Gallo LLP Files Complaint for the first 190 Plaintiffs in an Anticipated Series of Lawsuits Against Uber For Breach of its Restricted Stock Unit Agreements with Employees

SAN FRANCISCO, Aug. 27, 2020 /PRNewswire/ -- Gallo LLP today announced that it has submitted for filing at the San Francisco Superior Court a lawsuit against Uber Technologies, Inc. (UBER) for breach of contract, fraud, and labor code violations on behalf of 190 current and former professional employees who received Restricted Stock Units (RSUs) as part of their compensation packages. Estimated direct financial damages for the current 190 plaintiffs exceed $9 million. Gallo currently represents more than 270 affected employees, and is continuing to sign new clients. The lawsuit is expected to be the first filing in a series. An estimated 15,000 current and former Uber professional employees (all those who received RSUs that vested on Uber's IPO) have similar claims, with estimated direct economic damages totaling $200 million.

The disputes may be subject to mandatory arbitration, which will preclude a class action, such that only those who engage attorneys can hope to be made whole.

As part of their compensation agreements, thousands of Uber employees were given RSUs that became fully vested on the May 9, 2019 IPO, requiring Uber to issue shares of Uber common stock neither sooner nor later than six months following the company's IPO, on November 9, 2019 (after the expiration of the lock-up period). Uber instead unilaterally chose to issue the shares on the IPO date of May 9, 2019. Employees consequently received shares at the IPO price of $45 each and were taxed on that amount, even though they could only realize $27 per share after the mandatory 180 day "lock-up" period was over and they were legally able to sell shares to cover their tax obligations.

As a result, RSU holders have paid or will pay an estimated total of $200 million more in income taxes --- taxes they would not have owed but for Uber's unilateral decision --- and will and have realized that much less value than their contracts with Uber entitled them to.  Some employees may have ever owned more in income tax than they could realize from sale of their stock, depending on the stock price when they sold---such that their equity compensation resulted in a net loss to them after taxes.

The lawsuit alleges that Uber made the decision seeking to fix its 2019 compensation expense associated with issuing the shares, and to eliminate the risk its stock price would rise from the IPO date to November 9, 2019, increasing Uber's compensation expense by an indeterminate amount. But in the process Uber imposed on RSU holders the risk that the share price would decline, causing them to owe tax on income they could not realize.

The lawsuit also alleges that Uber's executives and underwriters knew that the share price would likely decline, prejudicing RSU holders, but still opted to accelerate the settlement date for its own benefit, possibly on the advice of its IPO underwriters. On average, stock prices are lower than IPO prices six months post IPO. Lyft went public a few weeks before Uber. And Lyft's share price---perhaps the most relevant data point for Uber's analysis---had already declined from its IPO price by the time of Uber's IPO.

Gallo LLP currently represents more than 270 current and former Uber professionals who have engaged the firm to assert these claims, and continues to sign new clients through its dedicated client website at https://uberrsuclaims.gallo.law?ml=24056004. All Gallo clients seek to have Uber pay them a pre-tax amount the after-tax net from which will cover the income taxes Uber's decision imposed.

About Gallo LLP

San Francisco-based Gallo LLP (www.gallo.law) is a law firm serving businesses, executives, and consumers alike, making winning arguments privately and in state and federal courts. The firm prosecutes public interest and consumer fraud cases, like this one, as part of its ongoing commitment to promote ethical business practices. Ray E. Gallo is its managing principal and trial counsel.

SOURCE Gallo LLP

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