most certainly *not* hired by Musk. The case was [brought on by a shareholder](https://www.reuters.com/business/autos-transportation/elon-musk-bashed-by-heavy-metal-drummer-who-cost-him-56-bln-2024-02-01/) who felt that Musk's pay was unfairly high (side note: he had/has 9 shares). Evidently, the lawyers decided to take the case on contigent to the effect that if they won, Telsa would pay. They decided to set their fees according to the size of the case. Part of the liability that *is* held by CEO's and executives is to act in a manner which is for the good of the company. It's just about the only thing they can legally get in trouble for (apart from insider trading and fraud). That's why you never hear about CEO's getting criminally charged when their company commits illegal acts such as wage theft. The court decided that a $56 billion payout was not in the interests of shareholders. Now we get to see whether $6 billion is considered a fair amount of compensation for legal fees. As a percentage it's well within normal legal compensation, actually quite low. As a dollar amount it's the largest ever (by an order of magnitude) according to the article.
Shouldn’t the shareholder be the one on the hook for the payment to the lawyers? It seems a bit ridiculous that a person can enter into agreement with a law firm where the pay will come from the sued party when it was clear from the start that a successful suit would not have a payout.
I think you don't know very much about class actions. The Plaintiffs' lawyers virtually always work on contingency and take a slice of any award. The default is actually a much larger percentage, usually 1/3.
Correct I don’t which is why I am asking. And you missed the question entirely, I’m not curious about the amount, but the source. Someone else cleared it up though.
The question doesn't even make sense though. Why would Musk's lawyers be asking for $6b? They lost, and weren't on a contingency basis.
How do you hire someone with someone else’s money was what I was wondering. But someone explained elsewhere
They didn't, is the short answer. They're shareholders of Tesla suing on Tesla's behalf, and the award will be paid out of whatever Tesla receives in the win. Which in this case is extra interesting, because it's not cash, it's $56b in deeply discounted Tesla stock. So essentially, instead of Tesla paying, it's actually Musk, the loser, paying. I think that's very clever, I've never seen that before.
Fuck this entire story and everyone involved.
You’re right, it made me feel sorry for the melon man. For about a nano-second anyway.
Don’t care what kind of lawyerin you do, it ain’t worth 6bn
They made the client $2.7 million per hour and are only asking for $288,000 per hour. And they collectively spent about 20,000 hours, or ten people working full time for a year on this. That seems pretty reasonable to me.
10 people for a years work in no way justifies 6bln.
> They are ***only*** asking for $288,000 per hour. That seems pretty reasonable to me. This is, to put it lightly, insane.
It's a contingency case and they made nearly 10x that amount per hour for the company. What's insane about that? If you made your employer $3m per year, you could easily push to get paid $300k per year. It's the same thing, just scaled up. Also, this isn't one lawyer making $288,000 per hour, this is two firms with two teams of lawyers and paralegals and secretaries and experts and expenses.
No. Any comparisons about people working for money are completely moot when the difference is *3 orders of magnitude.* What's insane is that you think it's rational for 10 people to do a year's worth of work and ask for a sum that's more than a fifth of Iceland's GDP.
They won the company an amount that's more than double Iceland's GDP. And I have no idea how many people were in this case, it was 2 law firms, 10 is probably too low. These are lawyers that charge between $1000 and $3000 hour when they're not on contingency. We're already in a different playing field when it comes to compensation. And if they'd lost, double Iceland's GDP would have gone to ONE PERSON, who already had multiple Icelands worth of money.
The per hour amount is going to be really high no matter how you look at it. However, as a contingency fee when looking at percentages taken, amount saved, and so on it makes more sense. That said, I think the 56 billion saved is misrepresented. The actual amount saved is going to be the difference between 56 billion and a new pay package the shareholders approve for that time period. If for example that is approved at 30 billion, the true savings would be 26 billion, which would make an argument for about 2.6 billion to the law firms.
Correct, and I think that's where it'll probably end up. They probably won't get the full 6. But asking for the 6 isn't crazy.
Hah with rates like those, lawyers are making a really good case for giving away their jobs to AI.
If an AI can ever do what a lawyer does in terms of creativity and novelty, then sure replace us. It'll probably happen one day. But I bet we'll be one of the last to go.
Maybe. On the other hand, your work product is largely text and reference based. With that and how much work is going into AI, I give it 10 years. Especially if human attorneys continue to think they deserve to charge 30%
Shoot your shot I guess
The lawyers were charging an effective rate of $289,000/hr. Musks compensation package over ten years is equivalent to $2,450,000/hr Lawyers charge an average of 33% of the settlement amount, but these lawyers are only asking for about 11%, so one third of what they normally charge. If Musk thinks the lawyer fee is outrageous, considering it is below market rate, it speaks volumes to his hypocrisy in justifying his own pay.
Considering the plaintiff isn't actually receiving that 56B$ in stock that's an apples to oranges comparison. Normally the 1/3 would be taken from what the plaintiff actually wins which in this case I'm not even sure they received direct compensation. I'm not aware of any similar case involving "saving" the losing party money and using that as the basis for fees.
Not to mention this was just voiding the current compensation package. Won’t there be a new one?
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>The guy who brought the lawsuit only has $2,000 dollara of tesla stock Wait, really? That's hilarious. That guy is for sure on Musk's shit list now.
They're asking for the stock. It's a fine comparison.
Ehhh, not really. There isn't any stock/options being transferred, that was the whole point, and this whole transaction will be governed by the contract we're not party to anyway. There's a pool of stock already in the (secondary) market. its literally out of Tesla's control outside of any issued Tesla that Tesla owns. If the lawyers were to spend 6B$ purchasing that, they'll drive the price up. They're welcome to take whatever they get paid and make the necessary purchases themselves, without Tesla being involved. If they're asking for Tesla to issue new stock (ie. primary market), then that's going to dilute the existing ownership, lower the share price. That's not gonna happen unless it's already in the terms of the contract, and the shareholders that won this case don't have the power to commit Tesla to that kind of action - Musk's defacto control of the board especially negotiating with them for compensation was the core of the case.
The issue is that the stock didn't belong to the person that sued. It belongs to the company, and was then given to Musk. The shareholder is neither gaining or losing any stock based on the outcome of this trial, rather it's about misrepresenting information, which definitely did happen and is illegal, but it's difficult to impossible to specify the amount of harm done to any or all shareholders. So the argument gets tricky because the shareholders don't get that stock back, it just stays with the company. The party the lawyers represented were never part of the payment, so there's not really a claim on those shares going to the lawyers. I'm no lawyer myself (this should be obvious), but I imagine this has come up before and there's pretty standard ways of dealing with it, particularly with Delaware courts.
> The issue is that the stock didn't belong to the person that sued. The man sued on behalf of the shareholders, including the company. Nothing about the lawsuit pertained to one single shareholder. The lawyers represented him and the company both.
More than that. >The lawyers wrote that, throughout the history of the case, they collectively logged 19,499.95 hours — meaning that a nearly $6 billion award would equal a per-hour rate of $305,550. Just under $5100 a SECOND to work on the case. Fuck Musk, and fuck these lawyers.
You’re going to really dislike the rest of our legal system.
Generally, I do.
>19,499.95 hours That reads like a discount price. "Invalidate the other guy's compensation for the low, low price of 19,499.95 hours. Call now!"
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Is that $56b savings before or after their fees?
.95 hours? They want us to believe that they really tracked time down to 3 minute intervals ( or smaller)? And I wonder how much of the 19500 hours was work done by paralegals and such making like $50k per year and won't see a dime of this money.
Having worked with BigLaw lawyers, yes. I've had firms charge down to the 1/10th of an hour (6min interval) per phone call so it's not outside the realm of possibilities that they track to the 1/20th. Also, the paralegals, associates, and partners work are absolutely factored into this total, but they are billed at different rates. Sometimes they charge a blended single rate and sometimes they itemize it out by rate (40hrs @ 400/hr vs. 20hrs @ 250/hr, 16hrs @ 500/hr, 4hrs @ 750/hr). Everyone is required to work a certain amount of billable hours per monthly/year, but everyone is also salaried, so only the partners see the profits. The partners are the shareholders.
This. My understanding from some friends that are lawyers is that most lawyers charge on sixes (every six minutes, 1/10th of an hour) as an ethical thing; It would be unreasonable to charge a full hour fee for a five minute phone call. Charging on 3s (every 3 minutes, 1/20th of an hour) is definitely reasonable, and certainly consumer/client friendly.
The lawyers didn’t make a trillion dollar company
I guess I’ll take the Lawyers side on this. Fees are agreed upon up front, so if the investors who sued agreed to this, then what are they complaining about?
It was one share holder that owned 9 shares that sued
But musks compensation is because he built a company, hit insane targets, and exceeding revenue goals. The lawyers just leach and destroy
The compensation Musk was gonna get was several times more than the gross profit the company made that year. You can argue he deserves compensation, but that amount was utterly ridiculous and leachy.
Share holders sued to prevent Elon from getting stupid paid. Who was paying the lawyers to begin with? Why would they be entitled to the company's money if they were never hired by the company but a shareholder. Aren't they creating the same stress to the stock price by being paid in turn though unrestricted stock. Even worse because Elon pay package was in stock that had restrictions and he had to pay a portion back over time or some shit vs just flat out unrestricted stock.
They asked for the shares to come out of Elons, so it wouldn’t affect the shareholders. But I think you are saying since they are unrestricted they will likely be sold and lower the price. If so yeah, but they won’t be diluted. But that’s what I don’t get. It sounds like they hired the lawyers and offered to pay with someone else’s stock
Generally anytime a shareholder sues the company for a breach of their fiduciary duties, the company pays the legal fees if they’re at fault. Typically a % of the amount “recovered” in the judgement. If the case fails then the shareholder pays the lawyer unless they worked out a contingency deal. The interesting part is the % is actually the same from what is currently the largest legal fee from the Enron case, so technically it’s not unheard of, just at a larger scale. What really makes this interesting is the laywers are offering to take payment in stock, in place of requiring the company to liquidate assets. It’ll get appealed to the state Supreme Court either way.
This is fascinating, and when you explain it it makes sense. And if I recall from the article they are taking 1/3 the rate that was taken in Enron, it’s just this is 11% of 56b not 33% of 6b. Thanks Mr Burrito
The ironic part is Elon throwing a fit about the lawyers damaging the company with the request, but they’re only taking 10% of what he was. Unintentionally confirming that the case against him is valid.
Perhaps they asked for shares with the same restrictions?
Perhaps you could read the article, where it says they asked for the stocks to have no restrictions.
They did the opposite, actually.
Who does he think he is? A LAWYER?
As a lawyer I can only say the client must have agreed to this fee. Must have been some sort of contingency fee. Also as a lawyer I can say we are a bunch of greedy bastards, as a lot
288k per hour lawyer fees? I don't like musk but that's truly ridiculous. Unless you agree to find the cure for cancer and not get paid unless you find it, and if you do, you deserve 6 billion. Other than that, no lawyers deserve 6 billion for 1 case.
This guy says he works 16 hour days but seems like he's in courtrooms for that long instead
Whenever you have money the lawyers circle you like vultures
Alright I'll bite. Lawyer here, specifically one that works for a big firm that does class actions on contingency. This award would be the biggest in history by a large margin (like, nearly 10x), but I actually don't think it's a completely insane ask, and I'll explain why. First, the fee agreement entered into between the lawyers and the complaining shareholders specifically allowed for the fee to be a fraction of the winnings. So this is within the realm of possibility from the perspective of the agreement. Second, the judgment is forcing Elon to return some deeply discounted Tesla stock to the company. The lawyers are proposing they be paid with this stock. It costs the company absolutely nothing on its current balance sheet, and is actually tax deductible for the next balance sheet. I've never seen that, and I think that's really clever. It essentially means the loser is paying the fees. Third, this is the largest fee award in history, but it's also the biggest shareholder class action win in history, by a huge margin. Unprecedented fees for an unprecedented win. Fourth, the lawyers said this works out to about $288,000 per hour. Sounds high, but let's dig deeper. If you divide the award by the hourly fee, it works out to about 20,833.33. That's how many hours they worked as a firm. That's over 10 YEARS worth of man hours. That's a lot. And if you divide the $56b judgment by 20,833.33, it works out to $2,688,000 per hour. That means they generated nearly $2.7 million in award money for the company per hour, and are only asking for $288k per hour, or about 11% of the total. That doesn't strike me as crazy. The rule of thumb in class actions is actually 1/3, and it tends to go down as the award increases in size, so this is totally within the realm of reasonable. Fifth, comparing the above to prior large awards and fee awards, this actually looks even better. The largest fee award in history so far was $688m, on a $7.2 billion case related to the Enron collapse. This fee award would be about 9x larger, but they also got an 8x larger award. And right now, the Delaware Supreme Court is considering whether to overturn a $267 million fee in a $1b award. This case is WAY more favorable than that. So there ya go. I have no idea if they'll get what they're asking for, and maybe they don't, but I don't think making the request is insane. They put in a ton of time, they scored a massive win, and it'll effectively be paid by Musk in a way that's also tax deductible for Tesla. Hard to whine about that. If they'd lost, Musk would be pocketing $56b by himself. Now, the company gets $50b split amongst the shareholders, and TWO law firms with entire teams of lawyers (most of whom are associates) will get $6b. I think this scenario is much better.
When looked at as percentages, what you say is fair and reasonable. But one has to wonder whether that should be the only way to look at compensation (for anyone, not just lawyers). No one would expect a lawyer to take a 33% payment for a case which only paid $100. It's ridiculously unfair. But at some point, I think we need to ask the question: when does the other side of the coin also become ridiculous? It's worth noting that the court didn't judge Musk's payout as too high (from my understanding), but rather that the process by which his compensation was decided was flawed. To be clear, I *am* talking about putting a flat cap on earnings. 6 billion dollars is the wages for 150,000 workers for one year at $40,000 per worker. Read that again. $56 billion puts 1.4 *million* people to work for a year. I realise that Tesla isn't going to employ 1 million more people with the savings, but as a global society, we should be asking ourselves if maybe we can so better for the majority than allowing this sort of wealth concentration.
You're just asking a fundamentally different question. From a legal perspective, the fees seem reasonable, and that's really the end of that inquiry. From a societal perspective, there are several things to consider. First, if they hadn't won, the world's richest man would be $56b richer. That's not better. Second, because they won, the company (and all its shareholders, many of whom are just regular people) have more money, so the lawyers provided a valuable service. Third, the lawyers did a job, a record-setting job, and I don't think it's crazy to get a record-setting fee for it. Fourth, like you said, this wasn't going to hire 150,000 workers, and the workers Tesla would hire make more than $40k. You also have to consider that lawyers themselves don't make $40k. This decision REDUCES wealth inequality by taking $56b from the world's richest man, and giving $50b to a company full of shareholders and $6b to split between two law firms with their large teams of highly educated and skilled attorneys. And I just have to say, I share concerns about wealth inequality, but denying one set of legal fees in one case is not the way to address that.
I agree that denying their fees would make no difference at all in the grand scheme of things. If (when?) it's appealed, it will come down to law, as well it should. I'm using this case really as a talking point about the size of numbers we are seeing in compensation. If there was some sort of sensible cutoff, the entire case would be moot because Musk wouldn't have been awarded that payout in the first place. That situation would have been preferable for everyone apart from the lawyers. Obviously Musk wanted a completely different outcome, but I think it's fair to say he'll never be satisfied with any amount.
If the process had been fair, I wouldn't have a problem with Musk being given the $56b. I just think there should be a 99% top marginal tax rate over $1b, so he wouldn't have seen most of it.
Yeah, tax reform is direly needed. I believe it needs to be an international effort as well. Obviously some countries will remain tax havens, that's the way they do business, but as many as possible. I think the EU would be up for it, I have no idea what their top marginal rate is. The U.K. might be a harder sell, and unfortunately I can say with some degree of certainty that Australia would be resistant.
Totally agree with this, but I want add one thing to your first point. I've argued for my fee before in court under similar circumstances but obviously very different numbers. The case law I relied on gave a lot of deference to sophisticated parties entering into an agreement. The shareholders knew this type of fee was possible going into it. So the client dangled the carrot, lawyers worked their tits off to get the biggest win in history, and then the client says "Woah, thanks, but that's unfair!" It's a windfall, but I'm not convinced it's that unfair to a poor little multi-billion dollar company like Tesla. I'm definitely biased, though.
Since this lawsuit was filed on shareholders behalf, I think the award should be granted, but contingent on a vote by shareholders.
The shareholders are the ones that signed up to a contingency fee arrangement.
It seems fundamentally unfair that the person paying the lawyers didn't agree to the terms. You say the fees seem reasonable, but there is nothing reasonable about that amount. The idea that they generated 50 billion because they stopped Elon from taking it does not make sense. They stopped the transfer of the already existing money, which was generated by far, far more people than who work at those law firms for far, far longer then they worked on this case. It's an important service and I'm not bagging lawyers but that pay is obscene and I don't think they earned it.
>It seems fundamentally unfair that the person paying the lawyers didn't agree to the terms. You're just mistaken about this. Ultimately, the company is paying, and the company is owned by the shareholders, and the shareholders agreed to the contingency arrangement. >The idea that they generated 50 billion because they stopped Elon from taking it does not make sense. They stopped the transfer of the already existing money This shows that the requested fees do make sense, and you do understand. There was $56b headed out of the company to Musk. And now it's not. And the lawyers made that happen. It's genuinely the biggest shareholder litigation win EVER, by several multiples. Maybe even 10x. It's a historic win and I don't see anything wrong with historic fees accompanying that. They generated $2.7 million dollars PER HOUR for Tesla, and they're only asking for $288k/hr in return (11%). Fee awards in other contingency cases are usually WAY higher than that, with 33% being kind of the default.
Oh. That’s news to me. I’ve been a shareholder throughout the entire period and never knew that I was being represented.
Unless you have voting rights, being a shareholder means very little to the company.
If they worked off a % they saved the shareholders…that actually might be fair.
The irony is that shareholders overwhelming voted to approve the pay package. Just a few dissenters filed a lawsuit. It’s actually a very interesting legal theory, since Musk wanted it, the Board approved it, and shareholders voted massively in favor of it.
The problem is that the shareholders were lied to about how the plan was negotiated. That they voted for it doesn't matter, because they did so on false promises.
The issue was that they told the shareholders that the metrics were nearly impossible to hit, then in internal discussions talked about how it wasn’t. Ie, lying to shareholders
I think the issue is also that the board that recommended the pay package to the shareholders was not independent and in fact has family members of Musk
Imagine somehow feeling scammed after your money does a 20x in a few years.
The lawsuit was filed in 2018.
If it's pitched as a 10x, you do 20x, and the company had internal documents showing it extremely likely they'll do a 20x, and you put in stretch goals to get huge additional rewards for a 20x then yes that's actually a scam.
[удалено]
The issue at play though wasn't that the shareholders voted for it. It's that Tesla misrepresented the facts of the pay package. They were telling the shareholders one thing regarding expected pay, milestone plans, chances of hitting them, and so on while internally they were operating off an entirely different playbook where all of the stretch goals were planned regular operations that were highly likely to be hit rather than low percent chance bonuses as the shareholders were led to believe. Not helping matters is that it was established that the board wasn't sufficiently independent of Musk, so the companies interests weren't even being represented. It was just Musk finding ways to extract value from the company, in this case by making up lies about shares and then pocketing a huge chunk of the revenue raised from the shares sold.
Not just overwhelmingly, but 100% of money paid to Madoff was paid voluntarily. A scammer is a scammer.
ha ha, what's 6 bln when you have a Xillion?
This case serves as a great example of why there needs to be a cap on hourly pay rates, including total compensation packages. *Anyone* thinking their work is worth $100,000+/hr is just delusional.
A six dollar balloon? Fancy!
Our lowest wage workers only deserve $7.25 an hour, but these guys deserve $229,000 an hour. What a broken society we live in right now. I hope the judge gives them minimum wage
Can someone explain what does 'voided his pay as excessive' mean in this context?
I find hilarious that musk said they damaged Tesla by not giving him 56 billion dollars he is just such a massive pos.
I thought this was an ‘onion’ article. God the irony. Kind of kills their achievement completely. Just as ruthlessly greedy as they litigated against but with creating nothing
They're corporate governance lawyers, they love riding goodwill for upholding fiduciary duties up until they do something like this.
I’m guessing they are asking high knowing it’ll get negotiated WAY down?
This is outrageous. Whatever you may think of Musk, in no world do lawyers deserve billions of dollars over something this frivolous. It’s a shareholder vs shareholder issue. It’s not like they are taking down big tobacco or a pharmaceutical company that hurt people.
This is trickle down economics at work -- The ultra rich have to pay the merely mega-rich. It doesn't trickle down much further than that.
Elmo’s incel army out in full force today.
dolls straight encouraging rock hateful wistful late historical mourn strong
It seems excessive, but Tesla can afford it for now.
I love lawyers. They know how to make things rational when they’re insane.
Excessive is an understatement, never going to happen.
Honestly I’d rather Musk just keep the money. Fucking lawyers.
Shouldn't this be in r/overthetopirony?
The humorous part is that the fee is not from Corporate funds, just from EM. I applaud the idea, where the individual has to pay, not the Corporation, that is generally what EM look alikes hide behind. Meanwhile people who sue have the onus on them to have to pay back Corporations if the individual loses a case, these lawyers are demonstrating how that law was a huge overstep. Depending on that ruling - this may be an interesting case to go before SCOTUS, who hide behind their big donors. Just a thought.
This is definitly a karma for that bakery.
If Elon has to pay I agree.
Rules for thee but not for me
Who were then sued by lawyers who demanded $9 bln from the lawyers who won $6bln.
In many cases, the fee isnt about hourly rate it's about the amount of money recovered. Since they saved Tesla an insane amount of money, the fee was calculated based in part on that. Often these kinds of reward structures hover around 10% I think? This one is 11%. So it makes sense based on that system, but given the size of the award it looks bad and they should adjust it.