Lehman Brothers Holdings Inc.'s bankruptcy judge said he doesn't see how the failed investment bank was damaged by what Lehman says is the failure of Barclays PLC to pay $500 million in employee bonuses.
Lehman says Barclays was required to pay $2 billion in bonuses and paid only $1.5 billion as part of its purchase of Lehman operations in 2008.
U.S. Bankruptcy Judge James Peck said at a hearing today that the amount for bonuses was an estimate and that the transaction was intended to protect Lehman from employee claims for compensation.
"I don't see how Lehman was damaged," Peck said.
The dispute stems from the purchase by Barclays of Lehman's North American broker-dealer in the days following the investment bank's September 2008 bankruptcy filing.
Lehman says it should be awarded $500 million in damages resulting from Barclays' failure to meet its obligation to pay the full bonus amount.
Peck said Lehman employees were the ones entitled to payment. Barclays assumed those liabilities from Lehman, providing a benefit to Lehman even if the bonus payments turned out to be less than estimated, the judge said. He didn't say when he would rule on the dispute.
"If the liability, whatever it is, is off the books how can there be a damage claim?" Peck said.
Barclays asked Peck to reject Lehman's claim. It says the $2 billion was an estimate of the exposure assumed for all compensation, which wasn't limited to bonuses. The bank said in court papers that it paid $1.95 billion in bonus, severance and related tax payments.