SDNY Judge Denies SFIG Motion to File Amicus Brief in Lehman Flip-Clause Case

Last week, Judge Schofield at the U.S. District Court in the Southern District of New York (SDNY) denied SFIG's motion for leave to file an amicus brief in the case of Lehman Brothers Special Financing Inc. v. Bank of America National Association et al. The case considers the treatment of a so-called "flip clause" in a securitization waterfall in the event of a bankruptcy. A "flip clause" redirects or reprioritizes cash flow upon bankruptcy, and often comes up in securitizations that include swaps.

The SDNY order indicated that the denial is due to the fact that SFIG's brief supports the defendants' position, and that defendants are "represented by exceedingly competent counsel" and were afforded additional time and pages for their brief.

Lehman appealed the July 2016 decision of the U.S. Bankruptcy Court dismissing the case to SDNY, and submitted a letter to the District Court refusing to consent to SFIG's request of June 2nd to file an amicus brief. A ruling will not come until after oral argument which has not yet been scheduled, so it is possible that a ruling from Judge Schofield may not come until late 2017 or possibly early 2018.  Depending on that ruling, the parties may then choose to appeal to the Second Circuit and eventually to the U.S. Supreme Court.

If you have any questions about this matter please feel free to reach out to Jennifer Wolfe or Alyssa Acevedo.

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