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Weil Wins Dismissal for Lehman Entities of Commercial Real Estate Investment Dispute

On August 8, 2016, Weil won a significant victory for a number of Lehman Brothers entities when the New York State Supreme Court granted defendants’ motions to dismiss all claims in a complex litigation relating to commercial real estate investments made in the lead-up to the financial crisis and Lehman Brothers’ subsequent chapter 11 filing. Co-defendants in this case included a number of former Lehman executives, including its former CEO, CFO, and Chief Legal Officer.

Plaintiffs in this action alleged that the Lehman entities and individual defendants induced plaintiffs to invest in certain partnerships – which were created to invest in commercial real estate – in order to rid Lehman’s balance sheet of allegedly devalued properties at plaintiffs’ expense. They asserted more than a dozen causes of action, including for intentional misrepresentation, breach of contract, breach of fiduciary duty, and declaratory relief.

In its memorandum and order dismissing plaintiffs’ complaint in its entirety, the Court held, among other things, that plaintiffs failed to sufficiently allege fraudulent intent, particularly given that internal and contemporaneous Lehman documents indicated that defendants did not believe that the value of the underlying real estate had declined in value at the time it was transferred to the investment partnerships. The Court also dismissed plaintiffs’ claims for breach of contract based upon its reading of the unambiguous terms of the limited partnership agreements signed by plaintiffs prior to making their investments, and plaintiffs’ breach of fiduciary duty claims, which the Court held were duplicative of their breach of contract claims.

This decision marks the second time Weil has defeated claims relating to these transactions. In March 2011, the U.S. District Court for the Southern District of New York granted the same defendants’ motion to dismiss a similar case, which the Second Circuit affirmed in 2012.

The Weil team was led by Jonathan Polkes, co-head of Weil’s Litigation Department, and included partner Robert Carangelo and associates David Byeff, Adam Banks, and Agustina Berro.