1

Filed 4/8/24

CERTIFIED FOR PARTIAL PUBLICATION*

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION FIVE

GAUTAM SHAH,

Plaintiff and Appellant,

v.

SKILLZ INC.,

Defendant and Appellant.

 A165372

 (City & County of San Francisco 

 Super. Ct. No. CGC-19-576014)

Plaintiff Gautam Shah joined defendant Skillz, Inc. (Skillz), a private 

company, as an employee in 2015. Like many people in Silicon Valley who 

join startups, Shah accepted less cash compensation in exchange for options 

to buy Skillz stock at a predetermined exercise price. “The unique value of” 

these stock options to employees like Shah “is that when the market price of 

the optioned stock surpasses the . . . ‘exercise’ price, he can buy at the lower 

figure for a virtually certain profitable investment . . . .” (Bertero v. Natl. 

General Corp. (1967) 254 Cal.App.2d 126, 141 (Bertero).) For startup 

employees like Shah, the hope is that the company will undergo an initial 

public offering (IPO)—which would allow those employees to sell their stock 

on the open market at a significant profit.1 Indeed, the primary value of 

* Pursuant to California Rules of Court, rules 8.1105(b) and 8.1110, this 

opinion is certified for publication with the exception of parts A and B of the 

Discussion.

1 These employees may also profit from their stock options if the 

startup is sold to another company. (See Alon-Beck, Unicorn Stock Options—
2

stock options like the ones granted to Shah lies with the ability to cash out 

those options if the company is successful and goes public. 

Skillz had an IPO in December 2020. But Shah was not able to realize 

the Silicon Valley dream because he lost all of his stock options when Skillz 

terminated him for cause in 2018. As a result, Shah could not exercise his 

options and sell the Skillz stock he would have acquired upon doing so at a 

huge profit after the IPO like other former and current Skillz employees.

Shah sued Skillz for breach of contract, alleging that Skillz did not 

have cause to terminate him and wrongfully prevented him from exercising 

the stock options he had earned as a Skillz employee. A jury found that 

Skillz breached its contracts with Shah and awarded Shah over $11.5 million 

in damages for the lost options. The trial court, however, conditioned the 

denial of Skillz’s new trial motion on Shah’s acceptance of a remittitur in the 

amount of $4,358,358. After Shah accepted the remittitur, the court entered 

judgment for Shah in that amount.

Both parties appealed. Skillz contends that the judgment must be 

reversed due to defects in the jury instructions and special verdict forms. 

Skillz further contends that the damages awarded to Shah are “contrary to 

law” because they were not measured as of the date of breach, requiring 

either a far lower award or a new trial on damages. Meanwhile, Shah 

contends that the jury verdict in excess of $11.5 million should be reinstated 

because of errors in the trial court’s new trial orders and remittitur. Shah 

Golden Goose or Trojan Horse? (2019) 2019 Colum. Bus. L.Rev. 107, 129 

(Unicorn Stock Options) [“In the event of a sale of the company, employees 

can exercise the vested options prior to the sale. After doing so, they will 

either be able to sell their shares or their options will be canceled in exchange 

for a payment equal to the spread between the exercise price and the sale 

price”].)
3

also contends that the court erred in dismissing his tort claims before trial 

because his stock options are “wages” under the Labor Code. We conclude 

that the court abused its discretion by excluding approximately $2.3 million 

in damages attributable to the loss of some of Shah’s stock options from the 

amount of the remittitur but affirm in all other respects. 

In the portions of our opinion certified for publication, we hold that: 

(1) under both California and Delaware law, Shah’s damages were properly 

measured after the date of breach, following the IPO; (2) the operative 

pleading gave Skillz adequate notice that Shah sought damages for the loss of 

the performance stock options he was granted in late 2016; and (3) stock 

options are not wages under the Labor Code. In the unpublished portion of 

our opinion, we reject the parties’ other arguments.

I. BACKGROUND

A. Facts

Skillz is a mobile gaming company founded in 2012 by Andrew 

Paradise and Casey Chafkin. The company provides an online platform

where users can play video games and compete with others on their mobile 

devices. Paradise is Skillz’s Chief Executive Officer and Chafkin is its Chief 

Revenue Officer.

In October 2015, Skillz hired Shah as Director of Skillz Live, a new 

program Skillz was launching at the time. Shah’s title later changed to 

Director of Finance and Strategy in mid-2017. At the time Shah joined 

Skillz, two contracts governed his employment: (1) the September 30, 2015 

offer letter (Employment Contract) that Shah accepted and signed; and (2) 

the Notice of Stock Option Grant (Notice).

Shah’s Employment Contract established that his employment was 

at-will and “may be terminated by [him] or the Company at any time for any 
4

reason with or without advance notice.” (Bolding and italics omitted.) It also 

referenced and incorporated a mandatory confidentiality agreement that

Shah separately signed and returned. As relevant here, the confidentiality 

agreement prohibited Shah, “without the prior written consent of the 

Company, [from] us[ing], except in the course of performance of [his] duties 

for the Company or by court order, disclos[ing] or giv[ing] to others any

Confidential Information.” The Contract stated that Shah’s annual salary 

was $160,000 and that he would be granted 69,487 stock options on a fouryear vesting schedule (25 percent after one year, and 6.25 percent every three 

months thereafter). Any unvested options were to be forfeited if Shah left 

Skillz before all of his options vested.

The Employment Contract further specified that the grant of Shah’s

stock options was “subject to and exclusively governed by” the Notice, the 

2012 Equity Incentive Plan (Plan),

2 and the Option Award Agreement.3 The 

Plan provided that if Shah was terminated without cause, he would have 

three months from his termination date to exercise his vested options. If 

Shah was terminated for cause, however, his options would expire on the 

date of his termination. The Plan defined “cause” to include various offenses,

including the employee’s “breach of his or her fiduciary trust or duty,” 

“material breach” of the confidentiality agreement, “gross misconduct or any 

act which is injurious” to Skillz. Theft was also considered a “cause” offense, 

2 In November 2015, Skillz replaced the 2012 Plan with an updated 

Equity Incentive Plan, which the parties agree was the operative Plan 

governing Shah’s stock options. Hereinafter, Plan means the 2015 Plan.

3 The Plan and the Option Award Agreement do not differ materially 

with respect to Shah’s stock option rights upon the termination of his 

employment.
5

even though it was not specifically enumerated in the Plan. A finding of

“cause” was to be made by Skillz’s Board of Directors (Board). 

The Notice, the second contract governing Shah’s employment, is a onepage document that summarizes the terms of Shah’s initial stock option 

grant. It established an exercise price of 34 cents per share. It also 

mistakenly included a two-year vesting schedule instead of the four-year 

vesting schedule contained in Shah’s Employment Contract. Skillz later

informed Shah of this error and sent him a correction letter to sign. But 

Shah did not sign the letter despite repeated requests from Skillz.

4 Finally, 

the Notice “incorporated” the Plan and Option Award Agreement “by 

reference.”

In late 2016, Skillz was in financial trouble and asked higher earning

employees like Shah to voluntarily reduce their cash compensation.

Specifically, Skillz asked Shah to take a $62,000 reduction in compensation, 

consisting of a $20,000 reduction in Shah’s annual salary and the elimination 

of his $42,000 bonus. In exchange, Skillz granted 21,000 additional stock 

options to Shah. This additional grant was memorialized in a December 5, 

2016 Compensation and Title Adjustment Letter (Performance Grant)—the 

third contract at issue in this case. These options were granted to Shah 

quarterly and vested immediately upon each grant. 14,250 of these options 

had an exercise price of 38 cents per share while the remaining 6,750 options 

had an exercise price of $1.12 per share. In September 2017, Skillz 

reinstated the $62,000 in Shah’s cash compensation and ended the 

Performance Grant.

4 The jury found that Shah’s initial stock option grant was subject to a 

four-year vesting schedule. Shah does not challenge this finding on appeal. 
6

In January 2018, Shah was scheduled to go on a trip with Paradise to 

meet with potential investors to obtain additional funding for the company. 

Right before this trip, Shah sent Paradise an email shortly after midnight on 

January 18, 2018, asking to discuss “[his] future at the company and 

formaliz[e] [his] associated compensation.” He acknowledged that it was a 

busy time but that this was important to him. Paradise promptly responded

that human resources “will follow up” but that given the timing of Shah’s 

email, it would be best to cancel his involvement in the investor trip. 

Paradise then “asked company counsel and [Chafkin] to deal with this” so he 

could focus on the trip.

Later that same day, Shah met with Chafkin and told him he wanted a 

promotion and more compensation. Chafkin responded that a promotion was 

not appropriate given Shah’s current performance. Shah also brought up his 

vesting schedule and the correction letter he had not yet signed. Chafkin 

believed Shah “was looking for something in exchange for signing . . . the 

correction letter.” The next day, Shah spoke with Paradise and Chafkin over 

the phone about his future at the company and the correction letter Skillz 

was “forcing” him to sign. Shah commented that it did not make sense for 

him to remain at the company if Skillz did not plan to promote him or 

increase his compensation. At the end of this call, Chafkin and Paradise 

asked Shah for an outline of what he was looking for. 

On January 21, 2018, Shah emailed a proposal to Chafkin and Paradise 

about transitioning to consultant work for Skillz. The proposal outlined two 

alternatives for compensation. The first proposed a $192,000 annual cash 

salary and an equity bonus of “0.50% of FDSO [fully diluted shares 

outstanding] upon completion of Qualified Financing.” The second included 

no cash salary but proposed that Shah receive 176,050 Skillz shares as an 
7

equity salary with the same equity bonus. Chafkin found this proposal 

“comical” because the compensation requested by Shah was worth “a couple []

million dollars.” Skillz did not respond to Shah’s proposal.

On January 22, 2018, Shah forwarded an email from his work account 

to his personal email account. That email contained a confidential business 

report prepared by Mike Termezy (Termezy report). Termezy was a 

consultant hired by Skillz to analyze its “most confidential business data to 

determine where [it] had opportunities to grow [its] business in . . . a very 

competitive market space.”

On January 24, 2018, Chafkin asked Skillz’s then Vice President of 

Engineering to conduct “a forensic analysis of the company property that Mr. 

Shah had access to”, including Shah’s emails. Chafkin testified that given

Shah’s representation about leaving the company and compensation request, 

he wanted to find out whether Shah had done anything harmful to the 

company’s interests. 

The search—which was completed on the same day that Chafkin made 

the request—revealed that Shah had forwarded the Termezy report to his 

personal email. Chafkin testified that there was no legitimate business 

reason for Shah to have done this because he could have just logged into his 

work email to view the report. A committee formed within Skillz to 

investigate this matter, which included Chafkin and company counsel,

recommended terminating Shah for cause that same day. The committee, 

however, never spoke with Shah before making its recommendation.

Paradise discussed the committee’s recommendation with a Board member, 

who then discussed it with other Board members. Paradise stated that as far 

as he knew, the Board “agreed with the recommendation from the team, that 

cause was appropriate.”
8

Later that same afternoon, Chafkin met with Shah and told him that 

he was being terminated for cause for violating company policy on 

confidential information and theft. Shah stated that he wanted to exercise 

his stock options,

5 but Chafkin responded that “the penalty for being 

terminated with cause is the company takes back all the options.” At the end 

of the meeting, Chafkin walked Shah out the door. A month or so later, Shah 

tried to exercise a small portion of his options because he had not received 

anything in writing from Skillz prohibiting him from doing so. Shah sent

Skillz a check for exercising 100 options but was notified by Skillz that his 

options were void under his stock option agreement. 

In December 2020, Skillz had its IPO, with an opening stock price of 

$17.89 per share.6 Current and former Skillz employees like Shah, however, 

were subject to a six-month “lock-up” period. As a result, they could sell their 

Skillz shares on the public exchange no earlier than June 14, 2021. But there 

was one exception to this limitation. As part of an early release, Skillz

employees could sell up to 18.9 percent of their shares on March 23, 2021. On 

that date, Skillz stock sold for $23.34 per share. Eighty-four shareholders

(which included employees, former employees, and investors) sold a total of 

36.8 million shares that day.

7 Between June 14 and 30, 2021, Skillz stock 

sold for an average price of $20.01 per share. 

5 As of January 24, 2018, the date of his termination, 39,086 of Shah’s 

69,487 initial options and all 21,000 of his Performance Grant options had 

vested. 

6 We grant Skillz’s unopposed request for judicial notice. 

7 It is not clear from the record what percentage of eligible shares were 

sold by Skillz employees on the early release date.
9

Before the IPO, there may have been private secondary markets where 

certain Skillz shareholders could sell their Skillz stock. Skillz facilitated 

some of these private sales, the first of which occurred at the end of 2018 with 

a purchase price of 96 cents per share.

B. Procedural History

In May 2019, Shah sued Skillz for breach of contract, breach of the 

implied covenant of good faith and fair dealing, wrongful termination, 

retaliation, and conversion.8 Skillz later filed a First Amended Complaint 

(FAC), which omitted the breach of implied covenant claim but otherwise 

mirrored his original complaint. The FAC alleged that “the thin pretextual 

‘reasoning’ for [Shah’s] termination demonstrate[d] that [his] termination 

was taken in retaliation for [] asserting his rights to his vested benefits.” The

breach of contract cause of action alleged that Skillz breached the 

Employment Contract and Notice, and the FAC attached both documents as 

exhibits. The FAC also referenced the Performance Grant and expressly 

sought Shah’s “fully vested option[s] . . . granted pursuant to the Performance 

Grant” as a remedy. The FAC did not, however, attach the Performance 

Grant itself as an exhibit. The FAC also sought tort damages, including 

punitive damages and attorney fees, in connection with Shah’s causes of 

action for wrongful termination and retaliation.

Before trial, the trial court made several pertinent rulings on the 

parties’ motions in limine. First, the court ruled that Shah’s stock options 

were not “wages” under the Labor Code. This ruling negated Shah’s 

retaliation and wrongful termination claims—which the court dismissed

following Skillz’s motion for directed verdict. The court also granted Skillz’s 

8 Shah dismissed his conversion claim before trial. 
10

motion to preclude evidence and argument regarding any unpled causes of 

action, including Shah’s dismissed claim for breach of the implied covenant.

Finally, with respect to his breach of contract claim, Shah asked the 

trial court to find that damages for his lost stock options should not be 

measured at the time of breach (the date of Shah’s termination) but at the 

time Shah could have first sold his shares after the IPO in March and June 

2021. Skillz opposed, arguing that the measure of damages should be “the 

difference between the fair market value of Skillz’[s] shares at the time of 

breach and the agreed upon exercise price per share.” According to Skillz, 

the fair market value at the time of breach was equal to the “409A” 

valuation.9 The court tentatively agreed with Skillz that damages should be 

measured at the date of breach. The next day, however, the court changed its 

mind and ruled that Shah’s motion was premature. The court reasoned that

there were “factual issues that need to be decided by the jury” as to whether 

Shah was terminated for cause before it could determine the proper measure 

of damages. 

The case proceeded to trial on Shah’s only remaining cause of action for 

breach of contract. Shah argued that Skillz breached various contracts by 

preventing him from exercising his vested stock options under the pretext 

that cause existed for his termination. Shah testified that he sent the 

Termezy report to his personal email so he could read it on his iPad at home 

9 “A 409A valuation is an appraisal of a company’s shares of stock that 

is conducted to determine for tax purposes the value of stock options.” 

(Blattman v. Siebel (D.Del. Jan. 29, 2020, Civ. No. 15-530-CFC) U.S.Dist. 

Lexis 14583, *15, fn. 3.) It tends to be lower than other valuations in order to 

minimize taxable income. (See Deane v. Maginn (Del.Ch.Ct. Nov. 1, 2022) 

2022 Del.Ch. Lexis 315, *46, fn. 263 [“the 2020 409A Valuation, performed for 

Internal Revenue Service Code 409A purposes, provided the lowest 

valuation”].)
11

after he was criticized by Chafkin for not reading it at a prior meeting. Shah 

also testified that he had done this before with other emails “from time to 

time.” According to Shah, there was no evidence he intended to commit theft 

or use the report for any improper purpose.

The parties’ experts presented differing testimony on the damages 

suffered by Shah due to the lost stock options. Shah’s expert opined that 

Shah suffered approximately $11.5 million in damages assuming a four-year 

vesting schedule. In reaching this opinion, he assumed that Shah would 

have exercised all of his vested options shortly after he was terminated in

January 2018 and held onto them until the IPO in late 2020. He further 

assumed that Shah would have sold 18.9 percent of his shares at the early 

release in March 2021 and his remaining shares over a two-week period 

between June 14 and 30, 2021, immediately after the lock-up period ended.

Skillz’s expert testified that Shah suffered only $41,032 in damages due 

to the loss of his stock options (39,086 shares from his initial grant and 

21,000 shares from the Performance Grant) as of the date of his termination.

According to Skillz’s expert, the options were only worth $1.12 per share at 

that time based on the most recent 409A valuation before Shah’s termination. 

Skillz’s expert also offered an alternative calculation of Shah’s damages 

if they were not determined as of the date of Shah’s termination. According 

to Skillz’s expert, Shah’s expert made “inappropriate assumptions.” Instead 

of assuming that Shah would have sold 18.9 percent of his shares in March

2021 and the rest immediately after the lock-up period ended in June 2021,

Skillz’s expert used the average price of Skillz stock between June 14, 2021 

(the date the lock-up period ended) and September 8, 2021 (the day before his 

testimony) to calculate Shah’s damages. Based on this price, Skillz’s expert 

determined that Shah suffered about $6.7 million in damages, consisting of 
12

approximately $4.4 million from the initial grant and $2.3 million from the 

Performance Grant. 

At the close of evidence, the parties asked the trial court to instruct the 

jury as to what date it should use to measure the value of Shah’s lost stock 

options. The court, however, declined to do so and instructed the jury to 

determine the valuation date. It did, however, caution the jury that damages 

that are “speculative, remote, imaginary, contingent, or merely possible

cannot serve as a legal basis for recovery.” As to each of the three contracts

(Employment Contract, Notice, and Performance Grant), the jury found that 

Skillz breached the contract “by not allowing Shah to exercise his vested 

stock options under the pretext that ‘cause’ existed for his termination[.]” 

(Bolding omitted.) The jury awarded Shah $7,528,637 for the loss of his stock

options under the initial grant and $4,028,536 for the loss of his options 

under the Performance Grant, for a total of $11,557,173. The court entered 

judgment on the jury’s verdict. 

Skillz moved for a JNOV and new trial. In its JNOV motion, Skillz 

argued that: (1) Shah cannot recover damages for breach of the Performance 

Grant because its breach was not pled in the FAC; (2) there was no evidence 

that Skillz breached any contract by firing Shah for cause; and (3) the jury’s 

award of $11.5 million was improper because damages for lost stock options

must be measured as of the date of breach (Shah’s termination). The new 

trial motion argued that: (1) various irregularities rendered the trial unfair 

to Skillz; (2) the jury awarded excessive damages; and (3) there was 

insufficient evidence to support the verdict.

The trial court denied the JNOV motion because “Shah presented 

evidence to support all of his claims” at trial. As for damages, the court

conceded that “the jury needed further guidance on the appropriate measure 
13

of damages” and that the “date to value the loss of stock options remains an 

unsettled area of law in California” and is a complex topic that “might have 

been confusing to the jury.” (Bolding and capitalization omitted.) To rectify 

this, the court conditioned its denial of Skillz’s new trial motion on Shah’s 

consent to a remittitur in the amount of $4,358,358. This amount came from

the alternative calculation provided by Skillz’s expert, excluding any 

damages for the lost stock options under the Performance Grant. Shah 

accepted the remittitur, and the court entered an amended judgment in his 

favor for the reduced remittitur amount.

Skillz timely appealed the judgment, the trial court’s orders on the 

post-trial motions, and the amended judgment. Shah timely cross-appealed 

these same judgments and orders.10

10 Following the parties’ initial briefing, we requested and received 

supplemental briefing on the following issues: “1. Does the jury’s finding 

that plaintiff Gautam Shah did not engage in unclean hands (unethical or 

dishonest conduct in relation to the three contracts) necessarily mean that it 

also found that Shah was not terminated for cause? [¶] 2. Does Delaware 

law govern “the ‘measure of recovery’ ” for Shah’s breach of contract claim 

under section 13.4 of the Equity Incentive Plan [citation]? Assuming 

Delaware law applies, may benefit-of-the-bargain damages be calculated from 

a date other than the date of breach and, if so, when? [¶] 3. Did the First 

Amended Complaint provide sufficient notice to defendant Skillz, Inc. (Skillz) 

to justify a jury instruction and verdict form question as to the third contract 

(the Performance Grant)? [Citations] The relevance of the language in the 

third contract that it “alter[ed]” the terms of Shah’s Employment Contract 

should be discussed in answering this question. [¶] 4. If this court reverses 

the judgment on damages, may it order a judgment in the amount of $30,487 

(or $41,032) as argued by Skillz, rather than remand for a new trial on 

damages, in light of evidence at trial that Shah gave up ‘about $70,000’ in 

cash compensation in exchange for the Performance Grant stock options 

alone?”
14

II. DISCUSSION

A. Skillz’s Liability for Breach of Contract

Skillz contends it is entitled to a JNOV or a new trial on liability based 

on errors in the jury instructions and special verdict forms. First, Skillz

claims that the instructions and forms failed to identify any contractual 

obligation that was breached. Second, Skillz claims that the instructions 

and forms impermissibly referenced the term “pretext”—which is irrelevant 

in a breach of contract claim. We find no reversible error.

1. Relevant Facts

Before the trial began, Shah submitted proposed jury instructions 

stating, among other things, that the parties “entered into two contracts”:

the Employment Contract and Notice. Shah also included CACI No. 303

(breach of contract—essential factual elements)—which established as an

element of the breach of contract cause of action that Skillz “failed to do 

something that the contract required it to do”—and an instruction and 

special verdict form addressing his abandoned breach of the implied 

covenant claim, which Shah later withdrew.11 Around the same time, the 

trial court granted Skillz’s motion in limine to preclude evidence and

argument regarding any unpled causes of action, including Shah’s claim for 

breach of the implied covenant.

Skillz’s proposed jury instructions, submitted during trial, included a 

modified version of CACI No. 303. The modified instruction required the 

jury to find that the contracts “prohibited Skillz from terminating Shah’s 

employment for cause” and that “Skillz terminated Shah’s employment for 

11 Question 4 of Shah’s proposed breach of the implied covenant verdict 

form asked: “ ‘Did Skillz, Inc. terminate Gautam Shah based upon pretext 

that he committed theft?’ ” 
15

cause.” Skillz also submitted a proposed special verdict form with similar

language. 

After the close of evidence, Shah informed the trial court that he had 

“added two more special instructions” and provided copies of those 

instructions to Skillz. The court then held a conference to discuss the jury 

instructions. Although the court briefly referenced the parties’ competing 

versions of CACI No. 303 on the record, it apparently spoke with the parties 

about that instruction in an off-the-record discussion. Skillz claims that, 

during that discussion, the court, over Skillz’s “strenuous objection”, agreed 

to give a modified version of CACI No. 303 that included the “pretext” 

language.

Skillz objected to the addition, arguing that Shah never pled a breach 

of the Performance Grant “in the complaint” and that his new breach claim 

was actually a claim for breach of the implied covenant—which Shah had 

already dismissed. Shah countered that the FAC expressly referenced the 

Performance Grant, that Skillz’s witnesses testified about the Performance 

Grant, and that the Performance Grant contained an express promise to 

award stock options to Shah. Later, the court, on the record, permitted Shah 

to include the Performance Grant as the third contract.

The trial court directed the parties to finalize the jury instructions that 

it had approved, including the modified version of CACI No. 303, and

ordered Skillz to produce the final instructions. Later that day, Skillz 

submitted the parties’ joint instructions and special verdict forms. The final 

version of CACI No. 303 required Shah to prove “[t]hat Skillz breached” each 

contract “by not allowing Shah to exercise his vested stock options under the 

pretext that ‘cause’ existed for his termination.” Similarly, the final special 

verdict forms asked: “Did Skillz breach the [contract] by not allowing Shah 
16

to exercise his vested stock options under the pretext that ‘cause’ existed for 

his termination?” (Bolding omitted.)

2. The Jury Instructions and Special Verdict Forms Sufficiently 

Identified the Contractual Obligation Breached by Skillz

Skillz contends the judgment must be reversed because “neither the 

jury instructions nor the [special] verdict form identifies an obligation or 

prohibition in either” the Employment Contract or Notice that was breached.

According to Skillz, the purported breach identified in the instructions and

forms—“ ‘not allowing Shah to exercise his vested stock options under the 

pretext that “cause” existed for his termination’ ”—is “divorced from the 

contracts’ terms.” We review this contention de novo and reject it. (Saxena 

v. Goffney (2008) 159 Cal.App.4th 316, 325 (Saxena).) Both the Employment 

Contract and Notice incorporated by reference the terms of the Plan. The 

Plan, in turn, established that preventing Shah from exercising his stock 

options if he was not terminated for cause constituted a breach of those 

contracts. Thus, the instructions and verdict forms conditioned liability on 

the jury finding that Skillz had committed an act that was, in fact, a breach 

of its contractual obligations. 

“A contract may validly include the provisions of a document not 

physically a part of the basic contract.” (Williams Construction Co. v. 

Standard-Pacific Corp. (1967) 254 Cal.App.2d 442, 454 (Williams 

Construction)) “ ‘For the terms of another document to be incorporated into 

the document executed by the parties the reference must be clear and 

unequivocal, the reference must be called to the attention of the other party 

and he must consent thereto, and the terms of the incorporated document 

must be known or easily available to the contracting parties.’ ” (Ibid.) The 

contract, however, “need not recite that it ‘incorporates’ another document, 
17

so long as it ‘guide[s] the reader to the incorporated document.’ ” (Shaw v. 

Regents of University of California (1997) 58 Cal.App.4th 44, 54.)

Here, the Employment Contract summarized the terms of Shah’s initial 

stock option grant and stated that this grant would “be subject to and 

exclusively governed by the terms of” the Plan, the Notice, and the Option 

Award Agreement. The Notice likewise stated that Shah’s initial grant was 

governed “by the provisions of the Plan and the [Option Award Agreement]” 

and that both documents “are incorporated herein by reference.” (Italics 

added.) Thus, the references to the Plan in both contracts were “clear and 

unequivocal,” and Skillz does not dispute that the terms of the Plan were 

“known or easily available to the contracting parties.” (Williams 

Construction, supra, 254 Cal.App.2d at p. 454.) To the extent any doubts 

remain, the Notice itself explicitly incorporated the Plan’s terms by reference. 

The Plan, in turn, stated that Shah’s stock options expired on the date 

of his termination if he was terminated with cause. But if Shah was 

terminated without cause, the Plan stated that he had three months from 

the date of his termination to exercise his options. The Plan then defined

“cause” to encompass specific offenses, including a “material breach” of the 

confidentiality agreement, “gross misconduct or any act which is injurious” 

to Skillz, as determined by “the Administrator” (the Board).

12 Because these 

terms were incorporated by reference into the Employment Contract and 

Notice, Skillz had an obligation under those contracts to allow Shah to

12 Skillz concedes the Notice “could have been breached [] through 

incorporation of [the Plan]” but argues that the Plan “says that ‘cause’ exists 

if the Board determines there is cause . . . and the [special] verdict form[s] did 

not ask the jury whether the Board made a cause determination.” As 

discussed below, even assuming the verdict forms were ambiguous as to 

whether they required the jury to find a lack of cause, the jury’s no unclean 

hands finding resolves any ambiguity.
18

exercise his options within three months after his termination if he was not 

terminated with cause. As a result and contrary to Skillz’s assertion, the 

jury instructions and special verdict forms—which asked whether Skillz 

breached the contracts “by not allowing Shah to exercise his vested stock 

options”—did sufficiently identify a contractual obligation that was 

breached.

13

3. Any Defect in the Jury Instructions or Special Verdict Forms

Was Harmless

Skillz next argues that the inclusion of the term “ ‘pretext’ ” in the jury

instructions and special verdict forms was improper. According to Skillz, the 

term “ ‘pretext’ ” references Skillz’s motive in terminating Shah—which is 

only relevant to Shah’s breach of the implied covenant claim that was 

dismissed, and not to his breach of contract claim. As a result, the jury could 

have found Skillz liable for breach of contract solely because Skillz had an 

improper motive for terminating Shah and not because Skillz lacked cause 

to do so. In other words, the jury could have found a breach of contract even 

though Skillz terminated Shah with cause. Skillz contends this error was 

prejudicial and warrants a JNOV or, at a minimum, a new trial. We 

disagree. Assuming for purposes of argument that Skillz did not forfeit this

challenge and that the instructions and verdict forms were defective or 

ambiguous, we find any error harmless based on the jury’s rejection of 

Skillz’s unclean hands defense.

“[A] defective verdict form is subject to harmless error analysis.” 

(Taylor v. Nabors Drilling USA, LP (2014) 222 Cal.App.4th 1228, 1244 

13 Accordingly, we do not find that the special verdict forms were 

“ ‘ “fatally defective” ’ ” as Skillz argues because they “allow[ed] the jury to 

resolve every controverted issue.” (Saxena, supra, 159 Cal.App.4th at p. 325.)
19

(Taylor).) Thus, we must affirm, “even in the face of substantial error, if the 

judgment is ‘clearly right.’ ” (Id. at p. 1245). And we will “reverse only when 

we are of the opinion that there has been a miscarriage of justice.” (Id. at 

p. 1246.) Likewise, “[a] judgment may not be reversed for instructional error 

in a civil case ‘unless, after an examination of the entire cause, including the 

evidence, the court shall be of the opinion that the error complained of has 

resulted in a miscarriage of justice.’ ” (Soule v. General Motors Corp. (1994) 

8 Cal.4th 548, 580.) Thus, instructional error, like an error in the verdict 

form, “is [only] prejudicial ‘where it seems probable’ that the error 

‘prejudicially affected the verdict.’ ” (Ibid.; see Cassim v. Allstate Ins. Co. 

(2004) 33 Cal.4th 780, 801 [“the so-called Watson standard applies generally 

to all manner of trial errors occurring under California law, precluding 

reversal unless the error resulted in a miscarriage of justice”].)

Here, it is not probable that the alleged defect in the jury instructions 

or special verdict forms prejudicially affected the verdict. Because the jury 

rejected Skillz’s unclean hands defense by finding that Shah did not engage 

in any unethical or dishonest conduct, it could not have found there was 

cause for Shah’s termination. 

As to the unclean hands defense, the trial court initially instructed the 

jury to consider whether Shah “engaged in [any] unethical . . . or dishonest 

conduct, specifically in relation to the Termezy report” and the parties’ 

closing arguments focused on the same. During deliberations, the jury 

asked the court whether it should limit its consideration of dishonest or 

unethical conduct to the Termezy report, or whether it could also consider

Shah’s conduct in relation to the Notice. With the agreement of counsel, the 

court modified the unclean hands instruction to state: “If you find that Shah 

engaged in unethical or dishonest conduct specifically in relation to any of 
20

the three contracts . . . [t]hen that unethical or dishonest conduct bars Shah 

from recovering on the claims in relation to which he engaged in such 

conduct.” After the court read the revised instruction to the jury, counsel

presented supplemental arguments.

Applying the revised instruction, the jury found that Shah did not 

engage in unclean hands. The court subsequently issued a statement of 

decision denying Skillz’s unclean hands defense. The court noted, “assuming 

Shah had an obligation to alert Skillz about the [vesting schedule] error by 

Skillz, Shah’s claim of two-year vesting and refusal to sign the correction 

letter had no effect on the amount of the verdict.” The court further 

observed that “no evidence was ever presented that Shah benefitted or 

profited in any way from the information contained in the Termezy report” 

and that although “Shah did not always conduct himself honorably . . . there 

is no evidence that he benefitted from his unethical conduct or that his 

‘unclean hands’ impacted the verdict.” 

Skillz contends we cannot rely on the jury’s “ ‘no unclean hands’ ”

finding to find harmless error because: (1) we cannot “ ‘imply findings’ from 

one answer on a special verdict form to remedy a defect in another question”;

and (2) the jury’s finding does not mean it also found that Shah was 

terminated without cause. We disagree. 

First, it is true that we “may not ‘imply findings’ to ‘save’ a defective 

special verdict.” (Taylor, supra, 222 Cal.App.4th at p. 1244.) But the jury’s 

finding of no unclean hands, though advisory, was still an express finding

that Shah did not engage in any unethical or dishonest conduct in relation to 

the three contracts. Thus, we are relying on an actual jury finding, rather 

than implying a finding, to find harmless error. And contrary to Skillz’s 

contention, this finding is not being used as the basis for the judgment. 
21

Rather, the finding is being used to show that the jury necessarily found 

that Skillz terminated Shah without cause even if the jury instructions or 

special verdict forms were defective or ambiguous as claimed by Skillz. In 

other words, the jury’s rejection of Skillz’s unclean hands defense establishes

that the jury made the requisite finding for a breach of contract claim 

against Skillz—that Skillz prevented Shah from exercising his vested stock 

options even though Skillz had no evidence that Shah engaged in any 

unethical or dishonest conduct.14 In relying on an actual jury finding to find 

harmless error, we are simply applying the same analysis used in many 

other cases. (See, e.g., K.M. v. Grossmont Union High School Dist. (2022) 84 

Cal.App.5th 717, 770–771; Adams v. MHC Colony Park, L.P. (2014) 224 

Cal.App.4th 601, 614–615; Gombiner v. Swartz (2008) 167 Cal.App.4th 1365, 

1377.)

We also reject Skillz’s contention that “the jury’s ‘no unclean hands’ 

verdict does not mean it found Shah was terminated without cause” because 

it “could have found that Shah violated a company policy . . . but believed 

that Shah was not morally wrong in doing so.” As a threshold matter, we 

question whether “unethical” conduct as used in the unclean hands 

instruction is limited to conduct that is morally wrong, particularly where, 

as here, professional business conduct is at issue. Indeed, unethical conduct 

in that context may also mean “unwilling to adhere to professional rules of 

conduct” or “not in accord with the standards of a profession.” 

14 The trial court apparently reached the same conclusion as the jury 

when it rejected Skillz’s unclean hands defense. As the court stated in its 

written order, although Skillz argued at trial that “Shah’s misappropriation 

of the Termezy report established cause to terminate Shah”, no evidence was 

presented “that Shah shared the [] report with any outside company or 

profited from the [] report in any way.” 
22

(<https://www.dictionary.com/browse/unethical> [as of April 8, 2024].) Thus, 

the jury, by finding that Shah did not engage in unethical or dishonest 

conduct, arguably found that Shah did not violate company policy based on 

the instructions themselves.

But even if we agree with Skillz’s cramped interpretation of unethical 

conduct, it is clear that the jury was never asked to consider whether Shah 

may have been morally right to take or appropriate the Termezy report—the 

only cause for termination asserted by Skillz at trial. Indeed, there is no 

reason to believe the jury did, in fact, do so.

First, Skillz never claimed that Shah engaged in unclean hands for any 

reason other than dishonesty. Indeed, in its closing argument, Skillz only 

argued that the jury should find unclean hands “if you find that Mr. Shah 

engaged in dishonest conduct.” (Italics added.) Thus, the jury, by rejecting 

Skillz’s unclean hands defense, necessarily found that Shah did not act 

dishonestly by emailing himself the Termezy report.

Second, Skillz, throughout the trial, only argued that Shah was 

terminated because he acted dishonestly by sending the Termezy report to 

himself in violation of Skillz’s confidentiality agreement and policy against 

theft. For example, Skills only claimed that it terminated Shah “due to his 

violation of the Fraud and Theft of Company Property Policy” in its trial 

brief and opening statement. And in its closing argument, Skillz only 

argued that it terminated Shah for his “honesty violations,” such as his 

“violation of the company’s fraud and theft policy.” Indeed, Skillz 

specifically argued that Shah “took the Termezy data with the intent to use 

it, which was a violation of Paragraph 2 of the confidentiality agreement.”

As a result, Skillz contended it “was perfectly justified in determining that 

that was dishonest, as the plan provided.” 
23

That Shah’s purported dishonesty in connection with the Termezy 

report was the sole basis for Skillz’s claim it had cause to terminate him is 

also consistent with the testimony of Chafkin. He testified that downloading 

a confidential work file, by itself, was not grounds for termination. Instead, 

he claimed that Shah had no legitimate business reason for sending the 

report to himself given the circumstances and timing. 

Finally, Shah’s arguments at trial confirm that he too understood that 

his alleged dishonesty in emailing the Termezy report to himself was the 

sole basis for Skillz’s claim it had cause to terminate him. For example, in 

his statement of the case, Shah wrote that Skillz claimed that it had 

“ ‘cause’ ” to terminate him because he had allegedly stolen a single email 

which they identified as confidential information. He made similar 

representations in his opening statement. And in his closing argument, 

Shah explained that whether Skillz breached any contracts came down to 

one “primary” question: Did Shah “by sending the Termezy report to his 

personal e-mail account commit theft?” 

Because Skillz only asked the jury to find unclean hands and cause to 

terminate Shah based on his alleged dishonesty in taking the Termezy 

report for illegitimate purposes, the jury’s finding that Shah did not engage 

in unclean hands means that the jury necessarily found that Skillz lacked 

cause to terminate him. Any ambiguity caused by the “pretext” language in 

the instructions or verdict forms therefore was not prejudicial.15

15 Under the terms of the Plan, Shah had the right to “exercise” his 

vested stock options “upon [his] Termination Date.” Thus, even assuming 

Skillz had cause to terminate Shah, Skillz arguably breached the contracts by

refusing to allow Shah to exercise his vested stock options after Shah told 

Chafkin that he wanted to do so at his termination meeting.
24

B. Shah’s Procedural Challenge to the New Trial Orders

Before we address the parties’ substantive challenges to the damage 

award, we consider Shah’s procedural challenges to the new trial orders and 

remittitur. On April 25, 2022—the last day it could rule on Skillz’s motion 

for new trial under Code of Civil Procedure section 66016—the trial court 

denied Skillz’s motion for a new trial conditioned on Shah’s acceptance of a 

remittitur for $6,694,000, the alternative amount of damages calculated by 

Skillz’s expert based on all of Shah’s stock options, including the 

Performance Grant. The amount of the remittitur, however, was erroneous 

because the court’s order also stated it was “not including the damages for 

the breach of the Performance Contract which Skillz argues was not 

properly pled.” Skillz promptly brought this error to the court’s attention, 

and the court issued an amended order the next day which corrected the 

remittitur to $4,358,358. The amended order made no other substantive 

changes. Shah contends both new trial orders are invalid because they lack 

the required statement of grounds and specification of reasons. This 

contention lacks merit.

Under section 657, the trial court must “specify the ground or grounds 

upon which [a new trial] is granted and the court’s reason or reasons for 

granting the new trial upon each ground stated.” Notwithstanding Shah’s 

assertions to the contrary, we find that both new trial orders adequately 

specified the grounds and reasons for their respective remittiturs. 

The parties agree that the only applicable statutory ground for the trial 

court’s remittitur was “excessive damages.” (See § 657, subd. (5).) Shah, 

however, contends the new trial orders are invalid because they do not 

16 All further statutory references are to the Code of Civil Procedure 

unless otherwise specified.
25

explicitly state “excessive damages” as the ground for relief. But inclusion of 

that statutory language “is not invariably required; the ground for a new 

trial is adequately specified if the intention of the court is clear.” (Jones v. 

Citrus Motors Ontario, Inc. (1973) 8 Cal.3d 706, 709–710.) And the court’s 

intention here was clear from its orders: it was issuing a remittitur based on 

excessive damages. First, the court expressly stated that it would consider 

granting a new trial “as to damages only.” (Italics added.) It then reduced 

the jury’s award from $11.5 million to $6.7 or $4.4 million. Second, the court 

referenced Shah’s acceptance of the remittitur pursuant to section 662.5, 

subdivision (a)(2), which solely governs orders granting a new trial based on 

excessive damages. Thus, it is clear that the court, notwithstanding its 

failure to use the words “excessive damages,” intended to conditionally grant 

a new trial on that ground. 

The new trial orders also adequately stated the reasons why the trial 

court found the jury’s award of $11.5 million to be excessive. The statement 

of reasons in a new trial order “should be specific enough to facilitate 

appellate review and avoid any need for the appellate court to rely on 

inference or speculation.” (Oakland Raiders v. National Football League

(2007) 41 Cal.4th 624, 634.) However, the judge need only “furnish[] a 

concise but clear statement of the reasons why he finds one or more of the 

grounds of the motion to be applicable . . . . No hard and fast rule can be laid 

down as to the content of such a specification, and it will necessarily vary 

according to the facts and circumstances of each case.” (Mercer v. Perez

(1968) 68 Cal.2d 104, 115.)

Here, the trial court explained that the “appropriate date to value the 

loss of stock options remains an unsettled area of law” that was “complex” 

and “might have been confusing to the jury.” It then conceded that “more 
26

instruction on the valuation of the stock options was probably necessary”

and, for this reason, granted a new trial “as to damages only.” More 

specifically, the court found that “the appropriate measure of damages” came 

from Skillz’s expert, rather than Shah’s expert as determined by the jury. 

Although both experts calculated damages based on the value of Skillz stock 

after the IPO, Skillz’s expert used the average value of the stock over 

roughly 90 days after the lock-up period ended. By contrast, Shah’s expert 

used the value of Skillz stock at the early release date and its average value 

during the two weeks after the lock-up period ended. In light of this clear 

testimony from the experts highlighting the differences in methodology they 

used to calculate damages, the court’s order furnished a sufficiently clear 

explanation for its rejection of the jury’s verdict as excessive. It also 

provided a clear and concise reason for excluding any damages suffered by 

Shah for the loss of stock options awarded under the Performance Grant: 

those damages were “not properly pled.” Thus, the court’s order is specific 

enough for appellate review and satisfies the requirements of section 657. 

C. The Appropriate Measure of Damages

We now turn to the parties’ challenges to the measure of damages used 

by the trial court to determine the remittitur. At trial, the court left “the 

appropriate date or approximate time period to value the stock options” for 

the jury to determine. But in deciding Skillz’s new trial motion, the court 

acknowledged that it may not have provided sufficient instruction to the jury 

on the appropriate measure of damages. As a result, the court issued a 

remittitur that adopted the alternative calculation of Shah’s damages

proffered by Skillz’s expert. For that calculation, Skillz’s expert assumed 

that Shah’s lost stock options should be valued after the lock-up period 

ended, rather than as of the date of breach. Skillz’s expert then used the 
27

average price of Skillz stock from June 14, 2021 (the date the lock-up period 

ended) to September 8, 2021 (the day before the expert’s testimony) to 

calculate Shah’s damages. Based on that average price, Skillz’s expert 

determined that Shah suffered approximately $4.4 million in damages from 

the loss of his initial grant of options and $2.3 million in damages from the 

loss of his options under the Performance Grant. Thus, to the extent the 

court may have erred by letting the jury decide the appropriate measure of 

damages, it corrected that error through its remittitur, and we now consider 

whether the measure of damages adopted in the remittitur is erroneous.

Both parties argue that the trial court erred by adopting the measure of

damages used by Skillz’s expert in his alternative calculation. Not 

surprisingly, they disagree on the remedy for this error. Skillz contends we

should either order a JNOV and award Shah the amount of damages 

calculated by Skillz’s expert as of the date of breach or “order a new damages 

trial.” By contrast, Shah contends we should reinstate the jury verdict. 

Applying de novo review (Toscano v. Greene Music (2004) 124 Cal.App.4th 

685, 691 (Toscano) [“the determination of whether [a plaintiff] is entitled to a 

particular measure of damages is a question of law subject to de novo 

review”]), we disagree with both parties and affirm the measure of damages 

used by the court in the remittitur.

1. Skillz’s Challenges to the Measure of Damages Adopted by the 

Trial Court in the Remittitur

Skillz argues that the value of Shah’s lost stock options should have 

been measured as of the date of breach—i.e., the date of Shah’s termination 

in 2018. Skillz further argues that, even if Shah’s damages may be 

measured after the date of breach, the court should not have used the price 

of Skillz stock during a period of time after the lock-up period ended because 
28

there is no objective evidence Shah would have held onto his shares until 

then. We are not persuaded. 

As a threshold matter, we consider what law should be applied in 

determining the date on which Shah’s damages are measured. At trial, both 

parties assumed that California law controlled, and neither argued that 

Delaware law governed the measure of damages. But in its reply brief, 

Skillz asserted for the first time that “Delaware law governs the Plan”—

which, in turn, governed Shah’s stock options. In support, Skillz cited to 

section 12.4 of the Plan—which stated that it “and all agreements hereunder 

shall be governed by and construed in accordance with the laws of the State 

of Delaware, without giving effect to that body of laws pertaining to conflict 

of laws.” By choosing to invoke this choice-of-law provision that it drafted, 

Skillz appears to have conceded that Delaware law should “govern the 

‘measure of recovery for a breach of contract’ ” in this case. (Airs Aromatics, 

LLC v. CBL Data Recovery Technologies Inc. (2020) 50 Cal.App.5th 1009, 

1014 (Airs Aromatics).)

Despite this apparent concession, Skillz now contends this court should 

not apply Delaware law because Shah has “waived enforcement of the 

choice-of-law provision” in the Plan. Skillz presumably does so because it 

believes that Delaware law is less favorable to its position on damages than 

California law. But Skillz’s attempt to have its cake and eat it too, by

cherry-picking the applicable law, makes no difference here. Under both 

California and Delaware law, damages for lost stock options in a breach of 

contract action may be measured from a date other than the date of breach

based on equitable considerations, including whether a reasonably available 

market for the stock exists at the time of breach. We therefore reject Skillz’s 

challenges to the remittitur.
29

i. Under California law, breach of contract damages for lost stock 

options need not be measured as of the date of breach

Skillz argues that “California law requires Shah’s stock options be 

valued as of the date of the alleged breach.” (Bolding omitted.) Skillz 

therefore contends Shah’s damages are limited to the difference between the 

exercise price of his vested stock options and the value of Skillz stock at the 

time of his termination, i.e., the date of breach. We disagree. 

California courts have long recognized that “ ‘[t]he rules of law 

governing the recovery of damages for breach of contract are very flexible.’ ” 

(Brandon & Tibbs v. George Kevorkian Accountancy Corp. (1990) 226 

Cal.App.3d 442, 455 (Brandon & Tibbs).) Under California contract law, 

“the theory is that the party injured by a breach should receive nearly as 

possible the equivalent of the benefits of performance. [Citations.] The aim 

is to put the injured party in as good a position as he would have been had 

performance been rendered as promised.” (Ibid.) Accordingly, California 

law generally permits recovery of damages “which might have been 

reasonably contemplated or foreseen by both parties at the time they made 

the contract, as the probable result of the breach.” (Id. at pp. 455–456.)

Consistent with these principles, California law has long recognized 

that damages in breach of contract actions involving “personal property” 

(unlike real property) need not be determined as of the date of breach. 

(Royer v. Carter (1951) 37 Cal.2d 544, 549.) Indeed, Civil Code section 3353

requires that for the sales of some personal property, “the value of the 

property is to be determined, not as of the date of the breach of the contract, 

but as of such time thereafter ‘as would have sufficed with reasonable 

diligence, for the seller to effect a resale.’ ” (Ibid., italics added) And even 

where no California statute requires that contract damages be measured as 
30

of a date other than the date of breach (Sackett v. Spindler (1967) 248 

Cal.App.2d 220, 235 (Sackett) [Civil Code section 3353 does not apply to 

contracts involving sales of stock]), “ ‘[t]he general rule that the measure of 

damages is the difference between the contract price and the market value 

[at the time of breach] is not a hard-and-fast rule, but may be varied if 

circumstances require it’ ” (id. at p. 236, italics added). In particular, the

rule does not apply “ ‘where a better method of measuring loss or damages is 

available under the circumstances,’ ” such as “when there is no market 

available at the time and place of performance.” (Ibid.)

That damages for breach of a contract involving personal property like 

stock options need not be measured as of the date of breach under California

law is further confirmed by Civil Code section 3306. That section states that 

“the detriment caused by the breach of an agreement to convey an estate in 

real property is deemed to be . . . the difference between the price agreed to 

be paid and the value of the estate agreed to be conveyed at the time of 

breach.” (Italics added.) The absence of a similar provision for the breach of 

an agreement to convey any other types of property further suggests that 

California law is not as rigid on damages in breach of contract actions as 

argued by Skillz. Otherwise, the quoted language in Civil Code section 3306 

would serve no purpose.

This is aptly illustrated by Sackett. In that case, the court of appeal 

was tasked with how to measure breach of contract damages after a buyer 

failed to complete an agreed-upon purchase of stock in a newspaper. After 

the buyer reneged on the deal, the seller (the owner of the newspaper) sold 

the stock to a third party almost a year later at a much lower price than the 

contract price. (Sackett, supra, 248 Cal.App.2d at pp. 225–227.) The seller 

then sued the buyer for breach of contract and prevailed. (Id. at p. 224.) In
31

calculating the seller’s damages, the trial court used the original contract 

price and subtracted “all sums of money received by him from” the buyer and 

the “net proceeds” received by the seller from his subsequent sale of the 

stock one year later. (Id. at p. 232.) The buyer appealed, “contend[ing] that 

the [] court erred in measuring damages by the difference between the 

contract price for the stock and the price at which [the seller] ultimately 

resold the stock to a third party.” (Ibid.) According to the buyer, the seller’s 

damages should be the difference between the contract price and the stock’s 

value as of the date of breach. (Ibid.)

The court of appeal disagreed. The court acknowledged that, as a 

“general rule,” “the measure of damages for breach of a contract to accept 

and pay for the stock is the difference between the contract price and the 

market price at the time and place of delivery.” (Sackett, supra, 248 

Cal.App.2d at p. 235.) But it concluded that this rule should not apply 

where, as here, “there is no market available at the time and place of 

performance.” (Id. at p. 236.) Instead, “resort may be had to the market of 

the goods at the nearest available market.” (Ibid.) “[A]nd in the absence of 

an available market, . . . the measure of damages may be . . . the actual 

damages naturally and directly resulting from the buyer’s breach.” (Ibid.) 

Moreover, even where there is an available market for the stock, “ ‘[t]he 

general rule that the measure of damages is the difference between the 

contract price and the market value’ ” at the time of breach may not apply. 

(Ibid.) Applying these principles, the court of appeal, after considering 

events that occurred after the breach, concluded that “the trial court could 

properly conclude that there was no available market for the stock at the 

time of [the buyer’s] breach.” (Ibid.) The court reached this conclusion even 

though the seller was able to sell the stock after the breach, because the 
32

publicization of the purchase agreement made resale extremely difficult for 

the seller after the buyer breached the agreement. (See id. at pp. 236–237

[testimony that the seller was “extremely fortunate to sell his stock” after 

the breach “tends to show the unavailability of a market for the stock at the 

time of the breach”].) The court of appeal therefore held that the trial court 

properly refused to measure damages using the market value of the stock as 

of the date of breach. (Id. at p. 237.) 

In accordance with the principles of contract damages described in 

Sackett, at least one court of appeal has held that damages for the loss of 

stock options due to the breach of a contract may be measured as of a date 

other than the date of breach based on equitable considerations. In Bertero, 

the plaintiff filed an action for declaratory relief “with respect to the rights

and duties of himself and the defendants to three written contracts.” 

(Bertero, supra, 254 Cal.App.2d at p. 129.) In two of those contracts, the 

plaintiff received “options to purchase stock of his employer,” the defendant. 

(Ibid.) The trial court found “the options to be ‘valid, subsisting and 

enforceable’ ” and gave the defendant “the choice of either stipulating that 

[the options] should be extended so that [the plaintiff] should be accorded 

the benefit of a full seven-year term as to each, or of paying damages for 

their breach in the amount found by the trial court.” (Id. at p. 133.) 

In calculating the damages caused by the loss of the stock options, the 

trial court did not use the price of the defendant’s stock on March 29, 1962, 

the date of breach. (See Bertero, supra, 254 Cal.App.2d at p. 140 [the 

defendant wrongfully terminated the plaintiff’s stock options on March 29, 

1962].) Instead, it apparently found that the plaintiff would have exercised 

his options several years later and used the price of the defendant’s stock as 
33

of that later date to calculate the plaintiff’s damages. 17 (See id. at p. 149.) 

In affirming the trial court’s “alternative award for money damages with 

respect to the stock options,” the court of appeal held that the trial court

properly considered the equities, including “events occurring up to the time 

of judgment,” to determine “the ascertainable value of the options.” (Id. at 

p. 150.) Moreover, the court of appeal held that “ ‘[o]ne whose wrongful 

conduct has rendered difficult the ascertainment of the damages cannot 

escape liability because the damages could not be measured with 

exactness.’ ” (Id. at p. 151.)

Finally, measuring damages for lost stock options as of a date other 

than the date of breach if, for example, there is no market available for the 

stock at the time of the breach comports with the theory behind contract 

17 In an unreported decision, a federal district court declined to apply 

Bertero in determining damages in a breach of contract action involving an 

option in a lease agreement because Bertero “is not a traditional breach of 

contract case.” (First Natl. Mortgage Co. v. Federal Realty Investment Trust 

(N.D.Cal. Sept. 12, 2005) 2005 U.S. Dist. Lexis 34285, *16 (First Natl.).) Of 

course, that federal decision is not binding on this court. (Ram’s Gate Winery, 

LLC v. Roche (2015) 235 Cal.App.4th 1071, 1080.) In any event, we do not 

find it persuasive. Although Bertero involved a claim for declaratory relief, 

the trial court’s alternative award of damages was undoubtedly based on the 

damages suffered by the plaintiff due to the defendant’s breach of contract. 

Indeed, notwithstanding the federal district’s assertion to the contrary (see 

First Natl., at p. *5 [“Neither court . . . discussed substantive breach of 

contract damage principles”]), Bertero expressly relied upon fundamental 

principles of contract damages in affirming that damage award (see Bertero, 

supra, 254 Cal.App.2d at pp. 147 [“The employment agreement continued in 

full force and effect and defendants cannot, by their own wrongful act, 

deprive [the plaintiff] of that which had bargained for: the opportunity to 

share in the successes of [the defendant] over a specified period of time”].) 

Moreover, as explained above, the reasoning of Bertero appears to be 

consistent with California law governing contractual damages. (See, supra, 

at pp. 29–32.)
34

damages. As the Third Circuit explained in Scully v. US WATS, Inc. (3d Cir. 

2001) 238 F.3d 497, 510 (Scully), the contract theory of damages “presume[s]

that a plaintiff has the ability to ‘cover,’ in other words, mitigate damages by 

protecting prospective profit, by entering the market to purchase the lost 

shares.” (Ibid., italics added.) Based on this presumption, the contract 

theory “puts the onus on a plaintiff to cover immediately upon the breach.” 

(Ibid., italics added.) Thus, when the plaintiff is, in theory, able to purchase 

his lost shares at the time of the breach, contract “damages are fixed as of the 

breach date.” (Ibid.) 

But that reasoning no longer applies if there is no available market for 

the stock at the time of breach because the plaintiff cannot cover his damages

by purchasing the lost shares immediately upon the breach. In that 

circumstance, “the blurring between conversion and breach of contract 

remedies may be justified” as suggested by Scully, supra, 238 F.3d at page 

512, because “[t]he conversion theory extends the cover date to a ‘reasonable 

time’ into the future” when the plaintiff could have mitigated the damages 

caused by the breach (id. at p. 510). This, in turn, “allows a plaintiff to 

recover, to a limited extent, a relevant benefit of his bargain, namely the 

prospect of future profits which provide the fundamental underpinning to 

stock options” granted to employees of startups like Skillz. (Ibid.; see Bertero, 

supra, 254 Cal.App.2d at p. 141 [the “unique value” of stock options comes 

from the ability of option holders to profit when the sale price of the stock 

exceeds the exercise price of the option].) Indeed, measuring damages from 

the date of breach, rather than a date in the future, in cases where there is no 

market for the stock at the time of the breach does not “achieve the requisite 

end of putting” the nonbreaching party “in the position most closely reflecting 

the one he would have held absent [the] breach.” (Scully, at p. 512.)
35

Moser v. Encore Capital Group, Inc. (S.D. Cal. 2012) 964 F.Supp.2d 

1224 (Moser) reinforces this conclusion. In Moser, the federal district court 

acknowledged that “valuing stock options on the date of the breach is 

typically preferable to utilizing a valuation date that is based solely on a 

plaintiff’s speculation as to when he ‘would have’ exercised his options.” (Id. 

at p. 1226.) However, the court also recognized that “[a] valuation date 

subsequent to the breach may . . . be appropriate in certain limited 

circumstances where ‘adequate evidence confirm[s] a plaintiff’s professed 

intent concerning the exercise’ of his stock options.” (Ibid.) For example, “if 

a plaintiff presents credible, convincing evidence that he would have 

exercised his options on a specific date, then a court may use that date as 

the valuation date.” (Id. at p. 1227.) That evidence should “indicate[] that 

[the plaintiff’s] intent to sell on a particular date was formulated before he 

had the benefit of hindsight.” (Id. at p. 1228; see Scully, supra, 238 F.3d at 

pp. 512–513 [“in the absence of a district court’s express credibility finding 

or other convincing evidence,” we “cannot accept a plaintiff’s after-the-fact 

assertion that he would have sold stock at a time that, in hindsight, would 

have been particularly advantageous”].) Under this reasoning, evidence that 

the plaintiff had little or no ability to sell his stock at the time of the breach 

would appear to justify a valuation date after the date of breach.

The California cases cited by Skillz do not compel a contrary 

conclusion. In Maughan v. Correia (2012) 210 Cal.App.4th 507 (Maughan) 

and Ryan v. Crown Castle NG Networks, Inc. (2016) 6 Cal.App.5th 775 

(Ryan), there was no dispute that damages for the lost stock options should 

be measured as of the date of breach. (See Maughan, at p. 519 [“The parties 

agree that the measure of Maureen’s damages for Maurice’s breach of 

contract is the difference between the fair market value at the time of the 
36

breach of the additional RHI stock Maureen sought to purchase, and the 

agreed upon option price for that stock”]; Ryan, at p. 788 [“Defendant did not 

contest any of the variables used by plaintiff’s expert to calculate” the value 

of the stock options].) Thus, neither case resolved the issue presented here. 

(See In re Noah S. (2021) 67 Cal.App.5th 410, 416 [“ ‘Cases are not authority 

. . . for issues not raised and resolved’ ”].)

The same is true for Peek v. Steinberg (1912) 163 Cal. 127 (Peek). In 

Peek, the plaintiff “was to receive ‘paid up stock in said corporation to the 

amount of $12,000’ ” under the agreement at issue. (Id. at p. 133.) 

Construing that term of the agreement, our high court concluded that the 

plaintiff was not entitled “to receive stock actually worth twelve thousand 

dollars, but merely to have stock of the nominal or par value of twelve 

thousand dollars issued to him.” (Ibid.) It then held that “[t]he measure of 

damages for the failure to issue the stock would, then, be . . . the actual 

value of the stock at the time when [the plaintiff] should have received it.” 

(Id. at p. 134.) But in reaching this conclusion, our high court did not 

consider the equities or any events occurring after the breach because the 

parties apparently presented none. (See id. at p. 134 [“The record discloses 

no substantial evidence tending to show with any approach to accuracy the 

value of stock in the defendant corporation”].) Thus, the court had no 

occasion to consider whether damages should have been measured as of a 

date other than the date of breach based on equitable considerations. (See 

In re Noah S., supra, 67 Cal.App.5th at p. 416.)

In sum, under California law, Shah’s damages are not limited to the 

difference between the exercise price of his stock options and the value of 

Skillz stock on or near the date of his termination (date of breach).
37

ii. Under California law, Shah’s damages were properly 

measured using the price of Skillz stock after the lock-up period 

ended

Skillz contends that even assuming California law allows a valuation 

date other than the date of breach, Shah’s damages still should have been 

calculated as of the date of breach using the value of Skillz stock on or near 

the date of his termination. We disagree. Although damages in breach of 

contract actions, as a general rule, should be measured from the date of 

breach under California law, that rule does not apply where, as here, there 

is no readily available market for the stock at the time of the breach.

At the time of Shah’s termination, shares of Skillz, a private company, 

could not be sold on the open market. Indeed, there was no public market 

for those shares until the IPO. And to the extent there was a market for 

Skillz stock, it was, at best, extremely limited. As a result, measuring 

damages using the value of Skillz stock on the date of breach is not 

appropriate. (See Sackett, supra, 248 Cal.App.2d at p. 236 [general rule 

measuring contract damages as of the date of breach does not apply “when 

there is no market available” on that date].) Indeed, the presumption 

underlying the measure of damages proposed by Skillz—that Shah could 

have covered his potential losses by purchasing his lost shares “immediately 

upon the breach”—is simply inapplicable here. (Scully, supra, 248 F.3d at 

p. 510.) Some “blurring between conversion and breach of contract 

remedies” is therefore justified in this case. (Id. at p. 512.) 

More significantly, measuring Shah’s damages from the date of breach 

ignores what was “reasonably contemplated” by Shah when he joined Skillz 

and entered into the contracts. (Brandon & Tibbs, supra, 226 Cal.App.3d at 

pp. 455–456.) As Shah explained, “[w]hen you join a startup, you join it with 
38

the hope that it goes public and you’re able to participate alongside the 

company’s success.” “[M]any talented individuals [choose] to work for a 

startup company for a below-market cash salary with a substantial stock 

option grant, dreaming of cashing out for a large sum of money after the 

startup’s IPO.” (Unicorn Stock Options, supra, 2019 Colum. Bus. L.Rev. at 

p. 117.) Indeed, Chafkin himself confirmed that this was true for former 

Skillz employees. As he explained, “former [Skillz] employees [who had been 

terminated] are some of the best shareholders” of Skillz stock because “they 

tend to be real believers in the mission . . . .” 

Thus, calculating Shah’s damages as of the date of breach does not 

compensate him for the damages that were “reasonably contemplated or 

foreseen by both parties, at the time they made the contract.” (Brandon & 

Tibbs, supra, 226 Cal.App.3d at pp. 455–456.) We therefore reject Skillz’s 

proposed measure of damages using the value of Skillz stock on or near the 

date of Shah’s termination. And because Skillz proposed no other measure 

of Shah’s damages at trial or in its appellate briefs aside from the 

alternative calculation provided by its expert at trial (which merely 

responded to the calculation provided by Shah’s expert), it is now stuck with 

that calculation.

But even if Skillz had proposed another alternative measure of 

damages, using the price of Skillz stock after the lock-up period ended, as 

the trial court did in the remittitur, still appears appropriate because it is 

“nearly as possible the equivalent of the benefits of performance.” (Brandon 

& Tibbs, supra, 226 Cal.App.3d at p. 455.) This is because Shah was free to 

sell for the first time and without any limitations any and all Skillz stock 

that he would have acquired if he had been allowed to exercise his stock 

options upon his termination on the date the lock-up period ended. Thus, 
39

the remittitur properly measured Shah’s damages from that date, rather 

than the date of breach, under California law.

A contrary ruling under these circumstances would allow a private 

startup company to take away stock options earned by a terminated 

employee with relative impunity before the company has been sold or goes 

public because the financial consequences of doing so would be negligible. 

We are aware of no California case law that contemplates such an 

inequitable result solely because the employee is limited to breach of 

contract damages.

Skillz counters that Shah’s damages should not be calculated from the 

date the lock-up period ended because Shah could have sold Skillz stock in

secondary markets before the IPO. But Skillz never argued at trial that 

Shah’s damages should be calculated based on the value of Skillz stock in 

these secondary markets. It has therefore forfeited the argument. (See 

Miller v. Pacific Gas & Electric Co. (2023) 97 Cal.App.5th 1161, 1170 [“an 

appellate court will generally not consider an issue presented for the first 

time on appeal that could have been but was not presented in the trial 

court”].)

In any event, there is ample evidence that Shah would not have sold 

his Skillz stock in a secondary market before the IPO. Shah testified that he 

would not have done so and did not research whether other Skillz employees 

had done so. Further, Skillz presented no evidence that Shah could have 

availed himself of these markets. Although Paradise testified about their 

existence, he did not explain how Shah could have accessed them and had no 

idea how many Skillz employees sold their shares in those markets. Indeed, 

Paradise himself did not sell any of his shares in secondary markets. 

Chafkin testified that Skillz facilitated some secondary sales by asking 
40

“people inside the company if they wanted to participate in the transaction” 

and “enabled them to sell a portion of their stock.” (Italics added.) But 

Chafkin did not explain how Shah, a former employee, would have 

participated in those sales. 

Moreover, Shah provided “credible, convincing evidence” that he would 

not have sold any Skillz stock before the IPO even if he lacked “the benefit of 

hindsight.” (Moser, supra, 964 F.Supp.2d at pp. 1227–1228.) First, the 

absence of a readily available market for Skillz stock before the IPO strongly 

supports Shah’s claim that he would not have sold his Skillz stock in any 

secondary market. Second, Shah’s testimony that he would have followed 

the lead of Chafkin, Paradise, and most other Skillz employees who did not 

sell their Skillz stock before the IPO provides additional “objective” evidence 

that Shah was “not simply picking an advantageous date with the benefit of 

hindsight.” (Id. at p. 1229 [evidence that the plaintiff would have followed 

the lead of his “guru” and other “insiders” is sufficient to support his claim 

that he would have sold the stock at a date other than the date of breach].) 

Third, Shah’s willingness to accept Skillz stock and forgo any monetary 

remuneration as compensation for consulting work immediately before his 

termination provides further evidence that he believed in the company and 

its prospects for sale or an IPO. Finally, Chafkin’s testimony that 

terminated Skillz employees were “some of the best shareholders” and “real 

believers in the mission” of Skillz indicates that Shah’s claim that he would 

not have sold his stock in any secondary market was credible. Thus, the 

trial court did not err by ignoring these secondary markets in determining 

the remittitur amount. 

Skillz also attacks an underlying finding behind the trial court’s 

remittitur—that Shah would have exercised all of his vested stock options 
41

within 90 days of his termination as permitted by the Plan. According to 

Skillz, Shah did not present sufficient evidence that he would have done so. 

We disagree. Shah told Chafkin that he wanted to exercise his options on 

the day he was terminated. Even after Chafkin told Shah that his options 

had been forfeited because he had been terminated for cause, Shah “tried to 

exercise a small portion of” his options approximately one month later when 

he did not receive anything in writing from Skillz about the forfeiture of his 

options. This time Skillz notified Shah in writing that his options were void 

under his stock option agreement. This is more than enough evidence to 

support the jury’s finding that Shah would have exercised all of his options 

within three months of his termination. (See Padideh v. Moradi (2023) 89 

Cal.App.5th 418, 446 [“Our substantial-evidence review begins and ends 

with our ascertaining that there is sufficient evidence in the record, 

contested or uncontested, to support the jury’s verdict and its implied 

finding[s]”].) 

In any event, Skillz, through its breach, rendered futile any attempt by 

Shah to exercise his stock options after his termination. Thus, the trial 

court properly assumed that Shah would have exercised all of his options in 

calculating Shah’s damages. (See Oldenkott v. American Electric Inc. (1971) 

14 Cal.App.3d 198, 203–204 [jury may “premise the damage caused by the 

loss of the option right upon the probable” losses the “plaintiff might have 

recovered under the contract were he permitted to exercise the option” 

because the defendant deprived him of that right].)

Accordingly, we find that, under California law, the trial court did not 

err by declining to measure Shah’s damages as of the date of breach using 

the value of Skillz stock at the time of Shah’s termination. In doing so, we 

reject Skillz’s only proposed alternative to the measure of damages adopted 
42

by the court in the remittitur. We therefore find that the court properly 

used the price of Skillz stock after the lock-up period ended—when Shah was 

free to sell that stock for the first time on the open market like any other 

former and current employee of Skillz—to calculate his damages.

iii. Under Delaware law, Shah’s damages should also be 

measured as of a date other than the date of breach

By arguing that Delaware law governs under the choice-of-law 

provision that it drafted, Skillz appears to have conceded that Delaware 

contract law may be applied here. (Airs Aromatics, supra, 50 Cal.App.5th at 

p. 1014.) Indeed, Skillz’s only argument against the application of Delaware 

law—that Shah waived enforcement of that choice-of-law provision—appears 

dubious at best. Although Shah did not rely on Delaware law below or 

initially on appeal, there is no evidence that Shah deliberately rejected 

Delaware law or strategically chose California law over Delaware law. (See 

Weber, Lipshie & Co. v. Christian (1997) 52 Cal.App.4th 645, 659.) Nor does 

Skillz argue otherwise. Given that Skillz chose Delaware law when it 

drafted the Plan and invoked Delaware law when it benefitted from it, Skillz 

can hardly complain that it is unfair for Shah or this court to invoke

Delaware law too. (See Applera Corp. v. MP Biomedical, LLC (2009) 173 

Cal.App.4th 769, 792.) And by selectively invoking California or Delaware 

law when that law was more favorable to its position, Skillz has arguably 

given this court discretion to apply either state law in affirming the 

remittitur. 

We, however, have no need to exercise that discretion here because, 

under Delaware law as well, Shah’s damages should not be measured as of 

the date of breach using the value of Skillz stock on his termination date. 

Indeed, longstanding Delaware precedents establish that damages for lost 
43

stock options in a breach of contract action may be measured as of a date 

other than the date of breach based on equitable considerations. Moreover, 

the stock price used to calculate damages for lost stock options need not be 

the price on the date of breach under Delaware law even when damages are 

measured from that date. This is because Delaware courts regularly apply 

“a variation of the formula used in conversion cases” in breach of contract 

actions involving lost stock options. (American General Corp. v. Continental 

Airlines Corp. (Del.Ch.Ct. 1992) 622 A.2d 1, 8 (American General).)

The Delaware Chancery Court made this clear over 30 years ago. In 

American General, American General Corporation (AGC), entered into a 

loan agreement with Continental Airlines Corporation (Continental). 

(American General, supra, 622 A.2d at p. 3.) Under that agreement, AGC 

received, among other things, warrants permitting it to acquire a certain 

number of shares of Continental at a specified exercise price. (Ibid.) After 

Continental filed for bankruptcy, it merged with Texas Air Corporation 

(Texas Air). (Ibid.) Under the merger, Continental employees received an 

option to buy a certain amount of Texas Air stock for every share of 

Continental stock they owned. (Id. at p. 4.) Continental and Texas Air did 

not, however, give this same option to AGC, and the Delaware court found 

that Continental and Texas Air breached the loan agreement by failing to do 

so. (Id. at p. 3.) Although the date of breach was the date of the merger, the 

court held “it would not be equitable to measure damages from that date.” 

(Id. at p. 7, italics added.) Instead, the court held that damages should be 

measured as of the date the merger was approved by stockholders because 

the “option was not ‘issued or payable’ ” until then. (Ibid.) 

More notably, the Delaware Chancery Court applied the “ ‘highest 

intermediate value formula,’ ” a “conversion formula of damages,” to 
44

calculate the damages suffered by AGC. (American General, supra, 622 A.2d 

at p. 8, italics added.) As the court explained, “a plaintiff’s damages are 

generally measured by what is necessary to put it in as good a position as it 

would have occupied had there been full performance of the contract.” 

(Ibid.) Because “[t]he defendant’s acts prevent[ed] [the] court from 

determining with any degree of certainty what the plaintiff would have done 

with his securities had they been freely alienable,” “ ‘fundamental justice 

requires that, as between [the plaintiff] and [the defendant], the perils of 

such uncertainty should be “laid at [the] defendant’s door.” ’ ” (Id. at p. 10.) 

During the three decades since American General was decided, 

Delaware courts have regularly followed it. For example, these courts have 

applied the conversion measure of damages used in American General to 

calculate damages in breach of contract actions involving similar properties 

like stocks. (See, e.g., Diamond Fortress Technologies, Inc. v. EverID, Inc. 

(Del.Sup.Ct. 2022) 274 A.3d 287, 307–308 (Diamond Fortress) [applying the 

“New York rule” adopted by American General in a breach of contract action 

involving “the wrongful conversion of stock or properties of like character”]; 

Duncan v. Theratx, Inc. (Del. 2001) 775 A.2d 1019, 1022–1023 (Duncan)

[applying the highest intermediate value framework to calculate damages in 

a breach of contract action involving wrongful restrictions on the sale of 

stock].) Thus, American General and its holding relevant to our decision in 

this case—that courts may measure damages from a date other than the 

date of breach in breach of contract actions involving stocks or stock options 

based on equitable considerations—appears to be well-established under 

Delaware law.

In any event, even when damages are measured from the date of 

breach, Delaware courts have declined to use the stock price at the date of 
45

breach to determine the value of lost stock options. In Comrie v. Enterasys 

Networks, Inc. (Del.Ch.Ct. 2003) 837 A.2d 1 (Comrie), the plaintiffs entered 

into an agreement with the defendant that, among other things, granted the 

plaintiffs options to purchase shares in a subsidiary of the defendant. (Id. at 

pp. 10–11.) The stock options were granted pursuant to a vesting schedule, 

and any unvested options were extinguished if the plaintiff was terminated 

by the defendant. (Id. at p. 11.) Upon termination, each plaintiff had 90 

days to exercise any vested options. (Ibid.) The agreement further provided 

that, if the defendant decided not to conduct an IPO for the subsidiary, then 

the plaintiffs would receive “equivalent substitute or replacement awards” or 

a set amount of cash. (Id. at p. 10.) The defendant decided not to pursue an 

IPO for the subsidiary and converted the plaintiffs’ options for shares of 

stock in the subsidiary into options for shares of stock in the defendant on 

August 24, 2001. (Id. at p. 11.) The monetary value of those new stock 

options, however, was far less than the value of the original options at the 

time the parties entered into the agreement. (Id. at pp. 11–12.) The 

plaintiffs sued the defendant for breach of contract, and the Delaware 

Chancery Court found that the defendant “breached its obligations under 

the” agreement. (Id. at p. 17.)

To calculate the plaintiffs’ damages, the Delaware court used the date 

of the breach—August 24, 2001—to determine the “equivalent” options in 

the defendant’s stock that the plaintiffs should have received under the 

agreement. (Comrie, supra, 837 A.2d at p. 19.) But to calculate the damages 

caused by the loss of those options, the court “consider[ed] events that took 

place after the date [of breach] in order to aid in its determination of the 

proper expectations [of the plaintiffs] as of the date of breach.” (Id. at p. 20.) 

As a result, the court did not use the price of the defendant’s stock at the 
46

time of breach to determine the plaintiffs’ damages. Instead, the court, 

applying the same conversion formula used in American General, used the 

“highest intermediate price” of the defendant’s stock during the 90-day 

period after the plaintiffs could have exercised the new options to calculate 

their damages. The court chose this 90-day period because the plaintiffs “ 

‘could have sold’ ” their shares of the defendant’s stock on the open market 

“ ‘ “without depressing th[at] market” ’ ” during that time period if the 

defendants had not breached the agreement. (Comrie, at p. 20.) In so doing, 

the court fulfilled the reasonable expectations of the plaintiffs at the time of 

breach and resolved any uncertainties in their “favor.” (Id. at p. 19.)

Like California law (see Brandon & Tibbs, supra, 226 Cal.App.3d at 

p. 455 [“The aim is to put the injured party in as good as a position as he 

would have been had performance been rendered as promised”]), Delaware 

law applies the “principle of expectation damages” in breach of contract 

actions and measures those damages “by the amount of money that would 

put the promisee in the same position as if the promisor had performed the 

contract” (Duncan, supra, 775 A.2d at p. 1022). And like California law—

which permits recovery of any damages that “might have been reasonably 

contemplated or foreseen by both parties at the time they made the contract”

(Brandon & Tibbs, at pp. 455–456)—Delaware law focuses on the “reasonable 

expectations of the parties ex ante” in determining damages for breach of 

contract (Duncan, at p. 1022). 

Moreover, consistent with Bertero, Delaware courts consider the 

equities in determining the proper measure of damages in breach of contract 

actions involving lost stock options (compare Bertero, supra, 254 A.2d at 

p. 147 with American General, supra, 622 A.2d at p. 7), including “events 

occurring up to the time of judgment” (compare Bertero, at p. 150 with 
47

Comrie, supra, 837 A.2d at p. 20). Further, the Delaware courts in Duncan,

supra, 775 A.2d at page 1023, American General, supra, 622 A.2d at page 1, 

and Comrie, supra, 837 A.2d at page 20, have applied the same legal 

principle applied in Bertero, at page 151: “ ‘One whose wrongful conduct has 

rendered difficult the ascertainment of the damages cannot escape liability 

because the damages could not be measured with exactness.’ ” Because of 

these similarities between California and Delaware law, the same reasoning 

used by this court to reject Skillz’s argument that Shah’s damages should be 

measured as of the date of breach under California law may also be used to 

reject that argument under Delaware law. (See, supra, at pp. 37–39.) 

Indeed, our ruling under California law is narrower in scope than the 

rulings made by our judicial colleagues in Delaware, who have held that a 

conversion theory of damages, i.e., the New York Rule, applies in every 

breach of contract action involving stocks or stock options. Because Skillz 

only challenges the remittitur on the ground that Shah’s damages should be 

calculated as of the date of breach and because neither party challenges the 

formula used by the trial court to calculate damages once the valuation date 

has been set, we need not decide whether and when a conversion formula 

applies in breach of contract actions under California law.18

Finally, at oral argument, Skillz argued that this court should remand 

for a new trial on damages if it applies Delaware law because Skillz would 

have presented additional evidence at trial had it known that Delaware, 

rather than California, law might govern. Of course, this argument is now 

18 Neither party has ever challenged the remittitur’s use of the average 

price of Skillz stock over a particular time period to calculate Shah’s 

damages. Accordingly, they have forfeited any such challenge. (See Lui v. 

City and County of San Francisco (2012) 211 Cal.App.4th 962, 970, fn. 7 

[failure to make argument on appeal forfeits it].)
48

moot because we reject Skillz’s arguments under both California and 

Delaware law. Moreover, Skillz waived its remand argument by conceding 

that Delaware law governed Shah’s stock options in its reply brief (see 

Martin v. PacifiCare of California (2011) 198 Cal.App.4th 1390, 1410 [by 

conceding preemption, the plaintiffs waived any preemption “contention”]) 

and forfeited that argument by failing to raise it in its supplemental brief

(see Vaughn v. Tesla, Inc (2023) 87 Cal.App.5th 208, 228 [the defendant 

forfeited any argument raised “for the first time at oral argument”].) 

In any event, there is no reason to believe that Skillz would have acted 

any differently if it believed that Delaware law applied. Despite its assertion 

that California law is clear and requires that damages be measured from the 

date of breach, Skillz presented through expert testimony an alternative 

calculation of Shah’s damages using a different valuation date—the date the 

lock-up period ended. Thus, Skillz contemplated the possibility that Shah’s 

damages may be measured from a date other than the date of breach under 

California law. Yet, Skillz chose not to present an alternative calculation 

using the value of Skillz stock in the secondary markets even though it 

presented evidence of those values at trial. More notably, Skillz does not

explain how the parties’ reliance on California law at trial prevented Skillz

from presenting that alternative calculation or additional supporting 

evidence to the jury especially in light of the California cases discussed above. 

Accordingly, we reject Skillz’s challenges to the remittitur under 

Delaware law as well.

2. Shah’s Challenge to the Measure of Damages Adopted by the Trial 

Court in the Remittitur

In his cross-appeal, Shah argues that the jury’s verdict should be 

reinstated because the amount of the remittitur “lacks substantive support.” 
49

According to Shah, the trial court, “by choosing between the experts’ 

valuation of” his damages, agreed that “post-IPO-sale damages were proper.” 

Then, in a leap of logic that is hard to follow, he contends the court could not 

have found “excessive damages” and should not have rejected the measure of 

damages adopted by the jury. 

But the measure of damages was a question of law to be decided by the 

court. (Toscano, supra, 124 Cal.App.4th at p. 691.) And the trial court, by 

adopting the alternative calculation proffered by Skillz’s expert, instead of 

the calculation proffered by Shah’s expert and adopted by the jury, 

necessarily concluded that the jury verdict was excessive because it:

(1) erroneously assumed that Shah would have sold 18.9 percent of his 

shares at the early release; and (2) erroneously used the average price of 

Skillz stock over a two-week period after the lock-up period ended to 

calculate Shah’s damages. Shah does not explain how the court erred by 

reaching these conclusions. Indeed, Shah never argues that those 

conclusions were erroneous. As explained above, the measure of damages 

adopted by the court in the remittitur comports with both California law and 

Delaware law. (See, supra, at p. 28.) Accordingly, we reject this challenge to 

the remittitur made by Shah and affirm the court’s adoption of the approach 

taken by Skillz’s expert.

D. The Trial Court’s Exclusion of Damages for Breach of the 

Performance Grant in the Remittitur

In his last challenge to the remittitur, Shah contends the trial court 

erred by excluding damages for breach of the Performance Grant (the third 

contract). To justify this reduction in Shah’s damage award, the court 

referenced Skillz’s argument that Shah did not “properly” plead a breach of 

this third contract. In that argument, Skillz claimed that Shah could not 
50

recover damages for breach of the Performance Grant because the FAC 

“failed to apprise Skillz of a need to prepare a defense as to breach of the 

[Performance Grant] and that [this] failure affected Skillz’s substantial 

rights.” We disagree.19 

“No error or defect in a pleading is to be regarded unless it affects 

substantial rights.” (Buxbom v. Smith (1944) 23 Cal.2d 535, 542.) “The 

primary function of a pleading is to give the other party notice so that it may 

prepare its case [citation], and a defect in a pleading that otherwise properly 

notifies a party cannot be said to affect substantial rights.” (Harris v. City of 

Santa Monica (2013) 56 Cal.4th 203, 240.) 

Here, the FAC notified Skillz that the stock options awarded under the 

Performance Grant were at issue even though the FAC did not attach the 

Performance Grant as an exhibit or expressly allege a breach of that 

contract. In the breach of contract cause of action, the FAC alleged that 

Shah entered into the Employment Contract—which awarded Shah 69,487 

stock options as memorialized in the Notice. It then alleged that Shah’s 

compensation under the Employment Contract was “adjusted” through an 

award of additional stock options under the Performance Grant and that, by

depriving him of those additional options, Skillz breached both the 

Employment Contract and the Notice. Finally, the FAC expressly sought 

“[r]estoration of [] Shah’s vested options to purchase 30,000 shares of Skillz

[] granted pursuant to the Performance Grant.” Read together, these 

allegations provided more than sufficient notice to Skillz that Shah was 

seeking damages for breach of the Performance Grant. 

19 Because we find that the trial court erred by excluding these 

damages, we do not address Shah’s argument that the court lacked 

jurisdiction under section 660 to amend the remittitur to exclude them.
51

In any event, Skillz does not appear to argue that any deficiencies in 

the FAC prevented it from preparing and presenting its defense to Shah’s 

claim for breach of the Performance Grant. Nor could it. At trial, Skillz did 

not object to the admission of the Performance Grant into evidence, and 

various witnesses testified without objection about that contract during trial. 

Indeed, Skillz’s own expert accounted for the value of the Performance Grant 

options in his damage calculations. And most notably, Skillz’s counsel

conceded after the close of evidence that the Performance Grant was at issue: 

“I’m not arguing that these performance grants are not in the case. I believe 

that, if the jury were to reach a verdict for plaintiff, there could include a 

damage award for the grants.” 

Finally, to the extent that the FAC failed to expressly allege a breach of 

the Performance Grant, this omission is immaterial because the Performance 

Grant “alter[ed] the terms” of the Employment Contract. As Skillz concedes 

in its supplemental brief, “[t]hat means that the Employment Contract, if 

breached, is breached as altered.” Therefore, by alleging a breach of the 

Employment Contract as altered, the FAC necessarily alleged a breach of the 

Performance Grant. Thus, any defect in the FAC could not have affected 

Skillz’s substantial rights, and the trial court abused its discretion by 

excluding damages for the breach of the Performance Grant in its amended 

remittitur. (See Dell’Oca v. Bank of New York Trust Co., N.A. (2008) 159 

Cal.App.4th 531, 547 [“a reduction in the amount of damages as a condition 

of denying” a new trial motion may be reversed if “it plainly appears the court 

has abused its discretion”].)

E. Stock Options Are Not Wages Under the Labor Code.

In the last argument of his cross-appeal, Shah contends we should 

reverse the trial court’s directed verdict dismissing his tort claims for 
52

retaliation and wrongful termination. According to Shah, the court erred 

when it concluded that stock options are not “wages” under the Labor Code. 

Shah therefore requests that we remand these claims for a new trial so he 

may pursue “tort damages, including punitive damages and attorneys’ fees.” 

We review de novo a directed verdict and find no error here. (Brassinga v. 

City of Mountain View (1998) 66 Cal.App.4th 195, 210.)

Shah acknowledges that his tort claims fail if stock options are not 

“wages” under the Labor Code. That Code defines “wages” as “all amounts

for labor performed by employees of every description, whether the amount 

is fixed or ascertained by the standard of time, task, piece, commission basis, 

or other method of calculation.” (Lab. Code, § 200, subd. (a), italics added.) 

It then makes it “unlawful for any employer to collect or receive from an 

employee any part of wages theretofore paid by said employer to said 

employee.” (Id., § 221.) 

We agree with Skillz that stock options are not wages because they “are 

not ‘amounts.’ They are not money at all. They are contractual rights to buy 

shares of stock.” (International Business Machines Corp. v. Bajorek (9th Cir. 

1999) 191 F.3d 1033, 1039 (IBM); see Falkowki v. Imation Corp. (9th Cir. 

2002) 309 F.3d 1123 [stock “ ‘options are not “wages” ‘ under [the Labor 

Code’s] definition of the term ‘wages’ ”].) This conclusion comports with the 

purpose behind Labor Code section 221. As the Ninth Circuit explained in 

IBM, “[t]he amount of money for which the shares can be sold on the market 

varies unpredictably from time to time, so it is not ‘fixed or ascertainable’ by 

any method of calculation when the agreements are made or exercised.” 

(Ibid.) Thus, the purposes behind Labor Code section 221 of “avoiding secret 

kickbacks enabling an employer to avoid minimum wage laws” and 
53

“protecting employees’ reliance interests in their expected wages, do not 

apply to stock options.” (IBM, at p. 1039.)

Shah counters with Schachter v. Citigroup, Inc. (2009) 47 Cal.4th 610

(Schachter) and claims that Schachter “settled the issue” that “all 

‘compensation,’ including ‘incentive compensation’ like stock options, is 

wages.” We disagree. Schachter did not involve stock options; it involved

shares of restricted stock under an employer’s incentive compensation plan. 

(Id. at p. 614.) The employee in Schachter elected to receive, in lieu of cash 

payment, a percentage of his annual compensation in the form of restricted 

stock shares. (Ibid.) The plan provided that the shares were subject to a 

two-year vesting period and that the employee forfeited these shares if he or 

she resigned or was terminated for cause before the end of that two-year 

period. (Id. at p. 615.) 

The main issue in Schachter was whether the employee’s unvested 

shares constituted “earned wages” making their forfeiture following the 

employee’s resignation a violation of Labor Code sections 201 and 202. 

(Schachter, supra, 47 Cal.4th at pp. 618–619.) As a threshold matter, our 

Supreme Court stated that incentive compensation including restricted stock 

constituted wages—which the employer did not dispute. (Ibid.) The court 

then held that because the employee agreed to the terms of the vesting 

schedule, “the Plan’s forfeiture provision [did] not run afoul of [Labor Code] 

sections 201 or 202 because no earned wages remain unpaid upon 

termination for cause or resignation.” (Id. at p. 623.)

Schachter’s dicta that restricted stock are wages does not mean that 

stock options should also be considered wages. Restricted stock shares have 

an ascertainable value and are immediately issued to the employee (subject 

to certain restrictions on their sale). (See Schachter, supra, 47 Cal.4th at 
54

p. 614.) By contrast, stock options merely grant the holder a contractual 

right to buy shares of stock at a later date at an agreed upon exercise price. 

Whether and when the holder chooses to exercise these options and what the 

market value of the stock will be at some future date at the time the holder 

chooses to exercise the options are unknown and undeterminable at the time 

of the grant. While we recognize that companies, especially startups like 

Skillz, often award stock options to incentivize employees to join and stay 

with the company for less cash pay, this does not make them “wages” under 

the Labor Code because those wages must be fixed or ascertainable 

“amounts.” (Lab. Code, § 200, subd. (a); see also Walter v. Adaptive Insights, 

Inc. (N.D.Cal. May 23, 2019) 2019 U.S.Dist. Lexis 243550, *3–*4 [Schachter 

did not supersede IBM because it did not “address[] stock options” or defin[e] 

‘wages’ under the California Labor Code”].)

By declining to find that stock options are wages under the Labor Code, 

we do not leave employees who are wrongfully denied their options without 

recourse. For example, those employees, like Shah, may still pursue a 

breach of contract claim to recover the value of any options they wrongfully 

lost. Our ruling only limits their ability to recover tort damages and

attorney fees. Accordingly, we affirm the directed verdict for Skillz on 

Shah’s tort claims. And because we do so solely on the ground that stock 

options are not wages under the Labor Code, we need not address Skillz’s 

argument that Shah cannot establish prejudice. 

III. DISPOSITION

The amended judgment of $4,358,358 is reversed. The matter is 

remanded to the trial court with directions to enter a new judgment in the 

amount of $6,694,000, which includes damages for breach of the Performance 

Grant as calculated by Skillz’s expert using the average price of Skillz stock 
55

after the lock-up period ended. The judgment is affirmed in all other 

respects. In the interests of justice, both parties shall bear their own costs. 

(Cal. Rules of Court, rule 8.891, subd. (a)(4).)
56

CHOU, J.

We concur.

SIMONS, Acting P.J.

BURNS, J.

Shah v. Skillz Inc. / A165372
57

A165372 / Shah v. Skillz Inc.

Trial Court:City & County of San Francisco Superior Court

Trial Judge: Hon. Suzanne Ramos Bolanos

Counsel: Eric Andrew Hiduke; William R. Herochik; Law Offices of 

Michael G. Ackerman and Michael G. Ackerman; Law Office of Ted W. 

Pelletier and Ted W. Pelletier for Plaintiff.

Orrick, Herrington & Sutcliffe, Amari L. Hammonds, Sheila Baynes, Lynne 

Charlotte Hermle, Joseph Charles Liburt, Jillian Victoria Kaltner, Andrew 

David Silverman , and Jodie Liu for Defendant.