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In re Lehman Brothers Holdings Inc.

United States District Court, S.D. New York

August 2, 2017

In Re Lehman Brothers Holdings Inc.

          For Appellant: John A. Bicks Henry E. Shin Robert T. Honeywell Priya Chadha K&L Gates LLP (NYC) Brian D. Koosed K&L Gates (DC).

          For Appellees: Christopher J. Cox Weil, Gotshal & Manges, L.L.P. Jacqueline Marcus Weil, Gotshal & Manges LLP (NYC).

          OPINION & ORDER

          DENISE COTE United States District Judge.

         This dispute arises from a bankruptcy proceeding in which Lehman Brothers Holdings Inc. (“LBHI”), the Chapter 11 bankruptcy plan administrator for Lehman Brothers Special Financing Inc. (“LBSF”) (collectively, “Lehman”), sought to “claw back” certain transfers to appellant Shinhan Bank (“Shinhan”). On April 20, while a motion to dismiss was fully submitted and pending before the bankruptcy court, Lehman and Shinhan agreed to a settlement of a certain sum of money in exchange for mutual releases. Shinhan appeals the bankruptcy court's finding that the settlement agreement is enforceable. For the reasons that follow, the decision of the bankruptcy court is affirmed.


         The facts, which are undisputed, are as follows. On September 14, 2010, LBSF filed an adversary proceeding in the bankruptcy court seeking to avoid, or “claw back, ” certain transfers to Shinhan and hundreds of other noteholder defendants. Shinhan is headquartered in South Korea. The defendants in the underlying proceeding, including Shinhan, filed a motion to dismiss on December 14, 2015, and the motion became fully submitted on April 4, 2016. Oral argument on the motion was scheduled to occur on May 4.

         While the motion was pending, the parties were referred to mediation. At an April 6, 2016 settlement conference, the Mediator proposed that Shinhan pay Lehman a certain amount (the “Settlement Amount”) to settle the case. On April 20, counsel for Shinhan wrote to the Mediator: “We appreciate your consideration in allowing Shinhan Bank additional time to consider your settlement proposal in this matter, which we are pleased to report that Shinhan has agreed to accept. We look forward to hearing back from you once you have Lehman's response.” The same day the Mediator reported via email that

the parties have agreed to settle this dispute: Shinhan Bank will pay Lehman $[redacted] in full and complete settlement. Because Lehman has routine settlement documentation, I ask Lehman to provide the documentation to Shinhan for its review. Please conclude this matter promptly. Inform me of any problems or delays. Thank you for your conscientious -- and very constructive -- work to bring this matter to a mutually agreeable resolution.

         On April 21, Lehman sent Shinhan's counsel a draft agreement. Oral argument on the motion occurred as scheduled on May 4.

         On May 11, Shinhan proposed two changes to the agreement: (1) granting Shinhan 10 days rather than 5 days to pay the Settlement Amount; and (2) revising Section 4 “to require that the parties execute hard copies . . . as opposed to electronic copies due to [Shinhan's] internal regulations.” Shinhan proposed that the agreement be dated as of the day that Shinhan executed it in hard copy form. Shinhan also requested documentation from LBSF to validate the authority of LBHI to sign the Agreement on LBSF's behalf.

         On May 12, Lehman accepted Shinhan's proposed changes and requests and advised that Lehman would “circulate[] an execution copy” of the agreement. On May 19, Shinhan requested that (1) rather than sign the agreement in counterparts, Lehman send Shinhan two original, signed copies of the Release Agreement; and (2) LBSF provide a Board resolution and other documents establishing the LBSF and LBHI signatories' authority to sign the written agreement. LBSF agreed to provide those additional documents that same day. On May 26, LBSF and LBHI, as credit support provider, signed the agreement, titled the “Release Agreement.” On May 27, LBSF sent the signed Release Agreement to Shinhan for its signature. On May 30, Shinhan received the Release Agreement signed by Lehman.

         On June 14, Lehman asked Shinhan's counsel: “Have you heard anything from Shinhan on their execution of the Agreement?” Shinhan's counsel responded that “Shinhan is trying to get everything signed up . . . by the end of this week.” On June 17, Shinhan's counsel informed Lehman: “[I]t looks like the week of June 27 is most likely for signature/payment.” On the morning of June 28, Lehman again inquired as to Shinhan's execution of the Release Agreement, asking Shinhan's counsel “Any updates?” Shinhan's counsel replied within minutes that “Shinhan just confirmed that they have completed their internal approval process and the Settlement Agreement will be signed by Thursday[, ] June 30 . . . after which they will remit the Settlement Amount.”

         Approximately four hours later on June 28, the bankruptcy court issued its order dismissing Lehman's claims against Shinhan and other defendants in the adversary proceeding, with prejudice. On June 30, 2016, LBSF wrote to Shinhan's counsel: “We have not seen the wire come in yet today. Please let me know which bank Shinhan has used to wire the Settlement Amount.” Shinhan's counsel responded that “[a]s we and our client are still evaluating the [bankruptcy court's] decision and expect to continue to do so over the next few days, we will get back to you on this sometime next week.”

         Shinhan subsequently advised Lehman that it did not believe an enforceable settlement agreement had been entered into and that it would not pay the Settlement Amount. Shinhan does not dispute that, until the bankruptcy court granted the motion to dismiss, it intended to sign the agreement. ...

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