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In re Lehman Brothers Holdings Inc.

United States District Court, S.D. New York

January 20, 2015

In the Matter of Lehman Brothers Holdings Inc. MARY ANNETTE ORTEGÓN, Appellant,
JAMES W. GIDDENS, as Trustee for the SIPA Liquidation of Lehman Brothers Inc., Appellee.


VALERIE CAPRONI, District Judge.

Mary Annette Ortegón never worked a day at Lehman Brothers Inc. ("LBI"). LBI made her a job offer, which she accepted, but before her first day of work, LBI rescinded Ortegón's offer. Although the Court can certainly understand how disappointed she must be, the remedy she seeks in this case - payment of the $350, 000 annual performance bonus that she would have been entitled to as an LBI employee - is not available to assuage her disappointment. Ortegón reasons that because LBI did not terminate her for cause (it rescinded her offer before she ever began to work), its decision to renege on her executed employment contract did not void LBI's contractual obligation to pay her a bonus. Giddens, as Trustee for LBI's liquidation, denied her claim, and Bankruptcy Judge Shelley Chapman awarded summary judgment for the Trustee. For the following reasons, the Court AFFIRMS the Bankruptcy Court's summary judgment for the Trustee.


A small number of undisputed facts suffice to resolve this breach-of-contract dispute. After a month-long interview process, LBI sent Ortegón an offer letter, proposing to hire her as a Business Chief Administrative Officer in its Fixed Income Division. JA 58. The letter, dated January 12, 2007, averred that LBI "expect[ed Ortegón's] employment to begin on or about January 18, 2007." Id. LBI offered Ortegón a "[b]i-weekly base salary of $5, 769.23, which is the equivalent of $150, 000 per year" and "[a] minimum bonus in the amount of $350, 000, less applicable deductions, payable at the time the Firm pays its annual 2007 bonus distribution (on or about January 31, 2008)." Id. Immediately thereafter the letter provided:

The foregoing salary will be paid for all periods of your active employment with the Firm in performance year 2007. The bonus amount set forth above will be paid at the time and in the amount stated except that it will not be payable if you have failed to obtain and/or maintain in good standing all applicable licenses and registrations or if, before the date of scheduled payment, you have resigned or have been terminated from the Firm because of misconduct, breach of Firm policies or rules, dishonesty, violation of laws or regulations, or substantial and continuing failure to perform employment duties or obligations satisfactorily. The bonus amount set forth above may be reduced in the event of an approved leave of absence during the applicable performance year.

Id. The letter also indicated that LBI could, in its discretion, pay an unspecified portion of Ortegón's bonus "in conditional equity awards." Id. Finally, LBI clarified that the letter was an offer of at-will employment:

[T]his letter is not a contract of continuing employment. Your employment by the Firm is for no fixed term, and either you or the Firm may terminate the employment relationship at any time for any reason, subject to any applicable notice requirement. Currently, the Firm's notice policy... provides for 30 days' advance notice by the Firm to its officers in the event of an involuntary termination under certain circumstances.... [T]his offer of employment is conditional upon the successful completion of a background investigation, including reference, credit, criminal and other checks, as well as on your satisfactorily meeting all preemployment requirements, including passing a pre-employment drug screen and producing documentation to have and maintain in good standing all applicable licenses and registrations.

JA 59.

After oral argument, the bankruptcy court held that the offer letter unambiguously imposed as a prerequisite for the bonus that Ortegón actually work for LBI. JA 488. Accordingly, without making any factual findings, the bankruptcy court found that the Trustee was entitled to judgment and denied Ortegón's claim. Id.

The parties nevertheless discuss their views of additional facts that lend color to the dispute. Most contentious is the dispute over the basis for LBI's decision to rescind Ortegón's offer - LBI told Ortegón at the time, and still maintains, that it reached this decision as a result of Ortegón's planned participation in an Executive MBA ("EMBA") program, which "would require her to be out of the office 2 days/month for the foreseeable future, " including her entire second week at LBI. JA 167. Ortegón maintains that she told LBI about her participation in the prestigious EMBA program early and often, including by mentioning it on her resume, JA 297, and that she offered not to participate in the program if it would pose an obstacle to her employment, JA 76. She avers that LBI's assertion that this was the basis for the rescission was pretext - Ortegón believes that she was terminated because LBI discovered that she had filed complaints of gender discrimination against two prior employers with the Equal Employment Opportunity Commission ("EEOC").[1] JA 124-25.

Both parties agree that after a January 18, 2007, meeting between Ortegón and several senior LBI officers, LBI rescinded Ortegón's offer of employment. Based on eccentricities with its human resources software, LBI could not reflect Ortegón as "un-hired, " but rather had to "term[inate] her in the system." JA 303-05. The Financial Industry Regulatory Authority ("FINRA") listed Ortegón as an employee of LBI beginning and ending on January 17, 2007. JA 315-16.

Ortegón filed a claim with LBI's Trustee, who contested her claim. The bankruptcy court granted summary judgment to the Trustee after oral argument, finding that LBI had rescinded the contract between the parties. JA 484. Noting that Ortegón had not brought a cause of action for wrongful rescission, the court emphasized its finding that Ortegón "never performed any work" and was therefore not entitled to a bonus that "was proposed compensation for work that would be performed." JA 488.


"A district court reviews a bankruptcy court's findings of fact for clear error and its conclusions of law de novo." Thakur v. S.J.P.B., Inc. (In re Thakur), 498 B.R. 410, 418-19 (S.D.N.Y. 2013) (citing Overbaugh v. Household Bank, N.A. (In re Overbaugh), 559 F.3d 125, 129 (2d Cir. 2009), and Fed.R.Bankr.P. 8013). "[O]n an appeal specifically from a bankruptcy court's summary judgment order, the standard of review is de novo, and the district court draws all factual inferences in favor of the non-moving party." Hanover Direct, Inc. v. T.R. Acquisition Corp. (In re T.R. Acquisition Corp.), 309 B.R. 830, 835 (S.D.N.Y. 2003) (Lynch, J.)); accord Beier v. Beier, No. 94-CV-2677(SS), 1995 WL 60026, at *2 (S.D.N.Y. Feb. 14, 1995) ("A reviewing court conducts a de novo review to determine whether a genuine issue of material fact exists that should preclude judgment ...

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