Employees Who Received Payments Pursuant to an Equity Participation Program Must Pay Them Back to Bankruptcy Trustee

The Tenth Circuit Court of Appeals ruled in In re Dittmer that employees who received $34,556 each in payment for their stock appreciation rights (SARs) must return to their employer’s bankruptcy trustee all of the money they received because the SARs were payments from the bankruptcy estate.  The employees had argued that the payments were not property of the bankrutpcy estate because the payments were entirely dependent upon the economic decisions of the employer.  The Court rejected the argument because the pre-bankruptcy contract required a payment to them if a certain event occurred.  Accordingly, the Court stated that the obligation existed before the employer filed for bankruptcy.