In re: Lehman Bros., No. 16-1296 (2d Cir. 2017)Annotate this Case
After Lehman Brothers filed for Chapter 11 bankruptcy, 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 and had thus been rendered worthless by the bankruptcy filing. The employees filed proofs of claim in the Chapter 11 proceeding and Lehman Brothers filed omnibus objections to the claims. The Second Circuit noted that it need not determine whether an RSU is an "equity security" under 11 U.S.C. 101(16), because, even if it is, RSU holders are not barred from asserting proofs of claim—such as the breach‐of‐contract claims asserted here—inasmuch as at least some of their claims are not duplicative of proofs of interest. However, the Second Circuit affirmed and concluded that Lehman Brothers' omnibus objections must nonetheless be sustained on the alternative ground that, pursuant to section 510(b) of the Bankruptcy Code, 11 U.S.C. 510(b), the claims must be subordinated to the claims of general creditors because, for purposes of this statute, (1) RSUs are securities, (2) the claimants acquired them in a purchase, and (3) the claims for damages arise from those purchases or the asserted rescissions thereof.