Beginning on September 15, 2008, Lehman Brothers Holdings Inc. (“LBHI”) and 16 of its affiliates (the “Debtors”) filed voluntary Chapter 11 bankruptcy petitions with the United States Bankruptcy Court for the Southern District of New York. The resulting bankruptcy cases are jointly administered by the bankruptcy court for procedural purposes (collectively, the “Chapter 11 Proceeding”), but to date, the Debtors remain separate legal entities.  

Financial advisors, investment bankers, lawyers and other professionals in reorganization cases should pay close attention to a decision of the U.S. Court of Appeals for the Second Circuit handed down on Jan. 6, 2009. In re Smart World Technologies, LLC, ___ F.3d ___ (2d Cir. 1/6/2009).

In In re Entringer Bakeries, Inc.,1 the United States Court of Appeals for the Fifth Circuit affirmed the viability of the “earmarking doctrine” as a judicially-created defense to a preference action under section 547(b) of the Bankruptcy Code.

Investors victimized by the fraud perpetrated by Bernard Madoff and his company, Bernard L. Madoff Investment Securities, LLC (collectively Madoff), should be aware of their legal options and risks. Some of these options have very short deadlines. Likewise, investors who successfully withdrew their investments before Madoff`s fraud came to light could face potential claims. In either circumstance, the prospects of litigation are high.

As the economy worsens and the value of corporate assets declines, unsecured creditors are finding that very little, if anything, is left for them at the bankruptcy table after the secured creditors have taken as much as they can from a debtor’s assets. Now, after a period of having copious credit available on attractive terms, debtors are going into bankruptcy without sufficient assets to pay even their secured creditors in full. In such circumstances, prospects for unsecured creditors are bleak indeed.  

In the insurance industry, title insurance is known as a “long-tailed” liability risk, which means that it is common for claims to be made many years after policies are issued. For this reason, owners of real estate, their lenders and their counsel have long scrutinized the financial health of title insurance underwriters.

The Sixth Circuit recently held that section 2-702(3) of the Uniform Commercial Code (the "UCC"), which permits good faith purchasers to defeat a valid right to reclaim, does not allow a secured creditor to defeat that right.[1] The Sixth Circuit found that the security interest held by a DIP lender could not be used to defeat the right of a reclaiming creditor under the UCC or pre-BAPCPA section 546(c) of the Bankruptcy Code. This decision may impact the way bankruptcy courts consider reclamation claims under revised section 546(c) of the Bankruptcy Code.

The Administrators of Lehman Brothers International (Europe) (in administration) (“LBIE”), acting as LBIE’s agent and without personal liability, have advised that they will be filing an omnibus claim on behalf of LBIE and LBIE’s customers against Lehman Brothers Inc. (“LBI”) in its liquidation proceedings under the Securities Investor Protection Act of 1970 (“SIPA”).  

Earlier this week, Barclays Capital Inc., the investment banking unit and capital markets unit of Barclays plc, and Lehman Brothers Inc., the brokerage unit of Lehman Brothers Holdings Inc., entered into a settlement under which Barclays Capital will receive approximately $689 million in cash and securities for securities belonging to customers of Lehman Brothers that were never transferred when Barclays plc closed the sale for Lehman Brothers on Septemb

On December 10, 2008, Bernard Madoff confessed to his two sons that he had been running what amounted to a massive Ponzi scheme on the scale of approximately $50 billion and that he could no longer sustain it due to, among other things, substantial redemption requests. That night, his sons alerted authorities.