Case: Employees’ Rights in ESOP Did Not Give Them Claims Against Chapter 11 Debtors (B.A.P. 9th Cir.) (IRC §409)

Bankruptcy court did not err in disallowing former employees’ claims against chapter 11 debtors, the U.S. Bankruptcy Appellate Panel of the Ninth Circuit held, affirming the bankruptcy court’s decision in an unpublished opinion. The panel agreed that the employees’ rights under an employee stock ownership plan (ESOP), in which the debtors contributed cash and stock for the employees’ benefit, did not give them an enforceable claim against the debtors. The debtor-employer was not required to repurchase the employees’ stock under the ESOP; the employer was an S corporation, and the ESOP provided the employees a right to receive cash distributions ...