Appellate Law

CA1: forfeiture in employee stock plan okay

By S. COTUS

Weems v. Citigroup. No. 06-2565 (7/24/08).  This is a pretty large MDL case, in which the plaintiffs claim that it is wrong for their employer to give them the option of receiving part of their salary as stock (at a discount rate), but requiring them to forfeit said stock if they ?voluntarily? leave the company before they ?vest? (usually after two or three years). 

Despite the fact that most of the people involved in litigating this issue probably tell everyone they meet that they work in ?securities? this comes down to a fairly straight-forward contract claim.  Not really that glamorous.  The First says that there was no breach of a contract. 

Someone found a memo which says that the purpose of this thing is to punish people that go work for competitors, and therefore it is an unlawful restrictive covenant.  (There are far, far, worse things companies do to their employees.)  But the First says this is fine, because forfeiture occurs whether or not they work for a competitor.  This doesn't really ring true, and it seems they are not taking this part of the argument too seriously.

Similarly, the First treats the rest of the common-law contract claims (under Florida law) with almost no degree of seriousness. 

Full post as published by Appellate Law and Practice on July 25, 2008 (boomark / email).