Firm Defeats Motion by Group of 77 Defendants in the Multi-Billion Dollar Lawsuit Commenced by the Firm on Behalf of Lehman Brothers Against Scores of Financial Entities

The Firm represents Lehman Brothers Special Financing Inc. (“LBSF”) in an adversary proceeding (the “Action”) in the Chapter 11 bankruptcy of Lehman Brothers Holdings Inc.(“LBHI”) and its affiliated debtors. The Action was styled as a defendant class action and commenced against scores of known and unknown financial entities, in their capacities as Trustees, Issuers and Noteholders, and seeks to recover billions of dollars for the Lehman bankruptcy estate arising from numerous credit default swap agreements (the “Swap Agreements”) wherein LBSF purchased credit protection from the Issuers in connection with collateralized debt obligation transactions. The Action specifically seeks (i) to prevent certain unenforceable ipso facto clauses from improperly impairing LBSF’s right to priority of payment from assets related to the Swap Agreements based solely upon the bankruptcy filing by LBSF and its ultimate parent, LBHI, and (ii) to recover funds that were improperly paid to the Noteholders in connection with the Swap Agreements. [Lehman Brothers Special Financing Inc. v. Bank of America, N.A., et al., Chapter 11 Case No. 08-13555 (SCC); Adversary Proceeding No. 10-03547 (SCC)]. A copy of the current Distributed Action complaint is available here.

Recently, the Firm sought implementation of a scheduling order with procedures to provide a manageable and efficient means for advancing this litigation against the hundreds of defendants (the “Scheduling Order”). However, a group of 77 defendants filed a motion (the “Motion”) seeking, among other relief, to oppose implementation of the Firm’s Scheduling Order and to file dozens of dispositive motions to dismiss claims in the Action. After briefing and oral argument, the Bankruptcy Court for the Southern District of New York ruled that the issue of class certification, not the filing of dispositive motions, would comprise the next phase of advancing the Action. A copy of the response to the Motion filed by the Firm on behalf of LBSF is availablehere. A copy of a recent industry publication commenting upon this favorable outcome is available here.