Lehman Brothers Inc.

FOR PUBLICATION
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
In re
LEHMAN BROTHERS INC.,
Debtor.
Chapter 11
Case No. 08-01420 (SCC)
POST-TRIAL MEMORANDUM DECISION
GRANTING IN PART AND DENYING IN PART TRUSTEE’S AMENDED OBJECTION
TO THE GENERAL CREDITOR PROOFS OF CLAIM FILED BY
CERTAIN FORMER EMPLOYEES OF LEHMAN BROTHERS INC.
A P P E A R A N C E S :
HUGHES HUBBARD & REED LLP
One Battery Park Plaza
New York, NY 10004
By: 	James B. Kobak, Jr., Esq.
Savvas A. Foukas, Esq.
Samuel C. McCoubrey, Esq.
Gregory C. Farrell, Esq.
Karen M. Chau, Esq.
Attorneys for James W. Giddens, as
Trustee for the SIPA Liquidation of Lehman Brothers Inc.
WHITE & CASE LLP
1155 Avenue of the Americas
New York, NY 10036
By: 	Douglas P. Baumstein, Esq.
Andrew C. Ambruoso, Esq.
Spencer Willig, Esq.
THE LAW OFFICES OF THOMAS M. MULLANEY
489 Fifth Avenue, Suite 1900
New York, NY 10017
By: 	Thomas M. Mullaney, Esq.
Attorneys for 1EE LLC
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REID RODRIGUEZ & ROUSE, LLP
1120 Avenue of the Americas, 4th Floor
New York, NY 10036
By: 	Gregory L. Reid, Esq.
Attorneys for Wayne Judkins
KASOWITZ, BENSON, TORRES & FRIEDMAN LLP
1633 Broadway
New York, NY 10019
By: 	David J. Mark, Esq.
Ross G. Shank, Esq.
Attorneys for Richard Hajdukiewicz
THOMPSON & KNIGHT LLP
900 Third Avenue, 20th Floor
New York, NY 10022
By: 	Jennifer A. Christian, Esq.
Robert L. Paddock, Esq.
Attorneys for J. Robert Chambers
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TABLE OF CONTENTS
PROCEDURAL HISTORY..........................................................................................................3
LEGAL STANDARD...................................................................................................................6
FINDINGS OF FACT...................................................................................................................6
I. 	Background .......................................................................................................................6
A. The Asset Sale to Barclays Pursuant to the APA .............................................................6
B. Barclays Makes Bonus and Severance Payments to Former LBI Employees
Pursuant to the APA..........................................................................................................9
C. Lehman’s 2008 Equity Award Program .........................................................................12
II. 	The Claimants .................................................................................................................14
A. Claimant Jonathan Hoffman ...........................................................................................14
1. 	Mr. Hoffman’s LBI Employment Agreements for 2007 and 2008 ....................15
2. 	The Calculation of Mr. Hoffman’s 2008 Bonus .................................................17
3. 	Mr. Hoffman Negotiates the Terms of his Employment with Barclays .............20
4. 	Mr. Hoffman Secretly Records his Conversations with
Messrs. Ricci, Keegan, Bommensath, and Gelband ..........................................23
5. 	Mr. Hoffman Commences Employment with Barclays
and is Paid $83 Million .......................................................................................27
B. Claimant J. Robert Chambers .........................................................................................30
1. 	Mr. Chambers’ 2007 Employment Agreement and 2007 Bonus ........................30
2. 	Mr. Chambers’ 2008 Employment Agreement ...................................................31
3. 	Mr. Chambers’ 2008 Bonus ................................................................................34
4. 	Mr. Chambers Accepts Employment with Barclays, is Terminated,
and is Paid a $1 Million Lump-Sum Payment ....................................................36
C. Claimant Wayne Judkins ................................................................................................37
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1. 	Mr. Judkins’ 2008 Employment Agreement with LBI .......................................38
2. 	Barclays Paid Mr. Judkins the $800,000 he was Owed Under his 2008
Employment Agreement with LBI......................................................................39
3. 	Mr. Judkins Did Not Incur Relocation Expenses in Connection with
Selling his Home in Maryland ............................................................................40
4. 	Mr. Judkins’ Home Equity Loan from Prudential ..............................................41
D. Claimant Richard Hajdukiewicz .....................................................................................42
1. 	LBI Does Not Exercise its Discretion to Pay a Portion of Mr. Hajdukiewicz’s
2007 Bonus in the Form of Conditional Equity Awards ....................................43
2. 	Mr. Hajdukiewicz Participates in the July RSU Grant .......................................43
3. 	Mr. Hajdukiewicz Joins Barclays, is Terminated, Receives a Lump-Sum
Payment, and Executes a Release .......................................................................44
III. 	The Claims ......................................................................................................................46
IV. 	The Trustee’s Objections to the Claims ..........................................................................47
DISCUSSION .............................................................................................................................48
A. LBI Delegated its Responsibility to Pay 2008 Bonuses
to “Transferred Employees” ........................................................................................48
B. The Hoffman Claim .....................................................................................................52
1. 	Guaranteed Bonus Amount of $7,712,500 for LBI’s Fiscal Year 2007 ..........53
2. 	Guaranteed Bonus Amount of $76,285,940 for LBI’s Fiscal Year 2008 ........54
i. 	LBI Delegated its Obligation to Pay Mr. Hoffman’s 2008 Bonus to
Barclays................................................................................................54
ii. 	Barclays Satisfied LBI’s Obligation to Pay
Mr. Hoffman’s 2008 Bonus .................................................................56
a. 	The Trustee is Not Estopped ....................................................57
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b. 	The Evidence Establishes that Barclays Paid Mr. Hoffman the
Additional $83 Million with the Intent of Satisfying LBI’s
2007 and 2008 Bonus Obligations to Mr. Hoffman ................61
C. The Chambers Claim ...................................................................................................64
1. 	Guaranteed Bonus Amount of $1,647,051 for LBI’s Fiscal Year 2007 ..........65
i. 	LBI Did Not Exercise its Discretion to Pay a Portion of Mr.
Chambers’ 2008 Total Compensation in RSUs ...................................66
2. 	Guaranteed Bonus Amount of $42,386,172.99
for LBI’s Fiscal Year 2008 ..............................................................................71
i. 	The Calculation of Mr. Chambers’ 2008 Bonus ..................................72
ii. 	Barclays Paid $1 Million of Mr. Chambers’ 2008 Bonus
on Behalf of LBI ..................................................................................74
3. 	Salary and Bonus Claims of $20,400,000 for 2009 and 2010 .........................75
D. The Judkins Claim .......................................................................................................76
1. 	Guaranteed Bonus Amount of $800,000 for LBI’s Fiscal Year 2008 .............76
2. 	Discretionary Bonus for LBI’s Fiscal Year 2008 ............................................78
3. 	Relocation Expenses ........................................................................................79
4. 	Prudential Home Equity Loan .........................................................................80
E. 	The Hajdukiewicz Claim .............................................................................................80
i. 	Mr. Hajdukiewicz Did Not Release his Claim.....................................81
ii. 	Mr. Hajdukiewicz was Paid $183,840 of his 2008 Bonus
in the Form of RSUs in July 2008 .......................................................84
iii. 	Barclays Paid $422,000 of Mr. Hajdukiewicz’s 2008 Bonus
on Behalf of LBI ..................................................................................85
CONCLUSION ..............................................................................................................................87
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SHELLEY C. CHAPMAN
UNITED STATES BANKRUPTCY JUDGE
In the early morning hours of September 20, 2008, five days after Lehman Brothers filed
for chapter 11 protection, Lehman’s sale of the bulk of its North American operations to
Barclays Capital gained court approval. As was widely recognized at the time, the most
compelling human dimension of the sale was the commitment by Barclays to employ thousands
of former Lehman employees. In some cases these so-called “transferred employees” went on to
have substantial and lucrative tenures at Barclays. For others, there was not a long-term
opportunity in the Barclays organization, and they were let go.
A key component of Barclays’ obligations to these transferred employees was the
payment of bonus compensation on account of their prior employment by Lehman. In this
contested matter, the Court must decide whether four former Lehman employees are entitled to
receive payment from the Lehman Brothers estate on account of their claims for bonuses, even
though they received substantial sums from Barclays. The Trustee maintains that they are
seeking to be paid twice and their claims must be disallowed to the extent of the sums they
received from Barclays; the claimants disagree, insisting they seek no more than what they
earned and are owed.
More specifically, before the Court is the amended objection (the “Objection”) of James
W. Giddens (the “Trustee”), as trustee for the liquidation of Lehman Brothers Inc. (“LBI”) under
the Securities Investor Protection Act of 1970, as amended, 15 U.S.C. §§ 78aaa et seq. (“SIPA”)
seeking entry of an order, pursuant to section 502(b) of title 11 of the United States Code (the
“Bankruptcy Code”), as made applicable to this proceeding pursuant to sections 78fff(b) and
78fff-1(a) of SIPA, to disallow and expunge (i) the general creditor claim represented by number
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4856, filed by 1EE LLC, as assignee of Jonathan Hoffman 1 (the “Hoffman Claim”); (ii) the
general creditor claim represented by number 4470, filed by Wayne Judkins (the “Judkins
Claim”); (iii) the general creditor claim represented by number 4725, filed by Richard
Hajdukiewicz (the “Hajdukiewicz Claim”); and (iv) the general creditor claim represented by
number 6107, filed by J. Robert Chambers (the “Chambers Claim” and, collectively with the
Hoffman Claim, the Judkins Claim, and the Hajdukiewicz Claim, the “Claims”) [ECF No.
10685].
Prior to the initiation of this proceeding on September 19, 2008 (the “Filing Date”), each
of Messrs. Hoffman, Judkins, Hajdukiewicz, and Chambers (collectively, the “Claimants”) was
employed at LBI. Following the Filing Date, each of the Claimants accepted employment with
Barclays Capital Inc. (“Barclays”). During their employment at LBI, each of the Claimants
worked pursuant to a written employment agreement that called for various forms of
compensation, including non-discretionary bonuses. The entirety of the Hoffman Claim and the
Hajdukiewicz Claim and the majority of the Judkins Claim and the Chambers Claim are for non-
discretionary bonuses in respect of LBI’s fiscal years 2007 and/or 2008. The bonuses were owed
in accordance with the terms of the Claimants’ respective written employment agreements with
LBI and were not paid by LBI. In addition to claims for non-discretionary bonuses in respect of
LBI’s fiscal years 2007 and/or 2008, each of the Judkins Claim and the Chambers Claim
includes claims for other amounts purportedly due under their respective employment
agreements.
The Objection seeks the disallowance or reduction of each of the Claims. First, with
respect to LBI’s obligation to pay non-discretionary bonuses to each of the Claimants, the
Trustee contends that such obligation was satisfied, either in full or in part, by Barclays. The
1 See n. 45, infra.
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Trustee further contends that, to the extent a Claimant’s claim for a non-discretionary bonus was
not satisfied in full by Barclays, a portion of such bonus was to be paid in LBHI restricted stock
units (“RSUs”). Accordingly, the Trustee contends that each of the Claimants’ claims for a non-
discretionary bonus must be (i) reduced to the extent such claim has already been satisfied by
Barclays and (ii) subordinated, pursuant to section 510(b) of the Bankruptcy Code, to the extent
such bonus was to be paid in RSUs and was not already paid by Barclays. The Trustee further
asserts that the additional amounts included in the Judkins Claim and the Chambers Claim are
meritless. Finally, the Trustee argues that to the extent the Hajdukiewicz Claim (i) was not
satisfied by Barclays and (ii) is not subject to subordination under section 510(b), Mr.
Hajdukiewicz waived such claim against LBI pursuant to his severance agreement with Barclays.
For the reasons that follow, and as further detailed below, the Objection is granted in part
and denied in part.
PROCEDURAL HISTORY
On May 30, 2014, the Trustee filed his Two Hundred Thirty-Seventh Omnibus Objection
to General Creditor Claims (the “Two Hundred Thirty-Seventh Omnibus Objection”) seeking to
disallow and expunge the claims identified on Exhibit A of the Two Hundred Thirty-Seventh
Omnibus Objection in their entirety, including the Hoffman Claim and the Judkins Claim [ECF
No. 9013]. On June 18, 2014, Mr. Judkins filed his response in opposition to the Two Hundred
Thirty-Seventh Omnibus Objection [ECF No. 9185]. On August 22, 2014, 1EE LLC filed its
response in opposition to the Two Hundred Thirty-Seventh Omnibus Objection with respect to
the Hoffman Claim [ECF No. 9694].
On October 7, 2014, the Trustee filed his Two Hundred Sixty-Seventh Omnibus
Objection to General Creditor Claims (the “Two Hundred Sixty-Seventh Omnibus Objection”)
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seeking to, among other things, disallow and expunge the claims identified on Exhibit A of the
Two Hundred Sixty-Seventh Omnibus Objection in their entirety, including the Hajdukiewicz
Claim [ECF No. 10097]. On October 27, 2014, Mr. Hajdukiewicz filed his response in
opposition to the Two Hundred Sixty-Seventh Omnibus Objection with respect to the
Hajdukiewicz Claim [ECF No. 10252].
On October 17, 2014, the Trustee filed his objection to the Chambers Claim (the
“Chambers Objection”) [ECF No. 10194]. On November 13, 2014, Mr. Chambers filed his
response in opposition to the Chambers Objection [ECF No. 10435].
The Court held two status conferences, on November 7, 2014 and on December 10, 2014
(the “December 10 Status Conference”), with respect to the Trustee’s objections to twenty-three
unresolved claims filed by former LBI employees, including the Claims, that the Trustee asserts
are similarly situated. Prior to the December 10 Status Conference, the Trustee sent a letter to
the Court [ECF No. 10637] suggesting that the twenty-three pending employee claims would be
most efficiently resolved by litigating the Claims “in a coordinated fashion as test cases.” The
Trustee’s letter attached a proposed scheduling order for a merits hearing on each of the Claims.
On December 30, 2014, the Court entered the Scheduling Order Regarding the Trustee’s
Objection to Claim Nos. 4725, 4856, 4470, and 6107 [ECF No. 10780]. On March 18, 2015, the
Court entered the Second Scheduling Order Regarding the Trustee’s Objection to Claim Nos.
4725, 4856, 4470, and 6107 [ECF No. 11513] further establishing a pre-trial schedule.
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The Trustee filed the Objection on December 17, 2014 and each of the Claimants filed
responses by January 23, 2015.2 Following discovery, the Trustee and the Claimants submitted
pre-hearing briefs on April 10, 2015.3
The Court conducted an evidentiary hearing on the Claims on April 22, 23, and 24, 2015
(the “Merits Hearing”). The Court heard live testimony from each of the four Claimants and
from (i) Mr. Mark Kurman, a Barclays Managing Director who was employed as Barclays
Director of Employee Relations for the Americas during the relevant time frame of September
and October 2008; (ii) Mr. Michael Keegan, Barclays’ Chief Operating Officer for the Americas,
who was employed as the Head of Principal Credit Trading at Barclays during the relevant time
frame of September and October 2008; and (iii) Mr. Kaushik Amin, LBI’s Global Head of
Liquid Markets during the relevant time frame of September and October 2008 and Mr.
Hoffman’s supervisor at LBI prior to the Filing Date. Each of the Trustee and the Claimants
introduced voluminous exhibits during the Merits Hearing. In addition, the Trustee and Mr.
Hoffman played audio recordings of conversations and meetings between Mr. Hoffman and
various parties during September 2008 that Mr. Hoffman secretly taped.
Following the Merits Hearing, the Trustee and the Claimants each submitted post-trial
proposed findings of fact4 and conclusions of law5 and replies to the post-trial proposed findings
2 ECF Nos. 11130 (Mr. Hoffman), 11186 (Mr. Judkins), 11092 (Mr. Hajdukiewicz), 11093 (Mr. Chambers). 1EE
LLC/Mr. Hoffman was granted an extension of time, from January 21, 2015 to January 23, 2015, to file its response
by the So Ordered Stipulation Extending 1EE’s Time to File Response to Trustee’s Amended Objection, dated
January 21, 2015 [ECF No. 11091].
3 ECF Nos. 11759 (Mr. Judkins), 11762 (the Trustee), 11771 (Mr. Hoffman), 11764 (Mr. Hajdukiewicz), 11766
(Mr. Chambers).
4 ECF Nos. 12246 (the Trustee), 12247 (Mr. Hoffman), 12249 (Mr. Judkins), 12250 (Mr. Hajdukiewicz), 12252
(Mr. Chambers) (the “Chambers Post-Trial Br.”).
5 ECF Nos. 12245 (the Trustee) (the “Trustee Post-Trial Br.”), 12248 (Mr. Hoffman) (the “Hoffman Post-Trial
Br.”), 12249 (Mr. Judkins) (the “Judkins Post-Trial Br.”), 12251 (Mr. Hajdukiewicz) (the “Hajdukiewicz Post-Trial
Br.”), 12252 (Chambers Post-Trial Br.).
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of fact and conclusions of law.6 The Court heard closing arguments from the Trustee and the
Claimants on July 21, 2015.
LEGAL STANDARD
A properly-filed proof of claim comprises “prima facie evidence of the validity and
amount of the claim,” Fed. R. Bankr. P. 3001(f), and is “deemed allowed, unless a party in
interest . . . objects,” 11 U.S.C. § 502(a). An objecting party “bears the initial burden of
production and must provide evidence showing the claim is legally insufficient” under section
502 of the Bankruptcy Code. In re Arcapita Bank B.S.C.(c), 508 B.R. 814, 817 (S.D.N.Y. 2014)
(citation omitted). Once the objecting party has met its initial burden, it is up to the claimant to
“prove by a preponderance of the evidence that under applicable law the claim should be
allowed.” Id. (citation omitted).
FINDINGS OF FACT 7
I. 	BACKGROUND
A. 	The Asset Sale to Barclays Pursuant to the APA
1. 	On September 15, 2008, Lehman Brothers Holdings Inc. (“LBHI”), the holding
company for the group of entities organized to form Lehman Brothers, then the United States’
fourth-largest investment bank (such entities and LBHI, collectively, “Lehman”), filed for
bankruptcy. On September 19, 2008, the District Court for the Southern District of New York
6 ECF Nos. 12460 (Mr. Judkins) (the “Judkins Post-Trial Reply Br.”), 12461 (the Trustee) (the “Trustee Post-Trial
Reply Br.”), 12462 (Mr. Hajdukiewicz) (the “Hajdukiewicz Post-Trial Reply Br.”), 12473 (Mr. Hoffman), 12476
(Mr. Chambers) (the “Chambers Post-Trial Reply Br.”).
7 Having considered the voluminous evidence, testimonial and documentary, including all exhibits admitted into
evidence, as well as the parties’ post-trial proposed findings of fact and briefs, and mindful that a court should not
blindly accept findings of fact and conclusions of law proffered by the parties, see St. Clare’s Hosp. and Health Ctr.
v. Ins. Co. of North Am., (In re St. Clare’s Hosp. and Health Ctr.), 934 F.2d 15 (2d Cir. 1991) (citing United States
v. El Paso Natural Gas Co., 376 U.S. 651, 656 (1964)), and having conducted an independent analysis of the law
and the facts, the Court makes the following Findings of Fact and Conclusions of Law pursuant to Bankruptcy Rule
7052, made applicable to this proceeding pursuant to Bankruptcy Rule 9014. To the extent any finding of fact later
shall be determined to be a conclusion of law, it shall be so deemed, and to the extent any conclusion of law later
shall be determined to be a finding of fact, it shall be so deemed.
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commenced this proceeding against LBI, Lehman’s broker-dealer and a wholly-owned
subsidiary of LBHI and referred the proceeding to this Court. The contracts of many Lehman
employees were between LBI and the employee, even if such employees were not engaged in the
operations of a broker-dealer or worked with a different Lehman entity altogether. Accordingly,
LBHI’s bankruptcy and the subsequent commencement of this proceeding against LBI threw the
professional futures and continued employment of thousands of Lehman employees, including
the Claimants, into uncertainty.8
2. 	On September 16, 2008, LBHI, LBI, LB 745 LLC, and Barclays entered into an
asset purchase agreement (the “APA”) pursuant to which Barclays agreed to purchase the
majority of the assets related to Lehman’s North American capital markets and investment
banking businesses.9
3. 	The APA addressed the uncertainty confronting Lehman employees by
incorporating Barclays’ commitment to offer employment to each LBI employee who worked in
the acquired business and to make certain payments to employees who accepted Barclays’
offer. 10 The LBI employees who accepted Barclays’ offer of employment were defined in the
APA to be “Transferred Employees.” 11
4. 	Specifically, the APA provided for Barclays to “pay each Transferred Employee
an annual bonus . . . in respect of the 2008 Fiscal Year that, in the aggregate, are equal in amount
to 100 percent of the bonus pool amounts accrued in respect of amounts payable for incentive
8 In re Lehman Bros. Holdings Inc. Case No. 08-13555, Sept. 19, 2008 Tr. 60:4-16 (LBHI ECF No. 318) (“Sale
Hearing Tr.”) [Miller] (“[The APA] affects directly the 25,000 employees whose futures became extremely clouded
because of the events of last weekend . . . . If it’s not approved . . . . [t]he unemployment rolls for the metropolitan
area will increase dramatically . . . .”).
9 See Trustee Ex. 1 (APA).
10 Trustee Ex. 1 (APA), § 9.1.
11 Each LBI employee “who accepts [Barclays’] offer of employment” was defined to be a “Transferred Employee.”
Id. § 9.1(a).
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compensation (but not base salary).” 12 This was Barclays’ undertaking to pay Transferred
Employees bonus amounts owed to them by LBI.
5. 	The APA also provided that Barclays would pay severance to Transferred
Employees whom it terminated before December 31, 2008 “at levels that are no less favorable
than such levels as the Transferred Employee[s] would have been entitled to receive pursuant to
the provisions of [Lehman’s] severance plans or agreements covering such Transferred
Employee[s] as in effect immediately prior to the Closing.”13
6. 	During the highly publicized hearing on approval of the sale (the “Sale Hearing”),
the parties and the Court highlighted these contractual commitments regarding LBI’s former
employees. As lead LBHI lawyer, the late Harvey Miller, emphasized, “the jobs of thousands of
employees would be saved and [the employees] will be entitled to substantial benefits from
Barclays in the form of compensation, bonuses and severance payments that are based upon the
employee’s prior performance while with Lehman.”14
7. 	The Court did indeed approve the APA, finding that “[a]pproving the transaction
secures[,] whether for ninety days or for a lifelong career[,] employment for 9,000 employees at
Lehman, and holds together an operation the value of which is really embedded in the talent of
the employees, their knowledge, their relationship, their expertise and their ability to create value
to the economy.”15
8. 	As the Court later noted:
12 Id.; see also Apr. 24 Tr. at 108:11-22 [Keegan] (“It was a liability we assumed from Lehman Brothers, it was a
bonus pool. . . . [W]e had undertakings to pay that out to employees, based on that assumption . . . .”).
13 Trustee Ex. 1 (APA) § 9.1(b).
14 Sale Hearing Tr. at 101:23-102:2; see also id. at 99:22-25 (Barclays was going to “assume exposure for the
employees that accept offers of employment . . . an exposure of approximately two billion dollars.”).
15 Id. at 250:23-251:3.
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Knowing that approval of the transaction would save a multitude of financial
sector jobs probably was the most significant single factor influencing the Court’s
thinking 	when 	it 	considered 	the 	sale. 	The 	transaction 	included 	offers 	of
employment to most members of the Lehman work force that not only helped
these individuals at a most difficult time on Wall Street, but also unquestionably
was good for the estate, brokerage customers and the general economy. A going
concern sale to Barclays also was the one way to eliminate claims of employees
for lost wages and benefits . . . .16
9. 	Indeed, Judge Peck observed that he “viewed . . . the transaction as it was being
developed in those early days of the bankruptcy case, as being to some extent[] employee-driven.
. . . And from the estate’s perspective, I viewed it as avoided claims; claims that might otherwise
have been asserted against the estate that were taken away by Barclays’ assumption of all of the
obligations associated with the employees.”17
B. 	Barclays Makes Bonus and Severance Payments to Former LBI Employees
Pursuant to the APA
10. 	Following the approval of the APA, and pursuant to the APA, Barclays offered
employment to LBI’s employees.18 On September 20, 2008, Barclays executives Bob Diamond
and Rich Ricci and former Lehman executive Bart McDade sent an email to former LBI
employees informing them that they would “soon receive an offer to join Barclays Capital.” 19
The email informed former LBI employees that those who did not “receive a role” at Barclays
going forward would be provided “severance support, as well as bonus consideration for their
16 In re Lehman Bros. Holdings Inc., 445 B.R. 143, 154 (Bankr. S.D.N.Y. 2011) (emphasis added).
17 In re Lehman Bros. Holdings Inc. v. Barclays Capital, Inc., No. 09-01731 (JMP) (Bankr. S.D.N.Y.), Sept. 7, 2011
Tr. at 10:24-11:8, [ECF No. 26].
18 Apr. 24 Tr. at 16:16-17 [Kurman] (“Virtually everyone from Lehman in the U.S. was offered the opportunity to
initially join Barclays.”).
19 Trustee Ex. 54 (September 20, 2008 email from “Dear Colleague” re: Message from Bob Diamond, Rich Ricci
and Bart McDade).
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contributions in 2008.”20 The email also stated Barclays’ intention to form a bonus pool to pay
2008 bonus compensation to former LBI employees.21
11. 	Thereafter, on September 22, 2008, Michael Evans, Global Head of Human
Resources for Barclays, sent by email an employment offer to former LBI employees.22 The
email stated that “[i]n the next week or so, you will receive additional details concerning your
employment if . . . any special arrangements apply to your situation.”23
12. 	For those former LBI employees whom Barclays hired but then terminated in the
months after the transaction closed, Barclays paid severance based upon Lehman’s severance
plan, under which the amount of severance depended on the employee’s years of service and
corporate title.24 As Mark Kurman, Barclays’ Manager of Employee Relations for the Americas,
testified, Barclays gave the former LBI employees credit for the length of time that the
employees worked for LBI in calculating severance.25
13. 	In addition to severance, Barclays also paid special lump sum payments in lieu of
a 2008 bonus to certain former LBI employees.26 As Mr. Kurman testified, Barclays did not
typically make such payments to terminated employees, but made these “enhancement[s] in lieu
20 Id.
21 Id. (“We also want to provide clarity around the 2008 year-end compensation process. It is our intention to create
a discretionary bonus pool for those employees joining Barclays Capital.”).
22 Trustee Ex. 55 (September 22, 2008 email from “Barclays Capital Employment Offer” re: Your Employment
Offer).
23 Id.
24 Apr. 24 Tr. at 19:9-22:19 [Kurman] (Barclays paid severance to the former LBI employees that it terminated
based on Lehman’s severance plan).
25 Id. at 22:15-19 [Kurman] (Q: “In calculating the amount of severance that was paid to the former Lehman
employees who were terminated, before the end of 2008, did Barclays apply these guidelines?” A: “Yes, we did.”),
23:24-24:3 [Kurman] (Q: “For those former Lehman employees terminated after December 31, 2008, did Barclays
consider their time spent working at Lehman Brothers, for purposes of calculating their severance?” A: “Yes, their
length of service, yes.”).
26 Id. at 24:4-10 [Kurman] (Aside from the severance payments, Barclays also offered an enhanced payment “in lieu
of bonus” to the terminated former LBI employees.).
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of bonus” to former LBI employees “to provide some recognition for their contributions at
Lehman, prior to joining Barclays.”27 Barclays calculated the amount of each terminated
Transferred Employee’s enhanced payment in lieu of bonus pursuant to a formula based upon the
employee’s LBI bonus and title at LBI.28 Former LBI employees who were Managing Directors
at LBI received twenty percent of the amount of their 2007 bonus.29 For those below the title of
Managing Director, Barclays paid them ten percent of the amount of their 2007 bonus.30
Barclays applied a $1 million cap as the maximum amount of enhanced payment in lieu of bonus
a terminated Transferred Employee could receive.31
14. 	Further, consistent with Lehman’s longstanding policy, Barclays required the
former LBI employees to sign a waiver in order to receive payments in connection with their
termination.32
C. 	Lehman’s 2008 Equity Award Program
15. 	In years prior to the bankruptcy, Lehman utilized and disseminated an employee
handbook which provided, among other things, that “[a]t the Firm’s option, a portion of [an
employee’s] total compensation (combined base salary, bonus and other compensation) may be
27 Id. at 24:4-25:17 [Kurman].
28 Id. at 24:18-25:1 [Kurman].
29 Id. at 24:20-22 [Kurman] (There “was a 20 percent calculation, based on prior year’s bonus for managing
directors.”).
30 Apr. 24 Tr. at 24:22-24 [Kurman] (“There was a ten percent calculation based on prior year’s bonus at Lehman for
people below the title of managing director.”).
31 Id. at 24:24-25:1 [Kurman] (“[T]here was a cap of a million dollars on whatever the number produced by the
percentage was, regardless what the comp was.”).
32 Trustee Ex. 3 (Lehman Brothers Employment Handbook) at LBI_BONUS_CLAIMS_0000412 (In order to
receive severance or any other separation payments, “an employee must sign a separation agreement . . . that
includes a waiver of any claims the employee may have against [LBI].”); Apr. 24 Tr. at 22:20-23:8 [Kurman] (Q:
“When Barclays terminated the former Lehman employees, did it require them to sign a waiver in order to receive
severance pay?” A: “Yes.”).
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payable in the form of equity, including restricted stock units or options, pursuant to the Firm’s
stock award program.” 33
16. 	Lehman’s stock award program was referred to as the Equity Award Program and
was governed by LBHI’s 2005 Stock Incentive Plan, as amended on November 8, 2007, and the
accompanying prospectus (together, the “Plan Documents”).34
17. 	The Equity Award Program was overseen and administered by the Compensation
and Benefits Committee of LBHI’s Board of Directors (the “LBHI Compensation
Committee”). 35
18. 	In its July 1, 2008 meeting, the LBHI Compensation Committee determined to
issue RSUs to certain Lehman employees that “would operate like an advance on the 2008 year-
end award” (the “July RSU Grant”).36 Accordingly, a grant date of July 1, 2008 was established
and RSUs were priced at $20.96, the closing price of LBHI stock on July 1, 2008. 37 Also on July
1, 2008, the LBHI Compensation Committee resolved that the number of RSUs to be granted
pursuant to the 2008 Equity Award Program would be determined in accordance with the
schedule attached to the minutes as Exhibit 1 (the “RSU Schedule”).38 Lehman employees
earning 2008 total compensation of $2,500,000 or more could receive up to 65% of their 2008
total compensation in the form of RSUs.39
33 See Trustee Ex. 3 (Lehman Brothers Employment Handbook).
34 See Chambers Ex. 13 (Prospectus for Lehman Brothers Holdings Inc. 2005 Stock Incentive Plan); Chambers Ex.
14 (Lehman Brothers Holdings Inc. 2005 Stock Incentive Plan, as amended November 8, 2007).
35 Chambers Ex. 14 (Lehman Brothers Holdings Inc. 2005 Stock Incentive Plan, as amended November 8, 2007) at
¶¶ 2(i), 4.
36 Chambers Ex. 15 (2008 LBHI Compensation Committee Minutes) July 1, 2008 Minutes at 2.
37 See Trustee Ex. 58 (Personnel file of Mr. Hajdukiewicz); Trustee Ex. 69 (Personnel file of Mr. Judkins). Both
exhibits report a grant price of $20.96 in respect of the July RSU Grant.
38 Chambers Ex. 15 (LBHI Compensation Committee Meeting Minutes) July 1, 2008 Minutes at 3.
39 Chambers Ex. 15 (LBHI Compensation Committee Meeting Minutes) July 1, 2008 Minutes at 3.
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19. 	The LBHI Compensation Committee made clear that neither the July RSU Grant
nor the RSU Schedule were to confer on any employee rights or entitlements to a grant of RSUs
at the end of Lehman’s 2008 fiscal year:
RESOLVED, that nothing in the foregoing resolutions is intended to, and shall
not, confer upon any employee any right to any discretionary bonus with respect
to [LBHI]’s fiscal year ending November 30, 2008 or any grant of any equity
award apart from the July RSUs; it being understood that the sole purpose of the
foregoing 	resolution 	determining 	the 	[RSU 	Schedule] 	is 	to 	permit 	the
communication of the overall deferral levels of the 2008 Equity Award Program
as is currently being anticipated at the present time to [Lehman]’s employees
without conferring any binding right or entitlement related thereto . . . . 40
20. 	The LBHI Compensation Committee’s resolutions were summarized in the 2008
Equity Award Program Summary of Select Material Terms for Bonus-Eligible Employees (on or
after July 1, 2008) (the “2008 Equity Award Program Summary”).41 The 2008 Equity Award
Program Summary was distributed to certain Lehman employees, including the Claimants. The
2008 Equity Award Program Summary also provided (i) a disclaimer on the front cover that it
was intended for informational purposes only; (ii) that the terms and conditions of the 2008
Equity Award Program, once finalized, would be subject to the Plan Documents; and (iii) that, in
the event of conflict between the Plan Documents and the 2008 Equity Award Program
Summary, the Plan Documents would control.42
21. 	In its September 3, 2008 meeting, the LBHI Compensation Committee amended
the RSU Schedule and reduced the maximum percentage of an employee’s total compensation
that could be paid in RSUs from 65% of 2008 total compensation, as set forth in the July 1, 2008
40 Chambers Ex. 15 (LBHI Compensation Committee Meeting Minutes) July 1, 2008 Minutes at 3.
41 Chambers Ex. 4 (2008 Equity Award Program Summary).
42 See Chambers Ex. 4 (2008 Equity Award Program Summary) at 1.
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RSU Schedule, to 50% of 2008 total compensation. 43 The September 3, 2008 minutes included
the same resolution quoted in paragraph 19, supra, making clear that the RSU Schedule was not
to confer on Lehman employees any rights or entitlement to a year-end grant of RSUs.
22. 	The LBHI Compensation Committee never determined a “Year-end Grant Date,”
as defined in the 2008 Equity Award Program documents, for 2008 or any subsequent year. 44
II. 	THE CLAIMANTS
A. 	Claimant Jonathan Hoffman
23. 	1EE LLC (“1EE”) is an entity formed by Mr. Jonathan Hoffman for the purpose
of asserting the Hoffman Claim. 45 1EE shall be referred to herein as “Mr. Hoffman.”
24. 	Mr. Hoffman was a proprietary trader at LBI and held the title of Managing
Director.46 Mr. Hoffman had worked at LBI since 1994 and had worked since at least 2001
pursuant to a series of annual employment agreements. 47
25. 	By all accounts, Mr. Hoffman was a gifted trader who generated billions of
dollars in profits for Lehman over the course of his employment by, as he describes it, trading
“interest rate products, mainly government bonds from, broadly speaking, developed
countries.”48
43 Chambers Ex. 15 (LBHI Compensation Committee Meeting Minutes) September 3, 2008 Minutes at 2.
44 See Kiplok Dep. Tr. 96:5-11 (“Q: But the trustee has no information whatsoever based on Lehman’s books and
records that there was ever a grant date established, is that right? A: When, for 2008? Q: For 2008. A: That’s
correct.”).
45 Hoffman Dep. Tr. at 25:20-26:5 (Q: “This was an LLC that you formed for the purpose of holding the bankruptcy
claim, right?” A: “Yes.”). Mr. Hoffman testified that he assigned his claim to 1EE to make it harder to “Google”
him and find out that he had filed his claim. See Apr. 23 Tr. at 211:8-12 [Hoffman] (Q: “But you didn’t want people
to Google you and find out that you had filed this claim, right.” A: “If it made it that much harder to Google me,
then so be it.”).
46 Apr. 23 Tr. at 14:11-20, 23:18-21 [Hoffman].
47 Apr. 23 Tr. at 13:18-14:7, 16:11-16 [Hoffman].
48 Apr. 23 Tr. at 14:11-20 [Hoffman].
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26. 	Mr. Hoffman’s trading performance was buoyed by the dislocated and volatile
markets of 2007 and 2008. As Mr. Hoffman described it, “they were challenging markets to
trade and make sense of, so if you knew what to do, it could be very lucrative.”49 Asked if he
had the experience to know what to do, Mr. Hoffman answered, “I did.”50
1. 	Mr. Hoffman’s LBI Employment Agreements for 2007 and 2008
27. 	Mr. Hoffman was highly compensated by LBI. For the years 2007 and 2008, Mr.
Hoffman had employment agreements with LBI that provided him with a $200,000 annual salary
and an annual bonus based on his trading performance.51 Pursuant to these agreements, Mr.
Hoffman’s bonus would be equal to twelve percent of the first $25 million in “net profit” (as
defined in the agreement) he generated and fourteen percent of net profit above $25 million, less
his salary.52
28. 	As was the case in prior years, Mr. Hoffman’s 2008 employment agreement
provided that part of his total compensation for 2008 could, at LBI’s discretion, be paid in
conditional equity awards.53 Pursuant to schedules attached to his 2008 employment agreement
with LBI, Mr. Hoffman agreed that up to fifty percent of his 2008 total compensation could, at
LBI’s discretion, be payable in the form of equity awards.54
49 Apr. 23 Tr. at 28:5-10 [Hoffman].
50 Apr. 23 Tr. at 28:11-13 [Hoffman].
51 Trustee Ex. 5 (Mr. Hoffman’s 2007 LBI agreement) at 1; Trustee Ex. 6 (Mr. Hoffman’s 2008 LBI agreement) at 1.
52 Trustee Ex. 5 (Mr. Hoffman’s 2007 LBI agreement) at 5; Trustee’s Ex. 6 (Mr. Hoffman’s 2008 LBI agreement) at
5.
53 Trustee Ex. 6 (Mr. Hoffman’s 2008 LBI agreement) at 1-2 (“At [LBI’s] discretion, a portion of your total
compensation for the Performance Year (including the full Performance Bonus) will be payable in conditional
equity awards (Restricted Stock Units, options, and/or other equity-based awards) pursuant to the Firm’s Equity
Award Program or other Firm-sponsored programs that may be established by the Firm from time to time and as
then generally in effect for employees at your level.”); Apr. 23 Tr. at 155:10-13 [Hoffman] (Q: “And every year you
were at the firm, there was equity, right?” A: “The prior years I’d been in the firm, there was always equity.”).
54 Trustee Ex. 6 (Mr. Hoffman’s 2008 LBI agreement) at 7 (Schedule attached to Mr. Hoffman’s 2008 employment
agreement providing – given Mr. Hoffman’s corporate title and the amount of his 2008 total compensation – for 50
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29. 	Mr. Hoffman’s bonus for 2007 and for 2008 was to be paid in two installments,
with the second installment serving as a so-called “clawback” that could be withheld if he lost
money for LBI in the subsequent year.55 The first installment of Mr. Hoffman’s performance
bonus was equal to 75 percent of his total performance bonus, including all the conditional
equity awards, less his salary of $200,000.56 The first installment would be paid when LBI paid
its bonuses for the fiscal year in which the bonus was earned.57 For example, the first installment
of Mr. Hoffman’s 2007 bonus was paid in early 2008 when LBI paid 2007 performance
bonuses.58
30. 	The second installment of Mr. Hoffman’s performance bonus consisted of the
remaining cash portion of Mr. Hoffman’s bonus.59 The second installment would be paid when
LBI paid its bonuses for the subsequent fiscal year.60 Thus, the second installment of Mr.
percent of Mr. Hoffman’s 2008 total compensation to be payable, at the discretion of LBI, in the form of conditional
equity awards).
55 Trustee Ex. 5 (Mr. Hoffman’s 2007 LBI agreement) at 1-2; Trustee’s Ex. 6 (Mr. Hoffman’s 2008 LBI agreement)
at 1-2; Apr. 23 Tr. at 154:12-23 [Hoffman] (Q: “And the second installment was a clawback, right?” A: “Yes.” Q:
“And, by that, that means that the installment wasn’t paid until the following year and could be lost depending on
your trading performance in that year, right?” A: “If I was employed trading, yes.” Q: “Right, you couldn’t make
100 million one year, lose 100 million the second year, and walk away with the first year’s performance bonus
whole, right?” A: “That’s right.”).
56 Trustee Ex. 5 (Mr. Hoffman’s 2007 LBI agreement) at 2; Trustee’s Ex. 6 (Mr. Hoffman’s 2008 LBI agreement) at
2; Apr. 23 Tr. at 154:24-155:9 [Hoffman] (Q: “And I think, as we talked about before, you talked about it on direct,
the way the installments worked for someone at your compensation level, under your contract, was that all of your
equity would be paid in the first installment, right?” A: “Yes.” Q: “Half of your cash in the first installment, and
then the second installment was all cash, right?” A: “If there was equity, it would be in the first installment. The
second would be all cash.”).
57 Trustee Ex. 5 (Mr. Hoffman’s 2007 LBI agreement) at 2-3; Trustee Ex. 6 (Mr. Hoffman’s 2008 LBI agreement) at
2-3); Apr. 23 Tr. at 17:4-9 [Hoffman] (Q: “And when would that – when would you have received the performance
bonus based on your net profitability?” A: “This is for 2007, I would receive a first installment in early 2008 and
second installment in early 2009.”).
58 Apr. 23 Tr. at 18:10-15 [Hoffman].
59 Trustee Ex. 5 (Mr. Hoffman’s 2007 LBI agreement) at 2; Trustee Ex. 6 (Mr. Hoffman’s 2008 LBI agreement) at
2.
60 Trustee Ex. 5 (Mr. Hoffman’s 2007 LBI agreement) at 2; Trustee Ex. 6 (Mr. Hoffman’s 2008 LBI agreement) at 2.
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Hoffman’s 2007 bonus had not been paid as of the Filing Date.61 The second installment of Mr.
Hoffman’s 2007 bonus would have been paid when LBI paid its 2008 bonuses, in early 2009,
and the second installment of his 2008 bonus would have been paid when LBI paid its 2009
bonuses, in early 2010.
31. 	Mr. Hoffman’s employment agreements also contained provisions specifying the
circumstances in which he would receive his bonuses if his employment with LBI ended.62 The
agreements provided that if Mr. Hoffman resigned or was terminated for cause before payment
of the first installment of his bonus, he would not receive any portion of the bonus.63 If Mr.
Hoffman was terminated for cause after payment of the first installment but before payment of
the second installment, he would not receive the second installment.64
2. 	The Calculation of Mr. Hoffman’s 2008 Bonus
32. 	When LBI entered into liquidation, Mr. Hoffman was owed $7,712,500 in cash
for the second installment of his 2007 bonus.65
33. 	The Trustee asserts that Mr. Hoffman was owed a total amount of $75,339,600 in
cash and RSUs on account of his 2008 bonus, though in his proof of claim Mr. Hoffman asserts
61 Apr. 23 Tr. at 18:10-19 [Hoffman].
62 Trustee Ex. 5 (Mr. Hoffman’s 2007 LBI agreement) at 2-3; Trustee Ex. 6 (Mr. Hoffman’s 2008 LBI agreement) at
2-3.
63 Trustee Ex. 5 (Mr. Hoffman’s 2007 LBI agreement) at 2 (“If your employment ends before the First Payout Date,
your Performance Bonus (if any) will be calculated as follows: If you resigned or were terminated by the Firm with
cause, you will not receive any portion of the Performance Bonus.”); Trustee Ex. 6 (Mr. Hoffman’s 2008 LBI
agreement) at 2 (same).
64 Trustee Ex. 5 (Mr. Hoffman’s 2007 LBI agreement) at 3 (“If your employment ends after being paid the First
Installment but before the Second Payout Date, your entitlement to the Performance Bonus (if any) will be
determined as follows: If you were terminated by the Firm with cause, you will not receive the Second Installment,
and the portion of your Performance Bonus already awarded in equity under the Firm’s Equity Award Program will
be treated as prescribed by the terms of that Program.”); Trustee Ex. 6 (Mr. Hoffman’s 2008 LBI agreement) at 3
(same).
65 Trustee Ex. 40 (Mr. Hoffman’s 2007 LBI Total Compensation Statement) (reflecting that second installment of
the 2007 performance bonus was $7,712,500); Trustee Ex. 36 (1EE LLC’s Proof of Claim) at
LBI_BONUS_CLAIMS_0000063 (claiming $7,712,500 for the second installment of Mr. Hoffman’s 2007 bonus).
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that this aggregate notional amount is $76,285,940.66. 67 Subsequent to the Merits Hearing, in
his post-trial proposed findings of fact, Mr. Hoffman revised his assertion of this amount
downward, to $76,124,408, to take into account his base salary.68
34. 	The calculation of Mr. Hoffman’s 2008 bonus begins with his net profit for the
2008 fiscal year.69 Under his employment agreement, “Net Profit” was defined as “Pre-
Compensation Profit,” which in turn was defined as “Gross Revenue of the Proprietary Portfolio,
less Brokerage and Execution Charges, Net Sales Credits, Short Term Interest Carry, Long Term
Interest Allocation and Incremental Expenses.”70 LBI’s books and records reflect that Mr.
Hoffman’s Net Profit for 2008 was $543,140,000.71. Mr. Hoffman claims that the proper Net
Profit for 2008 is $548,471,000, an amount that does not include a deduction of $5,331,000 for
brokerage charges reflected on LBI’s books and records.72 Mr. Hoffman contends that brokerage
charges were already deducted from the $548,471,000 but, at his deposition, he admitted that he
did not know for certain.73 At the Merits Hearing, he initially claimed that brokerage charges
were already deducted from the $548,471,000 but conceded that he was “not sure” if you had to
66 See Trustee Ex. 36 (1EE LLC’s Proof of Claim) at LBI_BONUS_CLAIMS_0000064.
67 See Trustee Ex. 36 (1EE LLC’s Proof of Claim) at LBI_BONUS_CLAIMS_0000064.
68 See 1EE LLC’s Proposed Findings of Fact [ECF No. 12247] at ¶ 21.
69 Trustee Ex. 6 (Mr. Hoffman’s 2008 LBI agreement) at 1 (“[T]he ‘Net Profit’ of the ‘Proprietary Portfolio’ (each
as defined in Exhibit A) for the period equal to the Performance Year (the ‘Performance Period’) will be multiplied
by the ‘Performance Bonus Percentage’ (as defined in Exhibit A), and then reduced by the total base salary paid to
you for the Performance Year.”).
70 Id. at 5.
71 See Trustee Ex. 41 (Mr. Hoffman’s LBI profit and loss statement as of September 12, 2008).
72 See id.
73 Hoffman Dep. Tr. at 107:25-109:23 (Q: “Ok. And so I guess I want to understand why you believe that the first
column has the fourth column.” A: “I’d ask product control, because it’s not my spreadsheet, but that was my
recollection.” Q: “So you have no way of knowing one way or the other yourself, sitting here today?” A: “Sitting
here today, no. I would suggest looking at supporting document as to the P&L and trying to break down how these
numbers are calculated. I think there is other – there is more comprehensive P&Ls you may have. I don’t have
them in front of me.”).
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“walk out this . . . five million number.”74 It is undisputed that, in 2007, brokerage charges were
deducted on the same schedule in calculating Mr. Hoffman’s 2007 bonus.75 The weight of the
evidence supports the conclusion that the brokerage charges of $5,331,000 must be deducted
from Net Profit for the purpose of calculating Mr. Hoffman’s 2008 bonus.
35. 	Accordingly, Mr. Hoffman’s 2008 bonus amount should be calculated as follows:
12% of $ 25,000,000 – 	$ 3,000,000
14% of $518,140,000 – 	$72,539,600
$75,539,60076
The $75,539,600 is then reduced by Mr. Hoffman’s 2008 salary of $200,000, resulting in a 2008
bonus of $75,339,600 in total.77 Thus, on the Filing Date, the total amount owed to Mr. Hoffman
by LBI was $83,052,100 ($7,712,500 for the second installment of his 2007 bonus and
$75,539,600 for his 2008 bonus).
36. 	Of the $83,052,100, Mr. Hoffman would have received $7,712,500 in cash for the
second installment of his 2007 bonus in early 2009, with the 2008 bonus payable in (i) a first
installment totaling $62,289,075, in some combination (at LBI’s discretion) of cash and RSUs in
early 2009 and (ii) $18,884,900 in cash, which he would have received in early 2010, assuming
he traded profitably.
3. 	Mr. Hoffman Negotiates the Terms of his Employment with Barclays
74 Apr. 23 Tr. at 180:9-183:15 [Hoffman] (“I’m not sure if you would then walk out this other five million number.
But I wouldn’t dispute that, if $105,000 was invoice brokerage that was not taken out, I wouldn’t argue that it should
come out.”).
75 Trustee Ex. 52 (Nov. 30, 2007 P&L Statement for Mr. Hoffman) at 2; Apr. 23 Tr. at 175:3-7 [Hoffman] (Q:
“Okay. And, in fact, in calculating your total compensation for 2007, both the numbers – the brokerage and the
long-term debt – were taken out to arrive at your total compensation, right?” A: “Yes.”).
76 Trustee Ex. 6 (Mr. Hoffman’s 2008 LBI agreement) at 5.
77 Id. at 1 (Mr. Hoffman’s performance bonus includes subtracting “the total base salary paid to you for the
Performance Year.”); Apr. 23 Tr. at 177:20-22 [Hoffman] (Q: “And then from that we’d subtract your $200,000
salary.” A: “That’s true.”).
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37. 	Mr. Hoffman did not respond to Barclays’ initial email offer of employment on
September 21, 2008 – he neither accepted it nor declined it. Mr. Hoffman also did not attend
work on September 22, 2008, which attendance would have represented acceptance of Barclays’
initial email offer. 78 He ultimately did accept Barclays’ offer of employment after having a
series of discussions with Barclays executives.79
38. 	When Lehman filed for bankruptcy, Mr. Hoffman’s primary concern was that he
would not be paid the approximately $83 million he had earned in LBI bonuses.80 Given his
concerns that he would not be able to collect on his claim, Mr. Hoffman wrote to Mr. James
Veale at Credit Suisse concerning his situation: “Just plain sux [sic]. No way to sugar coat it . . .
. i [sic] am pretty bummed, no comp for 2 years plus all the lost stock, never really had years like
these last 2 before. I’ve probably been paid 2% for my career.” 81
39. 	Mr. Hoffman wanted to be paid the approximately $83 million for the work he
had performed at LBI in 2007 and 2008, and he made that abundantly clear to Barclays.82 As
Mr. Keegan testified, Mr. Hoffman stressed that he wanted Barclays to pay him what he was
78 April 23 Tr. at 75:11-13 [Hoffman].
79 April 23 Tr. at 76:6-12 [Hoffman] (detailing that Mr. Hoffman never responded to Barclays’ email offer of
employment); Hoffman Dep. Tr. 20:16-25 (Q: “After Lehman went bankrupt, you went to Barclays at some point;
is that right?” A: “I worked for Barclays.” Q: “You didn’t work anywhere else in between Lehman and Barclays,
did you?” A: “I didn’t work anywhere else.”).
80 Apr. 23 Tr. at 184:9-20 [Hoffman] (Q: “You were concerned that you weren’t going to be paid the $83 million
that you were expecting, right?” A: “I was concerned that I was owed money by an entity that had just filed
bankruptcy.” Q: “And, in particular, what you were concerned about was that you were looking at not having $83
million that you had been counting on to that point, right?” A: “Among other things, yes.” Q: “And that was
probably your primary concern?” A: “Fair to say.”), 187:9-12 [Hoffman] (Q: “Right. What you were really
worried about and concerned about was the $83 million, right?” A: “As it related to what I had earned from
Lehman, that was my concern.”).
81 1EE Ex. 29 (E-mail dated September 18, 2008).
82 Apr. 23 Tr. at 190:14-191:16 [Hoffman] (Q: “What you’re talking about is getting paid $83 million based on the
work you had done at Lehman, right? That[’s] what you wanted. You didn’t want to have to earn it in the future
with some 25 percent that you could have gotten from Millennium. You wanted $83 million paid to you from what
you had done before, right?” A: “I wanted to get paid for the work, the contracts 2007-2008.” Q: “The work you
had done at Lehman. That’s what you wanted to get paid for, right?” A: “Yes.”).
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owed by LBI and that “in order for him to talk to us, we had to address that issue.” 83 Indeed, Mr.
Hoffman testified that he told Barclays he was “looking for $83 million to come to work here”
because “it was no secret to them that I had lost $83 million.”84 It was “not a pure coincidence”
that he demanded $83 million from Barclays;85 it was, in fact, part of his “negotiating
strategy.”86
40. 	At the Merits Hearing, Mr. Hoffman testified that he wanted Barclays to “assume
his contract,” though he was unable to explain exactly what that meant to him. In response to
questions from his counsel, Mr. Hoffman testified that his understanding was that if Barclays
“assumed” his contract, then “I would’ve gotten 27 million in cash in February of ’09 . . . they
would’ve owed $84 million. It just would’ve been over whatever the prescribed payments
were.”87 In response to questions from the Trustee’s counsel, Mr. Hoffman testified that when
he told Barclays he wanted it to “assume his contract,” what he wanted was for Barclays to pay
him the $83 million “under the schedule that he had with Lehman” and without him having to
work for Barclays.88 Mr. Hoffman conceded, however, that he would have been satisfied if he
was given the $83 million he was owed even if his contract was not assumed.89
83 Apr. 24 Tr. at 60:3-17 [Keegan].
84 Apr. 23 Tr. at 79:25-80:11 [Hoffman].
85 Hoffman Dep. Tr. 347:10-17 (Q: “It is just a coincidence that you picked 83 and 83 is what you were owed?” A:
“It was a negotiating strategy. So it is not a pure coincidence. But it is not –” Q: “Not a coincidence, you picked it
because it was what you were owed by Lehman?” A: “It was a negotiating strategy.”); Apr. 23 Tr. at 226:10-14
[Hoffman] (Q: “It wasn’t a coincidence that that was the number you talked about and that ended up in your
contract[?]” A: “There’s a couple of reasons. I thought I could get it, but I won’t say it’s a coincidence.”).
86 Apr. 23 Tr. at 192:6-8 [Hoffman]; Hoffman Dep. Tr. 330:6-11 (Q: “Whose idea was it to get to 83 million?” A:
“I – it’s possible, I suspect that that was my negotiating ploy was to say, hey, look, get me to 83 million, this is what
was required.”).
87 Apr. 23 Tr. at 94:18-95:8 [Hoffman].
88 Id. at 197:21-201:2 [Hoffman] (Q: “Well, I guess I don’t want to assume anything. I want to understand what
you wanted when you were telling Barclays and telling us that what you wanted was the assumption of your
contract. You wanted, I guess it sounds like, to be able to not trade at all, and just get $83 million paid to you under
the terms – under the schedule that you had with Lehman. That’s basically it? Didn’t have to trade for Barclays at
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41. 	In addition to discussing employment with Barclays, Mr. Hoffman discussed
employment with a number of other firms between September 16, 2008 and October 3, 2008. 90
In discussions with these potential employers, Mr. Hoffman continued to employ his negotiating
strategy of demanding $83 million.91 Although a number of the firms with which Mr. Hoffman
met expressed interest in hiring him, and Mr. Hoffman asserts that he could have secured a
formal offer from multiple firms, none of his discussions progressed to a formal offer of
employment and none of the firms expressed a willingness to guarantee him the $83 million he
was seeking.92
42. 	Mr. Hoffman testified that, shortly after the sale, he met with Barclays executive
Eric Bommensath, who told him initially that Barclays would not pay him the $83 million he
was owed by LBI.93 However, Mr. Hoffman subsequently met with Barclays’ Rich Ricci and
Michael Keegan to discuss further what Mr. Hoffman termed his “legacy compensation
all?” A: “No. I didn’t have to trade for Barclays at all.” Q: “Okay.” A: “It doesn’t mean I may have; I may not
have. But I didn’t have to.” Q: “Okay. That’s what you mean by ‘assume the contract.’ Right?” A: “Yes.”).
89 Apr. 23 Tr. at 130:3-12 [Hoffman] (Q: “Right, but I mean, I’m saying that you’ve emphasized repeatedly that you
wanted the contract assumed. You wanted the contract assumed. But you agree with me that if the check had been
pushed across the table at you because someone had said to you, ‘Now, you know, it’s lawyer stuff, assumption’s
really complicated. Here’s the money, John, we’re good, right?’ You would’ve – that would’ve been fine with you
and you would’ve gotten over . . . [?]” A: “If someone gave me $83 million, yes.”).
90 See Apr. 23 Tr. at 50:9-64:5 [Hoffman].
91 See Apr. 23 Tr. at 56:6-11 [Hoffman] (“Well, Mike was aware of what I was looking for. And $83 million
seemed like a reasonable thing to ask for, frankly, in light of things we talked about and in light of the fact that it
was obviously on the table, because I had just lost $83 million and that’s what I was looking for to go to work.”)
92 See Apr. 23 Tr. at 50:9-64:5 [Hoffman].
93 Apr. 23 Tr. at 245:5-14 [Hoffman] (Q: “Okay. And you talked a little bit about that Mr. Bommensath in the street
corner conversation that was the first time you had met Mr. Bommensath, right?” A: “Yes.” Q: “And basically the
first thing he told you was that they’re not paying you that money, right? They don’t owe you the money.” A:
“You don’t owe me the money. Lehman owes me the money and he’s not sure he wants to be in a proprietary
business, but he’d like to have a conversation.”).
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issues,”94 and he also had further discussions with Mr. Bommensath as the negotiations
progressed.
4. 	Mr. Hoffman Secretly Records his Conversations with Messrs. Ricci,
Keegan, Bommensath, and Gelband
43. 	Mr. Hoffman recorded his meetings and conversations with Messrs. Ricci,
Keegan, Bommensath, and Gelband without their knowledge or consent.95 When asked why, he
said that he did so as a note-taking technique.96 Mr. Hoffman testified that he made the secret
recordings, rather than actually take notes, because he had never seen someone take notes in a
work environment.97 Mr. Hoffman testified that he could not recall whether this was the first
time he had ever secretly recorded conversations.98 Mr. Hoffman’s testimony on the reasons for
making the secret recordings was dubious at best.
44. 	The recorded conversations leave no doubt that Mr. Hoffman was focused on
Barclays agreeing to pay him the $83 million he was owed by LBI in addition to paying him
separately for his trading performance at Barclays. For example, in a September 23, 2008
meeting with Michael Gelband, an ex-Lehman employee, Mr. Hoffman explained:
You know, my lawyer look [sic] at it, whatever you can do to preserve your
claim, you have to separate correctly, deal with Barclays correctly, you know.
Anyone could owe you money at any time. And, you know, any good lawyer will
tell you, one entity’s bankrupt; one isn’t. 	Who do you want? 	You know. 	We
94 Id. at 83:23-84:17 [Hoffman] (detailing that after he met with Eric Bommensath his next meeting was with
Barclays executive Rich Ricci), 115:1-13 [Hoffman] (Michael Keegan was the “direct negotiator for Barclays”);
Trustee’s Ex. 20 (Transcript of excerpt from 1EE_0000086) (Mr. Hoffman explaining to Rich Ricci that he has
“legacy compensation issues that are substantial”); Apr. 23 Tr. at 92:24-93:4 [Hoffman] (referring to “legacy
compensation issues” as the $83 million owed to him by LBI).
95 Apr. 23 Tr. at 211:8-212:5 [Hoffman].
96 Id. (Q: “I guess, if I understood your testimony correctly, you said it was a—the way that you were taking notes?
Is that right?” A: “Yes.”).
97 Hoffman Dep. Tr. at 306:23-307:3 (Q: “Couldn’t you have just taken a notepad out and taken notes as the
meeting is happening?” A: “I’ve never seen it done in a work environment like that.”); Apr. 23 Tr. at 212:15-213:6
[Hoffman].
98 Apr. 23 Tr. at 211:21-212:5 [Hoffman] (Q: “So it’s possible you had previously decided to take notes using a
secret recorder; you just don’t recall whether or not that’s the case?” A: “That’s what I’m saying.”).
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could talk about Lehman all day, Barclays has money. 	You’ve got to try to get
money from Barclays through the negotiation or they may feel in the back of their
minds, we’re not in the clear with this guy, although we’ll say we are. 	But, do
you know what I mean. 	They’ll have legacy issues with something at Lehman.
You can’t get away from it. That’s just, you know. I would, you know. So they
may feel like, well, we’ll offer him a good deal, because it will satisfy any
potential down the road that, you know, he tries to make it a legacy issue about
what he’s owed before. 	All that does is make it hard for me to, you know, if I
wasn’t owed any money, it would be easier. I’ll say what can you do for me, no
thanks, I’m leaving.99
Mr. Hoffman conceded that his reference to what he was “owed” was to the $83 million that he
was owed by LBI.100
45. 	Mr. Hoffman also recorded a September 23, 2008 meeting with Barclays
executive Rich Ricci, during which Mr. Hoffman explained to Mr. Ricci that he had “legacy
compensation issues that are substantial,”101 referring again to the $83 million that he was owed
by LBI.102 Mr. Ricci responded: “I hear you on the comp. And I think if we were to move
forward we’re going to have to figure something out, because we want you motivated.” 103
46. 	On September 26, 2008, Mr. Ricci sent Mr. Keegan an email asking if Mr.
Keegan was “committed to [Mr. Hoffman’s] prop bus[iness] going forward? I assume yes.”104
Mr. Keegan responded “[i]f we can work out the cy pay issue, yes.”105 Mr. Keegan testified that
99 Trustee Ex. 29 (Transcript of excerpt from 1EE_0000087) (emphasis added).
100 Apr. 23 Tr. at 217:3-9 [Hoffman] (Q: “Okay perfect. So, when you said right at the end of that that if I wasn’t
owed any money it would be easier, the money that you were owed that you’re talking about is the $83 million that
you were owed by LBI, right?” A: “It’s the money I was owed from my 2007 and ’08 compensation agreements
with LBI.”).
101 Trustee Ex. 20 (Transcript of excerpt from 1EE_0000086).
102 Apr. 23 Tr. at 224:11-15 [Hoffman] (Q: “Right. What – instead you told him the legacy compensation issues
that are substantial and the legacy compensation issues are the $83 million, right, that you were owed by LBI?” A:
“The money that I was owed, yes.”).
103 Trustee Ex. 20 (Transcript of excerpt from 1EE_0000086).
104 Trustee Ex. 30 (E-mails between Messrs. Keegan and Ricci, dated September 26, 2008, regarding Mr. Hoffman).
105 Id.
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the “cy pay issue” (i.e., the current year pay issue) that needed to be worked out was the $83
million that Mr. Hoffman was owed by LBI.106
47. 	A few days later, Mr. Keegan sent Mr. Bommensath and Barclays executive Jerry
del Missier the following email with a proposal for compensating Mr. Hoffman for the $83
million he was owed by LBI:
As discussed under his agreement with Leh J. Hoffman would [have] been owed a
total of $83m for his year to date earnings, 25% of which would have been subject
to a one year claw back (20.75m) and 50% would have been in 5 year stock
($41.5m). 	My recommendation for Jon is we pay John (sic) $30m of his total
bonus this year (25% in year BC vest stock) and defer an additional $40 for which
vests prorata if Jon is still an employee in Feb 28, 2010 and 2011. Going forward
his existing core deal would be restored (12% of first 25 of net revenues and 14%
above 25m) with elimination of the claw back. Additionally for the remainder of
calendar 08 we would pay Jon at a rate of 25% of net revenues earned and
realized by the bonus payment date in February of 09.107
Mr. Keegan testified that “the structure of the payouts that I proposed in my initial offer to [Mr.
Hoffman] was structured to try to match the payouts that he would have received under the
Lehman Brothers contract for the $83 million dollars.”108
48. 	Mr. Hoffman discussed this proposal with Mr. Keegan and Mr. Bommensath
during an October 2, 2008 meeting that Mr. Hoffman secretly recorded.109 During this meeting,
Mr. Hoffman asked for more time to make “the rest of the money that I seem to be out,”
referring to the short time frame in Mr. Keegan’s initial offer for him to make up the difference
between the $83 million he was owed by LBI and the $70 million in fixed payments Barclays
106 Apr. 24 Tr. at 61:24-62:12 [Keegan] (Q: “And the current year pay issue meaning?” A: “It was 2008. Meaning
his accrued to 2008, under his Lehman contract.” Q: “So is it – in other words, that’s the $83 million dollars he was
owed by Lehman?” A: “Yes.”).
107 Trustee Ex. 31 (E-mail, dated September 30, 2008, from Mr. Keegan to Messrs. Bommensath and del Missier
regarding Mr. Hoffman).
108 Apr. 24 Tr. at 97:15-21 [Keegan].
109 Trustee Ex. 22 (Audio file of October 3, 2008 conversation between Messrs. Keegan, Bommensath, and
Hoffman).
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was offering.110 Mr. Hoffman’s concern was addressed by extending the elevated payout period
to up to two years and capping the maximum amount Mr. Hoffman could earn under the elevated
payout percentage at $13 million.111
49. 	In the same conversation, Mr. Hoffman and Mr. Keegan discussed the form and
timing in which the $83 million would have been paid by LBI112 because Barclays was
attempting to structure its payment of the $83 million to match what he would have received
from LBI. 113 Mr. Hoffman acknowledged that Barclays had structured the deal to match the
payments that he would have received from LBI. 114
50. 	In the same recorded conversation, Mr. Bommensath – who had previously told
Mr. Hoffman that Barclays would not pay him the $83 million he was owed by LBI – told Mr.
Hoffman that he had “evolved from the first thing [he] told [him].” 115 Mr. Bommensath told Mr.
Hoffman that “we tried to respect you. Not to have you have the pressure to try to remake it, you
earned it Johnny. Okay? You earned it. All right? You earned that money, it’s yours.”116 Mr.
110 Trustee Ex. 23 (Transcript of excerpt from 1EE_0000088 (audio recording of the meeting)); Apr. 23 Tr. at 125:9-
14 [Hoffman] (Q: “When you said, ‘The rest of the money I seem to be out,’ what was that referring to?” A: “I had
asked for $83 million.”).
111 Apr. 24 Tr. at 66:4-15 [Keegan] (Barclays addressed Mr. Hoffman’s concern “with the short time frame that we
were giving him to earn the 13 million” by giving him “for an initial period of time until he earned the 13 million,
an[] open ended contract in terms of time, at a 20 percent payout, capped it at 13, however, so he couldn’t earn more
than 13, and we put the claw backs back in, the 20 million claw back.”).
112 Trustee Ex. 24 (Transcript of excerpt from 1EE_0000088).
113 Trustee Ex. 23 (Transcript of excerpt from 1EE_0000088) (“I tried to make sure in how you would have got paid
from Lehman that we’re giving you that, we’re not giving you less money than you would otherwise have from
Lehman.”).
114 Trustee Ex. 27 (Transcript of excerpt from 1EE_0000088) (“I think it’s, you know, but I do think in general the
pieces are probably more thought out than I thought they were in talking to you. Do you know what I mean? In
other words, you structured it trying to be more cognizant of some sort of payout. Matching payouts and . . . .”).
115 Trustee Ex. 26 (Transcript of excerpt from 1EE_0000088) (emphasis supplied).
116 Trustee Ex. 26 (Transcript of excerpt from 1EE_0000088).
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Keegan, who was present during this recorded conversation, testified that he understood Mr.
Bommensath to be referring to the $83 million Mr. Hoffman was owed by LBI.117
51. 	The evidentiary record is clear that Barclays ultimately agreed to pay Mr.
Hoffman the $83 million he was owed by LBI.118 Mr. Keegan explained that the significance of
the $83 million aggregate number in Mr. Hoffman’s Barclays contract was that it “was what
Jonathan would have been due under his contract with Lehman Brothers.”119 As Mr. Keegan
testified, “Jonathan was asking us to make him whole for what he thought he was entitled to
from Lehman Brothers, which we ultimately believe we did.”120
5. 	Mr. Hoffman Commences Employment
with Barclays and is Paid $83 Million
52. 	Following Barclays’ agreement to pay Mr. Hoffman the $83 million that he was
owed by LBI, Mr. Hoffman entered into an employment agreement with Barclays on October 3,
2008.121 The agreement listed Mr. Hoffman’s starting date at Barclays as September 22, 2008,
the same day that the sale pursuant to the APA had closed.122
53. 	In addition to paying him the $83 million he was owed by LBI, Mr. Hoffman’s
employment agreement with Barclays essentially replicated other key terms of his agreement
117 Apr. 24 Tr. at 96:8-22 [Keegan] (Q: “What money did you understand Mr. Bommensath to be talking about?”
A: “That was the $83 million bonus that would have been accrued to Jonathan under Lehman’s contract at the time
of bankruptcy.”).
118 Id. at 96:19-22 [Keegan] (Q: “And did Barclays agree to pay him that money?” A: “In the format that
ultimately the contract was structured, yes.”).
119 Id. at 69:10-16 [Keegan] (Q: “And again, what was the significance of the $83 million?” A: “It was what
Jonathan would have been due under his contract with Lehman Brothers, had Lehman Brothers not filed bankruptcy
and Jonathan finished the year at the performance level he had achieved at the time of the bankruptcy.”).
120 Id. at 118:6-19 [Keegan] (quoting Mr. Keegan’s March 27, 2015 deposition transcript).
121 Trustee Ex. 7 (Mr. Hoffman’s Barclays Employment Agreement).
122 See id. at 1 (“Your employment commenced on September 22, 2008.”).
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with LBI.123 The Barclays agreement provided that he would receive the same $200,000 base
salary he had earned at LBI. 124 It also provided that Mr. Hoffman would receive an annual bonus
based on the same formulas that were used in his LBI agreements – twelve percent of net profits
up to $25 million and fourteen percent of net profits above $25 million.125 The Barclays
agreement was actually more favorable for Mr. Hoffman than his LBI agreement had been as it
called for his annual bonus to be paid in a single installment and it provided that Mr. Hoffman
would be paid 75 percent of the bonus amount in cash rather than 50 percent. 126
54. 	In addition to the foregoing terms of his “core” compensation, Mr. Hoffman’s
agreement with Barclays provided that he would receive “Special Awards” of $70 million, of
which $30 million was to be paid in February 2009, $20 million was to be paid in February 2010,
and $20 million was to be paid in February 2011.127 These awards were to be paid 75 percent in
cash and 25 percent in equity.128
123 See id.; Apr. 24 Tr. at 64:21-65:3 [Keegan] (Q: “So when you referred to the existing core deal –” A: “It’s his
contract that was in place at the time of Lehman’s bankruptcy.” Q: “And when you said here that the core deal
would be restored, what did you mean by that?” A: “I meant we would just give him the same terms under a
Barclays contract.”).
124 Trustee Ex. 5 (Mr. Hoffman’s 2007 LBI agreement) at 1; Trustee Ex. 6 (Mr. Hoffman’s 2008 LBI agreement) at
1; Trustee Ex. 7 (Mr. Hoffman’s Barclays Employment Agreement) at 1; Hoffman Dep. Tr. at 197:14-199:4 (Q:
“And your compensation in the next section down, it says your base pay – base salary will be paid at the rate of
200,000 per year, correct?” A: “Yes.” Q: “And that’s the same salary you had at Lehman, right?” A: “Yes.”).
125 Trustee Ex. 7 (Mr. Hoffman’s Barclays Employment Agreement) at 4; Apr. 24 Tr. at 67:2-68:17 [Keegan] (Q:
“And was that the same as was the case in Mr. Hoffman’s LBI contract?” A: “It’s extremely similar, yes.” Q:
“Okay. Is there any difference that you’re aware of?” A: “Not that I’m aware of.”); Hoffman Dep. Tr. 215:23-
216:6 (testifying that the percentages in his Barclays agreement “look[] to be the same” as those in his LBI
agreements).
126 Apr. 23 Tr. at 247:13-248:9 [Hoffman] (Q: “What I’m saying is that instead of having two installments you got
one, right?” A: “There was one installment.”); Trustee Ex. 7 (Mr. Hoffman’s Barclays Employment Agreement) at
1 (providing for Mr. Hoffman’s performance bonus and special awards to be split between cash and equity with the
equity portion equal to “25% of each of the Performance Bonus and Special Awards”).
127 Trustee Ex. 7 (Mr. Hoffman’s Barclays Employment Agreement) at 1.
128 Id. (providing for Mr. Hoffman’s performance bonus and special awards to be split between cash and equity with
the equity portion equal to “25% of each of the Performance Bonus and Special Awards”).
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55. 	If Mr. Hoffman incurred trading losses at Barclays in 2009 or 2010, Barclays
could reduce the “Special Awards” to be paid in 2010 (on account of 2009 performance) and
2011 (on account of 2010 performance) by up to $10 million each.129 This provision was
intended to replicate the 25% second installment/clawback feature of his LBI agreement, under
which Mr. Hoffman could “lose” $18.9 million based upon his future performance. 130 Similarly,
the “Special Awards” would not be paid if Mr. Hoffman resigned or was terminated for cause,
just as Mr. Hoffman’s 2008 performance bonus under his LBI agreement would not be paid if he
resigned or was terminated for cause before it was paid.131
56. 	Vis-a-vis the $83 million number Mr. Hoffman had been discussing with
Barclays, the $70 million in “Special Awards” left a $13 million “shortfall” which was addressed
by providing for Mr. Hoffman to receive an increased performance percentage from the
twelve/fourteen percent arrangement to 20 percent of net profits until Mr. Hoffman received the
remaining $13 million of the $83 million.132 Thus, in total, Mr. Hoffman was to receive $83
million in addition to his core “go forward” deal with Barclays. 133
129 Id.
130 Trustee Ex. 6 (Mr. Hoffman’s 2008 LBI agreement) at 2; Apr. 24 Tr. at 66:4-15 [Keegan] (stating that Barclays
“put the . . . 20 million claw back” from Mr. Hoffman’s 2008 LBI agreement back in Mr. Hoffman’s Barclays
agreement).
131 Trustee Ex. 7 (Mr. Hoffman’s Barclays Employment Agreement) at 2; Trustee Ex. 6 (Mr. Hoffman’s 2008 LBI
agreement) at 3.
132 Trustee Ex. 7 (Mr. Hoffman’s Barclays Employment Agreement) at 2; Apr. 24 Tr. at 68:5-69:16 [Keegan] (Q:
“Okay, and []is that the 13 million, so in other words, it would only apply until he earned 13 million more than he
would have earned under his core deal?” A: “Yeah, that was intended for when—yeah, the fixed payments plus the
13 million to come to the 83 million.”).
133 Trustee Ex. 7 (Mr. Hoffman’s Barclays Employment Agreement) at 2; Apr. 24 Tr. at 68:5-69:16 [Keegan].
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57. 	In all, Mr. Hoffman received $100 million in compensation for his trading
performance at Barclays during 2008 to 2010, in addition to the $83 million in Special Awards
and increased profit sharing he received from Barclays on account of his LBI bonuses.134
58. 	Mr. Keegan testified that he was “surprised” when he learned about Mr.
Hoffman’s claim because, he explained, “he was due $83 million from Lehman and we paid it to
him.” 135
B. Claimant J. Robert Chambers
59. 	Mr. Chambers joined LBI in December 1994 and was continuously employed by
LBI for fourteen years.136 Mr. Chambers was employed by LBI pursuant to written contracts
commencing in or around 2002.137
60. 	In 2007 and 2008, Mr. Chambers, a proprietary trader, was the portfolio manager
of the Lehman Energy Fund (the “Fund”).138 Mr. Chambers and his team worked out of an LBI
branch office in Houston, Texas.139 The Fund loaned money to small energy companies and
secondarily made equity investments and purchased bonds and loans of energy companies.140
1. 	Mr. Chambers’ 2007 Employment Agreement and 2007 Bonus
61. 	For LBI’s 2007 fiscal year, Mr. Chambers had a written employment agreement
with LBI that provided for him to receive $200,000 in base salary and a performance bonus
134 Trustee Ex. 7 (Mr. Hoffman’s Barclays Employment Agreement) at 2.
135 Apr. 24 Tr. 100:19 [Keegan]; see also id. at 101:3-4 [Keegan] (“I thought we paid him the $83 million dollars,
yes.”).
136 Apr. 22 Tr. 131:5-6 [Chambers].
137 Apr. 22 Tr. 133:8 [Chambers].
138 Apr. 22 Tr. 131:15-17 [Chambers].
139 Apr. 22 Tr. 131:20-21 [Chambers].
140 Apr. 22 Tr. 131:24-132:1 [Chambers].
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based on the net profits generated by the Fund during that fiscal year.141 Specifically, Mr.
Chambers’ 2007 bonus was equal to twelve percent of the first $25 million in net profits the
Fund generated and fourteen percent of net profits above $25 million, less his salary.142
62. 	Mr. Chambers’ 2007 bonus was to be paid in two installments. 143 The first
installment was to be paid at the time that LBI paid its performance bonuses for the 2007 fiscal
year (in early 2008) and would be equal to 75 percent of the total performance bonus less the
salary he received for the year.144 The second installment, the remaining 25 percent, would be
paid at the time LBI paid its bonuses for the 2008 fiscal year (in early 2009).145
63. 	It is undisputed that the second installment of Mr. Chambers’ 2007 bonus was
$1,647,061, to be paid in cash.146 For purposes of Lehman’s 2008 Equity Award Program, the
second installment of Mr. Chambers’ 2007 bonus was to be considered part of his total
compensation for the 2008 fiscal year.147
2. 	Mr. Chambers’ 2008 Employment Agreement
64. 	On July 9, 2008, Mr. Chambers entered into an agreement with LBI that covered
his compensation for management of the Fund for 2008, 2009, and 2010.148
65. 	As was the case for Mr. Chambers’ 2007 LBI employment agreement, Mr.
Chambers’ 2008 LBI employment agreement provided that he would receive a $200,000 base
141 Trustee Ex. 11 (Mr. Chambers’ 2007 LBI Employment Agreement) at 1, 5.
142 Id. at 5.
143 Id. at 1-2.
144 Id.
145 Id. at 2, 6.
146 Trustee Ex. 59 (Mr. Chambers’ Proof of Claim) at LBI_BONUS_CLAIMS_0000089; Trustee Ex. 60 (2007 Total
Compensation Statement for J. Robert Chambers).
147 Trustee Ex. 11 (Mr. Chambers’ 2007 LBI Employment Agreement) at 2 (“The Second Installment will be
considered part of your total compensation for the 2008 Performance Year for purposes of the Equity Award
Program, except as otherwise specifically provided in this letter.”).
148 Trustee Ex. 12 (Mr. Chambers’ 2008 LBI Employment Agreement).
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salary.149 This $200,000 base salary would be paid to him only for periods in which he was
actively employed by LBI.150 If Mr. Chambers’ employment with LBI ended for any reason
during the 2008, 2009, or 2010 fiscal years, then his salary payments would cease at that time as
well.151 Mr. Chambers understood at the time he entered into this contract that he would not be
paid salary for periods during which he was not employed at LBI. 152
66. 	Mr. Chambers’ 2008 LBI employment agreement also provided that he was
eligible for a performance bonus for the 2008, 2009, and 2010 fiscal years.153 For the 2008 fiscal
year, the agreement provided for Mr. Chambers to receive his performance bonus out of a
“performance pool,” which would be equal to 25 percent of the net profit of the Fund. 154 Mr.
Chambers’ 2008 bonus would be paid in a single installment and was equal to the performance
pool minus (i) Mr. Chambers’ $200,000 salary for the 2008 fiscal year and (ii) the 2008 total
compensation of the employees of the Fund.155
67. 	For the 2009 and 2010 fiscal years, the agreement provided that the performance
pool would be an amount equal to the greater of “(i) the Net Profit of the [Fund] for the
applicable Performance Period, multiplied by the Performance Bonus Percentage; and (ii)
149 Id. at 1.
150 Id. (“The above salary will be paid for all periods of your active employment with the Firm.”).
151 Id. at 1-2. (“If you resign for any reason or are terminated by the Firm with ‘Cause’ . . . your salary payments will
end at that time . . . . If your employment is terminated by the Firm without Cause . . . your salary payments will end
at that time . . . .”).
152 April 22 Tr. at 184:18-21 [Chambers] (Q: “And you understood that you wouldn’t be paid salary under this
contract, if your employment with Lehman was terminated, right?” A: “That’s correct.”).
153 Trustee Ex. 12 (Mr. Chambers’ 2008 LBI Employment Agreement) at 1.
154 Id. at 4; April 22 Tr. at 148:23-149:16 [Chambers].
155 Trustee Ex. 12 (Mr. Chambers’ 2008 LBI Employment Agreement) at 4.
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$10,000,000, prorated for the applicable Performance Period (if less than the full Performance
Year).”156
68. 	At LBI’s discretion, a portion of Mr. Chambers’ total compensation for the 2008,
2009, and 2010 fiscal years would be paid in the form of conditional equity awards.157 Mr.
Chambers’ 2008 LBI employment agreement further provided that the deferral and delivery
schedule for the amount of his 2008 total compensation payable in conditional equity awards
would be as set forth in a schedule from the 2008 Equity Award Program Summary, attached to
his agreement.158 The schedule provided that for employees with total compensation above $2.5
million – which would include Mr. Chambers – “$1,500,000 plus 90 [percent] of 2008 [total
compensation] above $2,500,000 up to a maximum of 65 percent of [2008 total compensation]”
would be payable in the form of conditional equity awards.159
69. 	The agreement states that “[i]n no event will you be eligible for any Performance
Bonus with respect to a [fiscal year] in which you were not employed as contemplated by this
letter.”160
70. 	Mr. Chambers did not work for LBI during the 2009 or 2010 fiscal years.161 In
his testimony at the Merits Hearing, Mr. Chambers acknowledged that he understood at the time
156 Id.
157 Trustee Ex. 12 (Mr. Chambers’ 2008 LBI Employment Agreement) at 2 (“At the Firm’s discretion, a portion of
your total compensation for the 2008, 2009, and 2010 performance years (including any Performance Bonus) will be
payable in conditional equity awards (restricted stock units, options, and/or other equity-based awards) pursuant to
the Firm’s Equity Award Program or other Firm-sponsored programs that may be established by the Firm from time
to time and as then generally in effect for employees at your level.”).
158 Trustee Ex. 12 (Mr. Chambers’ 2008 Employment Agreement) at 2.
159 Trustee Ex. 13 (Mr. Chambers’ Summary of Select Material Terms) at 3.
160 Id. at 2.
161 Chambers Dep. Tr. at 79:19-22 (Q: “Do you consider yourself to have been actively employed by LBI following
your acceptance of Barclays’ employment offer?” A: “No, I do not.”).
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he entered into his employment agreement that he would not be paid bonuses for years that he
was not employed by LBI.162
3. 	Mr. Chambers’ 2008 Bonus
71. 	As of September 12, 2008, the date on which Mr. Chambers was instructed to
stop trading, the Fund had net profits of $171,627,000 for fiscal year 2008, and the performance
pool was thus $42,906,750.163
72. 	Besides Mr. Chambers, the Fund had three other employees during the 2008 fiscal
year – Kyle Kettler, Mathew Verghese, and Guy Hoffman. 164 Mr. Kettler’s 2008 total
compensation was to be at least $500,000, comprised of $150,000 in base salary and a $350,000
guaranteed bonus. 165 Mr. Verghese’s 2008 total compensation was also to be at least $500,000,
comprised of $175,000 in base salary and a $325,000 guaranteed bonus.166 Mr. Guy Hoffman’s
2008 total compensation was to be $200,000, comprised entirely of his base salary. LBI did not
pay any of Messrs. Kettler and Verghese’s 2008 bonuses, nor did LBI pay any salary to Messrs.
Kettler, Verghese, or Hoffman after the Filing Date.
73. 	With respect to compensation for fiscal year 2008, as of the Filing Date:
 	LBI had paid Mr. Chambers $146,153.89 in salary and $0 in bonus;
 	LBI had paid Mr. Kettler $100,384.60 in salary and $0 in bonus;
 	LBI had paid Mr. Verghese $127,884.63 in salary and $0 in bonus; and
 	LBI had paid Mr. Guy Hoffman $146,153.89 in salary.167
162 April 22 Tr. at 185:12-18 [Chambers] (Q: “And so, at the time that you entered into this contract, you understood
that if you were terminated, you would not be entitled to receive bonus payments for years after you were
terminated, right?” A: “I understood that I would not receive the performance bonus, if I were terminated,
correct.”).
163 Id. at 148:12-15, 149:22-150:9 [Chambers].
164 Trustee Ex. 59 (Mr. Chambers’ Proof of Claim) at LBI_BONUS_CLAIMS_0000089; Trustee Ex. 65 (Mr.
Verghese’s LBI Employment Agreement); Trustee Ex. 73 (Mr. Kettler’s LBI Employment Agreement).
165 Trustee Ex. 73 (Mr. Kettler’s LBI Employment Agreement).
166 Trustee Ex. 65 (Mr. Verghese’s LBI Employment Agreement).
167 Chambers Ex. 8 (Lehman Energy Proprietary Portfolio Personnel Expenses).
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74. 	Following the sale to Barclays, Mr. Kettler and Mr. Verghese became Transferred
Employees and were paid a salary by Barclays.168 Mr. Kettler and Mr. Verghese were both
subsequently terminated, and on December 5, 2008, both entered into separation agreements
with Barclays.169 Barclays paid Mr. Verghese $140,240 and Mr. Kettler $35,000 as special
lump-sum payments in lieu of their LBI bonuses.170
75. 	Mr. Kettler and Mr. Verghese each filed a claim against LBI for their respective
guaranteed bonuses.171 Mr. Kettler’s claim has been allowed in the amount of $300,625, of
which $10,950 was allowed as a priority claim, $50,312.50 was allowed as a subordinated claim,
and the remainder was allowed as a general unsecured claim.172 Mr. Verghese’s claim has been
allowed in the amount of $169,385, of which $10,950 was allowed as a priority claim, $12,040
was allowed as a subordinated claim, and the remainder was allowed as a general unsecured
claim.173
168 Trustee Ex. 71 (Mr. Verghese’s Barclays Separation Agreement); Trustee Ex. 72 (Mr. Kettler’s Barclays
Separation Agreement); April 22 Tr. at 177:12-17 [Chambers] (Q: “And you also understand that Mr. Kettler and
Mr. Verghese were both paid by Barclays in 2008 as well, right?” A: “I understand that they received salary from
Barclays, as did I, starting from some time in late September.”).
169 Trustee Ex. 71 (Mr. Verghese’s Barclays Separation Agreement); Trustee Ex. 72 (Mr. Kettler’s Barclays
Separation Agreement).
170 Trustee Ex. 71 (Mr. Verghese’s Barclays Separation Agreement) at 1; April 24 Tr. at 30:2-14 [Kurman] (Q:
“And do you see in paragraph three, that Mr. Verghese also received a special lump-sum payment of $140,240?” A:
“Yes, I do.” Q: “And what would your understanding be of what that special lump-sum payment represents?” A:
“Again, whether you fit the 10 percent category or the 20 percent category, the prior year’s bonus—that was the
enhancement in lieu of bonus.”). Trustee Ex. 72 (Mr. Kettler’s Barclays Settlement Agreement) at 1; April 24 Tr. at
32:17-33:2 [Kurman] (Q: “Okay. And would that be the enhancement in lieu of bonus to Mr. Kettler?” A: “That is
correct.”).
171 April 22 Tr. at 153:12-19 [Chambers] (Q: “Do you know if those individuals are pursuing claims against
Lehman Brothers?” A: “They are pursuing claims against Lehman Brothers[.]” Q: “And for the amounts that
they’re guaranteed bonuses?” A: “There are minimum guaranteed bonus, yes.”).
172 Stipulation and Order Regarding Proof of Claim of R. Kyle Kettler [ECF No. 12191].
173 Stipulation and Order Regarding Proof of Claim of P. Mathew Verghese [ECF No. 12192].
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4. 	Mr. Chambers Accepts Employment with Barclays, is
Terminated, and is Paid a $1 Million Lump-Sum Payment
76. 	Following the commencement of LBI’s SIPA proceeding, Mr. Chambers was
offered employment by Barclays.174 Mr. Chambers ultimately accepted Barclays’ offer on
December 5, 2008.175 Virtually simultaneously with his acceptance of Barclays’ offer, Mr.
Chambers was terminated by Barclays.176 Mr. Chambers and Barclays entered into a separation
agreement, which included a general waiver and release, dated December 5, 2008.177 With the
proposed separation agreement, Mr. Chambers was provided with a copy of the Disclosure
Information Provided Pursuant to the Older Worker’s Benefit Protection Act, and he was the first
person listed on exhibit one to that document, with the job title “desk manager, age 41.”178
77. 	Pursuant to the separation agreement, Barclays paid Mr. Chambers 42 weeks of
severance in accordance with Lehman’s severance policy and after taking into account the years
of Mr. Chambers’ service at LBI.179 Mr. Chambers admitted that Barclays told him that the
severance he was being paid was on account of the years he worked at LBI. 180
174 April 22 Tr. at 186:17-20 [Chambers] (Q: “And then, around the time of the bankruptcy, you said that you also
received an email from Barclays, offering you employment, correct?” A: “Yes.”).
175 Id. at 166:17-18; Trustee Ex. 64 (December 5, 2008 email from Mr. Chambers to
“acceptbarclaysoffer@lehman.com”).
176 April 22 Tr. at 166:17-167:15 [Chambers].
177 Trustee Ex. 14 (Mr. Chambers’ Barclays Separation Agreement).
178 April 22 Tr. at 168:19-22; 170:19-171:2 [Chambers].
179 Id. at 1; Apr. 24 Tr. at 26:21-27:11 [Kurman] (Q: “And do you see from this agreement, that Mr. Chambers
received 42 weeks of severance pay?” A: “Yes, I see that.” Q: “Can you tell me how that was calculated, sir?” A:
“The formula in the Lehman handbook, that we just looked at a moment ago, would dictate how many weeks he
received.” Q: “And did that severance pay account for Mr. Chambers’ time at Lehman Brothers?” A: “Yes, it
did.”).
180 Apr. 22 Tr. at 191:6-13 [Chambers] (Q: “And under your severance – and Barclays told you, as you mentioned,
Barclays told you that they calculated the amount of severance based on years of service, right?” A: “That’s what
they told me.” Q: “And that was years of service with Lehman Brothers, right?” A: “That’s what they told me.”).
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78. 	Barclays also paid Mr. Chambers a $1 million lump-sum payment. 181 Barclays
executive Mark Kurman testified that the $1 million enhanced payment was to compensate Mr.
Chambers for his 2008 service at LBI.182 At the Merits Hearing, Mr. Chambers admitted that
Barclays told him the $1 million payment was calculated based on his pre-acquisition work at
LBI.183
79. 	Before executing the separation agreement and waiver and general release, Mr.
Chambers negotiated with Barclays to include language in the release providing that:
For the avoidance of doubt, notwithstanding any other provision of
this Waiver and General Release, nothing in this Waiver and
General Release, or in the Separation Agreement to which it is
attached, releases, discharges, or limits any claim, right, or cause
of action I have or may assert against Lehman Brothers Inc. or any
other Lehman Brothers entity by reason of my employment with
Lehman Brothers Inc., the termination of that employment, or for
any other reason.184
C. Claimant Wayne Judkins
80. 	Mr. Judkins was a proprietary trader at LBI and held the title of Senior Vice
President at the time of Lehman’s bankruptcy.185 Mr. Judkins began his employment with LBI in
January 2008, trading U.S. government 10-year and 30-year bonds.186
1. 	Mr. Judkins’ 2008 Employment Agreement with LBI
181 Trustee Ex. 14 (Mr. Chambers’ Barclays Separation Agreement) at 1.
182 Apr. 24 Tr. at 27:12-28:2 [Kurman] (Q: “Do you see that there’s a reference there to a million dollar special
lump-sum payment?” A: “Yes.” Q: “Could you tell me what that special lump-sum payment represents?” A:
“That is the enhancement in lieu of bonus for the prior year’s service at Lehman.”).
183 Apr. 22 Tr. at 191:14-25 [Chambers] (Q: “And under your severance agreement with Barclays, Barclays also
gave you a million dollars, right?” A: “That is correct.” Q: “And you testified that they told you that the million
dollars was based on your title, your time of service, your years of service, and that it was the cap, the most amount
that they would pay you, right?” A: “That’s what they told me at the time.” Q: “And you knew that years of
service referred to your years of service at Lehman Brothers, right?” A: “That is correct.”).
184 Trustee Ex. 14 (Mr. Chambers’ Barclays Separation Agreement) at 3.
185 Trustee Ex. 66 (Mr. Judkins’ Proof of Claim) at LBI_BONUS_CLAIMS_0000042 (Mr. Judkins was a “Senior
Trader in the Fixed Income Division” and his title was Senior Vice President).
186 Apr 22. Tr. at 228:15-229:1.
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81. 	Mr. Judkins had a written employment agreement for LBI’s 2008 fiscal year187
which provided for a base salary of $200,000 and a “minimum bonus in the amount of $800,000”
for the 2008 fiscal year.188 Mr. Judkins’ employment agreement provided that, at LBI’s
discretion, a portion of his 2008 total compensation would be payable to him in the form of
conditional equity awards pursuant to the 2008 Equity Award Program. 189 Mr. Judkins received
a grant of RSUs with a value equal to $48,000 – 20 percent of the equity portion of his
compensation guarantee – pursuant to the July RSU Grant.190
82. 	While Mr. Judkins claims he was told that, if he performed well, he would receive
additional bonus compensation, he admits that the $800,000 bonus was the only bonus
guaranteed to him in writing.191 It was LBI’s written bonus policy that bonuses were “not
guaranteed unless otherwise agreed upon in writing” and were “determined at the full discretion
of senior [Lehman] management.”192 Mr. Judkins conceded that any bonus amounts for the 2008
fiscal year that he may have been awarded above the $800,000 minimum guarantee would have
been determined at the discretion of LBI’s management. 193 Thus, as Mr. Judkins admitted, LBI
187 Trustee Ex. 15 (Mr. Judkins’ LBI Employment Agreement).
188 Id. at 1.
189 Trustee Ex. 15 (Mr. Judkins’ LBI Employment Agreement) at 1 (“At the Firm’s discretion, a portion of your
2008 and future years’ total compensation (combined base salary, bonus, and other compensation) will be payable in
conditional equity awards (restricted stock units, options, and/or other equity-based awards) pursuant to the Firm’s
Equity Award Program as then generally in effect for employees with your position and corporate title.”).
190 Trustee’s Ex. 69 (Mr. Judkins’ Human Resources File) at 30-31 (recording that on July 1, 2008, Mr. Judkins
received a grant of 2,290.08 RSUs with a grant price of $20.96, a total of $48,000).
191 April 22 Tr. at 254:17-20 [Judkins] (Q: “And that minimum $800,000 bonus, that was the only bonus amount
that was guaranteed to you in writing, right?” A: “Yes.”).
192 Trustee Ex. 3 (Lehman Brothers Employee Handbook) at LBI_BONUS_CLAIMS_0000378.
193 Apr. 22 Tr. at 254:21-24 [Judkins] (Q: “Any bonus amount above the $800,000 would have been determined in
the discretion of LBI management, correct?” A: “Yes.”).
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could have decided to pay him only an $800,000 bonus for the 2008 fiscal year no matter how
well he performed during the year.194
2. 	Barclays Paid Mr. Judkins the $800,000 he was Owed Under his 2008
Employment Agreement with LBI
83. 	Following LBI’s bankruptcy, Mr. Judkins accepted Barclays’ offer of
employment. 195 Barclays provided Mr. Judkins with a written employment contract that
provided for him to receive the same total compensation from Barclays as he would have
received from LBI for 2008. Thus, under Mr. Judkins’ agreement with Barclays, he was entitled
to receive $200,000 in base salary and an $800,000 bonus for 2008.196
84. 	The bonus compensation that Barclays agreed to pay Mr. Judkins was for 2008,
and not for any period after that.197 Although Mr. Judkins testified that his agreement with
Barclays prohibited him from working elsewhere for three months after his employment
terminated,198 his understanding was incorrect – such agreement did not prohibit Mr. Judkins
from being employed by Barclays’ competitors for any period after his employment terminated;
rather, it provided only that he could not solicit Barclays’ employees or companies engaged in
business with Barclays for a three month period.199
194 Judkins Dep. Tr. at 46:14-17 (Q: “And they could have decided to pay you only 800,000 dollars no matter how
high your P&L was for the year, is that correct?” A: “Yes.”).
195 April 22 Tr. at 257:15-20 [Judkins] (Q: “After Lehman filed for bankruptcy, Barclays offered you employment,
correct?” A: “Yes.” Q: “And you ultimately accepted Barclays’ offer, right?” A: “Yes.”).
196 Trustee Ex. 17 (Mr. Judkins’ Barclays Employment Agreement).
197 Id.; Judkins Dep. Tr. 104:7-17 (Q: “And that was for the 2008 performance year, correct?” A: “Yes.” Q: “It
wasn’t for 2009 performance or anything thereafter?” A: “No. If you wanted to have me in 2009, you had to pay
me for 2008.”); Apr. 22 Tr. at 260:15-20 [Judkins] (Q: “What I’m trying to ask you is, this says for October 6th,
2008, we, Barclays, are giving you $660,000 for the performance year 2008. What does ‘for performance year
2008’ refer to?” A: “That refers to the period from October to December 31st, 2008.”).
198 April 22 Tr. at 258:19-259:2 [Judkins] (Q: “It wasn’t for 2009 or any point after 2008[?]” A: “Well, actually, it
is, but it says on the next page, it’s basically they can hold me for another three months beyond that date.”).
199 Trustee Ex. 17 (Mr. Judkins’ Barclays Employment Agreement) at 2 (“[F]or a period of three months after the
expiration of your Notice Period, you shall not . . . induce, solicit or entice . . . any employee of Barclays . . . to
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85. 	Barclays paid Mr. Judkins a bonus for the 2008 fiscal year of $800,000, all in
cash, in February 2009.200
3. 	Mr. Judkins Did Not Incur Relocation Expenses in Connection with
Selling his Home in Maryland
86. 	In connection with accepting his position at LBI, Mr. Judkins relocated from
Maryland to New York. 201 To facilitate Mr. Judkins’ relocation, LBI agreed to provide Mr.
Judkins with relocation assistance in accordance with LBI’s Executive Relocation and Home
Sale Policy (the “Relocation Policy”).202
87. 	The Relocation Policy provided for certain entitlements for employees who
owned their primary residence and were asked to relocate.203 The Relocation Policy provided
that a “third-party relocation firm will assist you in selling your former residence.”204 Provided
that the employee engaged the services of Lehman’s designated third-party relocation firm,
Prudential Relocation (“Prudential”), the Relocation Policy provided for Lehman to be billed
directly “for all reasonable and customary closing costs incurred in the sale of your former
residence.”205 The Relocation Policy explicitly stated that “[u]pon termination of your
employment for any reason, any remaining relocation benefits will cease immediately.”206
terminate his or her employment . . . [or] any . . . business entity to terminate or modify its business relationship with
Barclays . . . .”).
200 April 22 Tr. at 249:13-16 [Judkins] (Q: “Okay, $800,000, I believe. And do you recall whether you were told –
do you recall when you received that bonus?” A: “At the end of February 2009.”), 261:18-20 [Judkins] (Q: “And
you received the entire amount in cash, right?” A: “Yes.”).
201 Id. at 262:13-17 [Judkins].
202 Trustee Ex. 15 (Mr. Judkins’ LBI Employment Agreement) at 2 (“In connection with your relocation to New
York, you will be provided relocation assistance in accordance with the Firm’s policy.”).
203 Trustee Ex. 4 (Executive Relocation and Home Sale Policy) at 6.
204 Id.
205 Id.
206 Id. at 7.
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88. 	Although Mr. Judkins otherwise qualified for the benefits of the Relocation
Policy, he did not sell his home in Maryland.207 The costs Mr. Judkins claims in connection with
the sale of his home in Maryland are not actual costs but are instead costs Mr. Judkins claims he
would incur were he to sell his Maryland home. 208 Mr. Judkins and his family still use his
Maryland home as a vacation home.209
4. 	Mr. Judkins’ Home Equity Loan from Prudential
89. 	Pursuant to LBI’s relocation services agreement with Prudential, LBI employees
who relocated and had owned their former residence were eligible to receive a home equity loan
from Prudential under certain circumstances.210 Upon the sale of the LBI employee’s former
residence, Prudential would deduct the amount of the loan from the proceeds of the sale of the
residence.211 The relocation services agreement provided that if the employee failed to repay the
loan to Prudential within 120 days after receiving the loan, LBI would pay Prudential the amount
of the loan.212 In the event that LBI were to pay back a loan on behalf of one of its employees,
LBI would be “subrogated to the rights of Prudential against the Employee and [would] assume
complete responsibility for collecting the [Equity Loan].” 213
207 Apr. 22 Tr. at 264:3-5 (Q: “But you never sold your Maryland home, correct?” A: “Correct.”).
208 Apr. 22 Tr. at 271:16-19 (Q: “So the amount of your claim is an estimate of costs that you would incur if you did
sell your house in Maryland, correct?” A: “Yes.”).
209 Apr. 22 Tr. at 267:6-19 (Q: “But you testified that you haven’t actually sold your home in Maryland, is that
correct?” A: “Right . . . . So we looked at the value of the home and said, ‘It’s significantly down. I’m not going to
go incur $300,000 in expenses that won’t be reimbursed. We’ll just keep it as a second home.’”).
210 Trustee Ex. 68 (Relocation Services Agreement between Lehman Brothers Inc. and Prudential Relocation, Inc.,
dated March 14, 2006) at 4.
211 Id.
212 Id.
213 Id.
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90. 	Mr. Judkins obtained an $840,000 home equity loan from Prudential (the “Equity
Loan”).214 The Equity Loan was intended to be an advance on the equity in his Maryland home
and was to be repaid from the proceeds of the sale of the home. 215 Mr. Judkins did not sell his
Maryland home and he did not pay back the Equity Loan, causing Prudential to sue him. 216 After
Prudential brought its suit, Mr. Judkins paid back the Equity Loan. 217
D. Claimant Richard Hajdukiewicz
91. 	Mr. Hajdukiewicz entered into an employment agreement with LBI dated
September 14, 2007 that provided for him to join LBI as Head of Metals, Mining and Industrial
Sales, North America in the Fixed Income Division.218 Mr. Hajdukiewicz held the title of
Managing Director.219
92. 	For the 2007 fiscal year, Mr. Hajdukiewicz’s employment agreement provided for
him to receive a base salary of $200,000 and a 2007 performance bonus of $2.11 million.220 For
the 2008 fiscal year, his employment agreement provided for the same $200,000 salary with a
minimum bonus in the amount of $1.91 million.221
214 Apr. 22 Tr. at 263:16-24 [Judkins]; Trustee’s Ex. 67 (Prudential Equity Loan Note) at 1 (“Prudential Relocation
hereby loans You the sum of $840,000 . . . .”).
215 April 22 Tr. at 263:25-264:6 [Judkins] (Q: “And the loan was [a]n advance on the home – on the equity in your
Maryland home, correct?” A: “Yes.” Q: “I think you testified earlier that you were supposed to pay the loan back
out of the proceeds from the sale of your Maryland home, correct?” A: “Yes.”); Trustee’s Ex. 67 (Prudential Equity
Loan Note) at 1 (“Prudential Relocation will deduct the Equity Loan amount from your gross equity, which will
constitute repayment of your Equity Loan.”).
216 April 22 Tr. at 266:13-21 [Judkins].
217 Id.
218 Trustee Ex. 8 (Mr. Hajdukiewicz’s LBI Employment Agreement) at 1.
219 Apr. 22 Tr. at 197:25-198:2 [Hajdukiewicz].
220 Trustee Ex. 8 (Mr. Hajdukiewicz’s LBI Employment Agreement) at 1; Apr. 22 Tr. at 198:13-19 [Hajdukiewicz].
221 Trustee Ex. 8 (Mr. Hajdukiewicz’s LBI Employment Agreement) at 1; Apr. 22 Tr. at 198:18-19 [Hajdukiewicz].
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93. 	Mr. Hajdukiewicz’s employment agreement provided for him to receive a portion
of his 2007 and 2008 total compensation in the form of conditional equity awards.222
1. 	LBI Does Not Exercise its Discretion to Pay a Portion of Mr.
Hajdukiewicz’s 2007 Bonus in the Form of Conditional Equity Awards
94. 	Mr. Hajdukiewicz commenced his employment with LBI on December 18, 2007.
In early 2008, Mr. Hajdukiewicz received his 2007 bonus from LBI entirely in cash. When Mr.
Hajdukiewicz questioned Lehman’s Human Resources department as to why his 2007 bonus did
not include any conditional equity awards, Mr. Hajdukiewicz received the following response:
In order to receive equity in a given year, you must be employed by Lehman
before the grant date. 	The grate date is set by the executive compensation
committee each year. 	This year, it was December 8, 2007. 	Your start date at
Lehman was December 18, 2007. We do not have any discretion over this.223
2. 	Mr. Hajdukiewicz Participates in the July RSU Grant
95. 	On July 3, 2008, LBI informed Mr. Hajdukiewicz, via email, that he would
receive a grant of RSUs in July 2008 that he could think of as a 20 percent advance on his 2008
year-end equity award.224 The RSU Schedule, reflecting the resolutions of the LBHI
Compensation Committee, was attached to the e-mail.225
96. 	For Managing Directors with 2008 total compensation between $2,000,000 and
$2,499,999 – which included Mr. Hajdukiewicz – the RSU Schedule attached to the July 3, 2008
222 Trustee Ex. 8 (Mr. Hajdukiewicz’s LBI Employment Agreement) at 1-2 (“At the Firm’s discretion, a portion of
your 2007, 2008 and future years’ total compensation (combined base salary, bonus, and other compensation) will
be payable in conditional equity awards (restricted stock units, options, and/or other equity-based awards) pursuant
to the Firm’s Equity Award Program as then generally in effect for employees with your position and corporate
title.”); Apr. 22 Tr. at 199:11-15, 206:9-12 [Hajdukiewicz].
223 Hajdukiewicz Ex. 3 (E-mail from Kimmy Gardner to Richard Hajdukiewicz, dated February 11, 2008) at 1-2.
224 Id. (“You can think of this July award as an ‘advance’ against your 2008 year-end equity awards. For people like
you who are on a 2008 compensation guarantee, this July award represents 20% of the equity portion of your 2008
compensation guarantee.”).
225 Trustee Ex. 9 (July 3, 2008 email from “Your Benefits and Life Balance” re: 2008 Equity Award Program)
(“Attached to this email is a grid that will apply to all RSUs that you receive under the 2008 Equity Award
Program.”).
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e-mail provided that “$840,000 plus 72 [percent] of 2008 [total compensation] over $2.0
million” would be payable in the form of RSUs. 226
97. 	Consistent with the July 3, 2008 e-mail and the RSU Schedule, Mr.
Hajdukiewicz’s LBI personnel file reflects that he received a grant of RSUs, with a grant date of
July 1, 2008 and a grant price of $20.96, with a value of $183,840, equal to 20 percent of the
equity portion of his compensation guarantee.227 Mr. Hajdukiewicz does not recall receiving a
grant of RSUs in July 2008.228
3. 	Mr. Hajdukiewicz Joins Barclays, is Terminated, Receives a Lump-Sum
Payment, and Executes a Release
98. 	Following the Filing Date, Barclays offered Mr. Hajdukiewicz employment.229
Mr. Hajdukiewicz accepted Barclays’ employment offer,230 but within a week of accepting, he
learned that it was unlikely that he would continue to have a position at Barclays.231 Barclays
subsequently terminated Mr. Hajdukiewicz, and the two parties entered into a separation
agreement and general waiver and release, dated October 14, 2008.232
226 Id. at 3.
227 Trustee Ex. 58 (Mr. Hajdukiewicz’s Human Resources File) at 37-39 (recording that on July 1, 2008,
Hajdukiewicz received a grant of 8,770.99 RSUs with a grant price of $20.96, a total of $183,840).
228 Apr. 22 Tr. at 213:5-7; 215:6-9 [Hajdukiewicz].
229 Trustee’s Exs. 54-55 (E-mails from Barclays to Lehman employees regarding Barclays employment offer); Apr.
22 Tr. at 216:7-9 [Hajdukiewicz].
230 Apr. 22 Tr. at 216:20-217:5 [Hajdukiewicz].
231 Trustee Ex. 56 (E-mails, dated September 26, 2008, between Mr. Hajdukiewicz, Carlos Fierro, and Skip McGee);
Apr. 22 Tr. at 217:6-218:4 [Hajdukiewicz].
232 Trustee Ex. 10 (Mr. Hajdukiewicz’s Barclays Separation Agreement); Apr. 22 Tr. at 218:5-219:9
[Hajdukiewicz].
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99. 	Pursuant to the separation agreement, Barclays paid Mr. Hajdukiewicz 26 weeks
of severance in accordance with Lehman’s severance policy and taking into account Mr.
Hajdukiewicz’s years of service at LBI.233
100. 	Barclays also paid Mr. Hajdukiewicz a $422,000 enhanced payment in lieu of a
bonus based on the work he had performed for Lehman Brothers.234 The $422,000 payment,
which constituted 20% of his 2007 LBI bonus amount, was calculated pursuant to Barclays’
formula for calculating special lump sum payments to Managing Directors. 235
101. 	The waiver and general release Mr. Hajdukiewicz signed stated that:
In exchange for the payments and benefits set forth in my Separation Agreement,
I hereby release Barclays Capital (the “Bank”), and all of its past and/or present
divisions, 	affiliates, 	parents, 	subsidiaries, 	officers, 	directors, 	stockholders,
trustees, employees, agents, representatives, administrators, attorneys, insurers,
fiduciaries, predecessors, successors and assigns, in their individual and/or
representative capacities (hereinafter collectively referred to as “the Barclays
Group”), from any and all causes of action, suits, agreements, promises, damages,
disputes, controversies, contentions, differences, judgments, claims and demands
of any kind whatsoever (“Claims”) which I or my heirs, executors, administrators,
successors and assigns ever had, now have or may have against the Barclays
Group, whether known or unknown to me, by reason of my employment and/or
cessation of my employment, with the Bank or with Lehman Brothers, or
otherwise involving facts which occurred on or prior to the effective date of this
Waiver and General Release, except to the extent that any such Claim concerns an
allegation that the Bank has failed to make the payment(s) set forth above.236
233 Trustee Ex. 10 (Mr. Hajdukiewicz’s Barclays Separation Agreement) at 1; Apr. 22 Tr. at 219:10-222:1
[Hajdukiewicz]; Apr. 24 Tr. at 33:9-19 [Kurman] (Q: “And do you see from this agreement, that Mr. Hajdukiewicz
received 26 weeks of severance pay?” A: “Yes, I do.” Q: “Could you please tell me what that 26 weeks was based
upon?” A: “The same referenced Lehman severance policy.”).
234 Trustee Ex. 10 (Mr. Hajdukiewicz’s Barclays Separation Agreement) at 1; Apr. 24 Tr. at 33:20-34:10 [Kurman]
(Q: “Do you also see that Mr. Hajdukiewicz received a special lump-sum payment of $422,000?” A: “Yes, I do.” .
. . Q: “And finally, sir, is that special lump-sum payment also an enhancement in lieu of bonus?” A: “Yes, it is.”).
235 Apr. 22 Tr. at 223:13-18 [Hajdukiewicz]; Apr. 24 Tr. at 33:24-34:7 [Kurman] (Q: “What does that special lump-
sum payment represent?” A: “Depending on his title, that’s either 10 or 20 percent of his prior year’s bonus
agreement.” Q: “And if I represented to you that Mr. Hajdukiewicz was a managing director, would you be able to
tell me the percentage?” A: “That would be 20 percent then, of his prior year’s bonus.”).
236 Trustee Ex. 10 (Mr. Hajdukiewicz’s Barclays Separation Agreement) at 3.
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102. 	In connection with his separation agreement, Barclays provided Mr.
Hajdukiewicz, who was 53 years old at the time, with a copy of Disclosure Information Provided
Pursuant to the Older Workers Benefit Protection Act.237
III. 	THE CLAIMS
103. 	The entirety of the Hoffman Claim and the Hajdukiewicz Claim and the majority
of the Judkins Claim and Chambers Claims are for non-discretionary bonuses in respect of LBI’s
fiscal years 2007 and 2008, as the case may be, pursuant to employment agreements with LBI.
104. 	In addition to his claim for a non-discretionary bonus allegedly owed to him in
respect of LBI’s fiscal years 2007 and 2008, Mr. Chambers asserts that, pursuant to his
employment agreement, LBI owes him a $200,000 salary and a “guaranteed” $10 million bonus
for each of LBI’s fiscal years 2009 and 2010.
105. 	In addition to his claim for a non-discretionary bonus in respect of LBI’s fiscal
year 2008, Mr. Judkins also asserts claims for (i) a discretionary bonus in respect of LBI’s fiscal
year 2008; (ii) relocation expenses purportedly owed him under the terms of his employment
agreement; and (iii) reimbursement of the Equity Loan.
106. 	Specifically, the Claims are as follows:
 	The Hoffman Claim asserts that Mr. Hoffman is entitled to (i) a guaranteed bonus
amount of $7,712,500 for LBI’s fiscal year 2007, as provided for in his 2007
employment agreement; (ii) a guaranteed bonus amount of $76,285,940 for LBI’s
fiscal year 2008, as provided for in his 2008 employment agreement; and (iii) an
unliquidated damages claim for LBI’s alleged failure to deliver 783,475 restricted
stock units (“RSUs”) and 84,477 options to purchase LBHI stock.238
 	The Chambers Claim asserts that Mr. Chambers is entitled to (i) a guaranteed
bonus amount of $1,647,061 for LBI’s fiscal year 2007, as provided for in his
2007 employment agreement; (ii) a guaranteed bonus amount of $42,386,172.99
for LBI’s fiscal year 2008, as provided for in his employment agreement for
237 Trustee Ex. 10 (Mr. Hajdukiewicz’s Barclays Separation Agreement).
238 See Trustee Ex. 36 (1EE Proof of Claim).
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LBI’s fiscal years 2008-2010; (iii) a guaranteed bonus amount of $10,000,000 for
LBI’s fiscal year 2009, allegedly as provided for in his employment agreement for
LBI’s fiscal years 2008-2010; (iv) a base salary of $200,000 for LBI’s fiscal year
2009, allegedly as provided for in his employment agreement for LBI’s fiscal
years 2008-2010; (v) a guaranteed bonus amount of $10,000,000 for LBI’s fiscal
year 2010, allegedly as provided for in his employment agreement for LBI’s fiscal
years 2008-2010; and (vi) a base salary of $200,000 for LBI’s fiscal year 2010,
allegedly as provided for in his employment agreement for LBI’s fiscal years
2008-2010. 239
 	The Judkins Claim asserts that Mr. Judkins is entitled, pursuant to his 2008
employment agreement, to (i) a total bonus amount of between $2,000,000 and
$2,400,000, of which $800,000 was guaranteed, for LBI’s fiscal year 2008; (ii)
relocation expenses of $400,000 in connection with Mr. Judkins’ relocation from
Easton, MD to New York to accept employment with LBI; and (iii)
reimbursement of a home equity loan in the amount of $840,000.240
 	The Hajdukiewicz Claim asserts that Mr. Hajdukiewicz is entitled to a guaranteed
bonus of $1,610,000 for LBI’s fiscal year 2008, as provided for in his 2008
employment agreement.241
IV. 	The Trustee’s Objections to the Claims
107. 	In general terms, the Objection seeks to reduce or eliminate the amounts claimed
in respect of LBI’s obligation to pay the Claimants non-discretionary bonuses for LBI’s fiscal
years 2007 and 2008.
108. 	The Trustee argues that LBI delegated such obligation to Barclays and that
Barclays satisfied, in full or in part, LBI’s obligation to pay such non-discretionary bonuses.
109. 	The Trustee argues further that, if, after taking into account Barclays’ payments as
delegee, LBI still owes amounts in respect of its obligation to pay non-discretionary bonuses to
each of the Claimants in respect of LBI’s fiscal years 2007 and 2008, a percentage of each of
such bonuses was to be paid in RSUs and that therefore, in accordance with the previous
239 See Chambers Ex. 1 (Mr. Chambers’ Proof of Claim).
240 See Trustee Ex. 66 (Mr. Judkins’ Proof of Claim).
241 See Trustee Ex. 57 (Mr. Hajdukiewicz’s Proof of Claim).
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decision of this Court,242 any such portion of the Claims to be paid in RSUs must be
subordinated pursuant to section 510(b) of the Bankruptcy Code.
110. 	The Objection also sets forth the following claim-specific arguments.
111. 	First, with respect to the Hoffman Claim, the Trustee argues that to the extent
such claim (i) was not satisfied by Barclays and (ii) is not subject to subordination under section
510(b), it should be equitably subordinated based on Mr. Hoffman’s behavior following the
Filing Date.
112. 	Second, the Trustee argues that, to the extent the Hajdukiewicz Claim (i) was not
satisfied by Barclays and (ii) is not subject to subordination under section 510(b), Mr.
Hajdukiewicz waived such claim against LBI pursuant to his severance agreement with Barclays.
113. 	Finally, the Objection further asserts that the additional claims raised by the
Judkins Claim and by the Chambers Claim are meritless.
DISCUSSION
As the Trustee’s Objection to each of the Claims is premised on the assertion that LBI
delegated its obligation to pay Claimants’ LBI bonuses to Barclays pursuant to the APA, the
Court will begin by determining whether LBI delegated such obligation and, if so, will determine
the scope of the delegation. Then, as the remainder of the Objection to each Claim is dependent
on the particular facts of each such Claim, the Court will address each Claim in turn.
A. LBI Delegated its Responsibility to Pay 2008 Bonuses to “Transferred Employees”
The Trustee asserts that section 9.1(c) of the APA is the mechanism by which LBI
delegated to Barclays its responsibility to pay bonuses to the Claimants. That section provides,
in relevant part:
242 In re Lehman Brothers Holdings Inc., 519 B.R. 47 (Bankr. S.D.N.Y. 2014).
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On or after the Closing, [Barclays] shall, or shall cause its subsidiaries to, pay
each Transferred Employee an annual bonus (“08 Annual Bonuses”) in respect of
the 2008 Fiscal Year that, in the aggregate, are equal in amount to 100 percent of
the bonus pool amounts accrued in respect of amounts payable for incentive
compensation (but not base salary) and reflected on the financial schedule
delivered to Purchaser on September 16, 2008 . . . . 	Such 08 Annual Bonuses
shall be awarded on or before March 15, 2009 in such forms and proportions as
are consistent with Purchaser’s customary practices . . . .243
Citing two opinions by this Court (the Hon. James M. Peck, presiding), the Trustee
contends that the parties and this Court understood this language to effect a delegation of LBI’s
bonus obligations to Transferred Employees to Barclays. See In re Lehman Brothers Holdings
Inc., 445 B.R. 143 (Bankr. S.D.N.Y. 2011) (“A going concern sale to Barclays also was the one
way to eliminate claims of employees for lost wages and benefits.”); In re Lehman Brothers
Holdings Inc., 456 B.R. 213, 219 (Bankr. S.D.N.Y. 2013) (“Lehman no longer has any ongoing
liabilities to the Transferred Employees for bonus compensation.”). The Trustee acknowledges
that LBI did not assign, and that Barclays did not assume, the employment contracts of the
Transferred Employees and he also acknowledges that LBI remains liable to the extent that
Barclays did not pay the Transferred Employees. See Sporre S.A. de C.V. v. Int’l Paper Co., No.
99 Civ. 2638 (HB), 1999 WL 1277243, at *4 (S.D.N.Y. Dec. 30, 1999). However, to the extent
that Barclays did pay bonus amounts to the Claimants, the Trustee contends that, under Headrick
v. Rockwell International Corp., 24 F.3d 1272 (10th Cir. 1994) and Contemporary Mission Inc.
v. Famous Music Corp., 557 F.2d 918 (2d Cir. 1977), LBI’s liability to the Claimants is
discharged to the extent of payments made by Barclays.
243 Trustee Ex. 1(APA) § 9.1(c).
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Mr. Hoffman contends that LBI could not and did not delegate its obligations to
Transferred Employees to Barclays, for a number of reasons. 244 First, citing also to
Contemporary Mission, Mr. Hoffman asserts that, because the APA does not confer benefits
upon the Claimants, LBI could not delegate its obligation to Transferred Employees without the
consent of the Transferred Employees receiving delegated performance (which consent it did not
receive). Second, Mr. Hoffman urges that the delegation is actually an assignment that cannot
have effect because Barclays never expressly “assumed” an obligation to pay Mr. Hoffman, and
section 2.4(d) of the APA provides that all liabilities not expressly assumed by Barclays under
Article 9 of the APA are deemed excluded. Mr. Hoffman also notes that the APA provides that
Barclays is only liable on contracts that are “Purchased Contracts” and that Mr. Hoffman’s
contract was not a Purchased Contract. Third, Mr. Hoffman argues that a delegation cannot be
accomplished without the consent of the delegate and that Barclays did not consent to a
delegation. Finally, Mr. Hoffman argues that, because the timing and structure of Barclays’
payments to Mr. Hoffman were different from the timing and structure of the payments LBI
owed to Mr. Hoffman, the delegation fails because it does not meet Contemporary Mission’s
requirement that the duties delegated not differ materially from the duties of the primary obligor.
Each of Mr. Hoffman’s arguments is inapposite or incorrect. First, LBI’s delegation did
not require the consent of Transferred Employees. Contemporary Mission does not, as Mr.
Hoffman contends, stand for the proposition that delegation requires the consent of the party
receiving performance. In support of his contention, Mr. Hoffman cites to language from
Contemporary Mission stating that “[n]o one can assign his liabilities under a contract without
244 See Hoffman Post-Trial Br. ¶¶ 26-30. While each Claimant argues that the APA did not effect a delegation of
LBI’s obligations, Mr. Hoffman’s brief addresses each of the arguments made by the various Claimants and also
includes arguments not made by other Claimants. Accordingly, the Court will address only Mr. Hoffman’s brief
here.
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the consent of the party to whom he is liable.”245 That language is irrelevant here; the Trustee
concedes that LBI did not assign its liabilities to Barclays and indeed further concedes that it
remains liable for any amounts owed to the Claimants that Barclays did not pay, subject to its
own defenses. New York courts have found, in accordance with the Restatement (Second) of
Contracts, that “[w]hile a delegation of a duty of payment does not necessarily require the
obligee’s consent, it does not discharge the original obligor.” Beck v. Mfrs. Hanover Trust Co.,
125 Misc. 2d 771, 779 (N.Y. Sup. Ct. 1984) (quoting Restatement (Second) of Contracts).
This distinction, between an assignment of liability and a delegation of liability, also
answers Mr. Hoffman’s second argument. While Mr. Hoffman is correct that certain provisions
of the APA limited the liabilities Barclays would assume pursuant to the APA, these limitations
do not apply to a delegation, where there is no assumption of liability for the delegated
obligation.
Mr. Hoffman’s third argument also fails. Barclays did consent to the delegation; by
signing the APA, and accepting the language of Section 9.1(c), Barclays evidenced its agreement
to accept the delegation agreed to therein.
Fourth and finally, the duty LBI delegated to Barclays pursuant to Section 9.1(c) of the
APA – the obligation to pay Transferred Employees 2008 LBI bonuses – was identical to LBI’s
obligation; there was no variance in the duty delegated. While there may have been some
variance between the timing and structure of the LBI obligations to Transferred Employees and
the Barclays payments to Transferred Employees, such variance is relevant to the question of
whether Barclays satisfied the delegated obligation.
The Court finds that the plain language Section 9.1(c) of the APA evidences LBI’s
delegation of its obligations to pay the Transferred Employees bonuses in respect of LBI’s 2008
245 Hoffman Post-Trial Br. ¶ 27 (quoting Contemporary Mission, 557 F.2d at 924).
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fiscal year and Barclays’ acceptance of such delegation. Importantly, the scope of LBI’s
delegation to Barclays is limited solely to what is provided for in section 9.1(c) of the APA.
That section provides only that Barclays shall “pay each Transferred Employee an annual bonus
in respect of the 2008 Fiscal Year.” Thus, a payment from Barclays to a Claimant will only be
within the scope of the delegation, and thus discharge LBI’s liability to such Claimant, if (i) the
Claimant is a Transferred Employee and (ii) the payment is made in respect of a bonus for LBI’s
fiscal year 2008.
B. The Hoffman Claim
The Hoffman Claim asserts that Mr. Hoffman is entitled to:
 	a guaranteed bonus amount of $7,712,500 for LBI’s fiscal year246 2007, as provided for
in his 2007 employment agreement;
 	a guaranteed bonus amount of $76,285,940 for LBI’s fiscal year 2008, as provided for in
his 2008 employment agreement; and
 	an unliquidated damages claim for LBI’s alleged failure to deliver 783,475 RSUs and
84,477 options to purchase LBHI stock.247
The Trustee contends that, with respect to Mr. Hoffman’s bonus claims, (i) Barclays, as
LBI’s delegate, satisfied the entirety of the approximately $83 million of LBI’s bonus obligations
to Mr. Hoffman; (ii) the Hoffman Claim overstates the amount of the 2008 bonus Mr. Hoffman
to which Mr. Hoffman would have been entitled by approximately $1 million; (iii) to the extent
that Barclays did not satisfy any portion of Mr. Hoffman’s 2008 bonus claim, 50% of such bonus
would have been payable in RSUs and therefore must be subordinated pursuant to section 510(b)
of the Bankruptcy Code; and (iv) Mr. Hoffman’s bonus is subject to the cap imposed by section
502(b)(7) of the Bankruptcy Code limiting the amount of claims arising from termination of
246 At all relevant times, LBI utilized a fiscal year that ran from December 1 to November 30.
247 See Trustee Tr. Ex. 36 (1EE Proof of Claim). Mr. Hoffman appears to have abandoned his claim for unliquidated
damages for LBI’s alleged failure to deliver 783,475 RSUs and 84,477 options to purchase LBHI stock, perhaps in
recognition that such claim is foreclosed by this Court’s decision in In re Lehman Brothers Holdings Inc., 519 B.R.
47 (Bankr. S.D.N.Y. 2014).
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employment. The Trustee also contends that Mr. Hoffman’s claim for damages on account of
undelivered RSUs and options to purchase LBHI stock must be subordinated pursuant to section
510(b) of the Code. Finally, the Trustee asserts that, to the extent any portion of the Hoffman
Claim is allowed by the Court, such allowed amount should be equitably subordinated. The
Court will address each aspect of the Hoffman Claim in turn.
1. 	Guaranteed Bonus Amount of $7,712,500 for LBI’s Fiscal Year 2007
There is no dispute that, as of the Filing Date, pursuant to Mr. Hoffman’s 2007
employment agreement, LBI was obligated to pay Mr. Hoffman $7,712,500, in cash. 248 There is
also no dispute that Mr. Hoffman included the amount of his 2007 bonus in the $83 million that
he was seeking to recover when negotiating his employment in the days after the Filing Date.249
The Trustee’s Objection does not distinguish between Mr. Hoffman’s 2007 and 2008 bonuses;
that is, the Trustee contends that, because Barclays paid Mr. Hoffman $83 million on account of
LBI’s bonus obligations to him as of the Filing Date, the Hoffman Claim for bonus
compensation, whether for 2007 or for 2008, must be reduced by the same $83 million.250
While the Court has found as a matter of fact that Barclays structured Mr. Hoffman’s
employment agreement with Barclays to pay him the $83 million he was owed by LBI,251
Barclays’ payment releases LBI from its liability only if Barclays made such payments as LBI’s
delegate. See Headrick v. Rockwell Int’l Corp., 24 F.3d 1272, 1278 (10th Cir. 1994) (“If the
delegate performs the duty, the duty is discharged, and the obligor owes the obligee nothing.”)
(internal citations and quotation omitted). As described above, the scope of LBI’s delegation to
248 FoF ¶ 32.
249 FoF ¶ 39.
250 See Trustee Post-Trial Br. ¶¶ 23-29.
251 FoF ¶ 47.
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Barclays was limited to payments of bonuses (i) to Transferred Employees and (ii) in respect of a
bonus for LBI’s fiscal year 2008. Therefore, LBI’s obligation to pay Mr. Hoffman’s 2007 bonus
was outside the scope of the delegation to Barclays and LBI remains liable for such obligation.
As the Trustee has not disputed that Mr. Hoffman is entitled to a 2007 bonus in the amount of
$7,712,500, in cash, the Court finds that the portion of the Hoffman Claim related to Mr.
Hoffman’s 2007 bonus will be allowed.
2. 	Guaranteed Bonus Amount of $76,285,940 for LBI’s Fiscal Year 2008
i. 	LBI Delegated its Obligation to Pay Mr. Hoffman’s 2008 Bonus to Barclays
The Trustee contends that LBI delegated its obligation to pay Mr. Hoffman’s 2008 bonus
to Barclays. Again, the scope of LBI’s delegation to Barclays was limited to payments of
bonuses (i) to Transferred Employees and (ii) in respect of a bonus for LBI’s fiscal year 2008.
Mr. Hoffman’s 2008 bonus is indisputably in respect of a bonus for LBI’s fiscal year 2008.
Thus, if Mr. Hoffman is a Transferred Employee (as defined in the APA), LBI did indeed
delegate to Barclays its obligation to pay Mr. Hoffman’s 2008 bonus.
Mr. Hoffman argues, unpersuasively, that LBI did not delegate to Barclays its obligation
to pay him his 2008 bonus because he was not a Transferred Employee. Section 9.1(a) defines a
Transferred Employee as:
Each Offeree (i.e., all active Lehman employees employed in connection with the
business Barclays was purchasing, unless identified to Barclays) who accepts
[Barclays’] or one of its subsidiaries’ offer of employment, together with each
person whose employment transfers to [Barclays] automatically by operation of
law.
Section 9.1(a) of the APA further provides that:
An Offeree who performs work at his then applicable place of employment on the
first Business Day immediately following the Closing shall be deemed for all
purposes of [the APA] to have accepted [Barclays’] or one of its subsidiaries’
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offer of employment and shall be deemed to be a Transferred Employee for all
purposes of [the APA].
Thus, the APA provided two ways for a former LBI employee such as Mr. Hoffman to
become a Transferred Employee. First, the LBI employee could accept Barclays’ offer of
employment or, second, the LBI employee could simply perform work at his place of
employment on September 22, 2008, the first business day following the closing of the APA.
Mr. Hoffman argues that because he did not promptly or otherwise accept Barclays’
“blast email” offer of employment and did not perform work on September 22, 2008, he does not
meet the APA’s definition of a Transferred Employee. It is undisputed that Mr. Hoffman did not
perform work at his place of employment on September 22, 2008;252 accordingly, Mr. Hoffman
could not have become a “deemed” Transferred Employee. It is equally undisputed, however,
that Mr. Hoffman accepted an offer of employment from Barclays on October 3, 2008 and
commenced employment with Barclays, becoming as of that moment a Transferred Employee
pursuant to the plain meaning of the first sentence of Section 9.1(a) of the APA. 253
Mr. Hoffman attempts to evade this inconvenient truth by seizing on the fact that Section
9.1(a) of the APA, prior to introducing the concept of a Transferred Employee, provides that
Barclays must make offers of employment to Offerees, an obligation Barclays fulfilled in the
first instance by sending the so-called blast email to Lehman employees on September 21, 2008.
Mr. Hoffman therefore asserts that the only “offer of employment” that, if accepted, would make
the Offeree a Transferred Employee is the blast email offer of employment, which offer Mr.
Hoffman did not accept.254 This is pure nonsense.
252 FoF ¶ 37.
253 FoF ¶ 52.
254 Hoffman Post-Trial Br. ¶ 19.
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The APA’s definition of Transferred Employee provides, simply, that an Offeree “who
accepts [Barclays’] or one of its subsidiaries’ offer of employment” is a Transferred Employee.
The definition does not state that only one specific offer of employment will, if accepted, render
an Offeree a Transferred Employee. Had Lehman and Barclays wished to provide that only the
acceptance of the offer of employment referenced in Section 9.1(a), the so-called blast e-mail,
would be sufficient to render an Offeree a Transferred Employee, it would have been easy to do
so. However, Lehman and Barclays did not choose to add such limiting language and Mr.
Hoffman has offered no reasoning, other than perhaps proximity in the document, for why the
Court should read such language into the APA now. Accordingly, the Court finds that (i) Mr.
Hoffman’s acceptance, contractually and by his conduct, of Barclays’ October 3, 2008 offer of
employment was sufficient to bring him within the definition of a Transferred Employee under
the APA and (ii) pursuant to Section 9.1(c) of the APA, LBI delegated to Barclays its obligation
to pay Mr. Hoffman’s 2008 bonus.
ii. 	Barclays Satisfied LBI’s Obligation to Pay Mr. Hoffman’s 2008 Bonus
Mr. Hoffman’s employment agreement with Barclays essentially replicated the salary and
performance bonus terms of his 2008 LBI employment agreement. 255 By the Barclays
employment agreement, Barclays agreed to pay Mr. Hoffman $70 million in “Special Awards”
and an enhanced percentage of his trading profits until he earned an incremental $13 million.256
The Trustee contends that Barclays added this $83 million to what was essentially a continuation
of Mr. Hoffman’s LBI employment agreement in order to satisfy LBI’s bonus obligations to Mr.
Hoffman – and that he is not entitled to be paid twice.257
255 See FoF ¶ 47.
256 See FoF ¶¶ 47-49.
257 See Trustee Post-Trial Br. ¶ 25.
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Mr. Hoffman disputes the Trustee’s contention, on several grounds. He seeks to
characterize the $83 million paid by Barclays as wholly unrelated to his past performance at LBI;
rather, he says it was paid to “respect [him]” for his abilities.258 Mr. Hoffman also posits that the
Trustee should be judicially estopped from arguing that the $83 million paid to him by Barclays
satisfied some or all of LBI’s obligation because LBHI has previously taken the position before
the Court that such payments were unrelated to LBI’s bonus obligation.259 Neither argument is
persuasive.
a. 	The Trustee is Not Estopped
Judicial estoppel is a narrowly-tailored and infrequently invoked principle that only
applies if (i) a party’s later position is “clearly inconsistent” with its earlier position; (ii) the
party’s former position has been adopted in some way by the court in the earlier proceeding; and
(iii) the party asserting the two positions would derive an unfair advantage against the party
seeking estoppel. Adelphia Recovery Trust v. HSBC Bank USA, Nat’l Assoc. (In re Adelphia
Recovery Trust), 634 F.3d 678, 695 (2d Cir. 2011) (internal citations omitted). Mr. Hoffman
argues that LBI should be judicially estopped from arguing that Barclays satisfied LBI’s 2008
bonus obligation to Mr. Hoffman because, in two separate litigation proceedings against
Barclays that were before the Court in 2010 and 2011, LBHI took the position that Barclays’
payments to Mr. Hoffman were not in the nature of a bonus for his 2008 performance at Lehman,
and, in Mr. Hoffman’s view, the Court adopted such position. 260
In order to determine whether or not judicial estoppel applies here, it is necessary to delve
into some of the litigation history to which Mr. Hoffman refers. In 2010, each of the Trustee,
258 1EE Proposed Findings of Fact ¶ 150; Hoffman Post-Trial Br. ¶ 14.
259 See Hoffman Post-Trial Br. ¶¶ 33-38.
260 Id.
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LBHI, and the Official Committee of Unsecured Creditors (the “Movants”) separately moved for
relief under Federal Rule of Civil Procedure 60(b) from the Court’s order approving the sale to
Barclays pursuant to the APA (collectively, the “Rule 60(b) Motions”). Each of the Movants
also filed an adversary complaint against Barclays, each of which included counts that, to some
extent, overlapped with one or more of the Rule 60(b) Motions. By stipulation of the parties, the
Court ruled on such overlapping counts, along with the Rule 60(b) Motions, in In re Lehman
Brothers Holdings Inc., 445 B.R. 143 (Bankr. S.D.N.Y. 2011) (the “Rule 60(b) Decision”).
Count II of LBHI’s adversary complaint asserted that, because Barclays had paid less than the $2
billion estimated for 2008 bonuses on the schedule referred to in Section 9.1(c) of the APA, it
had not fully performed on its obligation to Lehman to pay 2008 bonuses to Transferred
Employees pursuant Section 9.1(c) of the APA and thus owed damages. The Trustee did not
make a similar assertion in his adversary complaint. Count II of LBHI’s adversary complaint
was not resolved in the Rule 60(b) Decision.261
LBHI’s Rule 60(b) Motion asserted that Barclays engaged in misconduct following the
closing of the sale, citing as evidence LBHI’s contention that Barclays had paid less than the $2
billion estimated for 2008 bonuses on the schedule referred to in Section 9.1(c) of the APA. In
defending against those assertions, Barclays offered a spreadsheet produced by Paul Exall (the
“Exall Spreadsheet”), the Barclays executive in charge of monitoring compensation paid to
Transferred Employees, purporting to list $1.951 billion in payments to Transferred Employees
for their pre-acquisition services, including $53 million in bonus payments to Mr. Hoffman. In
its post-trial proposed findings of fact in that matter, LBHI stated that Mr. Exall admitted during
the trial that the payments to Mr. Hoffman were not in the nature of a bonus for his 2008
261 See Rule 60(b) Decision at 167 (listing counts of adversary complaints that were to be resolved; Count II of the
LBHI adversary complaint is not included).
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performance at Lehman and cited to the portion of the trial transcript containing the purported
admission. 262 In the Rule 60(b) Decision, in a section entitled “The Rule 60(b) Standard and
Background of Movants’ 60(b) Claims,” Judge Peck discussed the Exall Spreadsheet and noted,
“Several entries on the spreadsheet, however, do not relate to bonuses.” 263 Judge Peck followed
that sentence with multiple citations to the trial transcript, including the portion that LBHI
argued contained Mr. Exall’s admission that the $53 million in payments to Mr. Hoffman were
not in the nature of a bonus for his 2008 performance at Lehman.264 Judge Peck ultimately
denied the Rule 60(b) Motions in the Rule 60(b) Decision. 265
Following the Rule 60(b) Decision, LBHI moved for summary judgment on Count II of
its adversary complaint, asserting damages for Barclays’ alleged failure to pay the entirety of the
$2 billion estimated for 2008 Lehman bonuses on the schedule referred to in Section 9.1(c) of the
APA. 266 Barclays cross-moved for summary judgment. In its motion, LBHI reasserted its
position that the $53 million in payments to Mr. Hoffman listed on the Exall Spreadsheet were
not in the nature of a bonus for Mr. Hoffman’s 2008 performance at Lehman267 and further
argued that Judge Peck had found, in the Rule 60(b) Decision, that Barclays had paid only $1.5
billion, a number arrived at by subtracting, among other non-bonus payments, the $53 million in
262 See 1EE Ex. 058 (LBHI Proposed Findings of Fact in connection with its Rule 60(b) Motion) ¶ 367.
263 Rule 60(b) Decision at 174.
264 Rule 60(b) Decision at 174-75.
265 Rule 60(b) Decision at 205 (“The sale process may have been imperfect, but it was still adequate under the
exceptional circumstances of Lehman Week. Especially due to the procedural and substantive importance of
maintaining the finality of orders approving the sale of assets under Section 363(b) of the Bankruptcy Code, based
on the evidence justice does not require relief from the Sale Order under Rule 60(b).”).
266 1EE Ex. 060 (LBHI’s Memorandum of Law in Support of its Motion for Summary Judgment on Count II of its
Adversary Complaint Against Barclays Capital Inc.).
267 1EE Ex. 060 (LBHI’s Memorandum of Law in Support of its Motion for Summary Judgment on Count II of its
Adversary Complaint Against Barclays Capital Inc.) ¶ 30.
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payments to Mr. Hoffman from the total $1.951 billion listed in the Exall Spreadsheet.268 At oral
argument on LBHI’s motion for summary judgment, Judge Peck confirmed that he did not view
his statements in the section of the Rule 60(b) Decision entitled “The Rule 60(b) Standard and
Background of Movants’ 60(b) Claims” to constitute findings of fact, stating, “it’s in
background, words that I took from the record. Every word I take from the record I don’t view
as my words, nor do I view that as my finding.”269 Judge Peck ultimately denied LBHI’s motion
for summary judgment and granted Barclays’ cross-motion.270
The foregoing litigation history reflects that none of the elements required to apply
judicial estoppel is present here. First, and most importantly, Mr. Hoffman seeks judicial
estoppel on the basis of a position taken by LBHI, not by the Trustee on behalf of LBI. As has
been made clear throughout these cases, LBHI and LBI are separate estates and separate entities
and the actions of one cannot automatically be attributed to the other. Accordingly, the positions
taken by LBHI with respect to Barclays’ payments to Mr. Hoffman cannot be attributed to LBI
or to the Trustee. In fact, the litigation history explicitly demonstrates that the Trustee did not
join LBHI’s arguments or adopt them as his own. The Trustee filed his own Rule 60(b) Motion
and did not at any point in the Rule 60(b) litigation join LBHI’s Rule 60(b) Motion.271 Further,
268 See 1EE Ex. 60 (LBHI’s Memorandum of Law in Support of its Motion for Summary Judgment on Count II of
its Adversary Complaint Against Barclays Capital Inc.) ¶ 46 (“The Court expressly found that . . . ‘[i]n the end,
subtracting out all non-bonus payments, Barclays paid approximately $1.5 billion in bonuses to Transferred
Employees.’”).
269 Sept. 7, 2011 Tr. 13:13-15, Lehman Bros. Holdings Inc. v. Barclays Capital, Inc., No. 09-01731 (JMP) (Bankr.
S.D.N.Y. Sept. 7, 2011), [ECF No. 26].
270 See In re Lehman Brothers Holdings Inc., 456 B.R. 213 (Bankr. S.D.N.Y. 2011).
271 See Rule 60(b) Decision at 163-68 (procedural history). Mr. Hoffman erroneously asserts that the Trustee and
LBHI acted as joint movants. Hoffman Post-Trial Br. ¶ 35. While the Trustee joined LBHI’s motion for an order
authorizing discovery from Barclays under Federal Rule of Bankruptcy Procedure 2004, he did not join LBHI’s
Rule 60(b) Motion. See Rule 60(b) Decision at 165-66.
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the Trustee filed his own post-trial brief in support of his Rule 60(b) Motion.272 The Trustee’s
brief did not in any way join or mention the arguments made by LBHI with respect to Mr.
Hoffman or the Exall Spreadsheet.273 Finally, following the Rule 60(b) Decision, the Trustee did
not join or otherwise participate in LBHI’s motion for summary judgment on Count II of its
adversary proceeding. Accordingly, the Trustee’s position here is not clearly inconsistent with
his earlier position, nor does it assert two separate positions. Thus, the first and third elements
required to apply judicial estoppel are not present here.
The second element, adoption by the Court, is also not present. Judge Peck made clear
that his statements in the background section of the Rule 60(b) Decision, including the citation to
Mr. Exall’s testimony with respect to Barclays’ payments to Mr. Hoffman, were not adopted by
the Court as its findings of fact. Further, Judge Peck denied LBHI’s Rule 60(b) Motion and
Count II of LBHI’s adversary proceeding. Thus, no court has adopted LBHI’s position with
respect to the nature of Barclays’ payments to Mr. Hoffman. Accordingly, the Trustee is not
estopped from asserting that Barclays paid Mr. Hoffman’s 2008 bonus on behalf of LBI.
b. 	The Evidence Establishes that Barclays Paid Mr. Hoffman the
Additional $83 Million with the Intent of Satisfying LBI’s 2007
and 2008 Bonus Obligations to Mr. Hoffman
Following the Filing Date, Mr. Hoffman was understandably concerned that LBI would
not be able to satisfy the approximately $83 million of bonus compensation he was owed for his
work in 2007 and 2008. 274 Mr. Hoffman further testified that he had been relying on his bonus
compensation to counterbalance the approximately $60 million decrease in value that his LBHI
equity had suffered prior to the Filing Date in 2008; as Mr. Hoffman put it, his bonus
272 Case No. 08-01420 [ECF No. 3911].
273 See id.
274 See FoF ¶ 38.
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compensation and the reduced value of his LBHI equity holdings “seemed to balance in my own
personal balance sheet.”275 Accordingly, as part of his negotiating strategy in late September
2008, Mr. Hoffman made clear to Barclays, and to other potential employers, that he was seeking
to recoup the approximately $83 million that he would not be receiving from LBI. 276
Specifically, in his negotiations with Barclays, Mr. Hoffman made clear, time and again, that he
was focused on obtaining the approximately $83 million he had earned for 2007 and 2008 and
that he would have preferred if Barclays had just assumed that liability.277
Notwithstanding the undeniable interest in his services, only Barclays put forward a
definitive offer to structure Mr. Hoffman’s compensation to allow him to recoup that
approximately $83 million. 278 In fact, as Mr. Keegan testified, Barclays structured Mr.
Hoffman’s employment agreement specifically to allow him to recover the approximately $83
million owed to him from his time at LBI.279 While other Barclays employees may have, in the
heat of negotiations with Mr. Hoffman, characterized the $83 million in payments as a “retention
tool” designed to “respect” and “motivate” Mr. Hoffman,280 Barclays itself has consistently taken
the position that the $83 million paid to Mr. Hoffman above and beyond the replication of his
core LBI deal was on account of LBI’s obligations to Mr. Hoffman for the 2007 and 2008 fiscal
years.281 Thus, the evidence shows that Mr. Hoffman negotiated for the payment of
approximately $83 million that he would have received had LBI continued as a going concern
275 Apr. 23 Tr. 141:17-23 [Hoffman].
276 FoF ¶¶ 39.
277 FoF ¶¶ 39-01.
278 See FoF ¶ 37.
279 FoF ¶ 47.
280 See Hoffman Post-Trial Br. ¶ 14.
281 See Trustee Ex. 34 (e-mail among Barclays’ HR professionals stating that Barclays had “assumed” LBI’s $83
million obligation to Mr. Hoffman and delivered it to him in the form of the special awards and increased profit
percentage up to an incremental $13 million).
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and Barclays, alone among market participants and potential employers, was willing to offer it to
him. Although the timing and structure of the $83 million payment provided for in Mr.
Hoffman’s Barclays employment agreement varied slightly from the timing and structure of the
approximately $83 million he would have received had LBI continued as a going concern, these
variances do not alter the conclusion: Mr. Hoffman sought $83 million from his post-LBI
employer in order to be made whole for his lost LBI bonuses and to balance his personal balance
sheet, and Barclays gave it to him.
The Court finds that the $83 million Barclays paid to Mr. Hoffman above and beyond the
replication of his core LBI deal was intended to satisfy LBI’s obligation to pay Mr. Hoffman his
2007 and 2008 bonus in respect of work performed by him while at LBI. Such payment fully
satisfies LBI’s obligation to pay Mr. Hoffman’s 2008 bonus, 282 which, as discussed above, was
the only obligation LBI delegated to Barclays.283 Accordingly, the Trustee’s objection to the
portion of the Hoffman Claim seeking an allowed claim in the amount of $76,285,940 on
account of Mr. Hoffman’s 2008 bonus is sustained.
In accordance with the foregoing, the Court finds that the Hoffman Claim should be
allowed in the amount of $7,712,500. 284 The Court further finds, in accordance with its
comments on the record during closing arguments, 285 that there is nothing in this record,
including the facts giving rise to Mr. Hoffman’s claim and his behavior in negotiating for
282 While the Court finds that Mr. Hoffman’s 2008 bonus is properly calculated as $75,539,600, FoF ¶ 35, the $83
million paid by Barclays on account of LBI’s obligation to pay Mr. Hoffman’s 2008 bonus satisfies even the
$76,285,940 shown on the Hoffman Claim, rendering such finding moot.
283 As the Court finds that the portion of the Hoffman Claim for Mr. Hoffman’s 2008 bonus has been satisfied in
full, it is not necessary to reach the Trustee’s argument that such claim is subject to the section 502(b)(7) cap.
284 For the reasons stated in the Court’s decision in In re Lehman Brothers Holdings Inc., 519 B.R. 47 (Bankr.
S.D.N.Y. 2014), the portion of the Hoffman Claim for RSUs and options to purchase LBHI Stock is subject to
mandatory subordination under section 510(b) of the Bankruptcy Code.
285 Jul. 21 Tr. at 81:6-8.
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employment with Barclays following the Filing Date, that persuades the Court that any portion
of such allowed amount should be equitably subordinated.
C. The Chambers Claim
As described more fully above, the Chambers Claim asserts that Mr. Chambers is entitled
to guaranteed bonuses for 2007 and 2008, calculated based on the Fund’s performance during
those years. The Chambers Claim also asserts that Mr. Chambers is entitled to purportedly
guaranteed salaries and minimum bonuses for 2009 and 2010, despite Mr. Chambers’
acknowledgment that the Fund was not operating and Mr. Chambers was not employed by LBI
during 2009 and 2010.
The Trustee does not dispute the amount of Mr. Chambers’ 2007 bonus but contends that,
as Mr. Chambers’ 2007 bonus was considered part of his 2008 total compensation for purposes
of Lehman’s 2008 Equity Award Program, 65% of Mr. Chambers’ 2007 bonus is payable in
RSUs and therefore such amount must be subordinated pursuant to section 510(b) of the
Bankruptcy Code.
With respect to the 2008 bonus, the Trustee contends that, taking into account Mr.
Chambers’ $200,000 salary, and the $1.2 million in total compensation of Messrs. Kettler,
Verghese, and Guy Hoffman, Mr. Chambers’ 2008 bonus is properly calculated as $41,506,750.
The Trustee argues that this amount should be further reduced by the $1 million lump-sum
Barclays paid to Mr. Chambers, which the Trustee contends was paid in respect of the bonus
obligation LBI delegated to Barclays. The Trustee further asserts that, as with his 2007 bonus,
65% of Mr. Chambers’ 2008 bonus (whether reduced by the $1 million lump-sum payment from
Barclays or not) is payable in RSUs and therefore must be subordinated pursuant to section
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510(b). The Trustee also contends that Mr. Chambers’ claim for his 2008 bonus is subject to the
cap imposed by section 502(b)(7) of the Bankruptcy Code.
Finally, the Trustee contends that Mr. Chambers’ claims for 2009 and 2010 salary and
bonus compensation are foreclosed by the terms of his 2008 employment agreement and by
section 502(b)(7) of the Bankruptcy Code. The Court will address each portion of the Chambers
Claim in turn.
1. 	Guaranteed Bonus Amount of $1,647,051 for LBI’s Fiscal Year 2007
The sole question with respect to Mr. Chambers’ 2007 bonus is whether any part of it is
payable in RSUs and therefore subject to subordination under section 510(b) of the Bankruptcy
Code. Mr. Chambers’ 2008 employment agreement provided that, at LBI’s discretion, a portion
of his 2008 total compensation could be payable in RSUs or other forms of equity pursuant to
Lehman’s 2008 Equity Award Program. As Mr. Chambers’ 2008 employment agreement
provided that, for purposes of Lehman’s 2008 Equity Award Program, his 2007 bonus would be
considered part of his 2008 total compensation; if LBI exercised its discretion to pay a portion of
Mr. Chambers’ 2008 total compensation in RSUs, such exercise of discretion would also affect
Mr. Chambers’ 2007 bonus.
i. 	LBI Did Not Exercise its Discretion to Pay a Portion
of Mr. Chambers’ 2008 Total Compensation in RSUs
Mr. Chambers’ 2008 employment agreement with LBI stated: “At the Firm’s
discretion, a portion of your total compensation for [applicable year or years] Performance Year
(including any Performance Bonus) will be payable in conditional equity awards . . . pursuant to
the Firm’s Equity Award Program . . . as generally in effect for employees at your level.” As
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Mr. Chambers points out in his brief, by its terms, the agreement required LBI to exercise its
discretion in order to make a portion of Mr. Chambers’ 2008 total compensation payable in
RSUs. 286 Mr. Chambers argues that LBI never exercised such discretion and, thus, section
510(b) of the Bankruptcy Code is inapplicable.287
As described above, through its administration of the Lehman Equity Award Program,
the LBHI Compensation Committee was vested with the Firm’s discretion to pay a portion of
Lehman employees’ compensation, including LBI employees such as Mr. Chambers, in
conditional equity awards.288 The evidence establishes that, if the LBHI Compensation
Committee did not exercise its discretion to pay a portion of an employee’s total compensation in
RSUs or other conditional equity awards, as was the case, for example, with Mr. Hajdukiewicz’s
2007 bonus, such employee would be paid entirely in cash.289 Therefore, to the extent the LBHI
Compensation Committee did not exercise its discretion to pay Mr. Chambers in conditional
equity awards, the entirety of his 2008 total compensation, including the remaining portion of his
2007 bonus, would be payable in cash.
The Trustee contends that the LBHI Compensation Committee exercised its discretion
with respect to all of the Claimants when it issued the RSU Schedules, which were attached to
the employment agreements of Mr. Chambers and Mr. Hoffman and e-mailed to Mr. Judkins and
Mr. Hajdukiewicz.290 The Trustee asserts that the percentage of each Claimant’s 2008 total
compensation identified on the RSU Schedule as payable in RSUs represents a claim for
unissued RSUs that must be subordinated pursuant to section 510(b) of the Bankruptcy Code and
286 See Chambers Post-Trial Br. ¶ 8.
287 See id. at ¶¶ 8-13.
288 See FoF ¶¶ 15-17.
289 See FoF ¶¶ 94.
290 See Trustee Post-Trial Br. at ¶¶ 51-54.
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In re Med Diversified, Inc., 461 F.3d 251 (2d Cir. 2006). The Trustee further argues that Mr.
Chambers (and the other Claimants), by agreeing to be paid partially in RSUs at the LBHI
Compensation Committee’s discretion, took on the risk and reward expectations of a shareholder
with respect to that portion of their compensation, placing them in a similar position as the
claimants in O’Donnell v. Tristar Esperanza Properties, LLC (In re Tristar Esperanza
Properties, LLC), 782 F.3d 492 (9th Cir. 2015) and KIT Digital, Inc. v. Invigor Group Ltd. (In re
KIT Digital, Inc.), 497 B.R. 170 (Bankr. S.D.N.Y. 2013), whose claims were subordinated.291
Finally, the Trustee submits that the Claimants’ situation is not different from that of
commission-based Lehman employees, whose claims for unissued RSUs the Court has
previously subordinated.292
This much is clear: LBI, or, more accurately, the LBHI Compensation Committee, did
not exercise its discretion to pay any portion of Mr. Chambers’ 2008 total compensation in
RSUs. Issuing the RSU Schedule did not, as the Trustee contends, operate as an exercise of the
LBHI Compensation Committee’s discretion. In fact, as Mr. Chambers notes in his brief, 293 the
LBHI Compensation Committee passed a resolution at the July 1, 2008 meeting – the same
meeting in which the LBHI Compensation Committee resolved to issue the RSU Schedule and
make the July RSU Grant – that makes clear that (i) the LBHI Compensation Committee retained
its discretion to grant RSUs with respect to an employee’s 2008 year-end bonus and (ii) issuing
the RSU Schedule was not to be understood as an exercise of its discretion in that regard:
RESOLVED, that nothing in the foregoing resolutions is intended to, and shall
not, confer upon any employee any right to any discretionary bonus with respect
to Holdings’ fiscal year ending November 30, 2008 or any grant of any equity
award apart from the July RSUs; it being understood that the sole purpose of the
291 See Trustee Post-Trial Reply Br. at ¶¶ 32-33.
292 Trustee Post-Trial Br. ¶ 32 (citing In re Lehman Bros. Holdings Inc., 519 B.R. at 64, n.18).
293 See Chambers Post-Trial Br. ¶ 11.
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foregoing 	resolution 	determining 	the 	[RSU 	Schedule] 	is 	to 	permit 	the
communication of the overall deferral levels of the 2008 Equity Award Program
as is currently anticipated at the present time to the Firm’s employees without
conferring any binding right or entitlement related thereto . . . . 294
The disclaimer on the front cover of the 2008 Equity Award Program Summary, in which the
RSU Schedule was disseminated, further reflected the LBHI Compensation Committee’s
resolution.295 The resolution was again reiterated at the LBHI Compensation Committee’s
September 3, 2008 meeting.296 As Mr. Chambers notes, in the same September 3, 2008 meeting,
the LBHI Compensation Committee resolved to reduce the maximum percentage of 2008 total
compensation that could be paid in RSUs from 65% to 50%, further demonstrating that the RSU
Schedule issued in July 2008 was meant only to be a statement of how the LBHI Compensation
Committee then anticipated it would exercise its discretion.297
Moreover, as Mr. Chambers argues in his brief, neither he nor any of the other Claimants,
had taken on the risks and rewards of shareholders as of the Filing Date.298 The Court agrees. In
fact, as the LBHI Compensation Committee’s July 1, 2008 and September 3, 2008 resolutions
make clear, as of the Filing Date, no Lehman employee had any legal right to receive RSUs.
Rather, the Claimants were eligible to receive a number of RSUs determined by dividing the
percentage of 2008 total compensation that the LBHI Compensation Committee, in its discretion,
determined would be payable in RSUs by the closing price of LBHI common stock on the Year-
end Grant Date to be selected by the LBHI Compensation Committee. Until the LBHI
Compensation Committee selected a Year-end Grant Date, thereby converting a percentage of
294 FoF ¶ 19.
295 FoF ¶ 20.
296 FoF ¶ 21.
297 Id. See also Chambers Post-Trial Br. ¶¶ 17-19.
298 See Chambers Post-Trial Br. ¶¶ 3-4.
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2008 total compensation into an entitlement to a fixed number of RSUs, the reward of an
increase in LBHI’s stock price would not accrue to Claimants as it would to an LBHI
shareholder. Instead, an increase in LBHI’s stock price simply meant that, when the LBHI
Compensation did select a Year-end Grant Date, the grant price would be higher and the
Claimant would therefore receive fewer RSUs. 299
Tristar and KIT Digital are each distinguishable. In Tristar, the Ninth Circuit held that a
member of an LLC who converted her claim to debt prior to the LLC’s bankruptcy was
nonetheless subject to subordination under section 510(b) of the Bankruptcy Code. 	In reaching
that conclusion, the court examined the law on subordination outside of the Ninth Circuit,
including citing to In re MarketXT Holdings Corp., 361 B.R. 369 (Bankr. S.D.N.Y. 2007), and
concluded, “[t]hese cases suggest that to be subject to subordination, the claimant must, at the
very least, enjoy the rights and privileges of equity ownership on the date of the bankruptcy
petition (citation omitted).”300 The Tristar court declined to follow that principle, noting, “[the
Ninth Circuit] rejected that principle . . . holding that a claimant who bargained for an equity
position was subject to subordination, even though he never enjoyed the benefits of equity
ownership.”301 The holding in Tristar is inconsistent with the law in this Circuit, which
contemplates only two rationales for mandatory subordination under section 510(b): either the
claimant (1) took on the risk and return expectations of a shareholder, rather than a creditor, or
(2) seeks to recover a contribution to the equity pool relied upon by creditors in deciding whether
to extend credit to the debtor. MedDiversified, 461 F.3d at 256; see also KIT Digital, 497 B.R. at
183 (applying MedDiversified).
299 As of the Filing Date, the LBHI Compensation Committee had not yet selected a Year-end Grant Date for fiscal
year 2008. FoF ¶ 22.
300 782 F.3d at 496.
301 Id.
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KIT Digital is distinguishable on its facts. In KIT Digital, Judge Gerber held that a
contractual claim to receive additional shares of stock in the debtor that could have, at the sole
discretion of the debtor, been satisfied with cash instead of shares of stock, was subject to
mandatory subordination under section 510(b). KIT Digital, 497 B.R. at 183. Judge Gerber
reasoned that the option of the debtor to satisfy its obligation to the claimant in cash, rather than
stock, did not change the fact that the claimant had bargained for stock and therefore assumed
the risk and return expectations of a shareholder. Id. at 185. Judge Gerber distinguished the two
cases upon which the claimants relied, In re NationsRent, Inc., 381 B.R. 83 (Bankr. D. Del.
2008) and CIT Group v. Tyco International Ltd. (In re CIT Group), 460 B.R. 633 (Bankr.
S.D.N.Y. 2011), by noting that the claimants in each case, unlike the claimants in KIT Digital,
did not have a contractual entitlement to receive stock. KIT Digital, 497 B.R. at 185. Here,
unlike the claimants in KIT Digital, the Claimants had an entitlement to cash that could be
satisfied in RSUs rather than an entitlement to stock that could be satisfied in cash. The
Claimants had no entitlement to RSUs and thus had not taken on the risk and return expectations
of a shareholder.
The Trustee’s final argument on this issue is also unpersuasive; the nature of Mr.
Chambers’ bonus entitlement is distinct from that of commission-based Lehman employees,
whom the Court previously held had a claim, albeit a subordinated one, for unissued RSUs.
Lehman’s commission-based employees were classified as “production based” for purposes of
the 2008 Equity Award Program and, in accordance with such classification, were compensated
partially in cash and partially in an accrual towards a year-end equity award with each pay
period.302 In other words, Lehman commission-based employees became entitled to RSUs with
302 Chambers Ex. 2 (2008 Equity Award Program Summary), at n.2.
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each pay period. By contrast, as Mr. Chambers emphasizes, he was a bonus-eligible employee,
not a production-based employee.303 Accordingly, he did not have any entitlement to RSUs until
the LBHI Compensation Committee decided to exercise its discretion.
Therefore, because LBI, through the LBHI Compensation Committee, had not, as of the
Filing Date, exercised its discretion to pay Mr. Chambers, or any other Lehman bonus-eligible
employee, a portion of their 2008 total compensation in RSUs, no portion of Mr. Chambers’
2008 total compensation was payable in RSUs as of the Filing Date. Accordingly, no portion of
Mr. Chambers’ 2008 total compensation, including his claim for a 2007 bonus, will be
subordinated pursuant to section 510(b).304
2. 	Guaranteed Bonus Amount of $42,386,172.99 for LBI’s Fiscal Year 2008
The Trustee concedes that Mr. Chambers is entitled to a claim for his 2008 bonus but
contends that such claim is overstated because it fails to deduct (i) the full compensation paid to
employees of the Fund and (ii) the $1 million lump-sum Mr. Chambers received from
Barclays.305
i. 	The Calculation of Mr. Chambers’ 2008 Bonus
Pursuant to his 2008 employment agreement, Mr. Chambers’ 2008 bonus was to be
calculated as 25% of the Fund’s net profits, “the performance pool,” less (i) Mr. Chambers’ 2008
303 See Chambers Post-Trial Reply Br. ¶ 8.
304 Because LBI, through the LBHI Compensation Committee, did not exercise its discretion to pay any portion of
the Claimants’ 2008 total compensation in RSUs, it need not address the argument, advanced primarily by Messrs.
Hoffman and Chambers, that no portion of the Claims should be subordinated under section 510(b) because, even
had LBI, through the LBHI Compensation Committee, exercised its discretion to pay Claimants a percentage of
their 2008 total compensation in RSUs, it could not have delivered a number of RSUs sufficient to satisfy its
obligation to the Claimants, given the value of LBHI stock following the Filing Date.
305 The Trustee also argues that, like Mr. Chambers’ 2007 bonus, 65% of his 2008 bonus was payable in RSUs and
is therefore subject to mandatory subordination pursuant to section 510(b). For the reasons discussed in Section
C.1.i, no portion of Mr. Chambers’ 2008 total compensation, including his 2008 bonus, was payable in RSUs.
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salary and (ii) the 2008 total compensation paid to the employees of the Fund.306 It is undisputed
that the 2008 performance pool was $42,906,750. 307 It is also undisputed that, as of the Filing
Date, LBI had paid Mr. Chambers and the Fund employees a total of $520,577.01 in
compensation.308 The Chambers Claim reduces the performance pool by this amount to arrive at
its claimed amount for Mr. Chambers’ 2008 bonus – $42,386,172.99. The Trustee contends,
however, that the performance pool should be reduced by Mr. Chambers’ full $200,000 salary
for 2008 and the 2008 guaranteed salaries and bonuses of the Fund’s employees, whether paid by
LBI or not – i.e., that Mr. Chambers’ claim for a 2008 bonus should be calculated by subtracting
$1.2 million from the performance pool, resulting in a claim of $41,506,750, before application
of the Trustee’s remaining defenses.309
The Trustee cites no authority for the inequitable proposition that Mr. Chambers’ claim
for his 2008 bonus must be reduced by amounts that were neither paid by LBI nor paid on LBI’s
behalf. However, the evidence at the Merits Hearing revealed that more than just the
$520,577.01 LBI had paid to Mr. Chambers and the Fund employees as of the Filing Date has
been paid, either by LBI or on LBI’s behalf, to employees of the Fund. Such amounts must be
deducted from Mr. Chambers’ claim for a 2008 bonus pursuant to his 2008 employment
agreement.
First, Mr. Kettler and Mr. Verghese each accepted employment with Barclays and
became Transferred Employees, meaning that LBI delegated its obligation to pay their 2008
306 FoF ¶ 66.
307 FoF ¶ 71.
308 See FoF ¶ 73.
309 Trustee’s Proposed Findings of Fact ¶ 79.
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guaranteed bonuses to Barclays. 310 The Trustee introduced the testimony of Mr. Kurman of
Barclays that Barclays had made payments of $140,240 to Mr. Kettler and $35,000 to Mr.
Verghese in lieu of their 2008 bonuses. 311 The testimony of Mr. Kurman was sufficient to meet
the Trustee’s burden of proof with respect to such amounts and shift the burden to Mr.
Chambers, who did not offer any evidence to the contrary. Accordingly, Mr. Chambers’ claim
for his 2008 bonus will be reduced by the total lump-sum payment of $175,240 that Barclays
made to Mr. Kettler and Mr. Verghese in lieu of their 2008 bonuses.
Second, Mr. Kettler and Mr. Verghese have been awarded allowed claims against LBI on
account of their 2008 guaranteed bonuses in the amounts of $300,625 and $169,385,
respectively.312 Mr. Chambers testified that, to replicate what would have happened with his
2008 bonus had LBI remained a going concern and Messrs. Kettler and Verghese had been paid
from the Fund’s performance pool, and to avoid a “double-dip,” his 2008 bonus should be
reduced by the amount of Messrs. Kettler and Verghese’s allowed claims.313 Accordingly, such
amounts will be subtracted from Mr. Chambers’ claim for his 2008 bonus.
Finally, although each of Mr. Chambers, Mr. Kettler, and Mr. Verghese were paid a
salary by Barclays, LBI did not delegate to Barclays its 2008 base salary obligations to
Transferred Employees; in fact, Section 9.1(c) of the APA expressly excludes base salary from
the scope of the delegation. Therefore, Mr. Chambers’ 2008 bonus will not be reduced by any
salary that he, Mr. Kettler, or Mr. Verghese was paid by Barclays in 2008.
310 FoF ¶ 74; Section A, supra.
311 FoF ¶ 74.
312 See FoF ¶ 75.
313 See Apr. 22 Tr. 153:16-154:1 [Chambers] (Q: “And if those claims became allowed claims against Lehman
Brothers, would you take a deduction from your bonus pool amount for the amount of that allowed claim?” A:
“We’ve offered that to the Trustee, I think, to reduce our claim by the amount of any allowed claim by the guys that
worked with me.” Q: In other words, to replicate what would have [happened] had all this not happened.” A:
“Right. I’m not trying to double-dip there.”).
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In accordance with the above, Mr. Chambers’ 2008 bonus is properly calculated as
$41,740,922.69.
ii. 	Barclays Paid $1 Million of Mr. Chambers’ 2008 Bonus on Behalf of LBI
Mr. Chambers received and accepted an offer of employment from Barclays.314
Accordingly, Mr. Chambers was a Transferred Employee and, pursuant to the APA, LBI
delegated to Barclays its 2008 bonus obligation to Mr. Chambers. Mr. Chambers was terminated
and entered into a separation agreement with Barclays on the same day he accepted Barclays’
offer of employment – December 5, 2008.315 Mr. Chambers’ separation agreement provided for
severance payments in accordance with Lehman’s severance policy and a $1 million lump-sum
payment above and beyond the severance called for by Lehman’s severance policy.316 Relying
on the testimony of Mr. Kurman of Barclays that this $1 million lump-sum payment was to
compensate Mr. Chambers for his 2008 service at LBI,317 the Trustee argues that such payment
was in partial satisfaction of Mr. Chambers’ 2008 bonus. In response, Mr. Chambers suggests
that the lump-sum payment may have been in exchange for Mr. Chambers’ release of Barclays
from any claims he may have had in connection with the termination of his employment,
including potential claims under the Older Workers Benefits Protection Act or the WARN
Act.318 The Court finds that Mr. Kurman’s testimony is sufficient to meet the Trustee’s burden
of proof on this issue, particularly given that Mr. Chambers has offered no evidence to the
contrary or in support of his contention.
314 FoF ¶ 76.
315 Id.
316 FoF ¶¶ 77-78.
317 FoF ¶ 78.
318 See Chambers Post-Trial Br. ¶ 28.
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Accordingly, the Court finds that Barclays paid $1 million of Mr. Chambers’ 2008 bonus
on behalf of LBI and that the allowed amount of Mr. Chambers’ claim for his 2008 bonus will be
reduced from $41,740,922.69 to $40,740,922.69. Because, for the reasons discussed above in
reference to Mr. Chambers’ 2007 bonus, LBI did not exercise its discretion to pay any portion of
Mr. Chambers’ 2008 total compensation in RSUs, no portion of Mr. Chambers’ claim for his
2008 bonus will be subordinated pursuant to section 510(b).
3. 	Salary and Bonus Claims of $20,400,000 for 2009 and 2010
Mr. Chambers’ 2008 employment agreement provided that, if his employment with LBI
ended for any reason during the 2008, 2009, or 2010 fiscal years, then his salary payments would
cease at that time as well.319 Similarly, Mr. Chambers’ 2008 employment agreement provided
that “[i]n no event will you be eligible for any Performance Bonus with respect to a Performance
Year in which you were not employed as contemplated by this letter.”320 Mr. Chambers
understood that if he was not employed by LBI during the 2009 or 2010 fiscal years he would
not be eligible for a salary or bonus in respect of such year or years.321 Because Mr. Chambers
was not employed by LBI at any time in 2009 or 2010,322 his claim for a 2009 salary and bonus
and a 2010 salary and bonus is therefore foreclosed by the terms of his employment agreement
and the portion of the Chambers Claim asserting such amounts will be disallowed.323
In accordance with the foregoing, the Court finds that the Chambers Claim will be
allowed in the amount of $40,740,922.69.
D. The Judkins Claim
319 FoF ¶ 65.
320 FoF ¶ 69.
321 FoF ¶¶ 65, 70.
322 FoF ¶ 70.
323 There is thus no need to address the Trustee’s section 502(b)(7) argument with respect to such amounts.
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As described more fully above, the Judkins Claim asserts claims for (i) a guaranteed 2008
bonus of $800,000; (ii) a discretionary 2008 bonus in the amount of between $1,200,000 and
$1,600,000; (iii) relocation expenses of $400,000 in connection with Mr. Judkins’ relocation
from Maryland to New York to accept employment with LBI; and (iv) reimbursement of a home
equity loan in the amount of $840,000. The Court will address each aspect of the Judkins Claim
in turn.
1. 	Guaranteed Bonus Amount of $800,000 for LBI’s Fiscal Year 2008
Pursuant to his employment agreement with LBI, Mr. Judkins was owed an $800,000
guaranteed bonus for the 2008 fiscal year.324 Mr. Judkins accepted Barclays’ offer of
employment following LBI’s bankruptcy and entered into an employment agreement with
Barclays in October 2008. 325 In accepting Barclays’ offer of employment, Mr. Judkins became a
Transferred Employee for purposes of the APA; accordingly LBI delegated to Barclays its
obligation to pay Mr. Judkins’ 2008 bonus.326 Mr. Judkins’ employment agreement with
Barclays entitled him to receive an $800,000 bonus for the 2008 fiscal year.327 In February
2009, Mr. Judkins received an $800,000 cash bonus from Barclays for fiscal year 2008.328
The Trustee contends that this $800,000 cash bonus from Barclays satisfied LBI’s
obligation to pay Mr. Judkins his 2008 bonus, arguing that it strains credulity to conclude that
Barclays would have paid Mr. Judkins an $800,000 cash bonus in recognition of his
approximately three months working at Barclays in 2008 before the conclusion of his
324 FoF ¶ 81.
325 FoF ¶ 83.
326 See Trustee Ex. 1 (APA), §§ 9.1(a), 9.1(c); Section A, supra.
327 FoF ¶ 83.
328 FoF ¶ 85.
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employment there.329 Mr. Judkins asserts, on the other hand, that the bonus from Barclays was
unrelated to his time at LBI, pointing to trading profits, in an unspecified amount, that Mr.
Judkins purportedly generated for Barclays during his three months of employment. He also
contends that a clause in his Barclays employment agreement that prevented him from soliciting
Barclays customers for three months following his departure from Barclays somehow supports
his position.330
The Court agrees with the Trustee and declines to conclude that Barclays would have
guaranteed and then paid Mr. Judkins an $800,000 bonus for his work from October-December
2008. Indeed, LBI had guaranteed Mr. Judkins $800,000 for his work for the entirety of the year
2008, and Mr. Judkins did not introduce any evidence demonstrating superior performance
during his brief tenure at Barclays consistent with awarding him a full year’s bonus for a quarter
of a year’s work. The Court concludes that the Trustee has successfully shifted the burden to
Mr. Judkins to prove that the $800,000 cash payment he received from Barclays in February
2009 was not on account of his 2008 LBI bonus.
By merely pointing to a non-solicitation clause in his Barclays employment agreement
and purported trading profits generated for Barclays in 2008, Mr. Judkins has failed to meet his
burden on this issue. Simply put, the non-solicitation agreement in his Barclays employment
agreement, a standard clause in numerous employment agreements that do not come with
guaranteed bonuses, does not explain an $800,000 bonus. Second, there is no evidence of Mr.
Judkins’ trading record at Barclays from October-December 2008 that would enable the Court to
conclude the bonus was on account of superior performance at Barclays. Accordingly, the Court
finds that the $800,000 cash payment Mr. Judkins received from Barclays in February 2009 was
329 Trustee Post-Trial Br. ¶ 30.
330 See Judkins Post-Trial Reply Br. at 3.
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in satisfaction of LBI’s obligation to pay him an $800,000 guaranteed bonus for LBI’s 2008
fiscal year.
2. 	Discretionary Bonus for LBI’s Fiscal Year 2008
It is undisputed that LBI’s written bonus policy was that bonuses were “not guaranteed
unless otherwise agreed upon in writing” and “[were] determined at the full discretion of senior
[Lehman] management.”331 Mr. Judkins conceded at the Merits Hearing that he understood
LBI’s policy meant that he could be paid nothing beyond his $800,000 guaranteed bonus, no
matter how well he performed. 332 Mr. Judkins further acknowledged, in his post-trial brief, the
well-settled New York rule that “[a]n employee’s entitlement to a bonus is governed by the
terms of the employer’s bonus plan.”333
While Mr. Judkins’ 2008 trading performance at LBI may have merited a discretionary
bonus had LBI remained a going concern and granted discretionary bonuses, LBI’s written bonus
policy made clear that no employee, including Mr. Judkins, had an entitlement to a discretionary
bonus. The clear and unambiguous terms of the LBI bonus policy govern here. Mr. Judkins’
claim for a 2008 discretionary bonus will be disallowed.334
3. 	Relocation Expenses
Mr. Judkins’ LBI employment agreement provided that he was eligible for relocation
assistance under the terms of the Relocation Policy furnished by Lehman. 335 The Relocation
Policy provided for Lehman to be billed directly “for all reasonable and customary closing costs
331 FoF ¶ 82.
332 Id.
333 Judkins Post-Trial Br. at 8 (quoting Hall v. United Parcel Serv. of Am., Inc., 555 N.E.2d 273, 279 (N.Y. 1990)).
334 As the Court finds that Barclays satisfied LBI’s obligation to pay Mr. Judkins’ entitlement to his 2008 bonus in
full, the Trustee’s argument that any allowed portion of Mr. Judkins’ 2008 bonus was payable in RSUs and therefore
must be subordinated under section 510(b), is moot.
335 FoF ¶ 86.
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incurred in the sale of your former residence.”336 The Relocation Policy explicitly stated that
“[u]pon termination of your employment for any reason, any remaining relocation benefits will
cease immediately.”337
Although Mr. Judkins “relocated” from Maryland to New York to join LBI, he did not
sell his residence in Easton, Maryland, which he continues to use as a vacation home. 338 In fact,
the relocation expenses the Judkins Claim asserts are the estimated costs that Mr. Judkins would
have incurred had he sold his Maryland home.339 Thus, Mr. Judkins did not suffer costs
“incurred in the sale of [his] former residence” – in short, no such costs exist because the
Maryland residence is not in fact his “former” residence. Accordingly, Mr. Judkins’ asserted
relocation expenses do not qualify for reimbursement under the Relocation Policy and will
therefore be disallowed.
4. 	Prudential Home Equity Loan
During the course of discovery, Mr. Judkins asserted for the first time his purported
entitlement to reimbursement for the $840,000 Equity Loan he had obtained from Prudential.340
Although LBI’s agreement with Prudential provided that LBI would act, in essence, as a
guarantor of Mr. Judkins’ obligations on the Equity Loan, LBI was not in fact a party to the
Equity Loan and did not have any obligations to Mr. Judkins in connection with the Equity
Loan.341 As the Trustee asserts, the portion of the Judkins Claim seeking reimbursement of the
336 FoF ¶ 87.
337 Id.
338 FoF ¶ 88.
339 Id.
340 FoF ¶ 90.
341 See FoF ¶¶ 89, 90.
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Equity Loan must fail, both on the merits and because it was not timely asserted in the Judkins
Claim. The Court agrees.
In accordance with the foregoing, the entirety of the Judkins Claim will be disallowed.
E. The Hajdukiewicz Claim
The Hajdukiewicz Claim asserts that Mr. Hajdukiewicz is entitled to a guaranteed bonus
of $1,610,000 for LBI’s fiscal year 2008, as provided for in his 2008 employment agreement.342
The Trustee contends, first, that Mr. Hajdukiewicz released his claim against LBI when he
signed the release included in his severance agreement with Barclays. The Trustee further
contends that, if Mr. Hajdukiewicz did not release his claim against LBI, it must be reduced by
(i) $183,840 which the Trustee asserts Mr. Hajdukiewicz received in the form of RSUs in July
2008 as part of the July RSU Grant and (ii) a $422,000 payment Barclays made to Mr.
Hajdukiewicz upon his termination from Barclays, which payment the Trustee submits was made
in partial satisfaction of LBI’s obligation to pay Mr. Hajdukiewicz’s 2008 bonus. For the
reasons stated below, the Court finds that (i) Mr. Hajdukiewicz did not release his claim against
LBI; (ii) Mr. Hajdukiewicz was paid $183,840 of his 2008 bonus in the form of RSUs in July
2008; and (iii) the Hajdukiewicz Claim was partially satisfied by the $422,000 cash payment
Barclays made to Mr. Hajdukiewicz upon his termination.
i. 	Mr. Hajdukiewicz Did Not Release his Claim
As part of his separation from Barclays, Mr. Hajdukiewicz signed a waiver and general
release in favor of Barclays that provided as follows:
In exchange for the payments and benefits set forth in my Separation Agreement,
I hereby release Barclays Capital (the “Bank”), and all of its past and/or present
divisions, 	affiliates, 	parents, 	subsidiaries, 	officers, 	directors, 	stockholders,
342 On October 20, 2014, Mr. Hajdukiewicz attempted to amend his claim to assert a claim in the amount of
$1,910,000, see Hajdukiewicz Ex. 9, but such amendment is barred by the Court’s July 2, 2014 Order [ECF No.
9273].
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trustees, employees, agents, representatives, administrators, attorneys, insurers,
fiduciaries, 	predecessors, 	successors 	and 	assigns, 	in 	their 	individual 	and/or
representative capacities (hereinafter referred to as the “Barclays Group”), from
any and all causes of action, suits, agreements, promises, damages, disputes,
controversies, contentions, differences, judgments, claims and demands of any
kind whatsoever (“Claims”) which I or my heirs, executors, administrators,
successors and assigns ever had, now have or may have against the Barclays
Group, whether known or unknown to me, by reason of my employment and/or
cessation of my employment, with the Bank or with Lehman Brothers, or
otherwise involving facts which occurred on or prior to the effective date of this
Waiver and General Release, except to the extent that any such Claim concerns an
allegation that the Bank has failed to make the payment(s) set forth above.343
The Trustee argues that the effect of this language is that Mr. Hajdukiewicz released his claim
against LBI. The Trustee contends that LBI was Barclays’ predecessor as Mr. Hajdukiewicz’s
employer and as the owner of the business in which Mr. Hajdukiewicz was employed and that
the reference to claims “by reason of my employment and/or cessation of my employment . . .
with Lehman Brothers” encompasses his entitlement, if any, to a 2008 bonus from LBI.344
Mr. Hajdukiewicz, not surprisingly, asserts that LBI is not a predecessor of Barclays
because Barclays purchased LBI’s assets and therefore is not a successor of LBI. 345 The Trustee
concedes that a purchaser of assets is not generally liable for the seller’s liabilities, but asserts
that this principle is inapposite because Mr. Hajdukiewicz agreed to release “all” of Barclays’
predecessors, in any context, and did not limit the release to only those predecessors whose
liabilities Barclays assumed. 346 The Trustee thus contends that “predecessor” should be read
broadly to include LBI, citing to Arrowgrass Master Fund Ltd. v. Bank of New York Mellon, 106
343 FoF ¶ 101.
344 See Trustee Post-Trial Br. ¶¶ 75-77.
345 See Hajdukiewicz Post-Trial Br. ¶¶ 27-28.
346 See Trustee Post-Trial Br. ¶ 76.
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A.D.3d 582 (N.Y. App. Div. 1st Dep’t 2013) as an example of a case in which a New York court
interpreted the term “predecessor” to include more than just a corporate predecessor.347
In Arrowgrass, a noteholder sued a predecessor indenture trustee for breach of fiduciary
duty in connection with an intercreditor agreement. The noteholders were bound by a release
executed by the successor indenture trustee that released the “2015 Note Trustees” and each of
their “predecessors” from “all” challenges to the subject intercreditor agreement, but argued that
they could nonetheless bring suit against the predecessor indenture trustee. The court found that
“predecessors” in the context of the release encompassed the predecessor indenture trustee,
interpreting predecessor to mean, in accordance with Black’s Law Dictionary, “[o]ne who
precedes another in an office or positions.”348 The court reasoned that “[c]ertainly, if the parties
intended the release not to cover the 2015 Note Trustees’ predecessors (i.e., defendant) they
would not have used the word ‘all,’ which we view as broadly releasing ‘all challenges to the
December 20, 2007 Intercreditor Agreement . . . . [t]hus, in the context of this broad release, it
makes perfect sense that ‘predecessor’ means Wilmington’s predecessor as trustee (i.e.,
defendant) and not just the corporate predecessor.”349
The Court declines to extend the broad reading the Arrowgrass court gave the word
“predecessor” beyond the rather unique context of predecessor and successor indenture trustees
and to the instant facts. Rather, the Court finds that the word “predecessor” in the context of Mr.
Hajdukiewicz’s release is limited to Barclays’ corporate predecessors. A previous employer
such as LBI is not a subsequent employer’s predecessor “in office” in the way that a predecessor
indenture trustee is a subsequent indenture trustee’s predecessor “in office.” While a successor
347 Id.
348 106 A.D.3d at 583.
349 106 A.D.3d at 583 (citations omitted).
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indenture trustee generally assumes the same rights and duties as a predecessor indenture trustee,
including becoming party to the same agreements, a subsequent employer does not necessarily
assume the same rights and duties with respect to the employee. Here, Barclays did not assume
or become party to LBI’s employment agreement with Mr. Hajdukiewicz but instead entered into
a new employment agreement, with terms different from the terms that governed his employment
by LBI.
Even if the meaning of the word “predecessor” were ambiguous, as urged by Mr.
Hajdukiewicz,350 such ambiguity could not be resolved by finding that Barclays and Mr.
Hajdukiewicz intended the use of the word to effect the release of LBI. There is no evidence
whatsoever suggesting that there was any bargaining or discussion between Barclays and Mr.
Hajdukiewicz with respect to releasing LBI and the attendant loss of Mr. Hajdukiewicz’s claim.
The Court finds that Mr. Hajdukiewicz did not release the Hajdukiewicz Claim.
ii. 	Mr. Hajdukiewicz was Paid $183,840 of his 2008
Bonus in the Form of RSUs in July 2008
On July 3, 2008, Mr. Hajdukiewicz received an e-mail from Lehman stating that “part of
your 2008 equity award will take the form of a July RSU Grant. You can think of that July
award as an ‘advance’ against your 2008 year-end equity award.”351 Consistent with that e-mail,
Mr. Hajdukiewicz’s LBI personnel file shows that Mr. Hajdukiewicz received in July 2008 an
award of RSUs (8,770.99 RSUs at the July 2008 grant price of $20.96, worth $183,840) as an
advance on his 2008 bonus.352
350 See Hajdukiewicz Post-Trial Br. ¶ 29.
351 FoF ¶ 95.
352 FoF ¶ 97.
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Mr. Hajdukiewicz argues that the evidence presented by the Trustee, the July 3, 2008 e-
mail and Mr. Hajdukiewicz’s personnel file, are insufficient to establish that Mr. Hajdukiewicz
in fact received RSUs as part of the July RSU Grant, as alleged by the Trustee. Mr.
Hajdukiewicz testified that he does not recall receiving any such award and the Trustee’s
introduction of his personnel file at the Merits Hearing did not refresh his recollection.
Subsequent to the Merits Hearing, Mr. Hajdukiewicz objected to the introduction of his
personnel file into evidence353 on the grounds that the Trustee failed to establish its relevance.
To the extent that Mr. Hajdukiewicz’s personnel file does not speak for itself, it is
nonetheless relevant in that it corroborates the statement in the July 3, 2008 e-mail that indicates
that Mr. Hajdukiewicz was to receive RSUs as part of the July RSU Grant. The Court finds that
the July 3, 2008 e-mail and Mr. Hajdukiewicz’s personnel file are sufficient to meet the
Trustee’s burden of demonstrating that Mr. Hajdukiewicz received an award of $183,840 worth
of RSUs as part of the July RSU Grant as an advance on his 2008 bonus, thereby shifting the
burden of proof to Mr. Hajdukiewicz. As Mr. Hajdukiewicz has not introduced any evidence
indicating that he did not receive such award, he has failed to meet his burden. Accordingly, the
Court finds that the Hajdukiewicz Claim should be reduced by $183,840, the amount of Mr.
Hajdukiewicz’s 2008 bonus that he received in the form of RSUs in July 2008.
iii. 	Barclays Paid $422,000 of Mr.
Hajdukiewicz’s 2008 Bonus on Behalf of LBI
Pursuant to his separation agreement with Barclays, Mr. Hajdukiewicz received, in
addition to severance, a special lump sum payment of $422,000 upon his termination by Barclays
353 See ECF No. 11992 at 5-6.
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shortly after accepting Barclays’ offer of employment.354 The Trustee argues that this payment
satisfied $422,000 of LBI’s obligation, if any, to Mr. Hajdukiewicz. Mr. Hajdukiewicz contends
that the Trustee has failed to meet his burden of proof to link the lump sum payment from
Barclays to LBI’s obligation to Mr. Hajdukiewicz, asserting that it is far more plausible that the
lump sum payment was in exchange for the release of any claims Mr. Hajdukiewicz may have
had against Barclays in connection with the termination of his employment, including potential
Old Workers Benefit Protection Act claims.355
Mr. Hajdukiewicz accepted Barclays’ offer of employment and became a Transferred
Employee under the APA.356 Accordingly, if Barclays made a payment to Mr. Hajdukiewicz in
respect of LBI’s obligation to pay Mr. Hajdukiewicz’s 2008 bonus, such payment must be
deducted from the Hajdukiewicz Claim. In support of his position, the Trustee relies upon the
testimony of Mr. Kurman of Barclays, who testified that the lump sum payment was calculated
to be 20% of Mr. Hajdukiewicz’s 2007 bonus and that such payment was made in lieu of a 2008
bonus. 357 As was the case with respect to the Chambers Claim, discussed in Section C, supra,
the Court finds that Mr. Kurman’s testimony that Barclays paid Mr. Hajdukiewicz the $422,000
to partially satisfy his 2008 LBI bonus is sufficient to establish this fact, and Mr. Hajdukieiwcz
has introduced no evidence to the contrary. As with the Chambers Claim, Mr. Hajdukiewicz’s
suggestion that Barclays would pay him $422,000 for a release of any claims against Barclays
that would have accrued in the short tenure of his Barclays employment is unsubstantiated.
Therefore, the Court finds that the Hajdukiewicz Claim should be reduced by $422,000.
354 FoF ¶ 100.
355 See Hajdukiewicz Post-Trial Reply Br. ¶¶ 6-8.
356 FoF ¶ 98.
357 See Trustee’s Post-Trial Br. ¶ 33.
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In accordance with the foregoing, the Court finds that the Hajdukiewicz Claim will be
allowed in the amount of $994,160. 358
358 The Trustee also argues that LBI exercised its discretion to pay 50% of Mr. Hajdukieiwicz’s 2008 bonus in RSUs
and that 50% of his claim must therefore be subordinated pursuant to section 510(b). For the reasons stated in
Section C.1.i, above (discussing Mr. Chambers’ claim), the Court has found that LBI, or more accurately the LBHI
Compensation Committee, did not exercise its discretion to pay any portion of 2008 bonuses owed to LBI
employees, including Mr. Hajdukiewicz, in RSUs.
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CONCLUSION
For the foregoing reasons, the Objection is GRANTED in part and DENIED in part. The
Claims shall be resolved as follows:
 	The Hoffman Claim shall be allowed in the amount of $7,712,500, of which $10,950
shall be allowed as a section 507(a)(4) priority claim, with the remainder allowed as a
general unsecured claim;
 	The Chambers Claim shall be allowed in the amount of $40,740,922.69, of which
$10,950 shall be allowed as a section 507(a)(4) priority claim, with the remainder
allowed as a general unsecured claim;
 	The Judkins Claim shall be disallowed in its entirety and expunged from the claims
register; and
 	The Hajdukiewicz Claim shall be allowed in the amount of $994,160, of which $10,950
shall be allowed as a section 507(a)(4) priority claim, with the remainder allowed as a
general unsecured claim.
The parties are directed to submit an order consistent with this decision.
Dated: October 8, 2015
New York, New York
/S/ Shelley C. Chapman
UNITED STATES BANKRUPTCY JUDGE
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