Sycamore Networks Wins Dismissal of Stock Options Backdating

Skadden attorneys won dismissal of a shareholder derivative lawsuit alleging stock options backdating for client Sycamore Networks, Inc., in the Delaware Court of Chancery. The potentially pivotal decision, issued on June 7, is one of the first court rulings on backdating, which has been alleged at dozens of U.S. companies over the past two years. Skadden attorneys in Boston and Wilmington, Del., represented Sycamore, a Massachusetts-based manufacturer of optical switches for telecommunications service providers. The Court ruled that the allegations by the plaintiff were insufficient in suggesting that the defendants were involved or had knowledge of backdating. The court ruled that the plaintiff failed to allege facts creating "a rational inference that the directors knowingly approved backdated grants of options." Indeed, the Court stressed that a plaintiff cannot plead a substantial likelihood of personal liability absent particularized allegations of a culpable state of mind: "Directors are protected from liability in a situation when they did not act with scienter."

Delaware Law Weekly Highlights Skadden's Win for Sycamore.

Click here to view.