Lehman Sues Barclays for $5 Billion

Lehman Brothers Holdings Inc. filed a lawsuit against Barclays Capital in New York federal court alleging the British bank took control of excess assets in collusion with Lehman executives when it bought its U.S. brokerage business in 2008. The Lehman bankruptcy is the largest U.S. bankruptcy in history. The claim alleges that Barclays Capital received a $8.2 billion “windfall profit” due to an undisclosed $5 billion discount on the sale of certain securities. The complaint alleges, “The windfall to Barclays was not disclosed to the Court, the Lehman Boards or Lehman’s lawyers so as to allow the transfer to Barclays of billions of dollars in excess assets, without consideration, in a manner designed to avoid judicial, corporate and creditor oversight.”

Bankruptcy litigation is booming amidst the flood of major bankruptcies filed in the U.S. We have seen more and more battles between bankruptcy trustees and receivers against the major worldwide banks. Since many of these cases are filed by and defended by law firms which often represent bulge bracket investment banks and broker dealers, it will be interesting to see how many international law firms will be conflicted out of handling such cases.

In the Lehman v. Barclays case, Jones Day represents the Debtor, Lehman in the Barclays matter. Weil, Gotshal & Manges, is Lehman’s lead bankruptcy counsel, but is not handling the Barclays litigation. Boies, Schiller & Flexner is representing Barclays. David Boies’ firm’s website states, “We have been described by The Wall Street Journal as a “national litigation power–house” and by the National Law Journal as “unafraid to venture into controversial” and “high risk” matters.” This certainly qualifies.

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