Shareholders' agreements in closely held corporations frequently grant the corporation and/or the other shareholders the right to repurchase a shareholder's shares if the shareholder ceases to be an employee of the company. What happens if an employee is terminated, his shares are repurchased and it is subsequently determined that the employee was wrongfully terminated?
This is essentially what happened in Saw v. Avago Technologies, Ltd., 2020 Cal. App. LEXIS 641. The facts of the case are somewhat more complicated - the repurchase agreement was governed by Singapore law and was between the plaintiff and the parent of the plaintiff's employer. The Court of Appeal concluded that the parent did not breach the shareholders agreement by relying on an unlawful termination to repurchase his shares. Although the Court of Appeal applied Singapore law, it does refer to Oracle Corp. v. Falotti, 319 F.3d 1106 (9th Cir. 2003) , in which the Ninth Circuit held that under California law, the terms of a stock option agreement must be given effect regardless of whether an employee was not given sufficient notice of termination under applicable foreign law.