IN RE LEHMAN BROS. HOLDINGS INC.

Docket No. 18-1079 August Term, 2018.

970 F.3d 91 (2020)

IN RE: LEHMAN BROTHERS HOLDINGS INC., Debtor. Lehman Brothers Special Financing Inc., Plaintiff-Appellant, v. Branch Banking and Trust Company, Successor in Interest to Susquehanna Bank and SBSI, Inc., U.S. Bank National Association, Continental Life Insurance Company of Brentwood Tennessee, Country Life Insurance Company, Deutsche Bank Trust Company Americas, as Trustee, Elliott International, L.P., First Northern Bank and Trust Company, Garadex Inc., Gatex Properties Inc., General Security National Insurance, Genworth Life and Annuity Insurance Co., Goldman Sachs International, Goldman Sachs & Co. LLC, f/k/a, Goldman, Sachs & Co., LGT Bank in Liechtenstein Ltd., The Liverpool Limited Partnership, Magnetar Constellation Fund II Ltd, Magnetar Constellation Master Fund III Ltd, Magnetar Constellation Master Fund Ltd, Mariner LDC, Marsh & McLennan Companies, Inc. Stock Investment Plan, Marsh & McLennan Master Retirement Trust, MBIA, Inc., Modern Woodmen of America, Inc., MoneyGram Securities, LLC and its Successors in Interest, Morgan Stanley & Co., Incorporated, Morgans Financial Limited, Mulberry Street CDO, Ltd., Natixis Financial Products LLC, PCA Life Assurance Co. Ltd., PHL Variable Insurance Company, Phoenix Life Insurance Company, Putnam Dynamic Asset Allocation Funds-Growth Portfolio, Putnam Intermediate Domestic Investment Grade Trust, Putnam Stable Value Fund, RGA Reinsurance Co., SBSI, Inc., SCOR Reinsurance Company, Security Benefit Life Insurance Co., Shenandoah Life Insurance Company, State Street Bank and Trust Company, as Trustee, State Street Global Advisors, State Street International Ireland Limited, Structured Credit Opportunities Fund II, L.P., Susquehanna Bank, Tricadia Credit Strategies Master Fund, Ltd., f/k/a, Mariner-Tricadia Credit Strategies Master Fund, Ltd., Trustee U.S. Bank Trust National Association, UniCredit Bank AG, London Branch, Zais Investment Grade Limited X, Defendants-Appellees, Citibank, N.A., Principal Life Insurance Company, Defendants.

United States Court of Appeals, Second Circuit.

Decided: August 11, 2020.


Attorney(s) appearing for the Case

Paul R. DeFilippo ( William F. Dahill , on the brief), Wollmuth Maher & Deutsch LLP, New York, NY, for Plaintiff-Appellant Lehman Brothers Special Financing, Inc.

Carmine D. Boccuzzi ( Emily J. Balter , on the brief), Cleary Gottlieb Steen & Hamilton LLP, New York, NY, for Defendants-Appellees Goldman Sachs International and Goldman Sachs & Co. LLC., f/k/a, Goldman, Sachs & Co.

Joshua Dorchak , Morgan, Lewis, & Bockius, LLP, New York, NY; John C. Goodchild, III , Rachel Jaffe Mauceri , Morgan, Lewis, & Bockius, LLP, Philadelphia, PA, for Defendant-Appellee Branch Banking and Trust Company, Successor in Interest to Susquehanna Bank and SBSI, Inc.

Franklin H. Top III , Chapman and Cutler LLP, Chicago, IL, for Defendants-Appellees U.S. Bank National Association and Trustee U.S. Bank Trust National Association.

Joshua Dorchak , Morgan, Lewis, & Bockius, LLP, New York, NY, for Defendants-Appellees Continental Life Insurance Company of Brentwood Tennessee, Country Life Insurance Company, Marsh & McLennan Companies, Inc. Stock Investment Plan, Marsh & McLennan Master Retirement Trust, Modern Woodmen of America, Inc., PHL Variable Insurance Company, Phoenix Life Insurance Company, Putnam Dynamic Asset Allocation Funds-Growth Portfolio, Putnam Intermediate Domestic Investment Grade Trust, Putnam Stable Value Fund, SBSI, Inc., and Susquehanna Bank.

Christopher M. Desiderio , Nixon Peabody LLP, New York, NY, for Defendants-Appellees Deutsche Bank Trust Company Americas, as Trustee, State Street Bank and Trust Company, as Trustee, State Street Global Advisors, State Street International Ireland Limited, and ZAIS Investment Grade Limited X.

Matthew J. Gold , Kleinberg, Kaplan, Wolff & Cohen, P.C., New York, NY, for Defendant-Appellee Elliott International, L.P.

William A. Slaughter , Ballard Spahr LLP, Philadelphia, PA; Leslie C. Heilman , Ballard Spahr LLP, Wilmington, DE, for Defendant-Appellee First Northern Bank and Trust Company.

John H. Thompson , McGuire Woods LLP, Washington, DC, for Defendants-Appellees Garadex Inc., Gatex Properties Inc., and Morgan Stanley & Co., Incorporated.

Scott Walter Reynolds , Chaffetz Lindsey LLP, New York, NY; Nicole E. Schiavo , Peter A. Ivanick , Hogan Lovells US LLP, New York, NY, for Defendants-Appellees General Security National Insurance and SCOR Reinsurance Company.

Nicholas P. Crowell , Alex R. Rovira , Andrew P. Propps , Sidley Austin LLP, New York, NY, for Defendants-Appellees Genworth Life and Annuity Insurance Co., Magnetar Constellation Fund II Ltd, Magnetar Constellation Master Fund III Ltd, Magnetar Constellation Master Fund Ltd., and UniCredit Bank AG, London Branch.

Gregory F. Hauser , Wuersch & Gering LLP, New York, NY, for Defendant-Appellee LGT Bank in Liechtenstein Ltd.

Matthew J. Gold , Kleinberg, Kaplan, Wolff & Cohen, P.C., New York, NY, for Defendant-Appellee The Liverpool Limited Partnership.

Thomas J. Fleming , Olshan Frome Wolosky LLP, New York, NY, for Defendants-Appellees Mariner LDC, Structured Credit Opportunities Fund II, L.P., and Tricadia Credit Strategies Master Fund, Ltd., f/k/a Mariner-Tricadia Credit Strategies Master Fund, Ltd.

Kevin J. Biron , Morgan, Lewis & Bockius LLP, New York, NY, for Defendant-Appellee MBIA, Inc.

Brian Dillon , Gray, Plant, Mooty, Mooty, & Bennett, P.A., Minneapolis, MN, for Defendant-Appellee MoneyGram Securities, LLC and its Successors in Interest.

Lewis J. Liman , Cleary Gottlieb Steen & Hamilton, New York, NY, for Defendant-Appellee Morgans Financial Limited.

Jack Yoskowitz , Seward & Kissel LLP, New York, NY, for Defendant-Appellee Mulberry Street CDO, Ltd.

Scott W. Reynolds , Chaffetz Lindsey LLP, New York, NY, for Defendant-Appellee Natixis Financial Products LLC.

Nicholas P. Crowell , Jon W. Muenz , Andrew P. Propps , Sidley Austin LLP, New York, NY, for Defendant-Appellee PCA Life Assurance Co. Ltd.

Emilio B. Nicolas , Jackson Walker LLP, Austin, TX, for Defendant-Appellee RGA Reinsurance Co.

David Adler , McCarter & English, LLP, New York, NY, for Defendant-Appellee Security Benefit Life Insurance Co.

Joseph J. Saltarelli , Hunton Andrews Kurth LLP, for Defendant-Appellee Shenandoah Life Insurance Company.

Madlyn Gleich Primoff , Timothy P. Harkness , David Y. Livshiz , Henry V. Hutten , Jill K. Serpa , on the brief, Freshfields Bruckhaus & Deringer US LLP, New York, NY, for Amicus Curiae Structured Finance Industry Group.

Before: Jacobs, Carney, and Bianco, Circuit Judges.


The Bankruptcy Code generally bars enforcement of "ipso facto clauses," which trigger or modify payment obligations when a party seeks relief in bankruptcy. Lehman Brothers Special Financing Inc. ("LBSF") seeks to recover payments made to defendant noteholders (the "Noteholders") in connection with certain synthetic collateralized debt...

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