Linear Technology Corporation Stock Option Spring-Loading and Bullet-Dodging

Shapiro Haber & Urmy LLP filed a shareholder derivative action on behalf of Linear Technology Corporation against certain current and former directors and officers of the company.  The complaint was filed on March 23, 2007 in the Delaware Court of Chancery.  The Defendants in this case include Linear's founder and Executive Chairman , its CEO, and Linear's then directors.

The Complaint alleged that options were generally issued shortly before favorable quarterly earnings announcements and shortly after unfavorable quarterly earnings announcements, and that this practice damaged the Company while allowing the option recipients to unjustly profit on the basis of non-public material information.

In this novel case involving allegations of "spring-loaded" and "bullet-dodged options" at Linear Technology Corporation, our firm obtained an important decision allowing the case to proceed and clarifying Delaware law involving stock option manipulation and derivative cases in general.

On April 28, 2011, the Court approved the parties’ Stipulation of Compromise and Settlement, which called for a $4,000,000 cash payment from Linear’s directors’ and officers’ insurance carrier, the repricing of certain options by the amount of $500,000, and substantial governance reforms which will prevent any future timing of stock options around corporate announcements to obtain lower exercise prices for options.  In approving the settlement, the Court commented that “counsel did a very good job” and that “plaintiff’s counsel should be commended.”