A GO litigation team prevailed on behalf of one of its financial services clients in a lawsuit filed in New York State Supreme court against the client and several of its individual officers arising out of the Lehman Brothers bankruptcy.  Seaview Mezzanine Fund L.P., a private equity fund, had loaned more than $5 million to our client in exchange for secured notes and warrants.  Our client set up two accounts at Lehman Brothers entities and used a portion of the funds to trade securities and zero coupon bonds.  After Lehman filed for bankruptcy, the funds were frozen and Seaview started its lawsuit claiming that when Lehman brothers went bankrupt causing the funds to be frozen, our client violated the loan documents between Seaview and our client.  In addition, Seaview claimed that the individual officers breached their alleged fiduciary duties to Seaview and were professionally negligent.  Seaview sought approximately $3 million in damages.

GO’s team of Debra Guzov, David Kaplan and Anne Salisbury successfully obtained dismissal of all of Seaview’s claims against our client as well as those against the individual officers.   Supreme Court Justice Barbara R. Kapnick ruled that neither our client nor the individual officers owed Seaview a special, fiduciary duty because it was an “arm’s length transaction between sophisticated parties”.  Judge Kapnick also dismissed claims of professional negligence against the individual officers and the contract claims, finding that our client was not responsible for the Lehman bankruptcy or the resulting freeze on the accounts, and therefore did not permit an “encumbrance” in violation of the parties’ contracts.   Having dismissed the underlying claims, Justice Kapnick also dismissed the request for an accounting and for attorneys’ fees.
 

A copy of the decision can be found  here.