Bank of America (NYSE: BAC) may be in for an expensive settlement, pending a final decision by a bankruptcy judge. The firm had received notice that a bankruptcy judge amended his order that they pay Lehman Brothers Holdings Inc. $590 million in compensation for taking its deposits, saying “the judgment is hereby deemed not to be a final judgment.”
Bank of America, a lender to Lehman in September 2008, appealed the November ruling by U.S. Bankruptcy Judge James Peck that it must return $500 million of deposits taken in violation of bankruptcy law and pay interest. Peck said yesterday in a filing in U.S. Bankruptcy Court in Manhattan that a final judgment will come later and the bank must delay its appeal until then. Peck has said he will consider whether to impose sanctions on Bank of America for ignoring a law that stops lenders from acting to recover their loans from companies in bankruptcy. The bank yesterday withdrew its notice of appeal, saying it reserved to right to challenge “any later final judgment.” Notifying Peck of the appeal this month, Bank of America said it “has established a substantial possibility of success on appeal,” based on banking law.
After Lehman filed bankruptcy two years ago, many major banks have been embroiled in lawsuits over it. Barclays Plc (NYSE: BCS) and JPMorgan Chase & Co. (NYSE: JPM) are also involved in litigation with the firm. The defunct firm has said creditors stand to get an average of 15.8 cents on the dollar. With Lehman selling off it’s valuable assets to Barclays in the wake of their collapse, there are few valuable tools left in the coffers. So, while the lawsuits drag on, the distribution available to creditors will surely weaken, likely leaving counterparties holding the bag.
