Plaintiff Not Entitled to Exercise Stock Option Because Request Was Untimely

In a Decision and Order dated May 11, 2022, in MacDonald v. GuarantR, Inc.., 2022 NY Slip. Op. 31525(U), Justice Joel M. Cohen granted defendant’s motion for summary judgment on Plaintiff’s claim for breach of contract stemming from defendant’s refusal to issue shares to plaintiff pursuant to a stock option provision in a consulting agreement between plaintiff and defendant. To be entitled to the shares, plaintiff had to exercise the option within three months of the termination of his service relationship with defendant. Service relationship was defined, in turn, as “the continuous period during which” plaintiff was “engaged as a consultant by and/or [is] engaged in another service relationship with, the Company”. The Court explained:

There is not, however, sufficient evidence in the record to permit a trier of fact to find that MacDonald remained engaged in "another service relationship" with the Company for a "continuous period" after expiration of the Consulting Agreement.

After September 2016, the record indicates that MacDonald's services to GuarantR were sporadic, uncompensated, and largely unsolicited. It is undisputed that MacDonald did not work full-time for GuarantR, did not keep any time records for hours he allegedly worked for GuarantR, and was not paid for any work he allegedly performed for GuarantR, despite asking repeatedly for compensation (id. ¶¶ 27, 34, 38).

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MacDonald's affidavit in opposition, in which he asserts an "ongoing, behind-the-scenes relationship" with the company after the Consulting Agreement expired, "does not raise a bona fide question of fact" (Lupinsky v Windham Constr. Corp., 293 AD2d 317, 318, 739 N.Y.S.2d 717 [1st Dept 2002]; Caraballo v Kingsbridge Apt. Corp., 59 AD3d 270, 270, 873 N.Y.S.2d 299 [1^st Dept 2009] ["[S]elf-serving affidavits denote an effort to avoid the consequences of plaintiff's earlier testimony and are insufficient to defeat defendant's motion for summary judgment"]; see MacDonald Aff. ¶ 13 [NYSCEF 94]). That is because the statements in the affidavit conflict with MacDonald's own prior statements and other undisputed facts of the case. For instance, the affidavit states that MacDonald "continue[d]" to provide services to GuarantR "on an informal basis" once the Consulting Agreement ended (id.), including "advis[ing] GuarantR on operations, practices and development of products and relationships in the New York insurance and real estate industries" (id. ¶ 14). But these statements are at odds with MacDonald's contemporaneous testimony that he had no "active consulting clients," or "significant consulting work," "formal" or "informal," after September 2016.

The attorneys at Schlam Stone & Dolan frequently litigate claims concerning stock options and breach of contract. Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning such disputes.