Ryan v. Gifford’s Empirical Analysis

Citation profile

4 federal appellate · 12 district · 27 state decisions

Most-quoted passages

The sentences later courts lift from this opinion, ranked by how many decisions quote each — the parts of the opinion doing the work. These counts are smaller than the citation total above because most of the 72 citing decisions cite the case generally; a passage count includes only decisions quoting that exact language verbatim.

1. “[a] director who approves the backdating of options faces at the very least a substantial likelihood of liability, if only because it is difficult to conceive of a context in which a director may simultaneously lie to his shareholders (regarding his violations of a shareholders-approved plan, no less) and yet satisfy his duty of loyalty. Backdating options qualifies as one of those “rare cases [in which] a transaction may be so egregious on its face that board approval cannot meet the test of business judgment and a substantial likelihood of director liability therefore exists.””

   4 later decisions quote this exact passage
   e.g. Ryan v. Gifford · In Re Openwave Systems Inc. Shareholder Derivative Litigation

2. “[T]he Defendants ... caused MSC to falsely state that the Company used the intrinsic value method specified by Accounting Principles Board Opinion No. 25 [“APB 25”] to calculate compensation expense associated with issuing stock options and, accordingly, recorded no such expense as such issuances were at fair value of the Company’s common stock [on] the date of grant. Under APB 25, if the exercise price of the Company’s stock options is not less than the market price of the underlying stock on the date of grant, no compensation expense is recognized. Such statements were materially false and misleading in each of these years because MSC has granted stock options at prices that were below fair market value on the date of the grant and failed to account for the in-the-money options as required by APB 25. As alleged previously, APB 25 required the Defendants to record compensation expense for options that were “in-the-money” on the date of the grant. However, they did not do so, thereby materially understating its net loss. These statements were designed to conceal, and did in fact conceal, the fact that the Defendants were engaged in continuous and systematic scheme of backdating stock option grants to MSC insiders in violation of state and federal laws.”

   2 later decisions quote this exact passage
   e.g. 576 F. Supp. 2d 360 - Plymouth County Retirement Ass'n v. Schroeder · 529 F. Supp. 2d 213 - Risberg Ex Rel. Aspen Technology, Inc. v. McArdle

3. “Merrill Lynch measured the aggressiveness of timing of option grants by examining the extent to which stock price performance subsequent to options pricing events diverges from stock price performance over a longer period of time. “Specifically, it looked at annualized stock price returns for the twenty day period subsequent to options pricing in comparison to stock price returns for the calendar year in which the options were granted.” In theory, companies should not generate systematic excess return in comparison to other investors as a result of the timing of options pricing events. “[I]f the timing of options grants is an arm’s length process, and companies have [not] systematically taken advantage of their ability to backdate options within the [twenty] day windows that the law provided prior to the implementation of Sarbanes Oxley in 2002, there shouldn’t be any difference between the two measures.””

   2 later decisions quote this exact passage
   e.g. 166 Wash. 2d 229 - Locals 302 & 612 of the International Union of Operating Engineers-Employers Construction Industry Retirement Trust ex rel. F5 Networks, Inc. v. McAdam · In Re F5 Networks, Inc.