Stack
In Madison County's smallest class action suit, Circuit Judge Daniel Stack must decide whether computer engineer Brian Wilgus tried to exercise stock options on his job.
Wilgus says he tried but his employer, CyberSource, thwarted him.
CyberSource says he never tried. At a Dec. 7 hearing CyberSource attorney Alan Goldstein asked Stack to grant summary judgment for lack of any issue of fact.
Stack took it under advisement.
Wilgus filed a class action against CyberSource in 2002, claiming his employer's delays rendered the options worthless.
He moved to represent about 80 plaintiffs who worked for PaylinX Corporation when it merged into CyberSource, in 2000. CyberSource agreed to class certification.
PaylinX made software for payment transactions. CyberSource provides computer systems for Internet transactions.
At the hearing Goldstein said, "He had an option at PaylinX. Cybersource merged with PaylinX. That's not in dispute."
"He gained an option on some CyberSource shares and he was free to exercise that if he chose to, but as the testimony indicates, his own testimony, he did not exercise," he said.
Goldstein said Wilgus could not complain about profit he could have earned. He said, "If you don't buy the stock you can't earn the profit."
He said Wilgus argued that CyberSource failed to establish E-trade accounts for exercise of options. He said the option did not say anything about E-trade accounts.
He said Wilgus argued that CyberSource delayed the conversion of options. He said the conversion took place on the date of closing as promised.
"Mr. Wilgus's PaylinX options became CyberSource options," Goldstein said. "Forty-five hundred of them were vested."
He said Wilgus argued that CyberSource improperly imposed a blackout. He said CyberSource wanted to comply with requirements concerning insider trading.
He said the stock fell from $10.75 at the merger on Sept. 18, 2000, to about $6.50 when the blackout ended Oct. 20.
"The plaintiff is complaining that he could have made about four bucks a share on the stock if he had bought and then sold the stock during that period, but the blackout period would not permit the sale of the stock during that period by an employee," Goldstein said.
Goldstein said Wilgus could have exercised his options during the blackout.
Howard Becker, representing Wilgus, said, "This is a case about a promise made and a promise broken."
He said, "The promise made was, if we merge with another company your stock options will become exercisable in full if you stay with the company."
"The employer did not make all options exercisable in full at the time of the merger," he said. "Instead they delayed for four months."
Showing Stack an e-mail to PaylinX employees, he quoted: "How do I exercise my options and trade the stock?"
He said, "The answer: "A very convenient vehicle has been established to do this. Each employee will be able to do this on line with Options Link, a service of E-trade."
"This is the only method conveyed to the certified class on how to exercise their options," Becker said. "There was nothing said about a written option."
He said nothing in the record demonstrated any other way to exercise options. He said, "If there is, it becomes an issue of fact for the jury."
He said employees from PaylinX relied on Lisa Loder to get E-trade packets. He said, "If you don't have your packets you can't exercise."
Becker said packets were not sent for months. He said executives in depositions could not recall reasons for the delay.
Stack asked if the blackout was in the option contract. Becker said no.
Goldstein said, "I will dispute that when I get up there."
Stack said, "Let's cut to the jugular. You are maintaining, Mr. Goldstein, that this blackout period was something built that was involved in the original contract between PaylinX and the employees."
Goldstein said, "The blackout period pre-existed any of these events. CyberSource had a blackout period of its own."
Becker said, "Even their people say our class had no access to inside information so you really have to start questioning their motives."
Stack said, "So if they had been able to buy stock immediately they could have traded it before the blackout period?"
Becker said yes.
Goldstein said, "Your honor, the merger closed on September 18th. And until it closes there is no deal."
Becker said, "That's an issue of fact."
Becker said Wilgus could have made a profit if the packets were available. He said, "They weren't there and they know that was wrong."
Goldstein said, "Not true."
Becker said, "They know that was wrong."
John Libra, also representing Wilgus, read from the option contract: "The shares may be purchased by giving the company written notice."
He said that in cases CyberSource cited the word 'must' appeared, not 'may.'
Goldstein then rebutted Becker's e-mail argument. He quoted it: "Your particular arrangement may differ from that outlined below."
He said, "All he needed to do was tender the writing and the purchase price to CyberSource in order to become a stockholder. He never did that.
"Now Mr. Libra says oh, it just says 'may.' He didn't have to do that. The reason it says 'may' is because he's got an option."
Goldstein read a deposition in which Wilgus did not know the name of the person who told him to use E-trade, whether it was a man or a woman, or whether it was in person or on the phone.
Stack told Goldstein, "Their argument is, he didn't attempt it because he got this e-mail that said this is the way you do it."
Goldstein said, "It said there will be a convenient vehicle. And it also said your particular arrangement may differ from that outlined below."
Stack said, "True, that e-mail doesn't say it's the only way to do it."
Becker said, "Obviously our argument is that it does. It is."
Stack asked Becker for a summary of cases. He said it would save time and keep him from having the case under advisement too long.
Goldstein said he would like to respond to Becker's summary.
Instead of saving time the briefs stirred up trouble.
Becker submitted summaries of four cases Dec. 20.
Goldstein on Dec. 28 tried to poke holes in all four cases, and answered with five of his own. Three had not previously appeared in any CyberSource brief.
Libra moved Jan. 5 to strike CyberSource's response. He called it a wolf in sheep's clothing that "audaciously includes additional case law."
Goldstein opposed the motion Jan. 9. He wrote, "Presenting an argument, in an effort to persuade the Court of the soundness of one's position is, after all, what attorneys are supposed to do."
Stack on Jan. 11 signed an order striking the three new cases.
As of Jan. 17 he had not ruled on CyberSource's motion for summary judgment.