martindale.com
Legal Library
|
Lehman Bankruptcy Court Rules on Right to Withhold Payment under ISDA Master Agreement by Sutherland Asbill & Brennan LLP - Washington Office
|
|
October 6, 2009
Previously published on September 29, 2009
On September 17, 2009, the U.S. Bankruptcy Court for the Southern District of New York granted Lehman Brothers Special Financing Inc.'s (LBSF, and collectively with its affiliates, Lehman) Motion to compel performance of Metavante Corporation's (Metavante) obligations under an executory contract and to enforce the automatic stay (the Motion). The Order requires Metavante to make all payments to LBSF required under the ISDA Master Agreement (Master Agreement) between the parties, including payments suspended as a result of the bankruptcy filing, together with default interest on such payments. Metavante withheld its payments in reliance on § 2(a)(iii) of the Master Agreement, which imposes a condition precedent that no Event of Default exist before a party is obligated to make any payment or delivery. Metavante argued that Lehman's bankruptcy filings constituted Events of Default and therefore allowed suspension of Metavante's payment obligations. In an oral statement accompanying the ruling, the Court found that Metavante's reliance on the condition precedent language in § 2(a)(iii) of the Master Agreement violated § 365(e)(1) of the Bankruptcy Code's prohibition of any termination or modification of a contract due to the debtor's bankruptcy filing, so-called ipso facto clauses.
|
The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance. |
| | View More Library Documents By... | | | | |
| | | | Sutherland Asbill & Brennan LLP Overview |
Practice Area Resource Centers
|
|