Lehman Brothers: the fight after the fall

One would have to have been sleeping right the way through, well everything to not know about the collapse of one of the worlds biggest investment banks Lehman Brothers. Any businessmanperson will know that no successful business can operate in isolation and therefore no successful organisation can fall without creating casualties.

It may seem like it has 'nothing' to do with you directly, but most of our banks and pension funds have dealings with Lehman. It will effect global financial markets and also share prices and things like getting a loan or mortgage have inevitably become more difficult.

Organisations affiliated with the bank are going to try and minimise their losses and get as much as they can while Lehman simultaneously attempts to retain as much as they can for their bankrupt estate. I really do hope you are following!

What this means for law firms is lots and lots of litigation (which is just the process of taking a case to court to determine the legal rights of the parties). Firms such as Linklaters, Norton Rose and Simmons & Simmons (yep it’s the firm that Mayer Brown has the hots for!) are all attempting to access money for their clients from the $billion Lehman Brothers International Europe (LBIE) pool.

 

The problem here is that last year the High Court ruled that the LBIE client money pool which should have been segregated when the company went into administration is not accessible by these clients. Obviously access to that pool means more money so the clients want access.

 

So today, all representing different clients, the firms are at the Court of Appeal fighting for what they believe should be theirs.  Allen & Overy are representing GLG Investments who say that the client pool should only be accessed by those whose money was indeed segregated. Baker & McKenzie’s clients do not want this client pool to be topped up with money from Lehman’s general estate.

 

ARRGGH! All too complicated:

 

So I own the biggest shoe store like in the whole world. And loads of people buy shoes from me. Some people even give me money so that when new shoes come out they can be the first to get them without having to pay. Imagine you give me £5000 shoe money and I say I’ll keep it aside for you. 1 million other people have given me different sums to hold shoes (which I throw into one massive shoe box labelled SHOE MONEY).

 

One day I lose faith (no pun intended) and my shoe store crumbles and I owe so many companies money they all want it now they know I am going bust. So you say, listen can I have that £5000 back now that I know I am not getting any shoes. And I say well yeah sure but uhm, I kinda didn’t keep that money aside. Theres only £1million left in SHOE MONEY but I owe £10million to shoe lovers.

 

You say GRRR! Give me my £5000! And I’m like but that’s also shoeloverlover’s £8000. IF I had kept that £5000 aside like I said I would, when I collapsed it would be known as yours, but now it is just in a massive pool of money owed to many shoelovers.

 

The End.

 

Now there are many legal and business concepts that apply to these processes (that will take ages to explain) and it definitely gets more complicated the larger the company is. Lehman Litigation has been continuing for years now and it is likely to continue with many disgruntled "shoelovers" in the end.