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Lehman looks to stay avoidance action litigation to save costs
By Caroline Salls
Pittsburgh, Sept. 16 - Lehman Brothers Holdings Inc. has asked the U.S. Bankruptcy Court for the Southern District of New York to stay prosecution of 50 avoidance actions it has filed "to avoid the enormous costs and burdens to all parties and the court associated with prematurely pursuing active litigation in the avoidance actions," according to a Thursday court filing.
Lehman said it filed the avoidance actions seeking to recover or avoid significant transfers related to more than 230 transactions because the Bankruptcy Code's statute of limitations for filing these actions runs out as early as two years from the company's bankruptcy filing date.
If the avoidance actions are not stayed, the company said it will be forced to divert resources from conducting further due diligence and actively trying to resolve these matters to responding to discovery demands, engaging in motion practice and preparing for contested proceedings and trials.
"Not only will wide-scale litigation of the avoidance actions drain the debtors' resources, it would also monopolize the court's docket," Lehman said in the motion.
The company said it has implemented several innovative procedures as an alternative to litigation to efficiently administer its cases.
Lehman said these procedures have helped it recover more than $200 million for its estates and settle disputes with 35 derivatives counterparties without litigation.
A hearing is scheduled for Oct. 20.
New York-based Lehman Brothers Holdings Inc. was the fourth-largest investment bank in the United States. The company filed for bankruptcy on Sept. 15, 2008. Its Chapter 11 case number is 08-13555.
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