Judge Chapman's judgment is obviously a welcome
development for participants in the structured capital markets,
particularly those who transact regularly with US
counterparties.
On 28 June 2016, the US Bankruptcy Court handed down an
important judgment in Lehman Brothers Special Financing Inc. v.
Bank of America National Association (Case No. 10-3547), summarily
dismissing claims of Lehman Brother Special Financing Inc.
(LBSF), which sought to claw back collateral
proceeds in respect of more than 40 series of collateralised debt
obligations (CDOs). Those proceeds were
distributed to noteholders in late 2008, following the collapse of
Lehman Brothers.
In dismissing LBSF's complaints, Judge Chapman departed from
a previous ruling of Judge Peck which found that "flip
clauses" (ie. provisions in structured finance documents that
reverse or "flip" the priority of payment obligations
owed to swap counterparties on the one hand and noteholders on the
other, following a
