Cases & Deals

Lehman Brothers Holdings seeks recovery of undisclosed asset value transferred in bankruptcy sale of broker dealer

Clients Lehman Brothers Holdings Inc.

Jones Day represents Lehman Brothers Holdings Inc. in an action to recover assets transferred to Barclays Capital Inc. when Barclays purchased the Lehman broker dealer business shortly after Lehman's bankruptcy filing in September 2008. The sale took place after a hearing before the bankruptcy court seeking the Court's approval.

In June 2009, when attempts to obtain information from the buyer about the sale were rejected, Jones Day obtained an order from the United States Bankruptcy Court for the Southern District of New York allowing extensive discovery concerning the negotiation and closing of sale.

In September 2009, after expedited discovery, Jones Day filed a motion to modify the bankruptcy court's Sale Order, and an adversary Complaint seeking turnover of assets, on the ground that material facts about the Sale Transaction had not been disclosed to the Court when it issued the Sale Order, resulting in an undisclosed windfall gain to Barclays. The case was tried to the Bankruptcy Court over approximately six weeks during 2010.

In a decision issued in February 2011, the Bankruptcy Court found that material facts had not been disclosed to the Court but denied certain of the relief requested because the disclosure failures, while proven, were not the result of actual fraud. The court also determined that Barclays was not entitled to keep over $4 billion in cash and cash equivalent assets it had taken in the transaction.

In re Lehman Brothers Holdings Inc., Case No. 08-13555 (S.D.N.Y. Bankr. 2009)

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