On June 28, 2016, in what essentially was a clean sweep for the noteholder and trust certificate holder defendants (the “Noteholders”), the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) granted an omnibus motion to dismiss Lehman Brothers Special Financing, Inc.’s (“LBSF”) adversary proceeding which sought the avoidance and recovery of various Noteholder distributions. In addition to rejecting Judge Peck’s “singular event theory,” Judge Chapman also found that the flip-clause provisions at issue were not unenforceable as argued by LBSF, and that regardless, all related collateral distributions were covered by the Bankruptcy Code’s safe harbors for financial contracts.View full memo, Judge Chapman Flips the Script
