Weiss v. Swanson
Delaware Chancery Court
948 A.2d 433 (2008)
- Written by Eric Miller, JD
Facts
Three stockholder-approved plans gave the Linear Technology Corporation (Linear) (defendant) board of directors (the directors) (defendants) the ability to grant stock options to the directors themselves. The per-share exercise price was the fair market value on the date of the grant. Frederick Weiss (plaintiff), a Linear stockholder, brought suit in the Delaware Chancery Court, alleging that the directors timed their option grants based on the contents of quarterly earnings releases. Weiss alleged that the directors would engage in bullet-dodging and spring-loading—i.e., delaying the grant until after an earnings release if the information was expected to adversely affect the exercise price or granting options prior to the earnings release if the information was expected to favorably impact the exercise price. The directors did not disclose their intent to engage in this practice when they sought the Linear stockholders’ approval of the company’s proxy statements. Weiss’s claims against the directors included breach of fiduciary duty, waste, and unjust enrichment. The directors moved to dismiss for failure to state a claim.
Rule of Law
Issue
Holding and Reasoning (Lamb, J.)
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