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Lehman July 13
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Lehman's Fuld Defeats Employee Lawsuit Over Retirement Losses
Jul 10, 2015 | Reuters
By Jonathan Stempel
A U.S. federal judge on Friday dismissed a lawsuit by former Lehman Brothers Holdings Inc employees seeking to hold onetime Chief Executive Richard Fuld liable for their retirement plan losses as the Wall Street bank plunged into its 2008 bankruptcy. U.S. District Judge Lewis Kaplan in Manhattan rejected claims that Fuld breached ... -
Lehman Workers' ERISA Suit Chalks Up Third Straight Loss
Jul 10, 2015 | Law360
By Cara Salvatore
A New York federal judge has again dismissed a class action by former employees of Lehman Brothers Holdings Inc. who owned stock in the bank and claimed that it failed to uphold its fiduciary duty to them before the bank failed in 2008. U.S. District Judge Lewis Kaplan dismissed the third amended consolidated complaint ... -
Lehman Trustee Says Ruling Voids $62M FirstBank Claim
Jul 13, 2015 | Law360
By Jonathan Randles
Lehman Brothers Inc.'s liquidating trustee is urging a New York bankruptcy judge to wipe out a claim worth at least $61.5 million brought by FirstBank Puerto Rico, arguing that a recent Second Circuit decision over a federal law protecting securities investors prevents the bank from recovering anything from the estate.
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Lehman's Fuld Defeats Employee Lawsuit Over Retirement Losses
Jul 10, 2015 | Reuters
By Jonathan Stempel
A U.S. federal judge on Friday dismissed a lawsuit by former Lehman Brothers Holdings Inc employees seeking to hold onetime Chief Executive Richard Fuld liable for their retirement plan losses as the Wall Street bank plunged into its 2008 bankruptcy.
U.S. District Judge Lewis Kaplan in Manhattan rejected claims that Fuld breached an obligation to share what he knew about Lehman's fast-deteriorating finances with officials who oversaw the plan, where Lehman stock was an investment option.
The judge also rejected claims that those officials breached their fiduciary duty to employees by letting them invest in Lehman stock, resulting in millions of dollars of losses.
Investors said the officials ignored mounting public concern about Lehman's health, failed to explore whether hidden risks made the stock unsafe, and did not consider whether "special" circumstances, including a regulatory ban on short sales of large bank stocks, made the share price unreliable.
"The true objects of plaintiffs' ire may well be the Lehman executives whom plaintiffs allege made material misstatements regarding the financial health of the company to the detriment of participants in the securities markets," Kaplan wrote.
Nonetheless, he said the federal Employee Retirement Income Security Act "is not the statutory mechanism to pursue such claims."
ERISA lawsuits over the inclusion of company stock in retirement plans are common after stock prices suffer large or surprise declines.
Kaplan previously dismissed two versions of the lawsuit, but revisited it after the U.S. Supreme Court in June 2014 lessened the defenses available to banks in similar cases, in a lawsuit involving Cincinnati-based Fifth Third Bancorp.
Mark Rifkin, a lawyer for the Lehman employees, called the decision "disappointing" and said he anticipates an appeal.
Fuld's lawyer Todd Fishman did not immediately respond to requests for comment.
Jonathan Youngwood, a partner at Simpson Thacher & Bartlett representing the plan officials, said: "We're very pleased. I hope for my clients' sake that it is over."...
For full story:
http://uk.reuters.com/article/2015/07/10/us-lehman-fuld-employee-lawsuit-idUKKCN0PK2C520150710
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Lehman Workers' ERISA Suit Chalks Up Third Straight Loss
Jul 10, 2015 | Law360
By Cara Salvatore
A New York federal judge has again dismissed a class action by former employees of Lehman Brothers Holdings Inc. who owned stock in the bank and claimed that it failed to uphold its fiduciary duty to them before the bank failed in 2008.
U.S. District Judge Lewis Kaplan dismissed the third amended consolidated complaint by the employees under the Employee Retirement Income Security Act, which they refiled after the Supreme Court revived their suit and sent it back down.
The Supreme Court revived the suit after a recent ruling, Dudenhoeffer, changed the standard of prudence for such cases, holding that now, “[employee stock ownership plan] fiduciaries are subject to the same duty of prudence as all other ERISA fiduciaries.”
But the claims of the employees are still limited by the classic pleading standards, Iqbal and Twombly, Judge Kaplan said. And he said they still fell short.
“The substitution of the [third consolidated amended complaint] in lieu of the [second consolidated amended complaint] does not change this result ... [The] new bits of information do no more than add marginally to the cacophony of 'mixed signals' described in the SCAC. They do not nudge the allegations of the TCAC across the plausibility threshold,” the judge said.
“Changed circumstances” — like the collapse of Bear Stearns in 2008 — “can trigger a fiduciary’s obligation to review the prudence of an investment, but … plaintiffs must allege that circumstances actually have changed sufficiently and that the failure to make such a review injured the plan. This is precisely what the TCAC fails to do,” he said.
In 2011, Judge Kaplan had dismissed for a second time the action over the management of the ESOP, which suffered massive losses when Lehman failed in September 2008.
Judge Kaplan ruled at the time that the plaintiffs had failed to sufficiently allege that the committee overseeing the retirement plan should have known that Lehman's stock was at risk prior to the investment bank's failure.
The plaintiffs had said that the plan committee should have known that Lehman was at risk of collapsing after the fall of investment bank Bear Stearns in March 2008, and that because Lehman had similar exposures to mortgage-backed securities, the plan committee should have sold its holdings in the company.
Judge Kaplan also ruled that the employees had failed to sufficiently allege that Lehman's directors, including its former Chairman and CEO Richard Fuld, had violated their fiduciary duty by appointing a board not qualified to oversee the fund. The judge also dismissed their allegations that the board failed to monitor the plan committee.
That ruling was the second time Judge Kaplan handed a defeat to the retirement plan plaintiffs. He dismissed the original consolidated complaint in February 2010...For full story:
http://www.law360.com/articles/678044/lehman-workers-erisa-suit-chalks-up-third-straight-loss
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Lehman Trustee Says Ruling Voids $62M FirstBank Claim
Jul 13, 2015 | Law360
By Jonathan Randles
Lehman Brothers Inc.'s liquidating trustee is urging a New York bankruptcy judge to wipe out a claim worth at least $61.5 million brought by FirstBank Puerto Rico, arguing that a recent Second Circuit decision over a federal law protecting securities investors prevents the bank from recovering anything from the estate.
In a letter U.S. Bankruptcy Judge Shelley Chapman, attorneys for the trustee said FirstBank's claim is barred because the bank cannot be considered a “customer” of the firm under the Securities Investor Protection Act. FirstBank's claim is tied to government securities it “entrusted” to LBI before Lehman imploded in 2008. The securities were intended to be used as collateral for a series of interest rate swaps.
Citing the Second Circuit ruling in CarVal UK Limited v. Giddens, the trustee said in its letter that FirstBank doesn't qualify as a customer under SIPA because it didn't enter into any contracts with LBI. Instead, FirstBank's counterparty in the swaps was a separate unit, Lehman Brothers Specialty Finance, the letter said.
The distinction is important, the letter said, because under Second Circuit precedent, no customer claims can exist between FirstBank and LBI. According to the trustee, FirstBank didn't entrust the securities to LBI, the bank merely delivered the posted collateral to LBI "as agent for [LBSF]," the letter said.
According to the letter, “FirstBank's swap counterparty was LBSF, not LBI, and FirstBank did not enter into any contract with LBI at all.” The trustee is requesting that the bankruptcy court expunge FirstBank's claim against the estate.
The trustee was responding to a letter FirstBank submitted to the court earlier this week argued that its relationship with Lehman was different from CarVal's, a British investment firm. Unlike in the CarVal case, FirstBank said the delivery of its security collateral to LBI “did not involve any transfer of title to LBI or any bilateral repurchase relationship.”
“LBI's sole role was as a securities intermediary holding FirstBank's securities in custodial safekeeping accounts, for the benefit of both FirstBank as the owner and pledgor and its swap counterparty (LBSF) as a secured party,” FirstBank's letter said.
“In this respect, FirstBank entrusted its securities to LBI in the ordinary course of its business as a broker-dealer for safekeeping, as collateral security and for purposes of effecting transfer,” the letter continued.
The facts of the dispute stretch back to 1999, when FirstBank entered into an interest-rate swap agreement with Lehman Brothers Specialty Finance and posted $220 million in collateral to secure its potential obligations.
The bank agreed that LBSF could use the posted collateral as it saw fit, and it later sold the securities to LBI to hold through a master repurchase agreement. Because of Lehman’s 2008 implosion, LBI hasn’t released any of the securities back to LBSF, and the two released each other from further obligations under the MRA through a 2013 settlement...For full story:
http://www.law360.com/articles/677960/lehman-trustee-says-ruling-voids-62m-firstbank-claim
Client Attorney Privileged/Attorney Work Product/At Request of Counsel
Employee Retirement Income Security Act
FirstBank Puerto Rico
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