Barclays Wins Summary Judgment in Lehman Adversary Proceeding

Cleary Gottlieb won summary judgment for Barclays Capital Inc. in a Lehman-related adversary proceeding in U.S. Bankruptcy Court for the Southern District of New York, dismissing all claims brought against Barclays by FirstBank Puerto Rico. FirstBank sought to recover against Barclays damages in the amount of approximately $63 million in securities FirstBank had pledged as collateral to Lehman Brothers Special Financing Inc. to secure swaps trades pursuant to an ISDA Master Agreement, but which LBSF failed to return upon the bankruptcy filing of its parent Lehman Brothers Holdings Inc. (LBHI) on September 15, 2008. Most of these securities were transferred to Barclays as part of a pool of assets under a $45 billion repurchase transaction on September 18, 2008 between Barclays and Lehman Brothers Inc., which securities later became part of the Purchased Assets purchased by Barclays in the Lehman sale transaction approved by the Bankruptcy Court’s Sale Order entered on September 20, 2008.

On May 10, 2013, Bankruptcy Judge James M. Peck granted Barclays’ motion for summary judgment, ruling that the securities pledged by FirstBank that were ultimately acquired by Barclays were “indisputably” Purchased Assets which under the Sale Order Barclays received “free and clear” of all interests and claims. For that reason, the Court held that the Sale Order barred FirstBank’s claims against Barclays.