Citibank Defends Trade Valuations To Open $2B Lehman Suit

By Alex Wolf

Law360, New York (April 25, 2017, 9:41 PM EDT) -- Lawyers for Citibank NA came out swinging Tuesday to open a bankruptcy court trial over the nearly $2 billion valuation of about 30,000 derivatives trades that went into default after Lehman Brothers’ 2008 collapse, saying Citibank used proper methods to determine the cost of replacing those trades.

Jay Cohen gives opening statement in the LBHI v Citibank trial in SDNY Bankruptcy trial

On the first day of a multiweek bench trial in front of U.S. Bankruptcy Judge Shelley C. Chapman, attorneys Jay Cohen and Claudia Hammerman of Paul Weiss Rifkind Wharton & Garrison LLP delivered opening arguments for Citibank.

Claudia Hammerman gives opening statement to Judge Shelly Chapman in SDNY Bankruptcy Court.

A question before U.S. Bankruptcy Judge Shelley C. Chapman is whether a creditor holding a claim secured by a right of setoff can recover post-petition interest under the U.S. Bankruptcy Code. Citi says its $2.2 billion in claims against Lehman are secured by setoff rights against $2 billion in Lehman cash it has held since 2008, and it wants the post-petition interest based on the argument that it is oversecured.

Citibank Trial Team: L-R Jay Cohen, Liza Velazquez, Claudia Hammerman, Julia Wood
Courtroom Art by Elizabeth Williams

Lehman's objection to the post-petition interest is part of a larger lawsuit over the validity of Citi's claims, which arose from clearing and settlement services it provided before Lehman’s collapse as well as credit and derivative contract debts.

The trial is expected to last into September 2017.