Lehman Takes Aim At BNY Mellon Over Derivatives Deal

By Maria Chutchian (October 19, 2011, 10:17 PM EDT) -- Lehman Brothers Special Financing Inc. hit BNY Mellon Corporate Trustee Services Ltd. with an adversary suit Tuesday, claiming the failed bank was deprived of property interest as a result of allegedly illegal provisions in a derivatives transaction agreement.

Lehman is seeking a judgment declaring that it is entitled to senior payment priority for the assets backing the deal and that the provisions violate its automatic stay and are unenforceable under federal bankruptcy law.

According to Lehman's complaint, the bank was a counterparty to a swap agreement with Cayman Islands-based Topaz Finance Ltd., which issued a collateralized debt obligation with an initial...

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