May 20, 2018

May 18, 2018

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BEWARE: In Bankruptcy, “Equity Compensation” Treated As Equity, Not Compensation

In a January 25, 2018 decision, In re: Lehman Brothers, Inc., the Second Circuit of the United States Court of Appeals upheld a lower court decision that restricted stock unit (RSUs) claims filed by former Lehman Brothers employees were securities claims, not creditor claims – putting the compensation claims behind the claims of creditors.  The Second Circuit accepted the lower court analysis that the employees “had … a choice” regarding compensation terms, which in our experience is often not true.  In reliance on the notion of choice, the Second Circuit agreed that, “Because [the employees] assumed the risk and reward expectations of shareholder when they agreed to receive compensation in the form of RSUs, [their claims] must be subordinated.”



About this Author

Brian J MacDonough, Employment Law, Sherin and Lodgen Law Firm

Brian J. MacDonough concentrates his practice in employment law and executive advocacy. He handles a wide range of matters, including discrimination, retaliation, whistleblowing, wage and hour issues, wrongful termination and contract negotiation and enforcement.

Brian has litigated cases in both federal and state courts in Massachusetts. He appears regularly before the Massachusetts Commission Against Discrimination. He also counsels and represents clients regarding employment agreements, severance terms and non-competition provisions.