• Lehman Ruling Sets Stage for Future Subordination Contests
  • September 8, 2017 | Author: Christopher J. Bosch
  • Law Firm: Sheppard, Mullin, Richter & Hampton LLP - New York Office
  • In the case In re Lehman Brothers Holdings Inc., 855 F.3d 459 (2d Cir. 2017), the U.S. Court of Appeals for the Second Circuit affirmed a district court order subordinating the claims of former Lehman Brothers employees for undelivered equity-based compensation to those of the defunct bank’s general creditors. The court determined the compensation benefits were securities that had been purchased by the former employees when they agreed to receive them in exchange for their labor and the asserted damages arose from those purchases, requiring the claims’ subordination under the Bankruptcy Code. The decision is important to employees and employers weighing the valueof hybrid compensation packages and creditors seeking to safeguard their priority position among bankruptcy claimants.