Court of Appeal holds stock options damages not wages, upholds calculation based on “equitable considerations”: Shah v. Skillz Inc.

In Shah v. Skillz Inc. (2024) 101 Cal.App.5th 285, the Court of Appeal (First Appellate District, Division Five) held that damages for lost stock options may be calculated based on “equitable considerations” rather than the date of breach, and that stock options are not wages under the Labor Code.

Defendant terminated Plaintiff for cause in 2018, voiding his stock options. Plaintiff sued Defendant for breach of contract, breach of implied covenant, wrongful termination, retaliation, and conversion, alleging he was terminated in retaliation for “asserting his rights to his vested benefits.” The trial court dismissed Plaintiff’s tort claims, ruling that the voided stock options were not “wages,” but a jury found Defendant liable for breach of contract and awarded Plaintiff approximately $11.5 million. The court conditionally granted Defendant’s motions for JNOV and a new trial, contingent on Plaintiff accepting a $4.3 million remittitur. Plaintiff accepted, Defendant appealed, and Plaintiff cross-appealed.

On appeal, the court held that “under both California and Delaware law, damages for lost stock options in a breach of contract action may be measured from a date other than the date of breach based on equitable considerations.” It upheld the trial court’s remittitur, finding the jury verdict excessive. However, the court found the trial court erred in excluding damages for breach of a performance grant and entered a new judgment for $6.7 million.  Finally, the court affirmed dismissal of the tort claims, holding, per International Business Machines Corp. v. Bajorek (9th Cir. 1999) 191 F.3d 1033, 1039, that “stock options are not wages because they ‘are not’ ‘amounts.’”

Full opinion

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