Comment by klausa
15 hours ago
I feel like I'm going crazy reading the comments, and I guess, big props to the author for writing this in a way that pulls it off.
The issue here is, IMHO, not "Nvidia owes me stock in an ironclad way and gets away with it because of statue of limitations", but "I accepted an offer from Nvidia but the paperwork between the offer and the options grant differed in a way that both benefits me, and nobody noticed or cared about until now".
The original offer was for 25k shares, vesting over 4 years.
The options paperwork says 25k shares, vesting over 4 _quarters_.
Now, I'm not a lawyer, and certainly not a securities lawyer, but that seems like it could be reasonably chalked down to a clerical error on the options paperwork? "You made a mistake and now I can get a billion dollars more than we agreed to originally" doesn't feel like a great lawsuit!
I think the issue is even simpler. When NVIDIA ended his advisory relationship in 1996, he had 90 days to exercise his vested options. That deadline passed nearly 30 years ago, regardless of whether vesting took one year or four.
He exercised the 15,625 options NVIDIA told him had vested. His claim now is that all 25,000 had actually vested, but NVIDIA’s letter gave him the wrong number. The letter was informing him of NVIDIA’s calculation; it did not change the option agreement. So the question is whether being given that incorrect information in 1996 gives him a claim today, despite both the exercise deadline and the statute of limitations having passed.
This presupposes the information/calculation was incorrect.
I disagree with this being a foregone conclusion
Usually, when an ITM option expires, the clearinghouse exercises it. I guess you have to jump through some hoops to claim them if they are offered to you through the company, but the stock is owed.
NVDA has also just announced they are buying back stock for 150b, so they could throw some the author's way, hehe.
I think ESOPs (employee equity ownership plan) options work differently. There is no options house in the picture because you’re dealing with the company directly, with no exchange in between.
If the author didn’t exercise his options, then the company would have redistributed the earmarked equity back into the common pool. This is a board-authorized % of equity put aside for stock awards.
No that only applies for options in public stock, Nvidia was private in 1996.
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Yes. I noted this below. A lot of times you see a decimal point in the wrong place and the courts don't just say "oh well, I guess it's a billion then!"
The rulings are fact-specific, but clearly both parties here had a mutual understanding that the paper was only meant to reflect.
This is a little different though. The intent was for that amount of shares. So the amount isn't in question, just the vesting schedule. While the schedule may be non-standard, it isn't beyond belief (like 4 days). Also, years to quarters isn't a single typo like punctuation.
No that’s just an example. Like I said, facts were unclear here but it seems like they had agreed something and then written down something different. Courts will often find a way to respect the first unless there was a real ambiguity.
But, he didn't dispute it at the time indicating the meeting of the minds was for the 4 year, not 4 quarter, schedule. Now, is that iron clad? no, but it goes to show this is not nearly open and shut because it's more "deliberately" wrong than a misplaced decimal
Not a decimal point, but the courts have shown deference to a comma (or lack there of in the case below) and has resulted in companies paying millions…
https://lawfold.com/oxford-comma-lawsuit/
Yes, it’s going to be a super fact-specific ruling in each case because what you’re trying to determine generally is what was actually agreed. (There are exceptions to this where what was written will have heavier or lighter weight.) Here though it seems like everyone at the time agreed one thing and wrote another. I’d be shocked if somehow this got the author rich even without time barring.
Completely irrelevant to this case. That's about grammar and punctuation; this is about an accounting error expressed in English.
This isn't an "obvious" clerical mistake though. It's common for option schedules to be unique. I could absolutely see a person whose work is supposed to go on for about a year being given a schedule commensurate with that timeline.
As for sitting on it for 30 years. Lawyers are expensive - more than the cost to resolve the issue 30 years ago, but given the recent stock climb, it's now more than worth it.
I would have sued.
I could buy it if the author had been stewing on this the whole time but never engaged a lawyer because lawyers are expensive. But the post makes it clear that he didn't notice what the document said until 2024. Both sides clearly thought it was meant to be "years" at the time it was signed.
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I think you could forgive people for thinking so, in a society where people get sent to prison for decades on the subjective read of technicalities (and subsequently released early when advocacy bashes the government's head against its own injustice for long enough; of course, at that point, the judge is retired or dead and the prosecutor has had a long, successful career, so everyone wins! /s).
Same for contracts where the written language is absurd, and the agreement one party claims without the necessary evidence is way more reasonable, and the court finds in favor of the absurd contract.
Yeah, it's a little unclear but I think your interpretation is correct. The key is the paragraph beginning with:
> Imagine my surprise: according to the duly signed option agreement, my options were meant to vest over four quarters, not four years, as both NVIDIA’s CFO and their outside counsel, Cooley, had asserted back in 1996.
On first reading it did give me pause because it's the first time "four years" is mentioned. But on another scan I agree it's cleverly written and never actually claims the agreement was four quarters, only that the paperwork says that.
Still it is a funny story, similar to those "I spent 20 Bitcoins on a pizza" ones, I guess.
There are documents linked in the footnotes that spell this explicitly, you don’t have to infer this:
The offer letter, which spells out “which vests over 4 years”: https://colo.to/invitation.pdf
The option grant which has the accelerated schedule: https://colo.to/grant.pdf
Yeah but it's a blog post, most readers aren't going to comb through the documents linked in footnotes.
“Imagine my surprise” seems really damning. A contract is supposed to be a meeting of the minds. The two sides agree on what the contract means and the written artifact is a record of it. If he’s surprised then that suggests he never intended it to be quarterly. And clearly the other party never meant that either. I’m no lawyer, but I don’t imagine “I didn’t mean this and they didn’t mean it but that’s what got written down so give me money” would fly in court.
I still don't think I understand the actual events. Is it that he got 1/4 of the shares as he expected after a year and did not chase for years 2/3/4 (and they never offered them)?
They should just offer to settle at a reasonable value as if it had been just the four quarters previously agreed, but a smart decision was made to sit on the shares.
> They should just offer to settle at a reasonable value
Since litigation is costly, the acceptable range for a settlement is centered around the expected outcome of a trial, plus or minus each party's cost of litigation (including opportunity cost).
In this case, "the claim is barred by the statute of limitations" implies that the expected outcome of litigation would be approximately $0. The net range for a settlement is then the 'nuisance value' of a lawsuit including any PR damage for airing the case publicly; that would be orders of magnitude below the $1bn claim.
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> just the four quarters previously agreed
Misreading. S/quarters/years/
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>You made a mistake and now I can get a billion dollars more than we agreed to originally
The world "smart contract" enthusiasts dream of.
Wouldn't a smart contract also have a statue of limitation built in?
That's beside the point.
The main idea is that in legal contracts, the written signed paper is just evidence for what the agreed-upon contract was. The actual contract is the agreement itself - which the paper may not reflect exactly. If the two parties disagree on what is the actual contract, the paper is of course strong evidence for one side or the other, but it's not the final word, other evidence may be brought that contradicts the written contract and that can be held to be more convincing.
In contrast, the smart contract crowd wants the contract code to represent the final word, and if any party didn't notice that the contract code didn't match the understanding they had of the agreement, too bad.
A statute is an act of legislation, and a "statute of limitations" typically prevents courts from dealing with claims arising from matters that happened years ago (subject to some exceptions). The public policy arguments are usually that witness memories decay to the point of obvious unreliability, and that the maxim "equity aids the vigilant not those who sleep on their rights" was already the root of the common law doctrine of laches, but scattered over so much case law that putting the concept on a statutory footing is useful for the courts and all litigants (and especially defendants).
(In criminal law, "justice delayed is justice denied" and clarifications of constitutional or treaty requirements for speedy trials also can be tidied up by the legislature in a statute of limitations).
Statute (legislation) is a superior source of law to contract law, and so there is generally no way to contract to avoid being statute barred if a claim for breach of contract (or specific performance, etc.) is made beyond the statutory deadline.
Typically there are carve outs enacted in a statute of limitations that allow a claim to be brought out-of-time if the defendant has acted in a dishonest way that prevented a claim from being filed in time, for certain classes of litigant, or for certain types of claim. (And in criminal law, for certain offences - serious crimes will tend to have a longer, or no, limit on how long after the crime the prosecution is begun).
A statute of limitations typically does not extinguish defences based on the lapse of too much time; but such defences in some jurisdictions may be contracted away, leaving the statutory limit as the hard deadline.
The smart contract itself may have been the one that contained the mistake. We've seen this happen before and they just had to fork the chain.
It's all nonsense. In the real world people make mistakes and a court should be allowed to override and figure out the right thing to do.
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A smartly written smart contract would. Will all smart contracts be drafted with such care?
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NO.
Because, as I say repeatedly:
Smart contracts ARE NOT CONTRACTS. Count them in the worst named things in computing.
A contract is a legal agreement that is mostly about stipulations on what to do if things go wrong.
A so-called "smart contract" is doubly bad named -- because it's just a stupid, irrevocable, unchangeable, piece of code. Imagine an ATM with the controls welded shut.
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