United States 1st Circuit Court of Appeals Reports

12-22-2006) THE FIRST MARBLEHEAD CORP., Plaintiff,
Appellee, v. GREGORY HOUSE, Defendant, Appellant. No.
06-1114. United States Court of Appeals, First Circuit.
December 22, 2006.

District Judge].

Peter N Wang, with whom Yonaton Aronoff and Foley & Lardner
LLP were on brief, for appellant.

Kenneth J. DeMoura, with whom Michael D. Riseberg and Adler
Pollock & Sheehan P.C. were on brief, for appellee.

Before LYNCH, Circuit Judge, SILER,[fn*] Senior Circuit
Judge, and LIPEZ, Circuit Judge.

[fn*] Of the Sixth Circuit, sitting by designation.

LIPEZ, Circuit Judge.

This case concerns a claim made by Gregory House against
his former employer, First Marblehead Corporation (the
“Company”), relating to its refusal to honor his attempt to
exercise certain incentive stock options (“ISOs”) he
received during his employment. According to the written,
board-approved plan governing the ISOs’ terms and conditions
(“the Plan”), House’s ISOs expired three months after his
resignation from the Company. However, House alleges that
he was repeatedly assured that his ISOs had a ten-year term
of exercise and that he never received a copy of the Plan.
He also alleges that the Company was advised by its outside
general counsel that employees such as House were
misinformed about the duration of their ISOs after
termination of employment, but that the Company failed to
inform him of this fact.

The district court granted summary judgment for First
Marblehead on House’s claims for breach of contract,
promissory estoppel, and negligent misrepresentation. After
careful review of the record, we affirm the grant of
summary judgment on the breach of contract and promissory
estoppel claims, but vacate the judgment on the negligent
misrepresentation claim and remand for further proceedings.


The following facts are drawn from the pleadings and
depositions and are largely undisputed. Where conflicts
exist, we view the record in the light most favorable to
House, who is the non-moving party. Clifford v. Barnhart,
449 F.3d 276, 280 (1st Cir. 2006). House was recruited by
Dan Meyers, his friend and First Marblehead’s CEO, to work
at First Marblehead in early 1996. Meyers promised House
that he would receive valuable stock options to compensate
him for the salary cut he would take by leaving his
previous position.

Shortly after House began working at First Marblehead, the
Company approved the 1996 First Marblehead Stock Option
Plan. The Plan documents included a vesting schedule and
specified the constraints on exercise when an employee
resigned or was terminated. According to the Plan, a
resigning employee’s “[o]ptions will remain exercisable by
the grantee for a period not extending beyond three
months.” House has testified and First Marblehead has
conceded that House never received a copy of this Plan.

In the spring of 1997, Meyers asked House to value the
incentive stock options the Company was preparing to issue.
Management described the key features of these options to
House — features that would play an important role
in House’s valuation — including that the options
would have a $32 strike price,[fn1] a ten-year duration,
and a certain rate of interest and volatility. This was the
first time House learned that the ISOs would be exercisable
for ten years.

At his compensation review in June 1997, House received a
worksheet indicating that he had been granted 2,500 ISOs,
valued at $31.25 per share. This worksheet did not
reference the Plan nor did it disclose that the ISOs would
expire within three months should House resign from First

A few weeks later, on July 7, 1997, House received a memo
from First Marblehead’s general counsel, Rodney Hoffman,
spelling out “the principal terms” of the ISOs. This memo,
and a presentation by Hoffman, reiterated the strike price
and the ten-year duration House had ascertained during his
role in pricing the options. The memo failed to address the
three-month expiration upon resignation. It did, however,
introduce conditions relating to the vesting schedule. The
vesting schedule caught House by surprise — only 20%
of his options would vest immediately and 20% of the
remainder would vest each year over a period of four years.
House objected to the vesting schedule and immediately
negotiated with Meyers to make his options exercisable at
once. Meyers agreed.

Shortly after preparing the memo and presentation laying
out the vesting schedule, Hoffman realized that the
three-month expiration date on options for employees
leaving First Marblehead was another significant term and
condition requiring disclosure.

According to Hoffman’s testimony in a deposition, he
prepared a supplemental memorandum on July 11, 1997,
specifying that vested options would terminate if not
exercised within three months of an employee’s departure.
The cover letter accompanying this memo and addressed to
“Employees of First Marblehead” stated:

In preparing the final form of the ISO grant document, I
found that I had misstated one of the terms of the option
in the summary memo. . . . Mea culpa. A copy of that
revised memo is attached. . . . You will note that the
change is to Section II.4 which describes what happens to
the options upon termination of employment.

Hoffman testified that he delivered this memo to the
Company, but it is unclear whether the Company distributed
it. House claims — and the Company concedes —
that he never received this memo.

In early 1998, House resigned from First Marblehead. In
February 2004 — after a public offering of First
Marblehead’s stock led to a dramatic increase in the
stock’s value — House attempted to exercise his
options, but his efforts were rejected. House claims that
his options are worth 7 million dollars; when issued, they
had a grant price of $75,125.

During the ensuing negotiations between House and First
Marblehead, the Company sought a declaratory judgment in
the Massachusetts Superior Court that House’s ISOs had
expired three months after his resignation. Invoking
diversity jurisdiction,[fn2] House removed the action to
federal court and asserted two counterclaims: breach of
contract, based on First Marblehead’s refusal to honor the
terms of his options, and promissory estoppel, based on
First Marblehead’s failure to make good on its repeated
promises to House that he had ten years in which to
exercise his options.

House became aware of the “mea culpa” memo as a result of
deposing Hoffman. Soon thereafter, House moved to compel
the Company to produce this memo. First Marblehead filed a
motion for summary judgment on House’s counterclaims soon
thereafter. During the pendency of that motion and after
the parties had submitted briefs and argued before the
district court, the district court compelled production of
the memo. House promptly amended his complaint to add a
negligent misrepresentation claim arising from First
Marblehead’s failure to inform House about the three-month
expiration of his options upon his resignation even though
Hoffman’s memo had alerted the Company to the urgency of
doing so.

The district court granted First Marblehead’s motion for
summary judgment on House’s breach of contract and
promissory estoppel counterclaims. In addition, the court
granted summary judgment sua sponte on House’s negligent
misrepresentation counterclaim, even though First
Marblehead had not moved for summary judgment on that claim
and the parties had not briefed the issue.

The district court granted the Company’s motion for summary
judgment on House’s breach of contract claim because it
found that the worksheet from House’s compensation review
and the July 7 memo contained no affirmative
representations that conflicted with the Plan and that,
even if they did, Delaware law requires that a written,
board-approved plan take precedence over all other
representations regarding corporate stock. The district
court also granted the Company’s motion for summary
judgment on House’s promissory estoppel claim on several
grounds: (1) Delaware law bars equitable claims based on
representations contrary to written, board-approved
language regarding stock options; (2) no affirmative
representations were made to House about a ten-year period
for exercising his options after terminating his employment;
and (3) House could not have reasonably relied on any
affirmative representations made in any event because he
had expert knowledge of how options worked. Finding that
House’s negligent misrepresentation claim required two of
the same elements as his rejected promissory estoppel claim
— an affirmative misrepresentation and reasonable
reliance — the district court granted summary
judgment to First Marblehead on that claim as well.

On appeal, House argues that the district court erred by
applying an overly broad construction of Delaware law to
his contract and promissory estoppel claims, and that
Delaware law does not foreclose either of these claims. He
also argues that the Company affirmatively misrepresented
the terms of his options; that he reasonably relied on
those assertions or, at the least, that the reasonableness
of his reliance — an element of both the promissory
estoppel and negligent misrepresentation claims — is
a factual question that should have survived summary
judgment; and that the Company’s failure to disclose to him
the “mea culpa” memo correcting the earlier, erroneous memo
constituted negligent misrepresentation. As we shall
explain, we agree in part with his contentions.


We review the grant of summary judgment de novo. McConkie
v. Nichols, 446 F.3d 258, 260 (1st Cir. 2006). We are not
“wed to the lower court’s rationale but, rather, may affirm
the entry of summary judgment on any ground made manifest
by the record.” Okmyansky v. Herbalife Int’l of Am., Inc.,
415 F.3d 154, 158 (1st Cir. 2005). Summary judgment is
proper where the record “show[s] that there is no genuine
issue as to any material fact and that the moving party is
entitled to judgment as a matter of law.” Fed.R.Civ.P.
56(c). We apply Delaware law to the contract and promissory
estoppel claims since both parties agree that it controls.
Cochran v. Quest Software, Inc., 328 F.3d 1, 6 (1st Cir.
2003) (noting that, where the parties agree as to the
substantive law controlling their diversity case, the court
can and should accept that agreement). However, we apply
Massachusetts law to the negligent misrepresentation claim.
See Rodi v. S. New Eng. Sch. of Law, 389 F.3d 5, 13 (1st
Cir. 2004) (“Sitting in diversity, we look to the
substantive law of the forum state . . . to guide our
analysis.”) (citing Correia v. Fitzgerald, 354 F.3d 47, 53
(1st Cir. 2003)).

A. Breach of Contract and Promissory Estoppel

1. Affirmative Misrepresentation

At the heart of both House’s breach of contract and
promissory estoppel claims is the proposition that the
Company represented to him that he would have ten years to
exercise his ISOs.[fn3] Even if the Company had
affirmatively represented to House that he had ten years in
which to exercise his ISOs even after terminating his
employment, any such representations would have been
contrary to the Plan approved by the Company’s board of
directors, which only permitted a three-month period for
the exercise of House’s ISOs after departure. As we
describe below, Delaware law requires that the terms and
conditions of stock options be governed by a written,
board-approved Plan.

2. Delaware Corporate Law

Pursuant to Delaware Law,” every corporation may create and
issue . . . rights or options . . . such rights or options
to be evidenced by or in such instrument or instruments as
shall be approved by the board of directors.” Del. Code
Ann. tit. 8, § 157(a) (emphasis added). Delaware
courts have observed that this rule was designed to serve
the important policy goal of “preserv[ing] the board’s
broad authority over the corporation and . . . protect[ing]
the certainty of investors’ expectations regarding stock.”
Grimes v. Alteon, Inc., 804 A.2d 256, 258 (Del. 2002); see
also STAAR Surgical Co. v. Waggoner, 588 A.2d 1130, 1136
(Del. 1991) (“The issuance of corporate stock is an act of
fundamental legal significance having a direct bearing upon
questions of corporate governance, control and the capital
structure of the enterprise. The law properly requires
certainty in such matters.”). Here the Plan’s explicit
three-month time limit for the exercise of ISOs held by
employees who resign would thus supersede any other
non-board-approved communications about the expiration of
the ISOs.

We note that Delaware courts have adhered to statutory
requirements respecting stocks when denying claims for
equitable relief — “even in situations when that
might generate an inequitable result.” Liebermann v.
Frangiosa, 844 A.2d 992, 1004 (Del.Ch. 2002); see also
STAAR Surgical Co., 588 A.2d at 1137 (directing that
“neither logic nor equity compel the validation of a
legally void [because in contravention of Section 157]
act”); Superwire.com, Inc. v. Hampton, 805 A.2d 904, 909 n.
17 (Del.Ch. 2002) (averring that the court “cannot give any
effect to void shares even in the context of an equitable
defense” (emphasis in original)) (citing STAAR Surgical
Co., 588 A.2d at 1137).

House urges us to read these cases narrowly, as standing
only for the proposition that the initial issuance of stock
need be controlled by a writing, duly approved by a
corporation’s board of directors. Since the case at hand
concerns the right to exercise options to purchase validly
issued stock, House argues that this Delaware jurisprudence
does not apply. We find this argument unpersuasive. The
policy concern motivating Section 157 — that a
“corporation know precisely what its capital stock is and
what the potential calls on that capital will be,” Grimes,
804 A.2d at 259 (quoting Grimes v. Alteon, No. 18442-NC, at
60 (Del.Ch. Apr. 11, 2001) (bench ruling)) — is
compromised if validly issued stock options are exercised
in a way that conflicts with the Plan’s terms.[fn4] It
seems incontestable that resurrecting House’s right to
redeem 100,000[fn5] shares of Company stock would
substantially affect the corporation’s control of its
capital stock.

Appellant also offers several cases suggesting that Section
157 may not completely bar his promissory estoppel claim.
See, e.g., Ostler v. Codman Research Group, Inc., 241 F.3d
91 (1st Cir. 2001); Wert v. Clear Channel Commc’ns, Inc.,
345 F.Supp.2d 909 (N.D. Ill. 2004). In Ostler, a case we
decided, the plaintiff (Ostler) held stock options that
were soon to expire. To exercise them, Ostler was required
by a board-approved writing to certify that he had fully
investigated the company’s current financial condition.
Ostler requested relevant information from the company, v
1997). as but received only a draft financial report just
days before the options were to expire. Because it was
likely that the final report would differ significantly from
the draft, company management extended the option exercise
deadline to 48 hours after a final report was issued. In a
subsequent breach of contract case, Ostler argued that the
deadline extension was not valid because it was not written
and approved by the board. We ultimately validated the
extension and denied relief to Ostler,[fn6] noting that at
least one Delaware court — albeit in an unpublished
decision — had recognized an exception to the
requirement that board approval be obtained for all actions
related to options. See Collins v. Am. Int’l Group, No.
14365, 1998 Del. Ch. LEXIS 67 (Del.Ch. Apr. 28, 1998).

We observed that the ruling in Collins “may suggest that a
minor extension of an option exercise deadline by
management is permitted under Delaware law, but it is
hardly conclusive.”[fn7] Ostler, 241 F.3d at 94. We further
noted that “[i]t is not clear in Collins whether the
[contested option] deadline was part of the option plan or
who had authority to alter the deadline; nor did the court
expressly discuss section 157.” Id. at 94 n. 2. In
underscoring our narrow interpretation of Collins, we
cautioned that “corporate law remains fairly fussy about
the actual authority of officers when their actions affect
stock options.” Id. at 94. Thus we emphasized in Ostler the
limited nature of the exception we were reluctantly
endorsing, allowing — in the district court’s words
— only “minor extensions of an option exercise
deadline . . . to deal with last minute emergencies.”

Appellant asks us to expand this narrow holding to
accommodate the far different circumstances here. Rather
than a 48-hour extension, appellant seeks to extend his
options years beyond the expiration period set by the
board. While a two-day extension arguably would not
frustrate management’s ability to make capital decisions
with certainty, a delay of years could have a significant
impact. We agree with the district court that Delaware law
does not allow the relief House seeks under these

3. Reasonable Reliance

In granting summary judgment to First Marblehead as to
House’s promissory estoppel claim, the district court also
found that, even if the Company had affirmatively
misrepresented the terms of his options, House could not
have reasonably relied on any such misrepresentation
because House was no “babe-in-the-option woods.” Because we
agree with the district court that Delaware law bars
House’s recovery on his breach of contract and promissory
estoppel claims, we do not analyze House’s reliance here.
Instead, we will address the reliance issue in analyzing
his negligent misrepresentation claim.

B. Negligent Misrepresentation

Although the district court noted that “neither party has
briefed this claim,” it granted First Marblehead summary
judgment on House’s negligent misrepresentation claim,
concluding that the claim failed for the same reasons as
his promissory estoppel claim. We disagree with that

1. Governing Law

Where the parties “have reached a plausible agreement about
what law governs, a federal court sitting in diversity
jurisdiction is free to forgo independent inquiry and
accept that agreement.” Cochran, 328 F.3d at 6. Pursuant to
a clause in First Marblehead’s Plan, its provisions “shall
be governed by and interpreted in accordance with” Delaware
law. Provisions of the Plan were, in fact, central to the
contract and promissory estoppel claims. Hence the parties
plausibly agreed that Delaware law applied to the contract
and promissory estoppel claims. Since no similar agreement
governs the negligent misrepresentation claim, we consult
Massachusetts choice of law principles to determine whether
Massachusetts or Delaware law applies.[fn8]

Massachusetts’s approach to choice of law is “explicitly
guided by the Restatement (Second) of Conflict of Laws
(1971).” Levin v. Dalva Bros., Inc., 459 F.3d 68, 74 (1st
Cir. 2006) (quoting Clarendon Nat. Ins. Co. v. Arbella Mut.
Ins. Co., 60 Mass. App. Ct. 492 (Mass.App.Ct. 2004)).
Section 148 of the Restatement spells out the choice of law
analysis for misrepresentation claims, indicating that the
law of the state where the representations were made,
received, and relied upon should govern unless another
state has a closer connection to the parties or the
occurrence. See Restatement (Second) of Conflict of Laws
§ 148(1) (1971). First Marblehead’s principal place
of business is Boston, Massachusetts. The
misrepresentations were made, received, and relied upon in
Massachusetts and House is a Massachusetts resident. These
factors all point to the application of Massachusetts law to
the negligent misrepresentation claim. Further, no one has
argued that the requirements of the cause of action in
Delaware are different than in Massachusetts, and there is
no obvious conflict with the Delaware statute. Cf. Reicher
v. Berkshire Life Ins. Co. of Am., 360 F.3d 1, 4 (1st Cir.

2. The Massachusetts Law of Negligent Misrepresentation

To prevail on his negligent misrepresentation claim under
Massachusetts law, House must show that the Company “(1) in
the course of [its] business, (2) supplie[d] false
information for the guidance of others (3) in their
business transactions, (4) causing and resulting in
pecuniary loss to those others (5) by their justifiable
reliance on the information, and (6) with failure to
exercise reasonable care or competence in obtaining or
communicating the information,” Nota Constr. Corp. v. Keyes
Assocs., 694 N.E.2d 401, 405 (Mass.App.Ct. 1998) (citation
omitted). We discuss the key issues of misrepresentation
and justifiable reliance.

a. Misrepresentation

The district court did not squarely address the
misrepresentation at issue on this claim. Instead, it
seemed to rely on its earlier conclusion that the Company
made no affirmative misrepresentation to House regarding
the expiration of his ISOs upon departure from the Company.
However, Massachusetts law allows negligent
misrepresentation claims to be predicated upon a failure to
disclose. Thus, even if First Marblehead made no
affirmative misrepresentations to House, this fact poses no
bar to House’s recovery. See Fox v. F&J Gattozzi Corp., 672
N.E.2d 547, 550-51 (Mass.App.Ct. 1996) (finding a grant of
summary judgment to employer improper where employee
advanced a negligent misrepresentation claim based on
employer’s withholding of critical information relating to
employees’ retirement benefits); see also Swinton v.
Whitinsville Sav. Bank, 42 N.E.2d 808 (Mass. 1942)
(establishing that the correct statement of liability for
non-disclosure is contained in the Restatement of Torts
§ 551); Restatement (Second) of Torts §
551(1) (1977) (“One who fails to disclose to another a fact
that he knows may justifiably induce the other to act or
refrain from acting in a business transaction is subject to
the same liability to the other as though he had
represented the non-existence of the matter that he has
failed to disclose if, but only if, he is under a duty to
the other to exercise reasonable care to disclose the
matter in question.”).

House’s negligent misrepresentation claim features the
allegation that the Company failed to inform him of the
three-month expiration upon termination of employment while
supplying him with incomplete materials suggesting that his
options would be exercisable for ten years. Indeed, when
First Marblehead’s outside general counsel and the drafter
of the Plan noticed that the July 7 memo (which House
received) specified a ten-year term without addressing the
three-month expiration that applied to employees upon
leaving the Company, he realized he had made a “mistake.”
Hoffman drafted a revised memo so that employees like House
could be advised of the misleading nature of his July 7
memo. In the cover letter he attached, Hoffman took
responsibility for his mistake and stressed the importance
of distributing the revised information to employees like
House who had received the earlier memo. Though Company
management claims it never received the memo, Hoffman
testified that he gave it to them and a jury could
reasonably believe Hoffman’s account of events.

That House did not receive the revised memo is undisputed.
In fact, First Marblehead attempts to make a virtue of its
failure to provide this memo to House, arguing that because
he never received the revised memo, he could not have
relied upon it. This is a foolish argument. The Company’s
failure to provide this revised memo to House is at the
heart of House’s negligent misrepresentation claim. Given
Hoffman’s testimony, a reasonable jury could find that the
Company “failed to exercise reasonable care” when it failed
to distribute the revised memo to House. Hoffman’s
testimony that the Company had notice regarding its failure
to disclose an important term of the options and the
Company’s acknowledged failure to disclose that information
to House are more than sufficient to raise a genuine issue
of material fact regarding negligent misrepresentation
through failure to disclose.

b. Reasonable Reliance

The district court determined that House could not have
reasonably relied upon any misrepresentations by First
Marblehead regarding the terms and conditions of his ISOs
because of his expertise in the options field. In our view,
the summary judgment record does not permit this definitive

It is indisputable that House had more than a passing
familiarity with stock options. House priced the ISOs
issued by First Marblehead; he testified during his
deposition that prior to joining the Company, he worked for
a bank that “traded options . . . I priced them —
managed — risk managed them, did a variety of things
in that regard”; and he admitted having read “uncountable”
books on the subject.

The record, however, casts doubt on the breadth of House’s
knowledge regarding ISOs’ legal attributes and suggests
that his familiarity with options extended only to their
technical, financial characteristics. House testified that
he had never received ISOs nor had he attempted to price or
redeem them before joining the Company.[fn9] In describing
a three-year period in which he was self-employed, House
explained that he “wrote a fixed income options pricing
model . . . [which] required [the] skill of writing in the
C [computer programming] language.” In addition, in his
subsequent employment with ABN Amro, he was employed by the
“software development group . . . provid[ing] the financial
information that would be used by the programmers to
develop . . . software.” According to Meyers, House was
hired by First Marblehead to work with the Company’s
president “[o]n financial modeling and technical issues.”

Responding to the question “Do you know what incentive
stock options are?”, House responded: “Yes, I have a vague
idea. I mean that to me is a legal term, and that is not my
area of expertise in what I do . . . [o]ptions to me are
— have mathematical characteristics that can be
mathematically modeled.” House testified regarding the
precise factors relevant to pricing options:

as far as I was concerned, these options were that
— options that from a mathematical standpoint could
have been on the Chicago board of trade, and we priced
them that way, and there was a standard variety
mathematical model for doing that. Embedded in that model
though is a set of assumptions . . . [s]ome are known,
like 32 dollar strike price and ten-year term, and some
are assumed. One main one was assumed. . . . volatility.

Massachusetts courts have expressed a strong preference
that reliance, in the context of negligent
misrepresentation claims, be determined by a jury, and not
on summary judgment, “unless the undisputed facts are so
clear as to permit only one conclusion.” Nota, 694 N.E.2d at
20 (citing Fox, 672 N.E.2d at 551). Whether House
reasonably relied upon the representations of the Company
is at least a question of fact that should have survived
the motion for summary judgment.


For the reasons stated above, we affirm the district
court’s grant of summary judgment on House’s breach of
contract and promissory estoppel claims; however, we vacate
and remand for further proceedings on House’s negligent
misrepresentation claim. Costs are awarded to appellant.

So ordered.

[fn1] The strike price is the price at which the employee
may purchase the corporate stock.

[fn2] House is a New Jersey resident; First Marblehead
incorporated in Delaware and its principal place of
business is Massachusetts.

[fn3] House also argues that the court should not have
granted the motion for summary judgment on the breach of
contract claim because First Marblehead’s failure to
disclose the terms and conditions of the ISOs breached
Section 5 of the Plan, which required First Marblehead to
deliver “a writing” to House “specifying the terms and
conditions” of his options. However, this appears to be a
novel claim not raised before the district court and we
will not entertain it here. Domegan v. Fair, 859 F.2d 1059,
1065 (1st Cir. 1988).

[fn4] House advances an alternative argument that depends
upon the distinction between “statutory” and
“non-statutory” options. Statutory ISOs that meet six
criteria enumerated in Section 422(b)of the Internal
Revenue Code, 26 U.S.C. § 422(b) (including
expiration within three months of employment termination)
qualify for special tax benefits. House contends that the
Plan required only that statutory options be exercised
within three months of resignation and that his ISOs should
be treated as non-statutory, thereby exposing him to tax
liability but shielding him from the three-month
expiration. House’s argument fails for two reasons. First,
it depends upon a misreading of the Plan. The Plan does not
limit the three-month expiration to statutory options.
Section 7.02(d), entitled: “The Effect of Termination of
Employment,” states: “[u]pon the termination of grantee’s
employment . . . the Options will remain exercisable by the
grantee for a period not extending beyond three months. . .
.” “Options” is a defined term in the Plan, signifying
“Incentive Stock Options and Non-statutory Stock Options
(collectively, as defined below, `Options’).” House relies
upon the testimony of the Plan’s drafter indicating that
non-statutory options were never intended to be covered by
this provision; however, the Plan language is clear and it
is well established that extrinsic evidence may not be used
to interpret an otherwise clear and unambiguous contract.
Eagle Indus., Inc. DeVilbiss Health Care, Inc., 702 A.2d
1228, 1232 (Del. 199 Second, there is no basis on which to
classify House’s options non-statutory: they were clearly
labeled ISOs in the worksheet and the July 7 memo and the
discussion of “types of options” in Section 4.01 of the
Plan allows for only ISOs “as defined in Section 422 of the
Code” and non-statutory options. There is no room for a
non-statutory ISO.

[fn5] Although House was initially granted 2,500 ISOs, he
argues that a series of stock splits has increased that
number to 100,000.

[fn6] Ostler’s claim in the case depended on a finding that
the company had not fulfilled its disclosure requirements
because it delivered its financial report after the
original option deadline. He therefore sought to
demonstrate that extension of the option deadline was

[fn7] In Collins, an employee brought a claim to enforce the
Company’s oral promise that it would waive the expiration
date for the exercise of his stock options upon his
retirement, allowing him ten years in which to exercise his
options. The Delaware Chancery Court determined that
Collins met his burden of proving the elements of promissory
estoppel and enforced the employer’s promise, allowing the
employee to exercise his options “but only to the extent
that he could have exercised them before the expiration of
the ninety-day grace period following his early retirement.
No. 14365, 1998 Del. Ch. LEXIS 67, at *18. We note that
Delaware permits the citation of unpublished decisions as
precedent. See New Castle County v. Goodman, 461 A.2d 1012,
1013 (Del. 1983) (“[L]itigants before this Court may cite
Orders as precedent.”)”

[fn8] The district court assessed the negligent
misrepresentation claim under both Delaware and
Massachusetts law, concluding that House’s claim was
foreclosed by the law of both jurisdictions. In briefing
this issue on appeal, the parties follow the district
court’s lead, citing the negligent misrepresentation law of
both Delaware and Massachusetts. Although the law of both
jurisdictions may well be the same, we see no reason to
avoid the choice of law issue.

[fn9] While House had priced options before, he had never
before priced incentive stock options, which often involve
the kind of abbreviated redemption period we see in this