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Supreme Court Ruling
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Supreme Court Declines Lehman Appeal Over $4 Billion Award to Barclays
May 4, 2015 | Wall Street Journal
By Joseph Checkler
The U.S. Supreme Court on Monday declined to hear an appeal by Lehman Brothers Inc. in its long-running fight over assets that went to Barclays PLC when the British bank bought Lehman’s brokerage in 2008. Trustee James W. Giddens, who is winding down Lehman’s brokerage, had appealed lower courts’ decisions to award $4 billion in disputed assets to Barclays. -
U.S. Supreme Court hands win to Barclays over $4 billion in Lehman assets
May 4, 2015 | Reuters
By Lawrence Hurley
The U.S. Supreme Court on Monday allowed Barclays Plc (BARC.L) to claim about $4 billion (£2.64 billion) of disputed assets as part of its hurried purchase of much of Lehman Brothers Holdings Inc's [LEHRG.UL] brokerage unit at the height of the 2008 financial crisis. -
Barclays Wins $4 Billion Lehman Clash as Court Spurns Appeal
May 4, 2015 | Bloomberg
By Gregory Stohr
Barclays Plc is entitled to $4 billion in assets stemming from the Lehman Brothers Holdings Inc. collapse, as the U.S. Supreme Court rejected an appeal from the bankruptcy trustee for the firm’s brokerage business. -
Barclays wins dispute over $4bn in Lehman assets
| Financial Times
By Eric Platt
Barclays has the right to roughly $4bn of disputed assets as part of its purchase of Lehman Brothers after the Supreme Court rejected an appeal from a challenger on Monday. -
Justices Won't Hear Lehman Trustee's $4B Fight With Barclays
May 4, 2015 | Law360
By Cara Salvatore
The U.S. Supreme Court declined Monday to review the Second Circuit's ruling that Barclays is entitled to $4 billion in trading collateral from the collapsed Lehman Brothers Inc.
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Supreme Court Declines Lehman Appeal Over $4 Billion Award to Barclays
May 4, 2015 | Wall Street Journal
By Joseph Checkler
The U.S. Supreme Court on Monday declined to hear an appeal by Lehman Brothers Inc. in its long-running fight over assets that went to Barclays PLC when the British bank bought Lehman’s brokerage in 2008.
Trustee James W. Giddens, who is winding down Lehman’s brokerage, had appealed lower courts’ decisions to award $4 billion in disputed assets to Barclays.
In petitioning the Supreme Court, Mr. Giddens had argued that allowing Barclays to keep the $4 billion could broadly inflict long-term damage to the section of the bankruptcy code that allows a trustee to sell a debtor’s assets outside of the ordinary course of business.
“We are disappointed but remain focused on continued progress in winding down and closing out the LBI estate,” said Kent Jarrell, a spokesman for Mr. Giddens. “The trustee appropriately reserved for the Barclays litigation, so the decision does not impact distributions already completed or assets on hand for potential additional distributions to unsecured general creditors.”
Boies Schiller & Flexner LLP’s Jonathan Schiller, who represented Barclays in the dispute, said, “We are happy for Barclays to have successfully concluded this long litigation after its bold and brilliant purchase of Lehman in the crisis that helped stabilize markets and get 12,000 people back to work.”
The legal fight over the sale began in 2009, when the Lehman brokerage and its parent company both sued Barclays, saying the British bank negotiated a secret discount when it bought Lehman’s brokerage.
The fight came down to a “clarification letter” agreed upon by the two sides in the hectic days of September 2008, but never reviewed by James Peck, who was Lehman’s bankruptcy judge. The judge ultimately decided that while he didn’t approve the terms of the letter explicitly, all parties involved treated it as if he had. The letter spelled out the terms of which assets would go to Barclays and which would stay with Lehman.
While Judge Peck had said in court that “no cash” could be transferred from Lehman to Barclays, some assets that the trustee later construed as cash did end up being transferred, per the letter. After the trial, the judge ultimately concluded that Barclays didn’t receive an improper “windfall” from the sale, but that Lehman’s brokerage was entitled to the approximately $4 billion in money described as margin assets.
Later, however, a three-judge court of appeals panel said “ambiguities and loose ends were inevitable” in such a speedy sale and ruled that Barclays was entitled to these disputed assets.
In his December appeal, Mr. Giddens said, “while the bankruptcy court rightly rejected Barclays’ claims to the margin cash assets, the decisions by the district and appeals courts reduced the amount available for the general estate by $4 billion, frustrated the purpose of the liquidation, and undermined the credibility of a sale hearing.”
The $4 billion would have been a boon for the creditors of the Lehman brokerage, who have already received more money back than originally expected. While individual customers of the U.S. brokerage received about $92.3 billion almost immediately after Lehman collapsed, other creditors had to wait until all others with “customer” status got 100% of their money back. Since then, distributions to unsecured creditors have begun in earnest, and Mr. Giddens has returned about $112 billion in all to customers and creditors of the brokerage.
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U.S. Supreme Court hands win to Barclays over $4 billion in Lehman assets
May 4, 2015 | Reuters
By Lawrence Hurley
The U.S. Supreme Court on Monday allowed Barclays Plc (BARC.L) to claim about $4 billion (£2.64 billion) of disputed assets as part of its hurried purchase of much of Lehman Brothers Holdings Inc's [LEHRG.UL] brokerage unit at the height of the 2008 financial crisis.
The U.S. top court declined to hear an appeal filed by Lehman's creditors, leaving intact an August 2014 ruling by the 2nd U.S. Circuit Court of Appeals in New York that went in favour of Barclays.
Barclays already had control of $3.5 billion of the disputed $4 billion.
Trustee James Giddens has been seeking to recoup money for the brokerage's creditors, including Lehman affiliates and hedge funds. Lehman had been Wall Street's fourth-largest investment bank. It had $639 billion of assets when it filed for Chapter 11 protection on Sept. 15, 2008, making its bankruptcy by far the biggest in U.S. history.
Barclays won court approval to buy much of Lehman's brokerage business at a Sept. 19, 2008, hearing overseen by U.S. Bankruptcy Judge James Peck in Manhattan.
A dispute remained, however, over how to dispose of various "cash" assets of the brokerage. These included the $4 billion of margin assets held by third parties to support a Lehman exchange-traded derivatives business.
Also in dispute was $1.9 billion of "clearance box" assets used to process securities trades, although that was not part of the Supreme Court appeal.
In February 2011, Peck said Barclays was entitled to the clearance box assets but not the margin assets. But in July 2012, U.S. District Judge Katherine Forrest in Manhattan partially reversed him, and said Barclays deserved both. The appeals court upheld that decision.
"We are disappointed but remain focussed on continued progress in winding-down and closing out" the Lehman Brothers estate, said Kent Jarrell, a spokesman for Giddens. "The trustee appropriately reserved for the Barclays litigation, so the decision does not impact distributions already completed or assets on hand for potential additional distributions to unsecured general creditors."
The case is Giddens v. Barclays, U.S. Supreme Court, No. 14-710.
(Reporting by Lawrence Hurley; Editing by Will Dunham)
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Barclays Wins $4 Billion Lehman Clash as Court Spurns Appeal
May 4, 2015 | Bloomberg
By Gregory Stohr
Barclays Plc is entitled to $4 billion in assets stemming from the Lehman Brothers Holdings Inc. collapse, as the U.S. Supreme Court rejected an appeal from the bankruptcy trustee for the firm’s brokerage business.
The justices left intact a federal appeals court ruling that said Barclays acquired the assets as part of a hastily drafted purchase agreement in September 2008. Barclays bought most of Lehman’s North American brokerage assets in that deal.
The trustee, James Giddens, sought to recoup the money, most of which is already in Barclays’ possession.
“We are disappointed but remain focused on continued progress in winding down and closing out the LBI estate,” Kent Jarrell, a spokesman for Giddens, said in an e-mailed statement. “The trustee appropriately reserved for the Barclays litigation, so the decision does not impact distributions already completed or assets on hand for potential additional distributions to unsecured general creditors.”
In his appeal, Giddens said lawyers for both sides had told a bankruptcy judge that London-based Barclays wouldn’t receive any cash in the deal. He also said the appeals court gave too much weight to a clarification letter the two sides drafted.
The appeals court said the disputed property -- margin assets that Lehman had posted at various institutions -- didn’t constitute cash.
The bankruptcy judge in the case, James Peck, at one point said Barclays had to give the money back. That ruling was overturned by a federal trial judge.
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Barclays wins dispute over $4bn in Lehman assets
| Financial Times
By Eric Platt
Barclays has the right to roughly $4bn of disputed assets as part of its purchase of Lehman Brothers after the Supreme Court rejected an appeal from a challenger on Monday.
The top US court denied an appeal on Monday from the trustee managing the liquidation of Lehman Brothers, which failed in 2008 at the height of the financial crisis, leaving in tact a ruling in 2014 from a lower court.
The dispute centres around approximately $4bn in margin assets that Barclays acquired during its purchase of the US investment bank, points that were not agreed on when the sale was hastily reached in 2008.
James Giddens, the trustee, argued the margin accounts counted as cash, a point agreed in 2011 by bankruptcy judge Jame Peck, who presided over the sale.
However that decision, which also encompassed other assets, was partially reversed by a district judge and then upheld on appeal, giving Barclays control.
Barclays already has a majority of the assets in its control.
A spokesperson for the trustee said he was "disappointed" but remained "focused on continued progress in winding-down and closing out the LBI estate".
The Trustee appropriately reserved for the Barclays litigation, so the decision does not impact distributions already completed or assets on hand for potential additional distributions to unsecured general creditors."
A spokesperson for Barclays was not immediately available to comment.
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Justices Won't Hear Lehman Trustee's $4B Fight With Barclays
May 4, 2015 | Law360
By Cara Salvatore
The U.S. Supreme Court declined Monday to review the Second Circuit's ruling that Barclays is entitled to $4 billion in trading collateral from the collapsed Lehman Brothers Inc.
The decision came in a list of denied petitions for certiorari and didn't include any elaboration on the court's reasoning, which is customary in denials of certiorari.
The Supreme Court review had been requested by LBI's Securities Investor Protection Act trustee, James Giddens, who said lower courts had improperly interpreted the complicated contracts surrounding the hasty sale of Lehman customer accounts and its North American investment banking business to Barclays in the fall of 2008, directly after Lehman's plunge into bankruptcy. The transaction was what's known as a 363 asset sale. But Barclays later said it was entitled to $4 billion in cash — prompting a massive fight and a 34-day trial, according to Giddens' petition for certiorari.
The Second Circuit ruling squarely contradicted a bankruptcy court decision that awarded the assets to the Lehman estate, Giddens said.
In his December petition for certiorari, Giddens had argued that the lower court’s decision violated the Bankruptcy Code and the due process clause of the U.S. Constitution. Giddens said in a statement at the time that he filed the petition out of fiduciary duty to Lehman Brothers’ customers and creditors.
A spokesman for Giddens, Kent Jarrell, said Monday that the decision would not affect its accounting going forward.
“We are disappointed but remain focused on continued progress in winding down and closing out the LBI estate,” Jarrell said in a statement. “The trustee appropriately reserved for the Barclays litigation, so the decision does not impact distributions already completed or assets on hand for potential additional distributions to unsecured general creditors.”
General unsecured creditors have received roughly 27 cents on the dollar so far, according to the trustee's office.
A spokesman for Barclays was not immediately available for comment.
The dispute arose after Barclays purchased Lehman's brokerage business following a bankruptcy court sale hearing in September 2008, according to court documents. During that hearing, the parties made repeated and unambiguous representations that "no cash" was to be included in the sale, Giddens told the high court in his petition. But Barclays later claimed that a post-transaction "clarification letter” entitled it to $4 billion in margin cash assets that secured exchange-traded derivatives and another $1.9 billion held in so-called clearance box accounts, he said.
Giddens told the justices in the December filing that U.S. District Judge Katherine B. Forrest and the Second Circuit panel violated the bankruptcy code and due process when they overturned U.S. Bankruptcy Judge James M. Peck’s decision to deny Barclays’ request for the assets.
In awarding both sets of assets to Barclays, the appeals court declined to characterize the encumbered securities as “cash.”
The Second Circuit’s ruling may now undercut the ability of the bankruptcy courts to rely on representations made during bankruptcy sale hearings, thereby threatening the integrity of the proceedings and the efficacy of the sales, Giddens argued.
Giddens is represented by Paul Clement, George Hicks Jr. and Barbara Smith Grieco of Bancroft PLLC and James Kobak Jr., Christopher Kiplok and Savvas Foukas of Hughes Hubbard & Reed LLP.
The case is James W. Giddens v. Barclays Capital Inc. et al., case number 14-710, in the United States Supreme Court.
--Additional reporting by Michael Lipkin and Andrew Scurria. Editing by Rebecca Flanagan.
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