An Illinois court recently allowed a stock-option claim by two former employees to go forward even though one of the employees signed a release of claims at the time of his termination. The plaintiff-employee who signed the release was awarded stock options under the company’s performance incentive plan. Under the terms of the plan, a terminated employee had three months to exercise his options before they expired. At the time of the plaintiff’s termination, the company was in the middle of a partial blackout period related to the restatement of its financial reporting with the Securities and Exchange Commission (SEC). All current and former employees were prevented from exercising their stock options during the blackout period.
As part of a severance agreement negotiated with the company upon his termination, the plaintiff signed a waiver and release of all claims arising out of his employment. Three months later, his options expired unexercised in accordance with the plan terms.
Despite repeated assurances to the plaintiff that the company was “working on” a resolution for the inability of employees to exercise their options, more than a year passed before the company made a cash settlement offer to those current and former employees whose options had expired during the blackout period. The plaintiff rejected the settlement offer and pursued his breach of contract claim against the company.
The company argued that the plaintiff’s claims are barred under the release he signed as part of his severance agreement. The court rejected this argument, noting that the injury arose only after the expiration of his options, three months after he signed the release and left his employment. Although the claims of breach arose out of the plaintiff’s employment with the company, the court held that the plaintiff’s claims did not exist until after the execution of the release, which only covered claims arising on or before he signed the release. In permitting the case to go forward, the court also pointed to language in the release, which did not unambiguously demonstrate the plaintiff’s intent to release any stock option claims, and to ongoing communications between the plaintiff and the company following his termination that raise questions as to the intention of either party to release or bar claims relating to the stock options. (Rawat v. Navistar Int’l Corp., NDIL 2012)