Court Case: Unvested Options Are Subject to Bankruptcy Claims

In DeNadai v Preferred Capital Markets Inc. (D. Mass, No. 01-40073-WGY, 11/13/01), a U.S. District Curt ruled that unvested options are contingent property of an estate that are subject to bankruptcy claims. When the options are exercised, the creditors will be entitled to a pro-rata share of the realized earnings based on the percentage of options that had been earned as of the date the petition was filed. Thus, if the options had 5-year graded vesting, and the employee had worked three years as of the filing, 60% of the option value would be subject to claims.