2nd Circ. Rejects Lehman's $1B Clawback Effort

Law360 (August 11, 2020, 10:01 PM EDT) -- The Second Circuit ruled Tuesday that a Lehman Brothers unit cannot claw back $1 billion in financial crisis-era payments distributed after Lehman filed for bankruptcy more than a decade ago, finding that the payments were protected by a safe harbor.

The Second Circuit panel said the Bankruptcy Code creates a safe harbor for the liquidation of swap agreements, including the agreements between Lehman Brothers Special Financing and the noteholders funding the collateral for those transactions, which contained priority provisions subordinating the Lehman unit's interests to those of the noteholders.

The Lehman unit has argued — first in bankruptcy court, then before...

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