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Court of Chancery Grants Motion to Amend Arguments in Brief On Eve of Oral Argument in Exchange for Payment of Attorneys' Fees

Lillis v. AT&T Corp., C.A. No. 717-N, 2005 WL 2149748 (Del. Ch. Aug. 23, 2005). Plaintiffs, former owners of options to purchase shares in AT&T Wireless Services, Inc. ("Wireless"), brought suit against Wireless and AT&T Corp., seeking compensation for the value of their options, which were canceled when Wireless merged with Cingular Wireless Corp. Plaintiffs were officers and directors of MediaOne Group, Inc., a broadband telecommunications company, which AT&T purchased. At MediaOne, plaintiffs were to receive stock options as part of their compensation under the 1994 Stock Plan. After AT&T acquired MediaOne, AT&T exchanged the MediaOne options for new options in AT&T and, subsequently, for options in Wireless. In response to plaintiffs' suit, defendant AT&T filed an answer that broadly admitted many of the allegations. Wireless's answer, however, did not make such admissions. Plaintiffs moved for judgment on the pleadings, pursuant to Rule 12(c). In its answering brief, AT&T admitted many of the same allegations and argued that the Wireless options had value that was reduced or destroyed by Wireless's merger, but that AT&T was not responsible. However, days before the court held oral argument on the Rule 12(c) motion, AT&T filed a letter seeking to correct an argument in its answering brief--attempting to take back damaging admissions and its argument that Wireless was responsible for the costs. The court granted AT&T's motion to amend but only on the condition that it agreed to pay the reasonable attorneys' fees and costs that plaintiffs incurred in bringing the motion. The court dismissed plaintiffs' motion on the pleadings with respect to Wireless, stating that they failed to prove that Wireless adopted and was bound by the 1994 Plan (which it was not party to because Wireless was formed after the plan was created). Authored by: R. Christian Walker 302-888-6974 rwalker@morrisjames.com