In re Lehman Brothers Holdings Inc.
- Summarized by Eduardo Glas , Law Office of Eduardo Glas PC
- 5 years 10 months ago
- Case Type:
- Case Status:
- 16-1296; 16-1304; 16-1306; 16-1360; 16-1361; 16-1363; 16-1365; 16-1367 (2nd Circuit, May 04,2017) Not Published
- Claims filed by Lehman employees on account of restricted stock units, giving them a contingent right to own Lehman stock after a five-year holding period, were properly subordinated to the claims of general creditors pursuant to 11 U.S.C. Section 510(b) because the restricted stock units are securities that the claimants acquired in a purchase and the claims for damages arise from that purchase or the asserted rescission thereof.
- Procedural context:
- The claims of the employees were objected to by the debtor during the bankruptcy proceeding. The bankruptcy court disallowed and/or subordinated the claims pursuant to Section 510(b). The district court affirmed the decision of the bankruptcy court. The Second Circuit affirmed by holding only that the claims were properly subordinated under Section 510(b). The Second Circuit did not reach the alternative ground used by the Bankruptcy Court and the District in the disallowing the claims because the RSUs were "equity securities" under 11 U.S.C. Section 101(16) and as such its holders are barred from asserting proofs of claim.
- When Lehman filed for bankruptcy in 2008, thousands of its employees were holding Restricted Stock Units( "RSUs") that had been awarded over the preceding five years, but that had not yet vested. Many of those employees filed proofs of claim in the bankruptcy proceeding, seeking cash payments in the amounts of and as substitutes for compensation they had been paid in RSUs. Lehman filed omnibus objections to the claims.
- Jacobs, Sack and Carney
ABI Membership is required to access the full summary. Please Sign In using your ABI Member credentials. Not a Member yet? Join ABI now - it is absolutely worth it!