Bloomberg Law’s® Bankruptcy Law News publishes case summaries of the most recent important bankruptcy law decisions, tracks major commercial bankruptcies, and reports on developments in bankruptcy...
By Daniel Gill
Former Lehman Brothers and Barclays star trader Jonathan Hoffman will be able to assert a claim against Lehman’s bankruptcy estate for $7.7 million of unpaid bonuses, the Second Circuit Court of Appeals ruled July 27. But the court otherwise left intact the district court’s finding that $83 million of bonus had already been paid by Barclays, and Hoffman wouldn’t be allowed to seek that compensation in Lehman’s bankruptcy case ( 1EE LLC v. Giddens ( In re Lehman Bros. Holdings Inc.) , 2017 BL 260154, 2d Cir., 16-2737, 7/27/17 ).
The summary, non-precedential order by the court also found that former employee Wayne Judkins was paid his entire promised bonus by Barclays and wouldn’t be able to pursue the bankruptcy case for the same award.
In the fall of 2008, Lehman Bros. filed what remains one of the largest and most consequential business bankruptcies in U.S. history. Almost immediately after the filing, Barclays acquired most of Lehman’s assets and employed many of the company’s employees, including Hoffman and Judkins. Barclays agreed to pay those transferred employees the bonuses promised by Lehman.
Hoffman garnered some notoriety when he sought to recover from the Lehman bankruptcy case about $83 million of bonuses owed him when Lehman filed its bankruptcy case in 2008, even though Barclays paid him the amounts as they agreed in the asset purchase agreement. Hoffman argued that what Barclays paid was independently negotiated compensation and didn’t absolve Lehman of its debt to pay the bonus.
The bankruptcy court conducted hearings and determined that Barclays paid the majority of Hoffman’s bonus claim—all but a $7.7 million “claw back” for 2007—and all of Judkin’s $800,000 bonus.
On appeal, the district court ruled that Hoffman can’t pursue the $7.7 million claw-back either.
The Second Circuit returned the decision to that made by the bankruptcy court. The bankruptcy court found that the $7.7 million obligation was not assumed by Barclays in its asset purchase agreement, meaning Barclays had no obligation to pay it. The circuit court found no error in that determination.
Accordingly, Hoffman can pursue a claim in the bankruptcy case to recover the $7.7 million. But Hoffman gets no second bite at the apple as to the $83 million of bonuses that Barclays paid him.
The panel consisted of Circuit Judges Dennis Jacobs and Debra Ann Livingston, and District Judge George B. Daniels, sitting by designation.
The appellant assignee for Hoffman was represented by Douglas P. Baumstein, White & Case LLP, New York and Thomas M Mullaney, New York. Gregory L. Reid, Reid Rodriguez & Rouse, LLP, represented Judkins.
The liquidation trustee was represented by James C. Fitzpatrick, Hughes Hubbard & Reed LLP, New York.
To contact the reporter on this story: Daniel Gill in Washington at email@example.com
To contact the editor responsible for this story: Jay Horowitz at JHorowitz@bna.com
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)