By Jonathan Stempel
NEW YORK (Reuters) - A former star Lehman Brothers Holdings Inc [LEHMB.UL] trader can try to recoup only about $7.7 million of an $83 million bonus he claimed to be owed after the investment bank collapsed in 2008, a federal appeals court ruled on Thursday.
The 2nd U.S. Circuit Court of Appeals in Manhattan upheld rulings by two lower court judges that Jonathan Hoffman was not entitled to the entire bonus for 2007 and 2008, on top of another $83 million he was paid by Barclays (LON:BARC) Plc, which bought much of Lehman's North American banking business.
One of the judges, U.S. District Judge Lorna Schofield, had ruled last July that while the former Lehman managing director had been "extremely successful" trading interest rate products, "he negotiated for and received everything he was owed," and receiving the full bonus would be a "windfall."
The three-judge appeals court panel nonetheless rejected a claim by the bankruptcy trustee for the Lehman Brothers Inc brokerage that allowing Hoffman's claim for a $7.7 million bonus for 2007 would be inequitable given how much Barclays paid him.
"Hoffman's employment agreement with Barclays required him to generate substantial profits for Barclays before earning the full amount promised under that agreement," the panel said.
"We therefore find nothing inequitable about allowing him to pursue his liquidated and unpaid 2007 bonus claim against LBI in bankruptcy," it added.
A lawyer for Hoffman, Douglas Baumstein, said in an email that he was pleased that his client's claim was "partially vindicated," calling the decision "a compromise position and an improvement from the district court's prior ruling."
The Lehman trustee, James Giddens, said in a statement he was pleased that "the most significant portion of this attempted double recovery from the LBI estate has been denied," an outcome that "supports fairness to all customers and creditors."
Hoffman had sought payments through his company 1EE LLC, after claiming to have generated more than $765 million of profit for Lehman in 2007 and 2008, court papers show.
Barclays later paid him another $100 million for his trading performance there from 2008 to 2010, the appeals court said.
Lehman's Sept. 15, 2008 bankruptcy remains the biggest in U.S. history and helped trigger a global financial crisis.
The case is 1EE LLC v Giddens, 2nd U.S. Circuit Court of Appeals, No. 16-2737.