Compensation Committee

A federal court in Oklahoma today issued a precedent-setting decision in favor of Gibson Dunn client WPX Energy, Inc., in Olagues v. Muncrief, No. 17-cv-153 (N.D. Okla. Jan. 26, 2018), ECF No. 42.  In the decision, the court held that pre-approved tax withholding dispositions made in connection with the vesting of equity grants are exempt from Section 16(b)’s prohibition on short-swing profits under Exchange Act Rule 16b-3(e)—even when an employee otherwise subject to the short-swing trading restrictions purchased the company’s shares during the six-month period preceding or following the tax withholding disposition.  This is the first time that a federal court has substantively addressed these types of short-swing trading claims, which have been serially raised by a small group of investors—first in the form of litigation demands and then, absent a payout to the investors, in litigation—during the last sixteen months.  A number of companies have refused the investors’ settlement demands, which has resulted in Section 16(b) cases against the companies’ executives in federal courts in California, Colorado, Delaware, Florida, Massachusetts, North Carolina, Ohio, Oklahoma, Tennessee, Texas, and Washington state.