In Re: Lehman Brothers Holdings Inc.
1:17-cv-03424
S.D.N.Y.Aug 2, 2017Background
- In Sept. 2010 LBSF (through LBHI) sued Shinhan and others to recover alleged voidable transfers; Shinhan moved to dismiss and the motion was fully submitted in April 2016.
- Parties participated in mediation; on April 20 the Mediator emailed that Shinhan had agreed to pay a specified Settlement Amount to Lehman in full settlement.
- Lehman sent a draft Release Agreement on April 21; parties exchanged drafts and negotiated limited nonmaterial terms (payment timing and whether signatures would be hardcopy).
- Lehman signed the Release Agreement on May 26 and sent it to Shinhan, which repeatedly represented it was completing internal approvals and would sign and pay (promising signature/payment by June 30).
- On June 28 the bankruptcy court dismissed Lehman’s claims with prejudice; Shinhan then declined to sign or pay, arguing no enforceable settlement existed.
- LBSF moved to enforce the settlement; the bankruptcy court found the April 20 settlement enforceable under the Winston factors, and the district court affirmed.
Issues
| Issue | Plaintiff's Argument (Lehman/LBSF) | Defendant's Argument (Shinhan) | Held |
|---|---|---|---|
| Whether parties formed a binding settlement on April 20 absent a fully executed written agreement | Parties agreed on material terms (amount for release) and manifested intent to be bound; subsequent drafting addressed performance details only | No binding contract because the written Release Agreement stated it would be effective only upon each party’s execution and payment; parties intended to be bound only by a signed writing | Court held a binding settlement existed on April 20; enforceable despite later unsigned draft |
| Whether any party expressly reserved the right not to be bound until a signed writing | No reservation was communicated; drafting routine documentation after agreement does not show reservation | The Release Agreement’s language (effectiveness upon execution) demonstrates reservation | Court found no express reservation before April 20 and that later draft language was irrelevant to the prior agreement |
| Whether partial performance occurred sufficient to bind | Lehman’s provision of drafts and cooperation evidenced reliance and steps to formalize settlement | No payment or executed releases occurred; therefore no partial performance | Court treated partial-performance factor as weighing against enforcement but not dispositive given other factors favoring formation |
| Whether all material terms were agreed | The core deal—payment in exchange for release—was agreed; remaining disputes were about mechanics (timing, hardcopy) | Draft negotiations showed unsettled terms and parties expected final signed document | Court held material terms were settled and remaining negotiations concerned performance logistics, so intention to be bound existed |
Key Cases Cited
- Winston v. Mediafare Entertainment Corp., 777 F.2d 78 (2d Cir. 1985) (sets four-factor test for determining whether parties intended to be bound without a signed writing)
- Powell v. Omnicom Group, Inc., 497 F.3d 124 (2d Cir. 2007) (parties may bind themselves absent a writing; intent to be bound is a fact-specific inquiry)
- Ciaramella v. Reader’s Digest Ass’n, Inc., 131 F.3d 320 (2d Cir. 1997) (language requiring a written agreement can constitute an express reservation not to be bound)
- In re Quebecor World (USA) Inc., 719 F.3d 94 (2d Cir. 2013) (standards of appellate review for bankruptcy findings and legal conclusions)