In Re: Lehman Brothers Holdings Inc.

Filing 14

MEMORANDUM OPINION: For the foregoing reasons, the bankruptcy court's summary judgment for the Trustee is AFFIRMED. The Clerk of the Court is respectfully directed to terminate the case. (Signed by Judge Valerie E. Caproni on 1/20/2015) (mro)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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In the Matter of
:
:
:
Lehman Brothers Holdings Inc.
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:
MARY ANNETTE ORTEGÓN,
:
Appellant,
:
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-against:
:
JAMES W. GIDDENS, as Trustee for the SIPA
:
Liquidation of Lehman Brothers Inc.,
:
Appellee.
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USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #:
DATE FILED: 1/20/2015

14-CV-8680 (VEC)
MEMORANDUM
OPINION

VALERIE CAPRONI, United States 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her a job offer, which she accepted, but before her first day of work, LBI rescinded Ortegón’s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reasons that because LBI did not terminate her for cause (it rescinded her offer before she ever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.
BACKGROUND
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.

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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

“In 2008, Ortegon filed a charge of retaliation with the EEOC against LBI based on her suspicions.” JA
47. This retaliation claim is not before the Court.

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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.
DISCUSSION
“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 as a matter of law.”). In this case, the bankruptcy court
made a small number of factual findings (e.g., “[Ortegón] never worked for LBI,” JA 479)
regarding uncontested matters and otherwise made only legal conclusions.
Summary judgment is appropriate when “the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.
R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). “‘Where the
record taken as a whole could not lead a rational trier of fact to find for the nonmoving party,
there is no genuine issue for trial.’” Scott v. Harris, 550 U.S. 372, 380 (2007) (quoting
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986)) (internal
quotation marks omitted). In reviewing grants of summary judgment, courts “‘construe the facts
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in the light most favorable to the non-moving party and resolve all ambiguities and draw all
reasonable inferences against the movant.’” Delaney v. Bank of Am. Corp., 766 F.3d 163, 167
(2d Cir. 2014) (per curiam) (quoting Aulicino v. N.Y.C. Dep’t of Homeless Servs., 580 F.3d 73,
79-80 (2d Cir. 2009)) (alteration omitted).
Ortegón alleges that the January 12, 2007, offer letter from LBI, which was executed by
both parties, constituted a binding contract. This is more or less consistent with the holding of
the bankruptcy court, which treated the offer letter as a binding contract that LBI chose to
rescind before Ortegón began to work for LBI. JA 488. Assuming arguendo that there was a
contract between LBI and Ortegón, Ortegón has not demonstrated that there is a genuine dispute
of any material facts that should foreclose summary judgment.
On an intuitive level, Ortegón did not work for LBI and is therefore not entitled to a
performance bonus. While Ortegón insists that she was an LBI “employee” in some sense, this
dispute is academic; it is clear that she did not do a single minute of work for LBI, which is why
she did not receive a single penny of salary.2 Ortegón claims that the only reason that she did not
perform under the contract – the reason that she did not work for LBI – is because LBI told her
not to. She asserts that LBI could not unilaterally terminate its responsibility to pay her a
$350,000 bonus by unilaterally terminating her employment contract prior to performance. This
argument is a red herring. Under some circumstances, “a party cannot insist upon a condition

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Even if there were some legal significance that attached to the question of whether she was ever an LBI
employee, the Court is not persuaded that Ortegón has shown the existence of an issue of fact. Ortegón relies
heavily on the fact that LBI reported her to FINRA as an employee (beginning and ending on January 17, 2007,
which was neither the date that she signed her contract nor a date that she reported to work for LBI), JA 322, but that
filing is entirely consistent with an automated notification sent whenever someone is programmed into an H.R.
system. On the other hand, Ortegón’s offer letter conclusively establishes the parties’ expectation that her
employment did not begin with the signing of the contract but “[would] begin on or about January 18, 2007,” her
anticipated start date. JA 58. There is no dispute that LBI postponed that date so that LBI officials could speak with
Ortegón regarding her participation in the EMBA program, JA 71, 122; ultimately the day that Ortegón’s
employment would begin never came to pass. Ortegón has not adduced evidence (or even alleged that evidence
exists) that would alter this analysis.

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precedent, when its non-performance has been caused by himself.” Amies v. Wesnofske, 255
N.Y. 156, 162-63 (1931); see also Eastman Kodak Co. v. Altek Corp., 936 F. Supp. 2d 342, 348
(S.D.N.Y. 2013). But in Amies, the defendants had agreed to pay a commission on the closing of
a real estate transaction to a broker, who performed all services that it was to perform under the
contract. 255 N.Y. at 159-60. Ortegón performed none of the work for which she was slated to
receive a $350,000 bonus. Had Ortegón worked at LBI, this case would be different. In such
cases, regardless of an employee’s at-will status and regardless of her employment status at the
time that bonuses were paid, New York courts have required employers to honor their
contractual obligation to pay employees’ bonuses. See Ryan v. Kellogg Partners Inst. Servs., 19
N.Y.3d 1, 14-15 (2012); see also Arakelian v. Omnicare, Inc., 735 F. Supp. 2d 22, 32 (S.D.N.Y.
2010). But in Ryan, Arakelian, and the cases on which they relied – as in Amies – the party
seeking to enforce the contract had expended the effort contemplated under the contract. In this
case, the contract was withdrawn prior to any performance by Ortegón.
To understand the flaws in Ortegón’s claim, it is worth noting what she is not alleging.
The bankruptcy court emphasized that Ortegón did not sue for wrongful rescission of her
contract. JA 484. She also did not sue for promissory estoppel (or allege any damages from
reliance on the offer).3 Ortegón only alleges that LBI breached her contract. Moreover, Ortegón
does not allege that LBI breached her contract by terminating her (or by withdrawing her offer),
which was well within LBI’s rights because Ortegón was an at-will employee. JA 59, Sabetay v.
Sterling Drug, Inc., 69 N.Y.2d 329, 336 (1987); Mayer v. Publishers Clearing House, 205
A.D.2d 506, 506 (2d Dep’t 1994). Finally, Ortegón does not allege that she is owed salary from

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Other quasi-contract theories, such as unjust enrichment and quantum meruit, are not appropriate vehicles
for this lawsuit because LBI was in no way “enriched” by Ortegón. See Schatzki v. Weiser Capital Mgmt., LLC, 995
F. Supp. 2d 251, 252-53 (S.D.N.Y. 2014).

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LBI, presumably because such a claim would be nonsensical in light of the fact that she never
worked at LBI.
Ortegón’s claim is solely that LBI breached her contract by failing to pay her a bonus.
This claim therefore hinges entirely on the nature of the bonus – if it was discretionary,
compensatory, or contingent on Ortegón’s remaining an LBI employee throughout the bonus
period, then LBI was within its rights in not paying her the bonus. See, e.g., Truelove v. Ne.
Capital & Advisory, Inc., 95 N.Y.2d 220, 225 (2000) (rejecting plaintiff’s claim for a bonus from
former employer when bonus was contingent on continued employment status); Bellinson Law,
LLC v. Iannucci, 116 A.D.3d 401, 402 (1st Dep’t 2014) (it is logically inconsistent to find that
plaintiff did not perform under the contract but is entitled to reimbursement thereunder); Kaplan
v. Capital Co. of Am. LLC, 298 A.D.2d 110, 111 (1st Dep’t 2002) (there is no contractual right to
discretionary bonuses). If the bonus were akin to a signing bonus, on the other hand, then
summary judgment would be inappropriate. See Wallace v. BMO Nesbitt Burns Corp., No. 01CV-7998(JGK), 2002 WL 32063120, at *4 (S.D.N.Y. Nov. 25, 2002) (“It is still possible the
plaintiff would be entitled to the ‘sign-on bonus’ whether or not [s]he was entitled to yearly
compensation.”).
To determine the nature of Ortegón’s bonus, the obvious beginning point is the language
of the offer letter itself. The letter introduces the bonus by asserting that “[f]or the performance
year 2007 . . . your compensation will be as follows,” and then states the salary and the bonus.
JA 58. This sentence immediately introduces the idea that the bonus is “compensation” linked to
“performance.” This theme is reemphasized in a subsequent paragraph describing Ortegón’s
“total compensation” as “combined base salary, bonus, and other compensation.” Id. Once
again, the language of the offer letter contemplates that the bonus will be part of what Ortegón
would receive as “compensation” linked to her work at LBI – work that never transpired.
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Ortegón does not identify any language suggesting that her bonus is more appropriately
viewed as a signing bonus – language, for example, indicating that the bonus would be payable
within a short period of time from her start date, cf. Wallace, 2002 WL 32063120, at *6 (30
days); Lewis v. Rahman, 147 F. Supp. 2d 225, 232 (S.D.N.Y. 2001) (on signing the contract);
Ross Stores, Inc. v. Lincks, No. 13-CV-1876(SAS), 2013 WL 5629646, at *1 (S.D.N.Y. Oct. 4,
2013) (less than 30 days); Matter of Clark v. N.Y. State Tax Comm’n, 86 A.D.2d 691, 691 (3d
Dep’t 1982) (“upon execution of the contract”); see also Dailey v. Societe Generale, 889 F.
Supp. 108, 110 (S.D.N.Y. 1995) (distinguishing between “sign-on bonus” and “performance
bonus,” which was paid after one year of performance); or would be a one-time employment
event, see Rojo v. Deutsche Bank, No. 06-CV-13574(HB), 2010 WL 2560077, at *2 (S.D.N.Y.
June 23, 2010) (distinguishing between one-time “sign-on” bonus and recurring compensatory
bonus); Brown v. Pension Bds., 488 F. Supp. 2d 395, 400 (S.D.N.Y. 2007) (signing bonus is a
“one-time” event); see also JA 58 (referring to “the time the Firm pays its annual 2007 bonus
distributions” and contemplating “future year’s total compensation” as including the next annual
bonus). Instead, Ortegón points to language purportedly limiting the occasions on which LBI
could decline to pay her bonus to a set number of circumstances, none of which (she alleges)
occurred. The offer 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.

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JA 58. This language does not undermine the clear meaning of the text, which is that the bonus
was compensation for work performed and not a signing bonus payable as long as Ortegón made
it far enough along in the human resources process to be deemed an “employee.” Notably, the
final sentence, tying the bonus to the amount of time that Ortegón actually worked for LBI in a
given year, further underscores the compensatory nature of the bonus; the bonus could be
reduced to reflect the amount of time that Ortegón actually worked for LBI, which in this case
was zero.
The list of reasons for a possible termination in the offer letter constitute reasons why
Ortegón might receive no bonus despite having done some work – and therefore having arguably
“earned” some part of the bonus. But they do not transmute what is otherwise clearly a
performance bonus into a signing bonus, payable despite the absence of work for which Ortegón
could be compensated.4
CONCLUSION
For the foregoing reasons, the bankruptcy court’s summary judgment for the Trustee is
AFFIRMED. The Clerk of the Court is respectfully directed to terminate the case.
SO ORDERED.
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VALERIE CAPRONI
I
United States District Judge

Date: January 20, 2015
New York, New York

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Because summary judgment is appropriate on this ground, the Court declines to discuss other equally
fruitful grounds including, for example, whether Ortegón “satisfactorily [met] all pre-employment requirements.”
JA 159. The Court does note that the offer letter is crystal clear that “[a]t the Firm’s discretion” any “portion of
[Ortegón’s] 2007 and future years’ total compensation [including] bonus[] and other compensation[] will be payable
in conditional equity awards,” which are now close to valueless. JA 58, 478.

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