**12-2322-bk (L) In Re: Lehman Brothers Holdings Inc.**  **Barclays Capital, Inc. v. Giddens** UNITED STATES COURT OF APPEALS 1
FOR THE SECOND CIRCUIT 2 August Term, 2012 3 4 (Argued: May 29, 2013 Decided: August 5, 2014) 5 Docket Nos. 12-2322-bk(L), 12-2933-bk(XAP) 6



### - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 7 IN RE: LEHMAN BROTHERS HOLDINGS INC., 8 9 Debtor

. 10 11



### - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 12 13 BARCLAYS CAPITAL INC., BARCLAYS BANK PLC, 14 15 Appellees-Cross-Apellants , 16 17 v. 18 19 JAMES W. GIDDENS, as Trustee for the SIPA Liquidation of Lehman 20 Brothers Inc., 21 22 Appellant-Cross-Appellee , 23 24 and 25 26 SECURITIES AND EXCHANGE COMMISSION, SECURITIES INVESTOR 27 PROTECTION CORPORATION, Statutory Intervenors pursuant to 28 Securities Investor Protection Act, 15 U.S.C. § 78eee(c)&(d), 29 30 Intervenors

. 31 32



### - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 33 34 B e f o r e: WINTER, HALL, and LYNCH, Circuit Judges

. 35 36 37 38

1Appeal from an order entered in the United States District 1 Court for the Southern District of New York (Katherine B. 2 Forrest, Judge ), reversing in part and affirming in part an order 3 of the bankruptcy court (James M. Peck, Judge ). The trustee of a 4 liquidating broker-dealer and the purchaser of the distressed 5 company’s assets dispute the entitlement to certain assets. We 6 affirm the district court. 7 WILLIAM R. MAGUIRE (Seth D. Rothman, 8 Neil J. Oxford, Samuel C. McCoubrey, 9 Hughes Hubbard & Reed LLP, New York, NY, 10 William R. Stein, Hughes Hubbard & Reed 11 LLP, Washington, DC, Kenneth E. Lee & 12 Scott B. Klugman, Levine Lee LLP, New 13 York, NY, on the brief ) Hughes Hubbard & 14 Reed LLP, New York, NY, forAppellant15 Cross-Appellee

. 16 17 KENNETH J. CAPUTO (Josephine Wang, on 18 the brief ) Securities Investor 19 Protection Corporation, Washington, DC, 20 forIntervenor Securities Investor 21 Protection Corporation

. 22 23 DAVID BOIES (Jonathan D. Schiller, 24 Boies, Schiller & Flexner LLP, New York, 25 NY, Hamish P.M. Hume & Jonathan M. Shaw, 26 Boies, Schiller & Flexner LLP, 27 Washington, DC, on the brief ) Boies, 28 Schiller & Flexner LLP, New York, NY, 29 forAppellees-Cross-Appellants

. 30 31 Michael A. Conley, Jacob H. Stillman, 32 Tracey A. Hardin, Benjamin M. Vetter, 33 Securities and Exchange Commission, 34 Washington, DC, forIntervenor 35 Securities and Exchange Commission

. 36 37 Sigmund S. Wissner-Gross, Brown Rudnick 38 LLP, New York, NY, Steven D. Pohl, Brown 39 Rudnick LLP, Boston, MA, forAmicus 40 Curiae Managed Funds Association

. 41 42

2WINTER, Circuit Judge : 1 2 Appellant James W. Giddens is the Trustee appointed pursuant 3 to the Securities Investor Protection Act (“SIPA”) to protect 4 public customers and creditors in the liquidation of Lehman 5 Brothers, Inc. (“LBI”). This appeal involves a dispute between 6 the Trustee and the appellee purchasers of LBI’s assets over the 7 entitlement to two sets of LBI assets: (i) the “Margin Assets,” 8 i.e. , cash and cash equivalents held by third parties to secure 9 LBI’s exchange-traded derivatives (“ETDs”) business; and (ii) the 10 “Clearance Box Assets” (sometimes “CBAs”), about $1.9 billion in 11 unencumbered securities held in LBI’s “clearance box” at the 12 Depository Trust Clearing Corporation (“DTCC”). A third dispute, 13 involved in the cross-appeal but now settled, was over the so14 called “Rule 15c-3 Assets.” 1 15 Bankruptcy Judge Peck held that Barclays had not purchased 16 either the Margin Assets or the Rule 15c-3 Assets, but was 17 conditionally entitled to the Clearance Box Assets. On appeal to 18 the district court, Judge Forrest affirmed in part and reversed 19 in part, holding that Barclays was entitled to both the Margin 20 Assets and the CBAs, and was conditionally entitled to the Rule 21 15c3-3 Assets. The Trustee appealed from the Margin Assets and 22

1 These were assets either held in LBI’s Reserve Bank Account pursuant to Securities and Exchange Commission (“SEC”) Rule 15c3-3, 17 C.F.R. § 240.15c3-3(e)(1), or included by LBI as a debit item in calculating the amount required to be held in the Reserve Bank Account pursuant to Rule 15c3-3.CBA rulings. 2Barclays cross-appealed from the Rule 15c3-3 1 Assets ruling but the settlement has disposed of that issue and 2 cross-appeal. 3 For the reasons that follow, we affirm the district court. 4
BACKGROUND 5 We relate here only those facts pertinent to the disposition 6 of the issues before us. Certain documents and asset-specific 7 facts are considered more fully in the Discussion section, infra

. 8 a) The Lehman Bankruptcy 9 On September 15, 2008, Lehman Brothers Holdings Inc. (“LBHI” 10 and together with LBI, “Lehman”) filed for bankruptcy. The SIPA 11 liquidation of LBI, LBHI’s North American broker-dealer 12 subsidiary, followed. 13 Both government regulators and Lehman alike desired, and 14 achieved, an emergency sale of LBI to Barclays Capital Inc. 15 (“Barclays”) pursuant to Section 363 of the Bankruptcy Code, 11 16 U.S.C. § 363 (the “Sale” or “Asset Sale”). The Sale was the 17 “largest, most expedited and probably the most dramatic asset 18 sale that has ever occurred in bankruptcy history . . . .” In re 19 Lehman Bros. Holding Inc. , 445 B.R. 143, 148-49 (Bankr. S.D.N.Y. 20 2011). The sale of Lehman’s businesses as a going concern saved 21

2 The Trustee’s position regarding the Margin Assets is adopted by the Securities Investor Protection Corporation (“SIPC”), “a statutorily created nonprofit corporation consisting of registered broker-dealers and members of national securities exchanges . . . .” In Re Bernard L. Madoff Inv. Secs. LLC , 721 F.3d 54, 58 (2d Cir. 2013), cert. denied, No. 13-448, 2014 WL 2921722 (U.S. June 30, 2014). Both SIPC and the SEC are authorized to participate in SIPA proceedings. See15 U.S.C. § 78eee(c)-(d).

4thousands of jobs and avoided losses estimated to be in “the 1 hundreds of billions of dollars.” 2 The Sale was also understood as a tremendous risk for 3 Barclays. However, as the bankruptcy court later stated, “the 4 overall transaction with Barclays . . . provided the means for 5 the most favorable disposition of these assets with the least 6 amount of risk.” Id.at 157. It was the best, and perhaps the 7 only, alternative to a huge economic loss. 8 On September 16, 2008, the day after the bankruptcy filing, 9 Lehman and Barclays executed an Asset Purchase Agreement (“APA”), 10 that defined the assets that would be “Purchased” by Barclays and 11 those that would be “Excluded” from that purchase. The assets 12 that were to be “Purchased” under the APA included, among other 13 things, retained cash, all deposits and prepaid charges and 14 expenses, and “exchange traded derivatives.” The assets that 15 were to be “Excluded” from the “Purchase” were set forth in 16 Section 1.1 of the APA, and encompassed “all cash, cash 17 equivalents, bank deposits or similar cash items of LBI,” as well 18 as “all assets primarily related to . . . derivative contracts.” 19 Although unknown to the bankruptcy court at the time, 20 Barclays’s board of directors was prepared to approve the deal 21 only if it was “capital accretive,” i.e. , included a buffer of 22 assets in excess of liabilities in the amount of $5 million. The 23 parties agreed to achieve such a buffer by means of a repurchase 24 agreement. On September 18, the day before the bankruptcy court 25
5was to hold the “Sale Hearing” to consider the Asset Sale, 1 Barclays provided LBI with $45 billion in cash so that LBI could 2 repay a loan it had received from the New York Federal Reserve. 3 In exchange, LBI was expected to provide Barclays with collateral 4 previously pledged to the New York Federal Reserve. However, the 5 collateral LBI transferred was worth far less than $45 billion. 6 In addition, LBI notified Barclays on the morning of 7 September 19, the day of the Sale Hearing, that it could no 8 longer deliver billions of dollars in assets that had been 9 promised in the APA. As a result, Barclays demanded that LBI 10 identify assets that LBI could still transfer, in order for 11 Barclays to decide whether to close the deal. The bankruptcy 12 court dubbed what ensued thereafter as the “asset scramble,” in 13 which LBI sought to identify assets that could be transferred to 14 Barclays in order to close the deal. 445 B.R. at 151. This 15 scramble produced the two groups of assets that are the subject 16 of the current appeal: the Margin Assets and the CBAs. 3 17 At the Sale Hearing later that day, the parties represented 18 that a deal had been reached in principle but that there were 19 still several moving parts. The Sale involved, inter alia , the 20 transfer of financial assets, liabilities, and 72,000 customer 21 accounts. It was presented in the form of the APA. Because LBI 22

3 Barclays contends that all the disputed assets here were already part of the APA, but that these assets needed to be specifically identified by LBI only to allow Barclays to assess their value. 6was unable to deliver assets previously promised to Barclays in 1 the APA, however, amendments and clarifications to the APA were 2 required. 3 A relevant change discussed at the Sale Hearing related to 4 the treatment of “cash.” The APA had initially provided that 5 Barclays would acquire $1.3 billion in “retained cash,” and 6 excluded cash in excess of that amount. That amount was later 7 reduced to $700 million and was completely eliminated from the 8 Sale by the date of the Sale Hearing. It was made clear at the 9 Sale Hearing that no “cash” from Lehman would be transferred to 10 Barclays. 11 Counsel for Barclays represented at the Sale Hearing that 12 all material changes had been disclosed. The bankruptcy court 13 admonished that any change to the deal in excess of $500 million 14 would be material. Given the urgency caused by the economic 15 crisis and the lack of time for ordinary negotiation and 16 drafting, Lehman, the bankruptcy court, the Trustee, Barclays, 17 the Securities Investor Protection Corporation (“SIPC”), and the 18 government all supported the Sale despite the lack of complete 19 documentation regarding the assets to be transferred. The 20 parties told the court that a “Clarification Letter” would be 21 forthcoming, memorializing any necessary changes. 22 After the Sale Hearing, the bankruptcy court entered an 23 order (the “Sale Order”), approving the transaction as presented 24 at the Sale Hearing. The Sale Order approved “the Asset Purchase 25 Agreement, as modified, clarified, and/or amended by the First 26

7Amendment, and a letter agreement, dated as of September 20, 1 2008, clarifying and supplementing the [APA].” 445 B.R. at 190. 2 “Given the many moving parts, the complexity of the acquisition, 3 and the extreme time pressure, the [bankruptcy court] knew that 4 the Sale Order needed to be flexible enough to accommodate 5 changes to the APA. This concept was reflected in the Sale 6 Order, which contemplated final documentation materially 7 consistent with its terms.” 445 B.R. at 188-89. In that vein, 8 the Sale Order “authorized and directed” the parties to “take all 9 other and further actions as may be reasonably necessary to 10 implement the transactions contemplated by the Purchase 11 Agreement.” 12 Over the weekend, the parties crafted the Clarification 13 Letter (“CL”), which was intended to record changes to the APA 14 consistent with representations made at the Sale Hearing. The CL 15 revised portions of the definitions of Purchased and Excluded 16 Assets. On Monday morning, September 22, the letter was filed 17 with the bankruptcy court, “giving broad notice of its terms.” 18 445 B.R. at 162. The letter was also served on all interested 19 parties who had appeared in the case. The parties, however, did 20 not seek court approval of the CL, representing that it did not 21 alter the APA but only documented changes discussed at the Sale 22 Hearing. The deal formally closed later that morning. Id.at 23 161. 24 For nearly a year, both Barclays and the Trustee relied on 25 the CL, referencing its validity while jointly, and successfully, 26

8defending an appeal of the Sale Order. Then, however, the 1 parties returned to the bankruptcy court: Barclays moved for 2 delivery of certain assets it claimed; at the same time, the 3 Trustee, LBHI, and the Official Committee of Unsecured Creditors 4 brought adversary proceedings and motions pursuant to Fed. R. 5 Civ. P. 60(b), seeking relief from the Sale Order (specifically 6 regarding the transfer of the Margin Assets to Barclays). 445 7 B.R. at 148, 150. These motions led to a 34-day trial in the 8 bankruptcy court. 9 b) Bankruptcy and District Court Opinions 10 On February 22, 2011, the bankruptcy court issued its 11 decision, followed by a final judgment in July 2011, which: (i) 12 awarded the Margin Assets to the Trustee (with prejudgment 13 interest); (ii) awarded the CBAs to Barclays; and (iii) found 14 Barclays’s claim to the Rule 15c3-3 Assets contingent upon the 15 Trustee having sufficient customer property to satisfy all 16 allowed customer claims filed in the SIPA liquidation. 17 Each party appealed to the district court: Barclays with 18 respect to the Margin Assets and the Rule 15c3-3 Assets, and the 19 Trustee with respect to the CBAs. On July 16, 2012, the district 20 court: (i) reversed the bankruptcy court and awarded Barclays 21 the Margin Assets; (ii) affirmed that Barclays was entitled to 22 the CBAs; and (iii) affirmed that Barclays did not have an 23 unconditional right to the Rule 15c3-3 Assets. An appeal and 24 cross-appeal followed, but, as noted above, the cross-appeal 25

9relating to the Rule 15c3-3 Assets has been settled. We thus 1 consider the Trustee’s appeal as to the Margin Assets and CBAs. 2
DISCUSSION 3 We review bankruptcy court orders that have been appealed to 4 the district court “independently.” In re CBI Holding Co. , 529 5 F.3d 432, 448-49 (2d Cir. 2008). The bankruptcy court’s “legal 6 conclusions are reviewed de novo ,” and its “factual conclusions 7 are reviewed for clear error.” Id.at 449. Additionally, we may 8 affirm on any ground that finds support in the record. McElwee 9 v. County of Orange , 700 F.3d 635, 640 (2d Cir. 2012). 10 The issues before us involve New York contract law. 11 Therefore, “the intention of the parties should control, and the 12 best evidence of intent is the contract itself.” Cont’l Ins. Co. 13 v. Atl. Cas. Ins. Co. , 603 F.3d 169, 180 (2d Cir. 2010) (internal 14 quotation marks and alterations omitted). After giving all the 15 terms of a contract “their plain meaning,” Olin Corp. v. Am. Home 16
Assurance Co. , 704 F.3d 89, 99 (2d Cir. 2012), we determine 17 whether language in a contract is ambiguous, seeLockheed Martin 18 Corp. v. Retail Holdings, N.V. , 639 F.3d 63, 69 (2d Cir. 2011). 19 Ambiguity exists only if a contract term “is capable of more than 20 one meaning when viewed objectively by a reasonably intelligent 21 person who has examined the context of the entire integrated 22 agreement.” Id.Where contractual language is ambiguous, a 23 court may consider extrinsic evidence of the parties’ intent. 24 Roberts v. Consol. Rail Corp. , 893 F.2d 21, 24 (2d Cir. 1989). 25 26

10a) The Margin Assets 1 1) Facts 2 The Margin Assets consist of approximately $4 billion that 3 had been maintained by LBI in accounts at various financial 4 institutions as collateral in connection with its exchange-traded 5 derivative (“ETD”) business. The assets in dispute were LBI 6 property and pledged by LBI to support its own and customer 7 trading. The ETD business included all of LBI’s ETD positions, 8 such as exchange-traded options and futures. To protect against 9 default, clearinghouses and carrying brokers through which ETDs 10 are settled require account owners to pledge margin collateral to 11 secure ETD obligations. The positions consisted of rights with 12 potential value but also potential losses when they included an 13 obligation to buy or sell assets at a pre-determined price in the 14 future. It is undisputed that Barclays purchased LBI’s ETD 15 business. The dispute is over whether the Margin Assets 16 supporting the ETD business, in the form of cash or cash 17 equivalents, were transferred along with the ETD business by 18 operation of the various documents at issue. 19 2) Relevant Contractual Provisions 20 Several contractual provisions are relevant to the Margin 21 Assets. As noted, the APA defines “Purchased” and “Excluded” 22 assets. The ETD business is listed as a “Purchased Asset” under 23 the APA. The APA provides further that Barclays would acquire 24 “all of the assets” that were “used in connection with the 25 Business (excluding the Excluded Assets).” Additionally, the APA 26

11contains a seller warranty stating that “all of the necessary 1 assets and services used by Seller and its Affiliates to operate 2 the Business as it is currently operated” would be transferred. 3 Section 2.2 of the APA provided: “Nothing herein contained 4 shall be deemed to sell, transfer, assign or convey the Excluded 5 Assets to Purchaser, and Seller (directly and indirectly) shall 6 retain all right, title and interest to, in and under the 7 Excluded Assets.” Excluded Assets, as defined in the APA, 8 included “all cash, cash equivalents, bank deposits, or similar 9 cash items of LBI and its Subsidiaries (the “Retained Cash”) 10 other than $1.3 billion in cash, cash equivalents, bank deposits, 11 or similar cash items.” Further, “Exclusion (n)” excluded the 12 transfer of “assets primarily related to the [Investment 13 Management Business] and derivatives contracts.” The term 14 “derivatives contracts” was not specially defined in the APA; nor 15 was the term “exchange-traded derivatives.” 16 Section 1(a) of the CL clarified the definition of 17 “Purchased Assets” as “all of the assets of Seller used primarily 18 in the Business or necessary for the operation of the Business 19 (in each case, excluding the excluded assets).” The CL also 20 provided more detail regarding specific assets that were included 21 as “Purchased Assets,” including “exchange-traded derivatives 22 (and any property that may be held to secure obligations under 23 such derivatives) . . . .” 24 Section 1(c) of the CL revised the APA’s definition of 25 “Excluded Assets.” It eliminated subsection (b), pertaining to 26

12the exclusion of “RetainedCashother than $ 1.3 billion in cash, 1 cash equivalents, bank deposits or similar cash items.” That 2 Section further provided: “Except as otherwise specified in the 3 definition of ‘Purchased Assets,’ ‘Excluded Assets’ shall include 4 any cash, cash equivalents, bank deposits or similar cash items 5 of Seller and its Subsidiaries.” In addition to eliminating 6 Exclusion (b), the Section carried over Exclusion (n), which 7 pertained to “all assets primarily related to . . . derivatives 8
contracts.” 9 3) Bankruptcy and District Court Decisions 10 The bankruptcy court found that the APA’s exclusion of “all 11 assets primarily related to . . . derivatives contracts” and its 12 general exclusion of “cash” exempted the Margin Assets from 13 transfer. Judge Peck also based his ruling, in part, on his own 14 recollection of the Sale Hearing. 15 Regarding the CL and provisions pertaining to the Margin 16 Assets, the bankruptcy court first determined that it would treat 17 the CL as “enforceable” because the parties had relied on it for 18 nearly a year, but that the CL would be valid only “to the extent 19 that [its] provisions are not inconsistent with the record of the 20 Sale Hearing and the language of the Sale Order.” The 21 bankruptcy court also found ambiguity in the CL’s parenthetical 22 that transferred “any property that may be held to secure 23 obligations under such derivatives [in the ETD business].” After 24 a review of extrinsic evidence, it found that such “property” did 25 not include the Margin Assets. 26

13The district court disagreed, based on the various 1 Agreements’ language. Central to its holding was the conclusion 2 that the bankruptcy court unequivocally approved (post-hoc ) the 3 CL in its decision described supra , and that none of the parties 4 appealed that approval. Thus, the language of the CL controlled, 5 and the “no cash” representations at the Sale Hearing (along with 6 Judge Peck’s own understanding of the representations made at 7 that Hearing, and his construal of the CL in accordance with that 8 understanding) were deemed inadmissible extrinsic evidence by the 9 district court. The district court concluded that, despite 10 Exclusion (n), the CL’s parenthetical unambiguously transferred 11 the Margin Assets to Barclays. 12 4) Resolution 13 We begin by noting the urgency under which this deal was 14 executed, as discussed supra . Ambiguities and loose ends were 15 inevitable. Indeed, the bankruptcy court admitted the existence 16 of certain aspects of the Sale, potentially significant aspects, 17 of which it was not aware. Nor could it have been under the 18 circumstances. 19 While noting these circumstances, we conclude that transfer 20 of the Margin Assets to Barclays was contemplated in the APA and 21 confirmed in the CL. 4The inclusion of the Margin Assets in the 22

4 The Trustee initially contended that $507 million of the Margin Assets was unavailable because it was a debit item used in the calculation of the Rule 15c3-3 Reserve Account. However, as noted in a September 5, 2013 letter from both parties to this court, the Trustee has abandoned this position in light of the settlement regarding the Rule 15c3-3 Assets. Our holding thus encompasses the entirety of the Margin Assets, including the $507 million that was previously a matter of additional dispute. 14CL is, therefore, not a material change to the APA and we deem 1 the dispute over whether the bankruptcy court approved the CL to 2 be irrelevant. 5 3 In the APA, “exchange-traded derivatives” are clearly 4 included in the definition of Purchased Assets. Further, the CL, 5 amending and clarifying the Sale as contemplated in the Sale 6 Order, specifically defined Purchased Assets to include 7 “exchange-traded derivatives” and “any property that may be held 8 to secure obligations under such derivatives.” The unambiguous 9 meaning of those terms conveys the Margin Assets to Barclays. 10 The Trustee claims that exclusions in the APA pertaining to 11 cash and derivatives contracts (Exclusions (b) and (n), 12 respectively) bar the transfer. We disagree. 13 First, Exclusion (b), pertaining to “cash,” explicitly does 14 not apply to those assets that are deemed “Purchased,” and the 15 Margin Assets fall under that term’s plain meaning in the 16 agreements. We are also not troubled by the “no cash” promises 17 emphasized at the Sale Hearing and recorded in the documents. 18 When used in a general sense, as here, cash means money ready for 19 use. Cash or cash equivalents pledged as a collateral are 20 encumbered and not ready for use. Moreover, it would be highly 21

5 Holding, as we do, that the transfer to Barclays of the Margin Assets was contemplated in the Sale and was not a material change to the Sale, we need not consider the Trustee’s and SIPC’s claims that, had the bankruptcy court approved a document that included material changes posthoc , such approval would violate Section 363.

15unusual for a buyer to purchase LBI’s ETD business in its 1 entirety but not the collateral that allowed that business to 2 exist, particularly in a time of economic crisis when the value 3 of the underlying assets, e.g. , options and futures, would be 4 extremely volatile. Indeed, notwithstanding LBI’s desperate need 5 for “cash,” it did not liquidate the Margin Assets because doing 6 so would have destroyed the ETD business, which it wanted to 7 sell. 8 If the Margin Assets were not to be conveyed, we would 9 expect a clear expression of such an intent. 6No doubt, had this 10 issue arisen before or at the Sale Hearing, even clearer language 11 would have been adopted in the APA and CL. The urgency of the 12 moment as well as a fear of ending any prospect of selling the 13 ETD business and perhaps losing the entire sale no doubt 14

6 Although our holding does not depend on it, there is ample and convincing extrinsic evidence, in particular their post-Sale conduct, that both parties understood that the Margin Assets were included in the Sale. On September 20, the day after the Sale Hearing, in the Transfer and Assumption Agreement (“TAA”), signed by Barclays, the Trustee, and the Options Clearing Corporation (“OCC”), the Trustee, acting on behalf of Lehman, agreed to transfer “all margin deposits held by OCC with respect to [account numbers 74, 84, and 273].” At oral argument before the district court, the parties agreed that the specified numbered accounts contained only Lehman proprietary margin assets, i.e. , a significant portion of the Margin Assets involved in this dispute. All signatories warranted that the TAA was “legal, valid and binding.” Also, the Trustee acknowledged and indicated his intent to transfer “substantial proprietary cash” in accordance with the TAA. The OCC also emailed the Trustee regarding “nearly $1 billion in cash” in LBI’s OCC accounts that would be transferred to Barclays under the Sale, and the Trustee agreed. Moreover, the Trustee approved the transfer of over $2 billion in proprietary Margin Assets to Barclays following the Sale. The Trustee also responded to inquiries from the OCC and Barclays with multiple acknowledgments of its “inten[t] to comply” with the TAA -- which it understood to involve the transfer of “collateral” -- and its knowledge of Barclays being “the owner” of LBI’s former OCC accounts, including all “positions and collateral.”

16precluded this. Particularly under these circumstances, the 1 language used is sufficient. 2 Second, to adopt the Trustee’s reading of Exclusion (n) and 3 include exchange-traded derivatives and related collateral in the 4 term “derivatives contracts” would conflict with the APA itself, 5 which specifically lists exchange-traded derivatives as a 6 Purchased Asset. We decline to engage in the exertion necessary 7 to create ambiguity and conflict where there is none when the 8 documents are read as a whole. The provisions clearly 9 distinguish the Margin Assets from pure “cash” and exchange10 traded derivatives from “derivatives contracts.” As noted above, 11 any interpretation that would create such ambiguity and result in 12 the sale of the exchange-traded derivatives without the Margin 13 Assets as collateral is rendered implausible by the commercial 14 unlikelihood of such a deal in the circumstances described. 15 b) The Clearance Box Assets 16 The Clearance Box Assets (“CBAs”) are “approximately $1.9 17 billion in unencumbered securities held in LBI's ‘clearance box’ 18 accounts at [the Depository Trust & Clearing Corporation 19 (“DTCC”)].” As the bankruptcy court found, the CBAs provided 20 collateral to secure open trading positions and, in the event of 21 a default by LBI, DTCC could look to the CBAs to cover any 22 potential liability that arose from failed trades. During the 23 weekend prior to closing, negotiations led to two separate 24 agreements that contained provisions arguably governing the 25

17transfer of the CBAs. One agreement was set forth in the CL, and 1 the other was set forth in the “DTCC Letter.” 2 First, the CL provided that Purchased Assets include “such 3 securities and other assets held in LBI’s ‘clearance boxes’ as of 4 the time of the Closing, which at the close of business on 5 September 21, 2008 were as specified on Schedule B previously 6 delivered by Seller and accepted by Purchaser.” According to 7 Schedule B -- which listed the specific assets to be transferred 8 -- 98 percent of these assets were “in LBI’s DTC clearance 9 boxes.” In re Lehman, 445 B.R. at 200. 10 Second, the DTCC Letter, which was executed by the DTCC, the 11 Trustee, and Barclays, provided that “Barclays has indicated, and 12 hereby agrees, that all of the accounts of LBI maintained at the 13 Clearing Agencies Subsidiaries . . . constitute ‘Excluded Assets’ 14 within the meaning of the APA.” On its face, this general 15 language appears to include the CBAs held by LBI at DTCC. 16 The bankruptcy court found the DTCC Letter to be ambiguous, 17 and thus considered it extrinsic evidence. After weighing that 18 evidence, the bankruptcy court found that it was “the intent of 19 the parties to transfer the Clearance Box Assets to Barclays.” 20 445 B.R. at 201. The district court affirmed. It found 21 ambiguity not in a particular term, but in the fact that the 22 provisions in the agreements conflicted, and agreed that 23 extrinsic evidence showed an intent to transfer the CBAs to 24 Barclays. 25

18Our view is as follows. At first reading, the provisions of 1 the CL and the DTCC Letter seem contradictory. The CL provided 2 that the CBAs are Purchased Assets acquired by Barclays, while 3 the DTCC Letter represented that accounts maintained by LBI at 4 the DTCC are Excluded Assets. But, like the bankruptcy court, we 5 find another reading of the DTCC Letter possible. The DTCC 6 Letter -- which does not specifically mention the CBAs -- shows 7 only that Barclays was not acquiring the LBI accounts themselves, 8 but could still receive a grant of assets (for example, the CBAs) 9 from within those accounts. 10 The DTCC Letter’s general reference to “accounts of LBI” 11 does not convey the CBAs unambiguously. The DTCC Accounts 12 contained billions of other assets, including collateral assets 13 in which the DTCC held a security interest. The CBAs, on the 14 other hand, were lien-free assets that were held in lien-free 15 accounts. Selling off the specific assets within the accounts was 16 a matter between Barclays and Lehman, not the DTCC. To the 17 extent that there appears to be conflict between these 18 provisions, the specific governs the general. See, e.g. , John 19 Hancock Mut. Life Ins. Co. v. Caroline Power and Light Co. , 717 20 F.2d 664, 669 n.8 (2d Cir. 1983)(“[P]articularized contract 21 language takes precedence over expressions of intent that are 22 general . . . .”); accordLiberty Surplus Ins. Corp. v. Segal 23
Co. , 142 Fed. App’x 511, 515 (2d Cir. 2005) (summary order). 24 As the bankruptcy court found, “[t]he unambiguous text of 25 the Clarification Letter contains more detail and is more 26

19specific with respect to the Clearance Box Assets than the DTCC 1 Letter.” 445 B.R. at 202. That is, “Schedule B to the 2 Clarification Letter specifically identifies individual Clearance 3 Box Assets, whereas the DTCC Letter has no similar itemized list 4 of securities.” Id. 5 The Trustee’s argument on appeal that, under APA Section 6 2.2, the conflict between the Agreements must be resolved in 7 favor of the dictates of the DTCC Letter, is not compelling. 8 Section 2.2 provides: “Nothing herein contained shall be deemed 9 to sell, transfer, assign or convey the Excluded Assets to the 10 Purchaser.” However, the DTCC Letter does not reference the CBAs 11 at all, let alone with the specificity required for the operation 12 of Section 2.2's preference for the APA’s designation of Excluded 13 Assets. For that reason, any ambiguity that remains in the DTCC 14 Letter, or as between the agreements, must be resolved by 15 extrinsic evidence. 16 We do not find clear error in the bankruptcy court’s 17 assessment of extrinsic evidence. There was at least some 18 extrinsic evidence in support of each party’s contention. For 19 example, the Deputy General Counsel of the DTCC testified 20 regarding telephonic negotiations in which Barclays purportedly 21 agreed to give up the CBAs. Nonetheless, the bankruptcy court 22 found, and we agree, that the weight of evidence tipped markedly 23 in Barclays’s favor. Specifically, the parties’ post-closing 24 conduct in approving the CL and finalizing Schedule B evinced an 25 intent to transfer the CBA assets. This intent is supported by 26

20the testimony of Barclays’s lawyers as well as an email of DTCC’s 1 outside counsel to the effect that DTCC agreed to accept 2 Barclays’s $250 million limited guarantee and in turn relinquish 3 the CBAs. As the bankruptcy court noted, the weight of the 4 extrinsic evidence also comports with the commercial reality of 5 the deal, which saw DTCC incur losses far below the $250 million 6 guarantee provided by Barclays, who took on the lion’s share of 7 the risk. 7 8
CONCLUSION 9 For the reasons stated above, we affirm the district court. 10 11 12 13 14 15 16 17 18 19 20

7 The Trustee also asserts that, even if the CL is read to transfer the CBAs to Barclays, it does so only because the lawyers representing Lehman during the drafting of the CL were unaware that Barclays had agreed to exclude the CBAs via the DTCC Letter. This contention contradicts the district court’s finding regarding the weight of extrinsic evidence and is also belied by the record on appeal, which indicates that Lehman’s lawyers were briefed on the DTCC agreement, saw several drafts of the resulting DTCC Letter, and elsewhere amended the CL to conform with the DTCC Letter. Moreover, counsel for Barclays and Lehman worked together and agreed on the finalized list of Purchased Assets in Schedule B, which included the CBAs. The Trustee received a copy of Schedule B andsigned both the CL and the DTCC Letter; he cannot now contest the CL’s unambiguous language based on a lack of knowledge of its terms. 21