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Good morning. Elon Musk’s $56 billion Tesla pay package can be voided, a Delaware judge said, in a ruling calling the compensation “an unfathomable sum,” our colleague Tom Hals reports. Plus, employment growth has slowed at major U.S. law firms amid relatively flat client demand; the University of North Carolina and Harvard paid out legal fees after losing their admissions cases; and a U.S. appeals court dinged an attorney who used AI and cited a non-existent case. Also on the docket, a venture capital fund heads to federal court today in Atlanta to defend its grant program for Black women.
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Billionaire Elon Musk’s $56 billion Tesla pay package can be voided, according to a ruling from Kathaleen McCormick of Delaware’s Court of Chancery, who said the compensation did not meet the standard of a fair price. Our colleague Tom Hals said the court’s opinion directed a Tesla shareholder who challenged the pay plan to work with Musk’s legal team on an order implementing the 201-page decision.
McCormick called the compensation “an unfathomable sum” that was not fair to shareholders, according to a court filing. “Good day for the good guys,” Greg Varallo, an attorney for the Tesla shareholder Richard Tornetta who brought the lawsuit, told Hals. Musk’s lawyer did not immediately reply to an email seeking comment.
>>> Read the court’s ruling.
Tesla’s agreement with Musk is by far the largest pay package in corporate America, and it makes up a significant part of his fortune, which is one of the world’s largest, Hals reports. The ruling can be appealed to the Delaware Supreme Court.
Read more: Who is Kathaleen McCormick, the judge who slashed Elon Musk’s pay package?
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- Employment growth has slowed among the largest law firms, which have responded to relatively flat client demand and a still-cool dealmaking environment by reducing hiring and increasing billing rates. Headcount grew an average of just 2.8% in 2023, according to Wells Fargo’s Legal Specialty Group.
- NYU is seeking to toss a student’s proposed class action alleging the editor selection process for the school’s flagship law review discriminates against white, heterosexual men, calling it a “hammer in search of a nail.” NYU argued in its motion to dismiss that the anonymous white male plaintiff lacks standing to sue and that his claims are unsubstantiated.
- U.S. District Judge Robert Pitman in Texas has awarded nearly $2 million in legal fees to the recruiting company formerly known as MWK, which alleged one of its former staffers broke employment provisions after leaving the company.
- David Elsberg, a founding partner of New York litigation firm Selendy Gay Elsberg, is departing to start a new litigation firm with two lawyers from Quinn Emanuel. Elsberg, Silpa Maruri and Rollo Baker will form Elsberg Baker & Maruri.
- Washington lawyer and Republican operative Jack Burkman is poised to lose his law license after pleading guilty to telecommunications fraud in Ohio. The D.C. Board on Professional Responsibility said Burkman earlier this month consented to disbarment.
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That’s how much University of North Carolina agreed to pay in legal fees and expenses to the group that successfully challenged its consideration of race in college admissions at the U.S. Supreme Court. The university disclosed those details in response to a public records request by Reuters seeking information on how much it agreed in November to pay to settle the fee demand by Students for Fair Admissions, a group founded by affirmative action opponent Edward Blum. Harvard reached an agreement with SFFA to resolve a separate request for fees but the terms are not public.
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Genetic testing company 23andMe is facing dozens of class actions stemming from last year’s theft of ultrasensitive DNA information about millions of customers. It’s hoping that a mediation on Wednesday with about 20 plaintiffs firms will lead to a quick settlement. But the law firm Edelson says it would be a disaster for 23andMe customers. Alison Frankel has the story on Edelson’s bid to forestall what it calls a “quick and dirty” deal.
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“Citation in a brief to a non-existent case suggests conduct that falls below the basic obligations of counsel.“
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—2nd Circuit appeals court order, referring a lawyer who cited a non-existent case generated by artificial intelligence to the court’s grievance committee. The appeals court said attorney Jae Lee used OpenAI’s ChatGPT for research in a medical malpractice lawsuit and did not confirm that the case she cited was valid. Lee said she would address “this matter with the seriousness it deserves.”
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- An 11th Circuit panel will consider whether a venture capital fund can move forward with a program that awards money to businesses run by Black women. The appeals court last year granted a request by plaintiff Edward Blum’s American Alliance for Equal Rights to temporarily block Fearless Fund from considering applications for grants only from businesses led by Black women. A different panel will hear Blum’s group’s appeal of a lower-court judge’s ruling rejecting its challenge to the program. The fund has said, “We remain fearless and steadfast in creating pathways that empower women of color entrepreneurs.”
- The chief executives of TikTok, Discord, Snap, Meta and X, formerly known as Twitter, are set to testify before a U.S. Senate Judiciary Committee hearing on online child sexual exploitation. U.S. Senators Dick Durbin and Lindsey Graham said the hearing will allow committee members to press CEOs from some of the biggest social media companies on their alleged failures to protect children online. TikTok CEO Shou Zi Chew will testify, in addition to Mark Zuckerberg, CEO of Meta, which owns Facebook and Instagram, X CEO Linda Yaccarino, Snap CEO Evan Spiegel and Discord CEO Jason Citron.
- In San Francisco, U.S. District Judge Edward Chen will hear arguments in a lawsuit against the federal ATF brought by California and the Giffords Law Center to Prevent Gun Violence. The plaintiffs are challenging ATF regulatory policies that they contend unlawfully allow purchasers to put together certain “ghost” firearms within hours. Lawyers from Gibson Dunn and Paul Hastings are on the team for the Giffords center.
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Court calendars are subject to last-minute docket changes.
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- Terraform Labs said its recent bankruptcy filing will enable it to pursue a “do-or-die” appeal in a securities fraud case brought by the SEC. The case is headed for trial in March on the SEC’s remaining fraud claims, but Terraform Labs said in a court filing that it likely could not afford to pay the yet-to-be-determined judgment or pursue an appeal.
- JetBlue and Spirit want the 1st Circuit to fast-track the airlines’ appeal aimed at reversing a lower court ruling that blocked their $3.8 billion merger. The airlines in a joint court filing said a Boston federal judge’s decision “disregards the benefits of the transaction to the majority of the flying public.”
- Mobile home park corporate owners and managers asked a Chicago federal court to dismiss “implausible” price-fixing claims lodged in a prospective antitrust class action last year. Residents in communities across the country alleged an industry conspiracy using shared, non-public data to artificially keep rents high.
- A federal jury ruled in favor of Sotheby’s at a trial in Manhattan in which the Russian billionaire oligarch Dmitry Rybolovlev accused the auction house of defrauding him out of tens of millions of dollars in art sales. The case has offered a view into an often secretive industry in which wealthy buyers sometimes don’t know whom they are buying from.
- New York state’s attorney general sued Citibank for allegedly failing to protect customers from electronic fraud and reimburse victims, which it said had cost customers in the state millions of dollars. Citi in a statement said it had taken steps to boost security, resulting in a significant drop in wire fraud, and followed all laws and regulations related to wire transfers
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- Cahill hired Colleen Tracy James in New York as co-chair of the firm’s life sciences patent litigation practice. James was previously at White & Case. (Cahill)
- Cozen O’Connor added real estate partners Enzo Sallese and Andrea Wong to the firm’s Toronto office. They were previously at Minden Gross. (Cozen O’Connor)
- Alston & Bird added IP partner Theresa Conduah in Los Angeles. She rejoins the firm from Haynes and Boone. (Alston & Bird)
- McGuireWoods added Houston-based energy deals partner Jay Hughes from Wilkie Farr, where he was co-chair of the power and renewable energy practice. (McGuireWoods)
- Troutman Pepper hired securities partners Rakesh Gopalan and David Wolpawith in Charlotte, N.C. The pair arrives from McGuireWoods (Troutman Pepper)
- Norton Rose Fulbright added bankruptcy and restructuring partner Robert Hirsh in the firm’s New York office. He arrives from Lowenstein Sandler. (Norton Rose Fulbright)
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