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Court Of Chancery Explains Stock Option Complaint Rules

Posted In Fiduciary Duty

Pfeiffer v. Leedle, C.A. 7831-VCP (November 8, 2013)

It is sometime thought that it is enough to state a claim for a complaint to just allege that the directors violated the terms of a stock option plan. Not so.  As this opinion points out, the complaint must also contain factual allegations that the directors knowingly violated the terms of the plan. A simple negligent violation is not enough to state a claim. Thus, if the terms of the plan are sufficiently ambiguous that the directors may have believed their actions conformed to the plan's requirements, the directors are not liable for a breach.