The Elon Musk Pay Package Attorneys' Fee Request: Justifying $288,888/Hour

Plus the U.S. appeals courts diverge on the limits of disgorgement in SEC actions.

Author

Bruce Carton
March 05, 2024

Good morning! Here’s what’s up.

Clips ✂️

Elon vs. the lawyers

Tesla Inc.’s shareholders voted to pay Elon Musk $56 billion (in Tesla stock) if he could raise Tesla’s market cap by $600 billion, and he did, and they were mostly happy, and then some lawyers sued and got a Delaware court to rescind that compensation package, and now those lawyers want $5.6 billion (in Tesla stock) for taking away Musk’s paycheck. I am not by any means an uncritical Elon Musk fan, but I think it is obvious to the casual observer that he has created more than 10 times as much value, for Tesla’s shareholders, as Greg Varallo has. And I think it is weird that Delaware law might not allow Tesla’s shareholders to vote to pay Elon Musk $56 billion, but might require them to pay Greg Varallo $5.6 billion without a vote. Not very shareholder-friendly!

by Matt Levine’s Money Stuff

👉 Reuters’ Tom Hals writes that the requested $5.6 billion fee

“implies an hourly rate of $288,888 for the work that each of the 37 lawyers, associates and paralegals spent on the case, according to documents filed in the Court of Chancery in Delaware.

By comparison, top-flight corporate attorneys bill $2,000 an hour and associates with several years under their belt at the biggest white-shoe law firms make around $288,000 - a year.

At that $2,000 an hour rate, the total time put in by the shareholders' legal team - some 19,500 hours - would amount to about $39 million, a far cry from $6 billion.”

Nonetheless, Reuters’ Alison Frankel adds in a separate article that “I don’t think there’s much doubt that the fee request is justifiable under Delaware case law, as I’ll explain.”

SEC’s $3 Billion Enforcement Tool on Murky Path as Courts Split

Cemtrex Inc. founder Aron Govil, who settled charges he lied to shareholders, could save millions of dollars simply because securities regulators sued him in New York, rather than a place like Louisiana.

US appeals courts disagree about what the Securities and Exchange Commission needs to show to take back profits from alleged wrongdoers: Is it about the person making money from illegal activities, or investors losing money? A patchwork of different requirements is starting to develop, with courts in different parts of the country operating under different rules.

At stake is one of the SEC’s most potent tools for collecting profits from illegal trading activity, which brought in some $3.37 billion in fiscal 2023—more than twice what the agency recovered in fines.

by Bloomberg Law

👉 A detailed look at how U.S. appeals courts are “charting different paths on disgorgement limits.”

Business Is Booming for DEI Lawyers as Corporate America Asks ‘What’s Legal?’

The furor over corporate diversity, equity and inclusion programs has turned so explosive that it’s never been busier for specialists on the topic.

Some companies are cutting back on DEI initiatives while others are disbanding them altogether. Many more are hurriedly reconfiguring their policies, striving to avoid lawsuits from conservative activists as they attack diversity programs.

That’s led to a flurry of requests for audits from law firms and consultancies who specialize on diversity in the workplace.

by Bloomberg

From SPAC Dreams to Riviera Mirage: How Lottery. com Imploded

Lottery. com had promised to do for lottery ticket sales what Uber did for getting a ride or DoorDash for getting a meal. No longer would you have to go into a convenience store to get your weekly fix of Powerball or Mega Millions; you could buy a ticket from anywhere on an app.

Instead, Lottery. com came to represent all the hubris and excesses of the special purpose acquisition company era: phantom revenues, multiple CEOs hired and fired, accusations of forged documents, an alleged check-kiting scheme, trails of stiffed investors and vendors—including a church— and finally, a promised rescue by a would-be Premier League team owner that turned into something else.

New executives are working to fend off lawsuits, raise money, and get operations going again. Prominent hedge fund Balyasny Asset Management bought a stake in Lottery. com last month. But its past looms large, with Securities and Exchange Commission and Department of Justice investigations underway. At least three company insiders say they’ve been interviewed by the US Attorney’s office for the Southern District of New York.

by Bloomberg Tax

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