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Examples of Recent Litigation Concerning Employee Stock Options

Cases involving Dell, Monsanto and iVillage have found their way into the courts.

As stock options are being used more often by companies to recruit and keep employees, legal disputes involving options also are on the rise nationally.

A growing number of employees have filed lawsuits claiming companies fired them before their stock options vested, costing the workers millions of dollars in lost potential earnings. Companies, meantime, increasingly are placing restrictions on options, such as so-called "clawback" provisions that force employees to forfeit stock option earnings if they leave to work for a competitor.

Legal experts say the law on stock options is still in the nascent stage, with legal precedents waiting to be set.

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A former employee of Waltham, Mass.-based computer software firm

Parametric Technology

(PMTC)

sued the company, claiming it fired him to prevent him from exercising his stock options. The

Ninth Circuit Court of Appeals

last year ruled in the employee's favor. It decided that under Massachusetts law, an employer cannot fire a worker in order to prevent the person from benefiting from stock options. Parametric didn't respond to a request for comment on the case.

In Texas, a former employee of

Dell

(DELL) - Get Report

has sued the company, claiming it wrongly terminated him shortly before his stock options were due to mature. The

Third District Court of Appeals

last year concluded Dell had authority to terminate the employee at will. But the court said the question of whether he was fired for cause still was an issue, and returned that portion of the case to the trial court. Dell didn't immediately respond to a request for comment on the case.

In a highly publicized case similar in some respects to the

DoubleClick

(DCLK)

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dispute, three former executives of

iVillage

(IVIL)

, an online women's network, sued the company last year and earlier this year in disputes over stock options. The company said Tuesday that the matter had been settled amicably without anyone admitting fault or liability, though it wouldn't disclose terms.

More than 100 employees of

Fisher Controls International

in Texas sued after the company's then-parent,

Monsanto

(MTC) - Get Report

, sold Fisher. Monsanto maintained the sale was effectively termination of employment for the workers, as far as their Monsanto stock options were concerned. The employees disagreed. Last year, the

First District Court of Appeals

in Texas returned the case to the trial court. Monsanto didn't immediately respond to a request for comment on the suit this week.

In separate decisions, the

U.S. District Court for the Southern District of New York

and the Ninth Circuit Court of Appeals in California last year ruled in favor of

IBM

(IBM) - Get Report

in lawsuits over its policy of forcing employees to forfeit stock option proceeds if they joined a competing firm within six months after exercising the options. In the New York case, the court ruled that stock options are not wages, and therefore not protected from forfeiture under the state labor law. IBM declined to comment on the suits.