By David Bario, From The Litigation Daily

The long and tortured legal brawl over Barclays plc’s firesale acquisition of Lehman Brothers’ brokerage business has finally arrived at the highest court in the land.

James Giddens of Hughes Hubbard & Reed, the liquidation trustee for Lehman Brothers Inc., turned to the U.S. Supreme Court on Monday in an attempt to undo Barclays’ near-total victory in the five-year-old case. Giddens tapped Bancroft’s Paul Clement to file Monday’s cert petition, which asks the court to consider whether the Lehman sale was improperly altered after it was initially approved, creating a multibillion-dollar “windfall” for Barclays.

By allowing Barclays to walk away from the deal with most of its alleged windfall intact, the petition argues, the lower courts gutted important legal safeguards and provided a “playbook for sophisticated parties and lawyers to game” bankruptcy-governed sales.

“If this bait-and-switch gambit works to the tune of $4 billion or more, there is no reason for others not to try to replicate the maneuver,” the trustee asserts.

Barclays acquired Lehman Brothers’ North American brokerage unit in the dark days of September 2008, just after the investment bank collapsed under the weight of its exposure to the subprime mortgage and credit markets. U.S. Bankruptcy Court Judge James Peck in Manhattan quickly approved the sale, but he explicitly ordered that no cash should go from Lehman to Barclays. As the hectic week unfolded, however, Barclays and the Lehman lawyers inserted a “clarification letter” into the deal that included significant assets for Barclays.

The parties have been battling over the letter—and its implications for billions of dollars in disputed assets—ever since.

We’ll spare you all the twists and turns, but suffice it to say the bankruptcy judge largely sided with Barclays in 2011, following a marathon bench trial, rejecting the bulk of Giddens’ “windfall” allegations. Giddens and Hughes Hubbard then appeared to regain their footing a few months later, persuading Peck that many of the disputed assets indeed qualified as “cash” and shouldn’t have been transferred to Barclays. In June 2012, however, U.S. District Judge Katherine Forrest in Manhattan erased most of Giddens’ victory. The U.S. Court of Appeals for the Second Circuit finally weighed in earlier this year, rebuffing Giddens’ attempt to claw back billions from Barclays.

In Monday’s petition, Giddens and his new Supreme Court hired gun hope to focus the justices’ attention on Section 363(b)(1) of the federal bankruptcy code, which requires “notice and a hearing” before certain sales of a debtor’s property can take place. Bancroft’s Clement argues that the sale that was initially presented to Judge Peck—and which had both the trustee’s and the judge’s blessing—was vastly altered in the final agreement.

“The decisions below eviscerate the statutory and constitutional safeguards provided by Section 363’s notice-and-hearing requirement,” the petition states. “And they work a massive injustice here, causing a sale approved on the basis of repeated assurances that ‘no cash’ would flow out to Barclays to produce a $4 billion-plus cash windfall for Barclays to the detriment of Lehman’s creditors.”

Monday’s petition—should the Supreme Court grant it—raises the intriguing prospect of a high court showdown between former U.S. solicitor general Clement and David Boies of Boies, Schiller & Flexner. Barclays has been represented throughout the litigation by attorneys at the firm, including Boies, fellow name partner Jonathan Schiller, and Hamish Hume.

Photo by Insider Monkey

For more on this story go to: http://www.litigationdaily.com/id=1202679131909/Lehman-Trustee-Takes-Barclays-Fight-to-Supreme-Court#ixzz3M461TPcz