It is not uncommon for corporate employers to compensate their high-ranking employees not only with cash, but also with equity in the corporation. Such arrangements align the employees’ financial incentives with, those of the company: If the company succeeds financially, so too do its stake-holding employees; but if the company falters—even to and beyond the point of bankruptcy—its employees bear some of the loss. Prior to its bankruptcy filing, Lehman Brothers Holdings Inc. (“Lehman Brothers”) adopted this approach, compensating many of its employees in part with restricted stock units (“RSUs”), which gave them a contingent right to own Lehman Brothers common stock at the conclusion of a five-year holding period. The holder of an RSU had risk and return expectations similar to those of a shareholder; he or she would ultimately benefit from any increase in the stock price or suffer from any decline.
When Lehman Brothers filed for Chapter 11 bankruptcy on September 15, 2008—the largest bankruptcy filing in United States history
We note at the outset that we need not determine whether an RSU is an “equity security” pursuant to 11 U.S.C. § 101(16), because, even if it is, RSU holders are not barred from asserting proofs of claim— such as the breach-of-contract claims asserted here—inasmuch as at least some of their claims are not duplicative of proofs of interest. We conclude, however, that Lehman Brothers’ omnibus objections must nonetheless be sustained on the alternative ground that, pursuant to section 510(b), the claims must be subordinated to the claims of general creditors because, for purpose of this statute, (1) RSUs are securities, (2) the claimants acquired them in a purchase, and (3) the claims for damages arise from those purchases or the asserted rescissions thereof.
BACKGROUND
Lehman Brothers paid many of its employees a portion of their compensation in RSUs,
The Program
The RSUs were awarded in accordance with Lehman Brothers’ Equity Award Program (the “Program”), which was administered by Lehman Brothers’ Board of Directors’ Compensation and Benefits Committee (the “Committee”). The Program’s purpose was to give Lehman Brothers’ employees (1) a financial stake in the company that aligned their interests with those of the company, and (2) a financial incentive to remain with the company until the RSUs matured.
In accordance with those goals, the Program gave Lehman Brothers discretion to pay some of its employees a portion of their compensation in equity-based awards, including RSUs.
The Program was governed by the terms of various documents, including the Employee Incentive Plan (the “Plan”). Section 8(b) of the Plan provides in pertinent part that Lehman Brothers’ RSU obligation is limited to delivery of the stock, •and does not include payment of cash:
With respect to any [RSUs] granted under the Plan, the obligations of the Company or any Subsidiary are limited solely to the delivery of shares of Common Stock on the date when such shares of Common Stock are due to be delivered under each Agreement, and in no event shall the Company or any Subsidiary become obligated to pay cash in respect of such obligation (except that the Company or any Subsidiary may pay to [Plan] Participants amounts in cash in respect of a restricted stock unit equal to cash dividends paid to a holder of shares of Common Stock, for fractional shares or for any amounts payable in cash upon the occurrence of a Change in Control).
Id. at 2890. Section 13(b) further provides that “[t]he grant of an Award shall not be construed as giving a Participant the rights of a stockholder of Common Stock unless and until shares of Common Stock have been issued to Participants pursuant to Awards hereunder.” Id. Section 16 provides additional information about the rights of Plan participants, and authorizes the creation of trusts to meet Plan obligations:
With respect to any payments not yet made to a Participant, ... nothing herein contained shall give any Participant any rights that are greater than those of a general creditor of the Company. In its sole discretion, the Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver Common Stock or payments in lieu thereof. .'..
Id. at 2891.
During the five-year holding period, the common stock was held in a trust, established and governed by a Trust Agreement, which provides that the “assets[,] including [s]hares, that shall be held therein” are “subject to the claims of the Company’s general creditors in the event the Company becomes insolvent ... until paid to Participants ... in such manner and at such times as the Company may specify to fulfill [its] obligations under the Plans.” Id. at 1835. Section 1(e) of the Trust Agreement subjects the trust assets to claims of general creditors:
The principal of the Trust, and any earnings thereon, .,. shall be used exclusively for the uses and purposes of Participants and general creditors as herein set forth. Participants shall have no preferred claim on, or any beneficial ownership interest in, any assets of the Trust. Any rights created under the Plans and this Agreement shall be mere unsecured contractual rights of Participants against the Company. Any assets held by the Trust will be subject to the claims of the Company’s general creditors under federal ¿nd state law in the event the Company becomes insolvent. ...
Id. at 1836. Section 3(b) reiterates that, “[a]t all times during the continuance of this Trust, ... the principal and income of the Trust shall be subject to claims of general creditors of the Company under federal and state law” in accordance with the provisions of the Trust Agreement. Id. at 1838.
Program documents for the years 2003 and 2004 (but not after) included provisions (“Subordination Provisions”) explicit
Employees received annual notice of the Program’s terms by way of information packets containing a summary of the Program’s material terms and a Program brochure.
Although common stock was not issued until the completion of a five-year period,
The Dispute
When Lehman Brothers filed for Chapter 11 bankruptcy on September 15, 2008, thousands of Lehman Brothers employees were holding RSUs that had not yet vested, having been granted for services performed between 2003 and 2008. Many RSU holders filed proofs of claim in the bankruptcy proceeding seeking cash payments equivalent to the amounts previously paid to them in RSUs. In response, Lehman Brothers filed fourteen omnibus objections seeking to reclassify over 3,000 RSU-based claims as equity interests and to subordinate them to the claims of general creditors. Most of the claimants did not oppose Lehman Brothers’ objections, and accordingly, the United States Bankruptcy Court for the Southern District of New York reclassified their claims as equity.
But 222 of the claimants opposed the objections. The bankruptcy court therefore held a hearing on December 21, 2011, where it indicated that it would follow the reasoning of In re Enron Corp., 341 B.R. 141 (Bankr. S.D.N.Y. 2006), which held “that claims for damages that arise from the ownership of employee stock options ... should be subordinated [to the claims of general creditors] pursuant to section 510(b),” id. at 144, unless the claimants could establish that their RSUs were meaningfully different from the stock options at issue in Enron. The bankruptcy court directed the parties to develop a factual record in this regard. And in April 2014, at the conclusion of more than a year of discovery, the bankruptcy court conducted a three-day evidentiary hearing at which it heard live testimony from six
On November 3, 2014, the bankruptcy court (Shelley C. Chapman, Judge)
Thereafter, some of the claimants appealed the bankruptcy court’s decision to the United States District Court for the Southern District of New York. And on March 30, 2016, the district court issued an opinion and order affirming the bankruptcy court’s decision on both grounds. In re Lehman Bros. Holdings Inc., 548 B.R. 663, 671, 673 (S.D.N.Y. 2016).
Three sets of claimants, representing a portion of the remaining claimants and each represented by different counsel, appealed from the judgment of the district court: (1) the Adler Claimants,
The bankruptcy and district courts addressed the subordination issue before considering whether the claims at issue here are disallowed because the claimants are equity security holders. We address these two issues in the reverse order because we think it more appropriate to determine whether the asserted claims are disallowed full stop, before considering whether they must be subordinated; an affirmative answer to the first question could preclude the need to answer the second. We conclude, however, that the claims at issue are not categorically disallowed because at least some of the claims are distinct from any equity security interests the claimants may otherwise hold, but that the claims must nonetheless be subordinated pursuant to section 510(b).
I. Standard of Review
‘We exercise plenary review over a district court’s affirmance of a bankruptcy court’s decision, reviewing de novo the bankruptcy court’s conclusion of law, and reviewing its findings of fact for clear error.” ANZ Sec., Inc. v. Giddens (In re Lehman Bros. Inc.), 808 F.3d 942, 946 (2d Cir. 2015) (internal quotation marks omitted).
II. Permissibility of the Claims
A debtor in bankruptcy may file an “omnibus objection” to purported claims on the ground they are “interests, rather than claims.” Fed R. Bankr. P. 3007(d)(7). The Bankruptcy Code defines a “claim” as a “right to payment ... or ... an equitable remedy,” 11 U.S.C. § 101(5), whereas an “equity security” is, as relevant here, a “share in a corporation, whether or not transferrable or denominated ‘stock,’ or similar security,” or a “warrant or right, other than a right to convert, to purchase, sell, or subscribe to [such an interest],” id. § 101(16)(A), (C). Those with “claims” against a debtor are “creditors,” id. § 101(10), and those with “equity securities” of the debtor are “equity security holders,” id. § 101 (17). Thus, an interest in an equity security is distinct from a claim to a right to payment or an equitable remedy. See In re Pine Lake Vill. Apartment Co., 21 B.R. 478, 480 (Bankr. S.D.N.Y. 1982) (distinguishing an interest in an equity security from “a claim against the debtor for which the equity holder may assert a right to payment”).
But under some circumstances, an equity security holder may assert both an interest and a claim relating to that interest. See 2 Collier on Bankruptcy ¶ 101.16 (Alan N. Resnick & Henry J. Sommer eds., 16 ed.) (explaining that “the holder of an equity security may also hold a claim that relates to or arises out of an equity security”). If an equity security holder, “out of confusion,” “file[s] [a] proof[] of claim”—instead of a proof of interest—the claim is “properly disallowed” as “duplicative” of a proof of interest. USA Capital Realty Advisors, LLC v. USA Capital Diversified Trust Deed Fund, LLC (In re USA Commercial
Here, the bankruptcy court determined that an RSU constitutes an “equity security” pursuant to section 101(16); on this basis alone, it held that the claimants’ proofs of claim must be disallowed. See Lehman Bros., 519 B.R. at 65-67 (“[T]he [claimants] assert an interest based on equity securities, and, accordingly do not assert a ‘claim’ at all under the Bankruptcy Code.”). This reasoning skips a step: Even assuming that RSU holders do have the right to assert proofs of interest insofar as RSUs constitute equity securities, it does not necessarily follow that the proofs of claim asserted by the claimants must be disallowed. They might be allowed if they are not duplicative of an asserted interest in an equity security. See USA Commercial Mortg., 377 B.R. at 615. And in our view, at least some of the breach-of-contract claims at issue here fall into this category.
The claimants assert, for example, that Lehman Brothers breached its contractual obligation to compensate them insofar as it did not pay them the cash value of the RSUs that never vested. This breach-of-contract claim, whatever its merits, is analytically distinct from any equity interest the claimants may or may not have in the RSUs. Thus, we need not resolve whether an RSU is an “equity security” pursuant to section 101(16) because, regardless of how we answer that question, the claimants are permitted to bring at least some of the claims at issue here.
III. Subordination of Claims
Although equity security holders may assert claims related to, but distinct from, their equity security interests, such claims are not necessarily on a par with other claims against the debtor. They must be subordinated if they are governed by section 610(b), which provides:
For the purpose of distribution under this title, a claim arising from rescission of a purchase or sale of a security of the debtor or of an affiliate of the debtor, [or] for damages arising from the purchase or sale of such a security, ... shall be subordinated to all claims or interests that are senior to or equal the claim or interest represented by such security, except that if such security is common stock, such claim has the same priority as common stock.
11 U.S.C. § 510(b).
Section 510(b) safeguards the absolute priority rule, a bedrock principle of bankruptcy law, under which creditors are entitled to be paid ahead of shareholders in the distribution of corporate assets. See Motorola, Inc. v. Official Comm. of Unsecured Creditors and JPMorgan Chase Bank, N.A. (In re Iridium Operating LLC), 478 F.3d 452, 463 (2d Cir. 2007) (explaining that, under the absolute priority rule, “any plan of reorganization in which stockholders are preferred before the creditor is invalid” (internal quotation marks and brackets omitted)); Elizabeth Warren, Bankruptcy Policy, 54 U. Chi. L. Rev. 775, 793 (1987) (explaining that “[t]he [Bankruptcy] Code provides that the equity owners participate in distributions or maintain ownership interests following reorganization only if the creditors have been paid in full or ... consent to their continued ownership^]” in accordance with
To that end, we construe section 510(b) broadly. See Rombro v. Dufrayne (In re Med Diversified, Inc.), 461 F.3d 251, 255-59 (2d Cir. 2006). We do so in light of the statute’s legislative history, specifically the House Report on the 1978 Bankruptcy Reform Act, H. Rep. No. 95-595, Bankruptcy Reform Act of 1978 (1977) (“House Report”), which, in adopting the language contained in the Act, relied on an article by John J. Slain and Homer Krip-ke, The Interface Between Securities Regulation and Bankruptcy—Allocating the Risk of Illegal Securities Issuance Between Securityholders and the Issuer’s Creditors, 48 N.Y.U. L. Rev. 261 (1973) (“Slain and Kripke”).
In Med Diversified, we also cited with approval In re Enron Corp., 341 B.R. 141 (Bankr. S.D.N.Y. 2006), a thorough and well-reasoned bankruptcy court decision applying section 510(b) to fraud and
In light of the analysis set forth in Med Diversified and Enron, the claims at issue here must be subordinated pursuant to section 510(b) if each of the following three conditions is met: (1) RSUs are securities, (2) the claimants acquired them in a purchase, and (3) the claims for damages arise from that purchase or the asserted rescission of it. We address each in turn, and ultimately conclude that subordination is appropriate.
A. RSUs as Securities
At the threshold lies the question whether an RSU of the sort at issue here constitutes a “security,” as that term is defined by the Bankruptcy Code. See 11 U.S.C. § 101(49). We conclude that it does.
Section 101(49) contains two subsections. Subsection (A) enumerates fifteen interests “include[d]” in the definition of a “security”: Fourteen of these are specific examples, see id. § 101(49)(A)(i)-(xiii), (xv);
An argument can be made that an RSU of the sort at issue qualifies as a security pursuant to one of the specific examples enumerated in subsection (A), namely that it is a “certificate of interest or participation in, temporary or interim certificate for, receipt for, or warrant or right to subscribe to or purchase or sell, a security.” 11 U.S.C. § 101(49)(A)(xv); see also id. § 101(49)(A)(ii) (identifying “stock” as a “security”). As the bankruptcy court explained, “a grant of an RSU constitutes a contingent right to participate in, receive [or] purchase [Lehman Brothers] common stock” “once certain employment-related conditions have been satisfied.” Lehman Bros., 519 B.R. at 60 (citing various Program documents). But even assuming that the claimants’ RSUs do not fall squarely within subsection (A)(xv)
We reach this conclusion on the ground that, in certain important respects, the
Several courts have similarly defined “security” in section 510(b) in terms of an interest tied to a firm’s overall success. See, e.g., KIT digital, Inc. v. Invigor Grp. Lid. (In re KIT digital, Inc.), 497 B.R. 170, 183 (Bankr. S.D.N.Y. 2013) (treating a debtor’s obligation to pay stock to a claimant as a security under section 510(b) because, “by agreeing to accept stock instead of cash[,] ... [the claimant] subjected itself to the greater risk that the price of the stock it would then receive might go down” while ensuring that it “would get the benefits if the price of the stock went up”); In re Club Ventures Inv. LLC, No. 11-10891 (ALG), 2012 WL 6139082, at *5, 2012 Bankr. LEXIS 5742 (Bankr. S.D.N.Y. Dec. 11, 2012) (holding that unissued membership units representing a future interest in an LLC after certain conditions were met constituted “securities” subject to section 510(b) because the units “would have given [the claimant] certain rights to share in the [debtor’s profits[ ] and ... the risk and reward expectations of an equity holder”); Aristeia Capital, L.L.C. v. Calpine Corp. (In re Calpine Corp.), No. 05-60200 (BRL), 2007 WL 4326738, at *13, 2007 U.S. Dist. LEXIS 86514 (Bankr. S.D.N.Y. Nov. 21, 2007) (“The value of the [convertible notes] var[ies] with the value of the common stock of [the debtor], and therefore resemble[s] an equity interest to which [s]ection 510(b) is applicable.”).
B. Purchase of Security
We must next decide whether the claimants received the RSUs through a “purchase or sale.” 11 U.S.C. § 510(b). We think they did insofar as Lehman Brothers awarded the claimants the RSUs as compensation for their labor.
The term “purchase” in section 510(b) is properly construed broadly to include circumstances where a claimant has received equity securities in exchange for labor. See Enron, 341 B.R. at 151 (“While it is true that the [claimants did not purchase the stock options on the open market, they nonetheless exchanged value for the options: here, their labor. Such exchange falls under a broad reading of the term ‘purchase.’”); see also Med Diversified, 461 F.3d at 258 (noting that the rationale for mandatory subordination “applies even if there is no actual sale or purchase” of securities (internal quotation marks omitted)); Liquidating Trust v. Wax (In re U.S. Wireless Corp.), 384 B.R. 713, 719 (Bankr. D. Del. 2008) (“[T]he Equity Package [the claimant] received as a portion of his compensation, i.e., in exchange for his labor, constitutes a purchase and sale of a security for the purpose of section 510(b).”); In re Touch Am. Holdings, Inc., 381 B.R. 95, 104 (Bankr. D. Del. 2008) (broadly interpreting “purchase” and noting that “[s]tock given to an employee as compensation nonetheless involves a bargain and exchange of value” (internal quotation marks omitted)).
In arguing otherwise, the claimants point to International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America v. Daniel, 439 U.S. 551, 99 S.Ct. 790, 58 L.Ed.2d 808 (1979), in which the Supreme Court held that participation in a compulsory and noncontributory pension plan does not constitute an investment decision within the meaning of the Securities Act or the Securities Exchange Act, id. at 559-60, 99 S.Ct. 790. Other courts, also in the context of federal securities law, have extended Daniel to compulsory and involuntary employee stock option plans. See, e.g., McLaughlin v. Cendant Corp. (In re Cendant Corp. Sec. Litig.), 76 F.Supp.2d 539, 545 (D.N.J. 1999) (holding that the “[p]laintiff did not receive her options as part of a bargained-for exchange that required her to make an affirmative investment decision” where her “participation in the option plan was an incident of employment and [her] only [other] choice would have been to [forgo] the receipt of benefits entirely” (internal quotation marks omitted) (second brackets in original)).
Here, however, Daniel is a glove that does not fit. It focused on whether employees made an investment decision that could be influenced by fraud or manipulation; the present case poses the distinct question whether equity was purchased through labor for purposes of subordination in bankruptcy. No case has been cited by the parties—nor have we found one—in which a court has applied the Daniel principle to section 510(b). And the claimants fail to make a compelling argument why the holding of Daniel should be extended beyond the context of federal securities laws so as to contravene the lesson of Med Diversified and Enron: Section 510(b) should be broadly construed in light of its purpose, see Med Diversified, 461 F.3d at 255-59, to include circumstances where a claimant has received a security in exchange for labor, Enron, 341 B.R. at 150-51.
Nor can the Neuberger Claimants successfully argue economic duress under New York law, a doctrine “reserved for extreme and extraordinary' cases,” VKK Corp. v. NFL, 244 F.3d 114, 123 (2d Cir. 2001), where the party asserting economic duress can show “(1) threats of an unlawful act by one party [that] (2) com-pelí ] performance by the other party of an act [that] it had a legal right to abstain from performing,” Chase Manhattan Bank v. New York, 13 A.D.3d 873, 874, 787 N.Y.S.2d 155, 157 (3d Dep’t 2004). And even in the unlikely event that they could meet these requirements,
Thus, within the meaning of section 510(b), we conclude that all the claimants purchased their RSUs by voluntarily choosing to receive them in exchange for a portion of their labor.
Finally, we must address whether the claims at issue are claims for damages arising from the purchase of a security pursuant to section 510(b). We conclude that they are.
Section 510(b) provides that claims “arising from” a securities transaction must be subordinated. In light of the well-settled principle that this provision is to be interpreted broadly, see Med Diversified, 461 F.3d at 257-58, courts have concluded that section 510(b) covers “a wide variety of causes of action arising out of securities transactions.” 4 Collier on Bankruptcy ¶ 510.04 (collecting cases). A claim (no matter how it is characterized by the claimant) arises from a securities transaction so long as the transaction is part of the causal link leading to the alleged injury. See, e.g., Med Diversified, 461 F.3d at 257-59 (holding that section 510(b) applies to a claim arising from a failed securities transaction even though the claimant never received shares in the debtor); Baroda Hill Invs., Ltd. v. Telegroup, Inc. (In re Telegroup, Inc.), 281 F.3d 133, 143-44 (3d Cir. 2002) (concluding that section 510(b) applied to a claim arising from the debtor’s failure to register shares after the securities transaction had been completed); In re Worldcom, Inc., 329 B.R. 10, 14 (Bankr. S.D.N.Y. 2005) (“So long as the nature of the damage or harm complained of by a shareholder can be said to result as a consequence of his having purchased or sold shares of stock or other securities of the debtor, the claimant falls within the scope of [s]ection 510(b)[.]”); Queen v. Official Comm. of Unsecured Creditors (In re Response U.S.A., Inc.), 288 B.R. 88, 94 (D.N.J. 2003) (concluding that breach-of-contract claims must be' subordinated where “they would not exist but for the [purchase of the security],” despite the claimants’ attempt to characterize themselves as “creditors who seek payment based on a contract”).
We think section 510(b) applies to all claims asserted here—and characterizations thereof—because they would not have arisen but for the claimants’ agreement with Lehman Brothers to receive part of their. compensation in the form of RSUs.
The claimants advance a variety of theories in opposition to this conclusion. We find none of them to be persuasive.
1. Alternative Performance
The claimants first assert that they have .alternative-performance claims against Lehman Brothers to be paid in cash in exchange for their labor because the RSUs they received never vested. These claims, they contend, do not arise from the purchase of a security within the meaning of section 510(b), but are instead general-creditor claims for cash owed in exchange for services rendered.
This theory finds no support in the Program documents under the terms of which Lehman Brothers had the discretion to pay a portion of the claimants’ compensation with RSUs; those documents also make clear that once Lehman Brothers chose to award RSUs in this manner, it had no further obligation to pay cash for that same portion of compensation.
With respect to any [RSUs] granted under the Plan, the obligations of the Company or any Subsidiary are limited solely to the delivery of shares of Common Stock on the date when such shares of Common Stock are due to be delivered under each Agreement, and in no event shall the Company or any Subsidiary become obligated to pay cash in respect of such obligation... ,27
JA at 2890 § 8(b); see also id. at 3505 § 8(b) (same). The Trust Agreement further reflects that RSU holders are distinct from general creditors insofar as the assets held in the trust, including the shares held for RSU holders, are “subject to the claims of the Company’s general creditors in the event the Company becomes insolvent.” Id. at 1835,1838.
The claimants point to the following language of the Plan as evidence that RSU holders are to be treated as general creditors: “With respect to any payments not yet made to a [p]articipant, .... nothing herein contained shall give any [p]artici-pant any rights that are greater than those of a general creditor....” Id. at 2891 § 16. But this provision does not support the claimants’ assertion. Its plain language reflects no more than that the participants’ rights may not be greater than those of general creditors, not that they may not be less than—or subordinate to—the rights of general creditors. The provision, moreover, applies by its own terms only to “any payments not yet made to a participant,” id., which, in light of the other Program documents already described, clearly refers to circumstances where Lehman Brothers has not yet paid its employees— either in cash or in RSUs—for services rendered. The provision does not apply where, as here, Lehman Brothers has already made payments to the claimants for all services rendered, either in the form of cash or RSUs.
In sum, we conclude that the claimants cannot assert claims arising from anything other than the purchase of RSUs because they have already been paid the compensation they were due in the form of RSUs and, as a result, have no right to any other mode of performance. Once they received RSUs, their only right vis-a-vis Lehman Brothers was for the delivery of stock at the conclusion of the five-year holding period, assuming the specified employment-related conditions were met. They therefore cannot avoid subordination of their claims under section 510(b).
Nor can the claimants circumvent section 510(b) by asserting restitution claims. In light of the failure of their alternative-performance theory, their strongest argument for restitution appears to be that: (1) Lehman Brothers, by filing for bankruptcy, repudiated its contractual condition to issue stock to RSU holders (who presumably satisfied their own employment-related conditions); and (2) as a result, RSU holders are entitled to recover in restitution for the reasonable value of the services they rendered to Lehman Brothers. Yet, under Delaware law, which governs the construction of the Program documents, see JA at 68, a breach-of-contract claim requires “damage to the plaintiff’ resulting from the breach, VLIW Tech., L.L.C. v. Hewlett-Packard Co., 840 A.2d 606, 612 (Del. 2003). Although the claimants were theoretically wronged by not receiving the Lehman Brothers shares they were owed, those shares became worthless once Lehman Brothers filed for bankruptcy. They therefore suffered no actual injury because the only thing to which they were contractually entitled— shares of Lehman Brothers common stock—had no value. This defeats their breach-of-contract claim and, thus, their right to restitution.
Finally, the claimants contend that the deletion of the Subordination Provisions in the Program documents evidences the parties’ intention to treat the claimants as general creditors in the event of bankruptcy-
As we have noted, Program documents for 2003 and 2004 included Subordination Provisions explicitly stating that in the event of bankruptcy, claims of RSU holders would be deemed to be claims for damages arising from the purchase or sale of a security pursuant to section 510(b); Program documents for subsequent years, however, did not contain Subordination Provisions. The claimants assert that this history supports a conclusion that (at least after 2004) the parties intended for the claimants to be treated as general creditors. But this assertion rests entirely on speculation. The claimants cite, and we ourselves see, no record evidence establishing the reason for the removal of the Subordination Provisions.
⅜ ⅜ ⅜
In sum, we conclude that the claimant’s’ RSU-based claims—no matter how they are characterized—must be subordinated pursuant to section 510(b) because they arise from the purchase or sale of securities. The claimants “took on the risk and return expectations of ... shareholder^], rather than ... creditor[s],” Med Diversified, 461 F.3d at 256, by agreeing to be paid a portion of their compensation in RSUs. They are thus “bound by the choice [they] made to trade the relative safety of cash compensation for the upside potential of shareholder status,” id., and the risk of loss—even bankruptcy—that accompanies that status.
CONCLUSION
For the foregoing reasons, we AFFIRM the judgment of the district court.
. See ANZ Sec., Inc. v. Giddens (In re Lehman Bros. Inc.), 808 F.3d 942, 944 (2d Cir. 2015) ("On September 15, 2008, Lehman Holdings filed for Chapter II bankruptcy protection— the largest bankruptcy filing in U,S. history.”).
. Lehman Brothers awarded RSUs to United States employees and contingent stock awards to overseas employees. These forms of equity, though different in name, were identical in substance.
. Near the end of each fiscal year, employees received a brochure with a schedule identifying the portion of their compensation they would be paid in RSUs, based on the employee’s corporate title and compensation level.
. Employees were also notified of the Program’s terms via face-to-face communications, conference calls, and e-mail.
. RSU holders did not incur income tax liability on the value of their RSUs until they vested.
. On February 1, 2014, these cases were transferred to Judge Chapman upon Judge Peck’s retirement from the bench. See Lehman Bros., 519 B.R. at 51 n.4.
. The Adler Claimants comprise: Jennifef Adler, Ian Anderson, Jennifer Becker, Craig Benson, Paola Biraschi, Karen Brewer, William Broadbent, David Brooks, Guillemette Callies, Patrick Cremin, Michael Collier, Joseph D’Amadeo, John Dmuchowski, Nestor De Jesus, Steven Engel, Louise Goldberg, Michael Gran, Anshuman Goyal, Adrian Graves, Sandra Hahn-Colbert, Gregg Hawes, Nicholas Howard, Julian Iragorri, Harriet Chan King, Karen Krieger, Tal Lev Ari, Yeruchim Levilev, Sarah Lewis, Patricia Luken, Lawrence McCarthy, Michael McCully, Paul Shot-ton, Steven Schwab, Colin S.A. Welch, Pier-luigi Volini, Ian Neville, Sandy Fleischman Richman, Jeffrey Weclcer, Norman Siegel, Thomas O’Sullivan, Peter Ward, Timothy Wilkinson, Milan Veleba, Andrea Sullivan, Hugh McGee, Judith Winchester, Ross Shapiro, Stephen Snelling, Brian Seward, Margaret Smith, Alvaro Santodomingo, Helmut Olivier, (Estate of) Michael Mullen, Jack Rivkin, Barry Porter, Gregg Somma, Christiane Schuster, Michael Petrucelli, Martin Patterson, Fabio Liotti, and Mary Langevin.
. The Antoncic Claimants comprise: Madelyn Antoncic, Michele Bareggi, Riccardo Ban-chetti, Timothy A. Burke, Nachiketa Das, Philippe Dufournier, Brian Gross, Peter Hornick, Andrea Jao, Michael Lawslcy, Alexandre Cata-lao Maia, Nikki Marshall, Richard Noble, Anke Parr, Vincent Primiano, Giancarlo Sar-onne, Johathan Sebiri, Charles Spero, Har-shad Shah, Gordon Sweely, Rocco F. Andrio-la, Amit K. Sarkar, Darían J. Cohen, Lars P. Jacobson, Christian E. Stevens, and Andrew Wideman.
, The Neuberger Claimants comprise: Marvin C. Schwartz, Stephanie Stiefel, Richard J. Glasebrook, II, Judith Ann Kenney, Richard Naclcerson, Henry Ramallo, Christian Reynolds, David I. Weiner, Richard Levine, and Seth Finkel,
. Although Giddens also arose out of Lehman Brothers’ bankruptcy proceedings and involved the subordination of claims pursuant to section 510(b), the specific legal issues there are not relevant here.
. Although various Bankruptcy Code provisions reflect the absolute priority rule, it is particularly prominent in 11 U.S.C. § 1129(b)(2)(B), which "provides that a reorganization plan may not give ‘property’ to the holders of any junior claims or interests ‘on account of those claims or interests, unless all classes of senior claims either receive the full value of their claims or give their consent.” DISH Network Corp. v. DBSD North America, Inc. (In re DBSD N. Am., Inc.), 634 F.3d 79, 88 (2d Cir. 2011) (quoting 11 U.S.C. § 1129(b)(2)(B)).
. Slain and Kripke conceptualized the subordination principle ultimately adopted in section 510(b) in terms of the absolute priority rule:
In theory, the general creditor asserts a fixed dollar claim and leaves the variable profit to the stockholder; the stockholder takes the profit and provides a cushion of security for payment of the lender’s fixed dollar claim. The absolute priority rule reflects the different degree to which each party assumes a risk of enterprise insolvency; no obvious reason exists for reallocating that risk.
Slain and Kripke, supra, at 286-87.
.The House Report also suggests that Congress sought to subordinate claims “seeking] to recover a contribution to the equity pool presumably relied upon by creditors in deciding whether to extend credit to the debtor." Med Diversified, 461 F.3d at 256.
. The enumerated examples of a "security” are:
(i) note; (ii) stock; (iii) treasury stock; (iv) bond; (v) debenture; (vi) collateral trust certificate; (vii) pre-organization certificate or subscription; (viii) transferable share; (ix) voting-trust certificate; (x) certificate of deposit; (xi) certificate of deposit for security; (xii) investment contract or certificate of interest or participation in [certain types of] profit-sharing agreements] or [leases for] oil, gas, or mineral royalties] ...; (xiii) interest of a limited partner in a limited partnership; ... [and] (xv) certificate of interest or participation in, temporary or interim certificate for, receipt for, or warrant or right to subscribe to or purchase or sell, a security^]
11 U.S.C. 101(49)(A).
. The specific examples expressly excluded from the definition of “security” are:
(i) currency, check, draft, bill of exchange, or bank letter of credit; (ii) leverage transaction, as defined in section 761 of this title; (iii) commodity futures contract or forward contract; (iv) option, warrant, or right to*473 subscribe to or purchase or sell a commodity futures contract; (v) option to purchase or sell a commodity; (vi) contract or certificate of a kind specified in subparagraph (A)(xii) of this paragraph that is not required to be the subject of a registration statement filed with the Securities and Exchange Commission and is not exempt under section 3(b) of the Securities Act of 1933 from the requirement to file such a statement; or (vii) debt or evidence of indebtedness for goods sold and delivered or services rendered.
11 U.S.C. § 101(49)(B).
. The claimants contend that subsection (A)(xv) does not cover an RSU because an RSU merely grants its holder a contingent or conditional right to receive stock upon the occurrence of certain events rather than an absolute right to participate in or subscribe to a stock. We do not find this argument persuasive because subsection (A)(xv) makes no distinction between conditional rights and absolute rights; nor have the claimants made any persuasive showing why we should read such a distinction into the text of the statute.
. The claimants assert that they did not have voting rights, but fail to cite any record evidence supporting their assertion. The documentary evidence on which the bankruptcy court relied, see Lehman Bros., 519 B.R. at 56, reflects that Lehman Brothers established a trust, funded with shares to be issued upon the conversion of RSUs to common stock, that gave RSU holders the ability to direct voting on those shares based on the proportion of the number RSUs held by the employees. See, e.g., JA at 2616 (2003 Program); id. at 2862 (2005 Program),
. The record reflects that (1) RSU dividends accrued quarterly and were reinvested as additional RSUs; (2) upon the issuance of common stock, the RSU holder received additional common stock in proportion to the dividend equivalents that had accrued during the five-year period; and (3) any additional RSUs awarded for dividend equivalents were not treated as income by Lehman Brothers or accounted for as a compensation expense of Lehman Brothers.
. The fact that RSUs were not taxed as ordinary income until the end of the five-year holding period, when the vested common stock was taxed according to its market value at the time of vesting, further supports the conclusion that RSUs were equity interests without a fixed valued.
. The claimants rely on three cases in which claims were not subordinated under section 510(b), but they are inapposite because here, unlike in those cases, the value of RSUs rose
. We pause to emphasize that we should not be understood to conclude that any interest called an “RSU” is necessarily a security within the meaning of section 510(b), let alone any other statute. As our analysis indicates', the requisite inquiry in each case is likely to be fact-intensive, and the result will turn on the substance of the particular "RSU” and the relevant legal definition of “security”—and that definition is likely to vary from statute to statute.
. The proposition that a security can be purchased with an employer’s labor also accords with the Bankruptcy Code’s expansive definition of “purchaser” as a "transferee of a voluntary transfer,” 11 U.S.C. § 101(43), where “transfer” is to be construed as ”broad[ly] as possible.” S. Rep. No. 95-989, at 27 (1978); see also 11.. U.S.C. § 101(54) (defining "transfer” as, among other things, "each mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting, with ... an interest in property”). Similarly, the Uniform Commercial Code, on which section 101(43) is based, broadly defines "purchase” as “taking by sale, discount, negotiation, mortgage, pledge, lien, security interest, issue or re-issue, gift or any other voluntary transaction creating an interest in property.” 2 Collier on Bankruptcy ¶ 101.43 (emphasis added) (quoting U.C.C. § 1-201(29)).
. The claimants were on notice that they could be compensated in part with RSUs. The employee handbooks reflect that "[a]t the Firm’s option, a portion of [an employee’s] total compensation ... may be payable in the form of conditional equity awards ([RSUs], stock options, or other equity awards) pursuant to the [Program].” JA at 7 ¶ 2. And where Lehman Brothers had employment contracts with its employees, those contracts stated that ”[a]t the Firm’s discretion, a portion of [the employees'] total compensation ... will be payable in conditional equity awards ([RSUs] and/or other equity awards) pursuant to the [Program]." Id.
. Even if we were to apply Daniel and Cen-dant here, it is far from clear that those cases would help the claimants. Both involved retirement plans offered to employees who were already compensated for their labor. See Daniel, 439 U.S. at 553-54, 99 S.Ct. 790 (explaining that the pension plans were part of a collective bargaining agreement and were
. Indeed, the Neuberger Claimants have failed to show anything unlawful about their arrangement with Lehman Brothers, including their non-compete agreements, which had limited one- to three-year restriction periods and were applicable only to Lehman Brothers' market. See Cardwell v. Thermo Fischer Scientific, No. 09 Civ. 7809 (DAB), 2010 WL 3825711, at *7, 2010 U.S. Dist. LEXIS 108302 (S.D.N.Y. Sept. 23, 2010) (stating that “New York Courts have held restrictions of up to five years to be reasonable depending on the circumstances,” and holding that a one-year non-compete covenant was reasonable).
. As noted above, the employee handbooks provide that “[a]t the Firm’s option, a portion of [an employee’s] total compensation ... may be payable in the form of conditional equity awards ([RSUs], stock options, or other equity awards) pursuant to the [Program],” JA at 7 ¶ 2; and where Lehman Brothers had employment contracts with its employees, those contracts made clear that "[a]t the Firm’s option, a portion of [the employee’s] total compensation (combined base salary, bonus and other compensation) may be pay
. There is a discretionary exception to this limited obligation to deliver stock to RSU holders, but it is not applicable here. See JA at 2890 § 8(b) (explaining that, "upon the occurrence of a Change in Control,” Lehman Brothers “may pay to Participants amounts in cash in respect of a[n RSU] equal to cash dividends paid to a holder of shares of Common Stock, for fractional shares or for any amounts payable in cash”).
. The alternative-performance theory could also be characterized as an argument that the award of RSUs did not constitute a payment in exchange for the claimants’ labor, despite the Program documents. Such an argument, however, is effectively a contention to rescind the contractual arrangement to which the claimants agreed so that they may be paid in cash—and only cash—for the services they rendered. Whatever the merits of this argument, it does not change the outcome here because a claim for rescission—like a claim for damages—is subject to section 510(b), See 11 U.S.C. § 510(b) ("[A] claim arising from rescission of a purchase or sale of a security of the debtor ... shall be subordinated to all
. Even if the claimants could allege an actual injury, their restitution claims might nonetheless be subordinated under section 510(b) inasmuch as those claims are functionally equivalent to a claim for rescission or a claim for damages, both of which are expressly covered by section 510(b). "As a remedy for [a] breach [of contract], ‘restitution’ means either the restoration of a specific thing or the payment in money of the value of a contractual performance by [the claimant].” Henry Mather, Restitution as a Remedy for Breach of Contract: The Case of the Partially Performing Seller, 92 Yale L. J. 14, 14 n.l (1982) (citing Restatement of Contracts § 326(b) (1932)). In the former sense, a "plea for restitution is merely the remedial flip side of [a] rescission claim; rescission will unwind or avoid the transaction, and restitution will put the parties back in their original positions.” Tekinsight.Com, Inc. v. Stylesite Mktg., Inc. (In re Stylesite Mktg., Inc.), 253 B.R. 503, 510-11 (Bankr. S.D.N.Y. 2000). A claim for restitution in this sense may well be subject to section 510(b), broadly interpreted, insofar as it is functionally equivalent to a claim for rescission. See id. at 511 (explaining that a claim that "depend[s] on [the claimant’s] purchase of the [debtor’s] stock ... arise[s] from that purchase” regardless of whether the claimant "chooses to call it” rescission or restitution). Similarly, the second sense in which the term "restitution” can be used as a breach-of-contract remedy—payment measured in terms of the defendant’s gain rather than the claimant’s loss—might sometimes (though not always) be functionally equivalent to a claim for damages. Restitution, of course, provides for a measure of recovery that is analytically distinct from that of damages. See In re Gartenberg, 636 F.2d 16, 17 (2d Cir. 1980) (“Restitution is a remedy distinct from damages and requiring different proof.”); see also Douglas Laycock, Restoring Restitution to the Canon, 110 Mich. L. Rev. 929, 938 (2012) ("The fundamental question in damages ... is how much a plaintiff lost.... But in restitution, ... [it] is how much [the] defendant was unjustly enriched.”). But "[w]hen the restitu-tionary claim leads to the same recovery as the ... claim [for damages], there is little reason to distinguish between them.” Douglas Laycock, The Scope and Significance of Restitution, 67 Tex. L. Rev. 1277, 1286 (1989). Indeed, "[w]hen the underlying wrong is the same and the remedy is the same, important collateral issues,” such as whether to subordinate claims pursuant to section 510(b), "should not be left open to the option of the clever pleader.” Id. Here, it appears that the claimants’ remedy would be the same whether awarded as damages or as restitution. Indeed, in making their restitution argument, the claimants contend that the proper measurement for recovery is the amount of cash that Lehman Brothers could have paid them in lieu of RSUs, the very same amount they seek in damages by means of their alternative-performance theory. See supra. In this regard, the restitution theory seems to be merely a
. As the bankruptcy court found at the evi-dentiary hearing, the parties adduced: (1) "no evidence as to why the Subordination Provisions are not contained in the Program Documents after 2004”; (2) “no evidence that the decision to omit [them] arose from any intent by [Lehman Brothers] to declare that [RSU-based claims] would cease to be subject to ... section 510(b) ... if a Chapter 11 proceeding should ever arise”; and (3) "no evidence that the [claimants] relied upon the omissions of the Subordination Provisions when making the choice to continue employment at Lehman [Brothers].” Lehman Bros., 519 B.R. at 64.