United States, Accountancy, Commercial Restructuring & Bankruptcy Alert,Vol. I, No. 3 (November 2005) - Reed Smith - 17/11/2005, Insolvency, Administration, Bankruptcy and Liquidation, Labour and Employment, Employee Benefits & Compensation, Litigation and Arbitration

Equitable Subordination of ESOP Stock Redemption Reversed

Citing United States Supreme Court precedent, a federal appeals court has held that bankruptcy courts may not, as a rule, automatically subordinate stock redemption claims that arise from employee retirement plans.

The ruling means that in the First Circuit, stock redemptions from plans qualified under the Employee Retirement Income Security Act of 1974 (ERISA) may not be equitably subordinated unless a court makes a specific finding that such subordination is justified in an individual case.

The dispute in Merrimac Paper Company, Inc. v. Harrison (In re Merrimac Paper Co., Inc.), 420 F.3d 53 (1st Cir. 2005) arose following the retirement of Ralph Harrison, who worked for Merrimac from 1963 to 1999. Harrison participated in an ERISA-qualified employee stock ownership plan (ESOP), which Merrimac adopted in 1985....

To read the full text of this article you need to login.

Please login below, and click submit.

Email/ Username:

Please enter your username or email address that your registered with us.

Password:

If you have fogotten your login details or need to register with Mondaq please select one of the options below.

This service is completely FREE but for the full article and thousands of other articles from 100+ countries please tell us about yourself by registering (and yes, our lawyers like to think you've read our Disclaimer).

Specific Questions relating to this article should be addressed directly to the author.

Do you have a question for the author?