Judge recommends hearing on Barclays' request to exclude American Express contracts from sale order

By Rebecca Melvin

New York, Dec. 16 - Lehman Brothers Holdings Inc.'s bankruptcy case judge said Tuesday he wasn't prepared to approve Barclays Capital Inc.'s request to modify the Lehman sale order to take out two contracts of American Express Travel Related Services Co. Inc.

Instead, he suggested that the parties prepare for an evidentiary hearing.

"It appears that there may be issues of fact that go beyond the substance of the declarations filed - that the court would need to delve into to understand what was going through the minds of people ... it's not obvious what the intent was," said judge James Peck of the U.S. Bankruptcy Court for the Southern District of New York.

Barclays posits that the American Express contracts were erroneously posted as "closing date contracts" in the Lehman sale order.

Counsel for American Express, Martin Bienenstock Dewey & LeBoeuf LLP, told the court that he believed it was deciding after the fact that the contracts weren't desirable and that Barclays didn't have standing to make that kind of change.

Bienenstock said that if the court ruled in favor of Barclays then it would in effect be saying that it wasn't going to follow a matter of case law, a UAL Corp. bankruptcy decision. "These are pure issues of law," he said.

Peck said he wanted to explore factual issues, including the circumstances of the "mistake," and how it came to be that there were ongoing communications with American Express within the week within the closing of the Barclays purchase, touching on cure amounts.

179 contracts mistakenly in sale order

However, another motion of Barclays was deemed by the court to be an inadvertent mistake.

Peck approved Barclays request to remove 179 contracts mistakenly posted as closing date contracts due to a computer error.

It was as simple as something that should have been minimized being maximized, Lehman counsel told the court.

New York-based Lehman Brothers Holdings was the fourth largest U.S. investment bank. The company filed for bankruptcy on Sept. 15. Its Chapter 11 case number is 08-13555.

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