Firm Prevails in Motion on Behalf of Lehman Brothers Seeking ADR Procedures Order for Multi-Billion Dollar Indemnification Claims Against Mortgage Loan Sellers

The Firm represents Lehman Brothers Holdings Inc. (“LBHI”) in connection with its application to the Bankruptcy Court for the Southern District of New York to establish an alternative dispute resolution (“ADR”) procedure to efficiently address indemnification claims that LBHI holds against approximately 3,000 counterparties involving more than 11,000 mortgage loans related to the recent settlements of claims litigation with the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corp. (“Freddie Mac”). As a result of the Fannie Mae and Freddie Mac settlements, LBHI may assert contractual or other rights to require banks and other mortgage lending institutions from which LBHI or its affiliates purchased mortgage loans to reimburse and indemnify LBHI pursuant to related transaction documents that contain indemnification provisions, wherein the mortgage loan sellers agree to hold LBHI and/or its affiliates harmless from any losses or damages suffered with respect to the mortgage loans. A copy of LBHI’s application for establishment of ADR procedures is available here.

On June 12, 2014, numerous law firms representing mortgage loan sellers filed objections to LBHI’s application and argued, among other things, that the Bankruptcy Court did not have jurisdiction to establish such an ADR procedure and that the ADR procedures were unfair. On June 17, 2014, LBHI filed an omnibus response to all of the objections to its application, a copy of which is available here.

On June 19, 2014, Bankruptcy Judge Shelley C. Chapman held a hearing on LBHI’s application, and granted all of the relief sought by LBHI. On June 24, 2014, the Bankruptcy Court entered an Order establishing the ADR procedures, a copy of which is available here.