Option Holder Class Action
Squires v. The ServiceMaster Co. and Clayton Dubilier & Rice, Inc., CH-08-0471-Part II (Shelby Co., Tennessee Chancery Court)
In this matter, our firm represented current and former employees who had been granted stock options in The ServiceMaster Co. (then a publicly held company) under its 1998 employee option plan. That option plan provided that if there were ever a “change in control” of the company (such as a merger or other acquisition), the employee options would become immediately exercisable and would remain exercisable until the expiration of their stated terms. Click here to view the Class Action Complaint.
In 2006, ServiceMaster was taken private in a cash out merger. For those options that were “in the money” (that is, the option strike price was less than the agreed upon per share cash purchase price of $15.625), ServiceMaster paid the difference to the option holder; for those who held “out of the money” options (where the strike price was greater than $15.625), ServiceMaster unilaterally canceled the options.
Relying on Delaware law, our clients brought an action for breach of contract, procurement of breach of contract and conversion on the grounds that the options were unlawfully canceled and that the options still had economic value regardless of being out of the money at the time of cancellation because they still had unexpired terms on the date of cancellation. ServiceMaster argued that even if the cancellation had been improper, the options had now expired by the time suit had been filed and that given the stock market crash of 2008, the options would never have gone into the money. Despite this argument, we were able to secured a $1million settlement for the class.