February 17, 2015
On February 17, 2015, the Firm obtained a significant victory on behalf of its client, Lehman Brothers Holdings Inc. (“Lehman”), when the United States Bankruptcy Court for the Southern District of New York held that Lehman’s claim for contractual indemnification was timely under New York law, and denied defendant’s motion to dismiss the claim on grounds of the statute of limitations.
In January and February 2014, Lehman resolved multi-billion dollar claims asserted by The Federal National Mortgage Association (“Fannie Mae”) and The Federal Home Loan Mortgage Corporation (“Freddie Mac”) concerning defects in loans that Lehman had sold to Fannie Mae and Freddie Mac. Thereafter, Lehman sought to enforce its contractual indemnification claims against hundreds of mortgage loan sellers from which it had purchased the defective loans.
Certain mortgage sellers contended that Lehman’s indemnification claim is simply a breach of contract claim based upon the mortgage sellers' breaches of representations and warranties made when the loans were sold to Lehman, and is not a separate claim for contractual indemnification. Consequently, the mortgage sellers asserted that the statute of limitations barred Lehman’s claims as the representations and warranties were breached when the loans were sold to Lehman many years earlier. Lehman contended that its indemnification claims were timely as they arose no earlier than January and February 2014, when its obligations to Fannie Mae and Freddie Mac were fixed.
Following extensive oral argument in bankruptcy court, defendants’ motions to dismiss on statute of limitations grounds were denied. With this ruling, a significant impediment to Lehman’s indemnification claims against the mortgage sellers has been removed.