Appeals Court Affirms Option Deadline Ruling

The U.S. Court of Appeals for the First Circuit affirmed a lower court finding that an executive who missed the deadline for exercising options was not entitled to compensation (Ostler v. Codman Research Group, Inc., 1st Cir., No. 99-2367, 3/2/01). David Ostler, the president of the company, had options that would expire in 1998. Ostler left the company in 1995; in 1998, he requested information concerning the valuation of the closely held company's stock. The company sent him some information, but Ostler contended it was inadequate and took the matter to court. The company provided additional information in response. The day before Ostler's options would expire, the company extended his deadline by 48 hours, and then granted him another 48 hours after that. They informed him that the company was negotiating a possible sale. Ostler did not exercise his options, however, and they lapsed.

Ostler's argument became peculiar after that. He sued the company, arguing that the company did not have the right to extend his deadline, and therefore the information they provided him was irrelevant and thus did not satisfy the company's disclosure obligations. The initial court ruled that Ostler had been given the chance to exercise his options and chose not to do so, so there was no further obligation on the company's part. The appeals court affirmed that ruling.