Lehman Court Finds Safe Harbors Protect Damage Calculation Provisions In Swap

Judge James M. Peck issued an important opinion in the Lehman Brothers bankruptcy late last month.  The opinion protects a non-debtor counterparty’s right to rely on a contractually agreed methodology for damages calculations upon the liquidation of a safe harbored swap agreement—even if the debtor’s bankruptcy triggers the provision. Because Judge Peck issued the opinion shortly before the holidays, the opinion has received scant attention.  However, it preserves important safe harbored rights.  In the opinion, Judge Peck attempts to distinguish his earlier rulings in the Lehman Brothers bankruptcy where the Court did not permit counterparties to enforce certain contractual rights triggered by the bankruptcy.  Mich. State Hous. Dev. Auth. v. Lehman Bros. Derivative Prods. Inc. (In re Lehman Bros. Holdings, Inc.), Adv. No. 09-01728 (JMP), 2013 WL 6671630 (Bankr. S.D.N.Y. Dec. 19, 2013).  Read More.