In Re: Lehman Brothers Holdings Inc., No. 12-2322 (2d Cir. 2014)

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Justia Opinion Summary

This appeal involves a dispute between the Trustee, appointed to protect public customers and creditors in the liquidation of LBI, and purchasers of LBI's assets over the entitlement to two sets of LBI assets: (1) the Margin Assets and (2) the Clearance Box Assets (CBAs). The district court held that Barclays was entitled to both the Margin Assets and the CBAs, and was conditionally entitled to the Rule 15c-3 Assets. The Trustee appealed from the Margin Assets and CBA rulings. Barclays cross-appealed from the Rule 15c3-3 Assets ruling but the settlement had disposed of that issue and cross-appeal. The court concluded that the transfer of the Margin Assets to Barclays was contemplated in the Asset Purchase Agreement and confirmed in the Clarification Letter. The court agreed with the district court that extrinsic evidence showed an intent to transfer the CBAs to Barclays. Accordingly, the court affirmed the judgment of the district court.

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12-2322-bk (L) In Re: Lehman Brothers Holdings Inc. Barclays Capital, Inc. v. Giddens 1 UNITED STATES COURT OF APPEALS 2 FOR THE SECOND CIRCUIT 3 August Term, 2012 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 (Argued: May 29, 2013 Decided: August 5, 2014) Docket Nos. 12-2322-bk(L), 12-2933-bk(XAP) - - - - - - - - - - - - - - - - - - - - - - - - - - - - IN RE: LEHMAN BROTHERS HOLDINGS INC., Debtor. - - - - - - - - - - - - - - - - - - - - - - - - - - - - BARCLAYS CAPITAL INC., BARCLAYS BANK PLC, Appellees-Cross-Apellants, v. JAMES W. GIDDENS, as Trustee for the SIPA Liquidation of Lehman Brothers Inc., Appellant-Cross-Appellee, and SECURITIES AND EXCHANGE COMMISSION, SECURITIES INVESTOR PROTECTION CORPORATION, Statutory Intervenors pursuant to Securities Investor Protection Act, 15 U.S.C. § 78eee(c)&(d), Intervenors. - - - - - - - - - - - - - - - - - - - - - - - - - - - - B e f o r e: WINTER, HALL, and LYNCH, Circuit Judges. 1 1 Appeal from an order entered in the United States District 2 Court for the Southern District of New York (Katherine B. 3 Forrest, Judge), reversing in part and affirming in part an order 4 of the bankruptcy court (James M. Peck, Judge). 5 liquidating broker-dealer and the purchaser of the distressed 6 company s assets dispute the entitlement to certain assets. 7 affirm the district court. 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 The trustee of a We WILLIAM R. MAGUIRE (Seth D. Rothman, Neil J. Oxford, Samuel C. McCoubrey, Hughes Hubbard & Reed LLP, New York, NY, William R. Stein, Hughes Hubbard & Reed LLP, Washington, DC, Kenneth E. Lee & Scott B. Klugman, Levine Lee LLP, New York, NY, on the brief) Hughes Hubbard & Reed LLP, New York, NY, for AppellantCross-Appellee. KENNETH J. CAPUTO (Josephine Wang, on the brief) Securities Investor Protection Corporation, Washington, DC, for Intervenor Securities Investor Protection Corporation. DAVID BOIES (Jonathan D. Schiller, Boies, Schiller & Flexner LLP, New York, NY, Hamish P.M. Hume & Jonathan M. Shaw, Boies, Schiller & Flexner LLP, Washington, DC, on the brief) Boies, Schiller & Flexner LLP, New York, NY, for Appellees-Cross-Appellants. Michael A. Conley, Jacob H. Stillman, Tracey A. Hardin, Benjamin M. Vetter, Securities and Exchange Commission, Washington, DC, for Intervenor Securities and Exchange Commission. Sigmund S. Wissner-Gross, Brown Rudnick LLP, New York, NY, Steven D. Pohl, Brown Rudnick LLP, Boston, MA, for Amicus Curiae Managed Funds Association. 2 1 2 3 WINTER, Circuit Judge: 4 to the Securities Investor Protection Act ( SIPA ) to protect 5 public customers and creditors in the liquidation of Lehman 6 Brothers, Inc. ( LBI ). 7 the Trustee and the appellee purchasers of LBI s assets over the 8 entitlement to two sets of LBI assets: 9 i.e., cash and cash equivalents held by third parties to secure Appellant James W. Giddens is the Trustee appointed pursuant This appeal involves a dispute between (i) the Margin Assets, 10 LBI s exchange-traded derivatives ( ETDs ) business; and (ii) the 11 Clearance Box Assets (sometimes CBAs ), about $1.9 billion in 12 unencumbered securities held in LBI s clearance box at the 13 Depository Trust Clearing Corporation ( DTCC ). 14 involved in the cross-appeal but now settled, was over the so- 15 called Rule 15c-3 Assets. 1 16 A third dispute, Bankruptcy Judge Peck held that Barclays had not purchased 17 either the Margin Assets or the Rule 15c-3 Assets, but was 18 conditionally entitled to the Clearance Box Assets. 19 the district court, Judge Forrest affirmed in part and reversed 20 in part, holding that Barclays was entitled to both the Margin 21 Assets and the CBAs, and was conditionally entitled to the Rule 22 15c3-3 Assets. 1 On appeal to The Trustee appealed from the Margin Assets and 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. 1 CBA rulings.2 2 Assets ruling but the settlement has disposed of that issue and 3 cross-appeal. 4 Barclays cross-appealed from the Rule 15c3-3 For the reasons that follow, we affirm the district court. 5 BACKGROUND 6 We relate here only those facts pertinent to the disposition 7 of the issues before us. 8 facts are considered more fully in the Discussion section, infra. 9 a) 10 Certain documents and asset-specific The Lehman Bankruptcy On September 15, 2008, Lehman Brothers Holdings Inc. ( LBHI 11 and together with LBI, Lehman ) filed for bankruptcy. 12 liquidation of LBI, LBHI s North American broker-dealer 13 subsidiary, followed. 14 The SIPA Both government regulators and Lehman alike desired, and 15 achieved, an emergency sale of LBI to Barclays Capital Inc. 16 ( Barclays ) pursuant to Section 363 of the Bankruptcy Code, 11 17 U.S.C. § 363 (the Sale or Asset Sale ). 18 largest, most expedited and probably the most dramatic asset 19 sale that has ever occurred in bankruptcy history . . . . 20 Lehman Bros. Holding Inc., 445 B.R. 143, 148-49 (Bankr. S.D.N.Y. 21 2011). The Sale was the In re The sale of Lehman s businesses as a going concern saved 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. See 15 U.S.C. § 78eee(c)-(d). 4 1 thousands of jobs and avoided losses estimated to be in the 2 hundreds of billions of dollars. 3 The Sale was also understood as a tremendous risk for 4 Barclays. 5 overall transaction with Barclays . . . provided the means for 6 the most favorable disposition of these assets with the least 7 amount of risk. 8 only, alternative to a huge economic loss. 9 However, as the bankruptcy court later stated, the Id. at 157. It was the best, and perhaps the On September 16, 2008, the day after the bankruptcy filing, 10 Lehman and Barclays executed an Asset Purchase Agreement ( APA ), 11 that defined the assets that would be Purchased by Barclays and 12 those that would be Excluded from that purchase. 13 that were to be Purchased under the APA included, among other 14 things, retained cash, all deposits and prepaid charges and 15 expenses, and exchange traded derivatives. 16 were to be Excluded from the Purchase were set forth in 17 Section 1.1 of the APA, and encompassed all cash, cash 18 equivalents, bank deposits or similar cash items of LBI, as well 19 as all assets primarily related to . . . derivative contracts. 20 Although unknown to the bankruptcy court at the time, 21 Barclays s board of directors was prepared to approve the deal 22 only if it was capital accretive, i.e., included a buffer of 23 assets in excess of liabilities in the amount of $5 million. 24 parties agreed to achieve such a buffer by means of a repurchase 25 agreement. The assets The assets that The On September 18, the day before the bankruptcy court 5 1 was to hold the Sale Hearing to consider the Asset Sale, 2 Barclays provided LBI with $45 billion in cash so that LBI could 3 repay a loan it had received from the New York Federal Reserve. 4 In exchange, LBI was expected to provide Barclays with collateral 5 previously pledged to the New York Federal Reserve. 6 collateral LBI transferred was worth far less than $45 billion. 7 In addition, LBI notified Barclays on the morning of However, the 8 September 19, the day of the Sale Hearing, that it could no 9 longer deliver billions of dollars in assets that had been 10 promised in the APA. 11 identify assets that LBI could still transfer, in order for 12 Barclays to decide whether to close the deal. 13 court dubbed what ensued thereafter as the asset scramble, in 14 which LBI sought to identify assets that could be transferred to 15 Barclays in order to close the deal. 16 scramble produced the two groups of assets that are the subject 17 of the current appeal: 18 As a result, Barclays demanded that LBI The bankruptcy 445 B.R. at 151. This the Margin Assets and the CBAs.3 At the Sale Hearing later that day, the parties represented 19 that a deal had been reached in principle but that there were 20 still several moving parts. 21 transfer of financial assets, liabilities, and 72,000 customer 22 accounts. The Sale involved, inter alia, the It was presented in the form of the APA. 3 Because LBI 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. 6 1 was unable to deliver assets previously promised to Barclays in 2 the APA, however, amendments and clarifications to the APA were 3 required. 4 A relevant change discussed at the Sale Hearing related to 5 the treatment of cash. The APA had initially provided that 6 Barclays would acquire $1.3 billion in retained cash, and 7 excluded cash in excess of that amount. 8 reduced to $700 million and was completely eliminated from the 9 Sale by the date of the Sale Hearing. That amount was later It was made clear at the 10 Sale Hearing that no cash from Lehman would be transferred to 11 Barclays. 12 Counsel for Barclays represented at the Sale Hearing that 13 all material changes had been disclosed. The bankruptcy court 14 admonished that any change to the deal in excess of $500 million 15 would be material. 16 crisis and the lack of time for ordinary negotiation and 17 drafting, Lehman, the bankruptcy court, the Trustee, Barclays, 18 the Securities Investor Protection Corporation ( SIPC ), and the 19 government all supported the Sale despite the lack of complete 20 documentation regarding the assets to be transferred. 21 parties told the court that a Clarification Letter would be 22 forthcoming, memorializing any necessary changes. Given the urgency caused by the economic The 23 After the Sale Hearing, the bankruptcy court entered an 24 order (the Sale Order ), approving the transaction as presented 25 at the Sale Hearing. 26 Agreement, as modified, clarified, and/or amended by the First The Sale Order approved the Asset Purchase 7 1 Amendment, and a letter agreement, dated as of September 20, 2 2008, clarifying and supplementing the [APA]. 3 Given the many moving parts, the complexity of the acquisition, 4 and the extreme time pressure, the [bankruptcy court] knew that 5 the Sale Order needed to be flexible enough to accommodate 6 changes to the APA. 7 Order, which contemplated final documentation materially 8 consistent with its terms. 9 the Sale Order authorized and directed the parties to take all 445 B.R. at 190. This concept was reflected in the Sale 445 B.R. at 188-89. In that vein, 10 other and further actions as may be reasonably necessary to 11 implement the transactions contemplated by the Purchase 12 Agreement. 13 Over the weekend, the parties crafted the Clarification 14 Letter ( CL ), which was intended to record changes to the APA 15 consistent with representations made at the Sale Hearing. 16 revised portions of the definitions of Purchased and Excluded 17 Assets. 18 with the bankruptcy court, giving broad notice of its terms. 19 445 B.R. at 162. 20 parties who had appeared in the case. 21 not seek court approval of the CL, representing that it did not 22 alter the APA but only documented changes discussed at the Sale 23 Hearing. 24 161. 25 26 The CL On Monday morning, September 22, the letter was filed The letter was also served on all interested The parties, however, did The deal formally closed later that morning. Id. at For nearly a year, both Barclays and the Trustee relied on the CL, referencing its validity while jointly, and successfully, 8 1 defending an appeal of the Sale Order. 2 parties returned to the bankruptcy court: 3 delivery of certain assets it claimed; at the same time, the 4 Trustee, LBHI, and the Official Committee of Unsecured Creditors 5 brought adversary proceedings and motions pursuant to Fed. R. 6 Civ. P. 60(b), seeking relief from the Sale Order (specifically 7 regarding the transfer of the Margin Assets to Barclays). 8 B.R. at 148, 150. 9 bankruptcy court. 10 11 b) Then, however, the Barclays moved for 445 These motions led to a 34-day trial in the Bankruptcy and District Court Opinions On February 22, 2011, the bankruptcy court issued its 12 decision, followed by a final judgment in July 2011, which: 13 awarded the Margin Assets to the Trustee (with prejudgment 14 interest); (ii) awarded the CBAs to Barclays; and (iii) found 15 Barclays s claim to the Rule 15c3-3 Assets contingent upon the 16 Trustee having sufficient customer property to satisfy all 17 allowed customer claims filed in the SIPA liquidation. 18 Each party appealed to the district court: (i) Barclays with 19 respect to the Margin Assets and the Rule 15c3-3 Assets, and the 20 Trustee with respect to the CBAs. 21 court: 22 the Margin Assets; (ii) affirmed that Barclays was entitled to 23 the CBAs; and (iii) affirmed that Barclays did not have an 24 unconditional right to the Rule 15c3-3 Assets. 25 cross-appeal followed, but, as noted above, the cross-appeal On July 16, 2012, the district (i) reversed the bankruptcy court and awarded Barclays 9 An appeal and 1 relating to the Rule 15c3-3 Assets has been settled. 2 consider the Trustee s appeal as to the Margin Assets and CBAs. 3 4 We thus DISCUSSION We review bankruptcy court orders that have been appealed to 5 the district court independently. 6 F.3d 432, 448-49 (2d Cir. 2008). 7 conclusions are reviewed de novo, and its factual conclusions 8 are reviewed for clear error. 9 affirm on any ground that finds support in the record. 10 v. County of Orange, 700 F.3d 635, 640 (2d Cir. 2012). 11 In re CBI Holding Co., 529 The bankruptcy court s legal Id. at 449. Additionally, we may McElwee The issues before us involve New York contract law. 12 Therefore, the intention of the parties should control, and the 13 best evidence of intent is the contract itself. 14 v. Atl. Cas. Ins. Co., 603 F.3d 169, 180 (2d Cir. 2010) (internal 15 quotation marks and alterations omitted). 16 terms of a contract their plain meaning, Olin Corp. v. Am. Home 17 Assurance Co., 704 F.3d 89, 99 (2d Cir. 2012), we determine 18 whether language in a contract is ambiguous, see Lockheed Martin 19 Corp. v. Retail Holdings, N.V., 639 F.3d 63, 69 (2d Cir. 2011). 20 Ambiguity exists only if a contract term is capable of more than 21 one meaning when viewed objectively by a reasonably intelligent 22 person who has examined the context of the entire integrated 23 agreement. 24 court may consider extrinsic evidence of the parties intent. 25 Roberts v. Consol. Rail Corp., 893 F.2d 21, 24 (2d Cir. 1989). Id. Cont l Ins. Co. After giving all the Where contractual language is ambiguous, a 26 10 1 a) The Margin Assets 2 1) Facts 3 The Margin Assets consist of approximately $4 billion that 4 had been maintained by LBI in accounts at various financial 5 institutions as collateral in connection with its exchange-traded 6 derivative ( ETD ) business. 7 property and pledged by LBI to support its own and customer 8 trading. 9 such as exchange-traded options and futures. The assets in dispute were LBI The ETD business included all of LBI s ETD positions, To protect against 10 default, clearinghouses and carrying brokers through which ETDs 11 are settled require account owners to pledge margin collateral to 12 secure ETD obligations. 13 potential value but also potential losses when they included an 14 obligation to buy or sell assets at a pre-determined price in the 15 future. 16 business. 17 supporting the ETD business, in the form of cash or cash 18 equivalents, were transferred along with the ETD business by 19 operation of the various documents at issue. The positions consisted of rights with It is undisputed that Barclays purchased LBI s ETD The dispute is over whether the Margin Assets 20 2) Relevant Contractual Provisions 21 Several contractual provisions are relevant to the Margin 22 Assets. As noted, the APA defines Purchased and Excluded 23 assets. The ETD business is listed as a Purchased Asset under 24 the APA. The APA provides further that Barclays would acquire 25 all of the assets that were used in connection with the 26 Business (excluding the Excluded Assets). 11 Additionally, the APA 1 contains a seller warranty stating that all of the necessary 2 assets and services used by Seller and its Affiliates to operate 3 the Business as it is currently operated would be transferred. 4 Section 2.2 of the APA provided: Nothing herein contained 5 shall be deemed to sell, transfer, assign or convey the Excluded 6 Assets to Purchaser, and Seller (directly and indirectly) shall 7 retain all right, title and interest to, in and under the 8 Excluded Assets. 9 included all cash, cash equivalents, bank deposits, or similar Excluded Assets, as defined in the APA, 10 cash items of LBI and its Subsidiaries (the Retained Cash ) 11 other than $1.3 billion in cash, cash equivalents, bank deposits, 12 or similar cash items. 13 transfer of assets primarily related to the [Investment 14 Management Business] and derivatives contracts. 15 derivatives contracts was not specially defined in the APA; nor 16 was the term exchange-traded derivatives. 17 Further, Exclusion (n) excluded the The term Section 1(a) of the CL clarified the definition of 18 Purchased Assets as all of the assets of Seller used primarily 19 in the Business or necessary for the operation of the Business 20 (in each case, excluding the excluded assets). 21 provided more detail regarding specific assets that were included 22 as Purchased Assets, including exchange-traded derivatives 23 (and any property that may be held to secure obligations under 24 such derivatives) . . . . 25 26 The CL also Section 1(c) of the CL revised the APA s definition of Excluded Assets. It eliminated subsection (b), pertaining to 12 1 the exclusion of Retained Cash other than $ 1.3 billion in cash, 2 cash equivalents, bank deposits or similar cash items. 3 Section further provided: 4 definition of Purchased Assets, Excluded Assets shall include 5 any cash, cash equivalents, bank deposits or similar cash items 6 of Seller and its Subsidiaries. 7 Exclusion (b), the Section carried over Exclusion (n), which 8 pertained to all assets primarily related to . . . derivatives 9 contracts. 10 3) 11 The bankruptcy court found that the APA s exclusion of all 12 assets primarily related to . . . derivatives contracts and its 13 general exclusion of cash exempted the Margin Assets from 14 transfer. 15 recollection of the Sale Hearing. That Except as otherwise specified in the In addition to eliminating Bankruptcy and District Court Decisions Judge Peck also based his ruling, in part, on his own 16 Regarding the CL and provisions pertaining to the Margin 17 Assets, the bankruptcy court first determined that it would treat 18 the CL as enforceable because the parties had relied on it for 19 nearly a year, but that the CL would be valid only to the extent 20 that [its] provisions are not inconsistent with the record of the 21 Sale Hearing and the language of the Sale Order. 22 bankruptcy court also found ambiguity in the CL s parenthetical 23 that transferred any property that may be held to secure 24 obligations under such derivatives [in the ETD business]. 25 a review of extrinsic evidence, it found that such property did 26 not include the Margin Assets. 13 The After 1 The district court disagreed, based on the various 2 Agreements language. Central to its holding was the conclusion 3 that the bankruptcy court unequivocally approved (post-hoc) the 4 CL in its decision described supra, and that none of the parties 5 appealed that approval. 6 and the no cash representations at the Sale Hearing (along with 7 Judge Peck s own understanding of the representations made at 8 that Hearing, and his construal of the CL in accordance with that 9 understanding) were deemed inadmissible extrinsic evidence by the Thus, the language of the CL controlled, 10 district court. The district court concluded that, despite 11 Exclusion (n), the CL s parenthetical unambiguously transferred 12 the Margin Assets to Barclays. 13 4) Resolution 14 We begin by noting the urgency under which this deal was 15 executed, as discussed supra. Ambiguities and loose ends were 16 inevitable. 17 of certain aspects of the Sale, potentially significant aspects, 18 of which it was not aware. 19 circumstances. Indeed, the bankruptcy court admitted the existence Nor could it have been under the 20 While noting these circumstances, we conclude that transfer 21 of the Margin Assets to Barclays was contemplated in the APA and 22 confirmed in the CL.4 The inclusion of the Margin Assets in the 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. 14 1 CL is, therefore, not a material change to the APA and we deem 2 the dispute over whether the bankruptcy court approved the CL to 3 be irrelevant.5 4 In the APA, exchange-traded derivatives are clearly 5 included in the definition of Purchased Assets. 6 amending and clarifying the Sale as contemplated in the Sale 7 Order, specifically defined Purchased Assets to include 8 exchange-traded derivatives and any property that may be held 9 to secure obligations under such derivatives. 10 Further, the CL, The unambiguous meaning of those terms conveys the Margin Assets to Barclays. 11 The Trustee claims that exclusions in the APA pertaining to 12 cash and derivatives contracts (Exclusions (b) and (n), 13 respectively) bar the transfer. 14 We disagree. First, Exclusion (b), pertaining to cash, explicitly does 15 not apply to those assets that are deemed Purchased, and the 16 Margin Assets fall under that term s plain meaning in the 17 agreements. 18 emphasized at the Sale Hearing and recorded in the documents. 19 When used in a general sense, as here, cash means money ready for 20 use. 21 encumbered and not ready for use. We are also not troubled by the no cash promises Cash or cash equivalents pledged as a collateral are 5 Moreover, it would be highly 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 post hoc, such approval would violate Section 363. 15 1 unusual for a buyer to purchase LBI s ETD business in its 2 entirety but not the collateral that allowed that business to 3 exist, particularly in a time of economic crisis when the value 4 of the underlying assets, e.g., options and futures, would be 5 extremely volatile. 6 for cash, it did not liquidate the Margin Assets because doing 7 so would have destroyed the ETD business, which it wanted to 8 sell. 9 Indeed, notwithstanding LBI s desperate need If the Margin Assets were not to be conveyed, we would 10 expect a clear expression of such an intent.6 11 issue arisen before or at the Sale Hearing, even clearer language 12 would have been adopted in the APA and CL. 13 moment as well as a fear of ending any prospect of selling the 14 ETD business and perhaps losing the entire sale no doubt No doubt, had this The urgency of the 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. 16 1 precluded this. 2 language used is sufficient. 3 Particularly under these circumstances, the Second, to adopt the Trustee s reading of Exclusion (n) and 4 include exchange-traded derivatives and related collateral in the 5 term derivatives contracts would conflict with the APA itself, 6 which specifically lists exchange-traded derivatives as a 7 Purchased Asset. 8 to create ambiguity and conflict where there is none when the 9 documents are read as a whole. We decline to engage in the exertion necessary The provisions clearly 10 distinguish the Margin Assets from pure cash and exchange- 11 traded derivatives from derivatives contracts. 12 any interpretation that would create such ambiguity and result in 13 the sale of the exchange-traded derivatives without the Margin 14 Assets as collateral is rendered implausible by the commercial 15 unlikelihood of such a deal in the circumstances described. 16 b) The Clearance Box Assets 17 As noted above, The Clearance Box Assets ( CBAs ) are approximately $1.9 18 billion in unencumbered securities held in LBI's clearance box 19 accounts at [the Depository Trust & Clearing Corporation 20 ( DTCC )]. As the bankruptcy court found, the CBAs provided 21 collateral to secure open trading positions and, in the event of 22 a default by LBI, DTCC could look to the CBAs to cover any 23 potential liability that arose from failed trades. 24 weekend prior to closing, negotiations led to two separate 25 agreements that contained provisions arguably governing the 17 During the 1 transfer of the CBAs. One agreement was set forth in the CL, and 2 the other was set forth in the DTCC Letter. 3 First, the CL provided that Purchased Assets include such 4 securities and other assets held in LBI s clearance boxes as of 5 the time of the Closing, which at the close of business on 6 September 21, 2008 were as specified on Schedule B previously 7 delivered by Seller and accepted by Purchaser. 8 Schedule B -- which listed the specific assets to be transferred 9 -- 98 percent of these assets were in LBI s DTC clearance 10 boxes. According to In re Lehman, 445 B.R. at 200. 11 Second, the DTCC Letter, which was executed by the DTCC, the 12 Trustee, and Barclays, provided that Barclays has indicated, and 13 hereby agrees, that all of the accounts of LBI maintained at the 14 Clearing Agencies Subsidiaries . . . constitute Excluded Assets 15 within the meaning of the APA. On its face, this general 16 language appears to include the CBAs held by LBI at DTCC. 17 The bankruptcy court found the DTCC Letter to be ambiguous, 18 and thus considered it extrinsic evidence. After weighing that 19 evidence, the bankruptcy court found that it was the intent of 20 the parties to transfer the Clearance Box Assets to Barclays. 21 445 B.R. at 201. 22 ambiguity not in a particular term, but in the fact that the 23 provisions in the agreements conflicted, and agreed that 24 extrinsic evidence showed an intent to transfer the CBAs to 25 Barclays. The district court affirmed. 18 It found 1 Our view is as follows. At first reading, the provisions of 2 the CL and the DTCC Letter seem contradictory. 3 that the CBAs are Purchased Assets acquired by Barclays, while 4 the DTCC Letter represented that accounts maintained by LBI at 5 the DTCC are Excluded Assets. 6 find another reading of the DTCC Letter possible. 7 Letter -- which does not specifically mention the CBAs -- shows 8 only that Barclays was not acquiring the LBI accounts themselves, 9 but could still receive a grant of assets (for example, the CBAs) 10 11 The CL provided But, like the bankruptcy court, we The DTCC from within those accounts. The DTCC Letter s general reference to accounts of LBI 12 does not convey the CBAs unambiguously. 13 contained billions of other assets, including collateral assets 14 in which the DTCC held a security interest. 15 other hand, were lien-free assets that were held in lien-free 16 accounts. Selling off the specific assets within the accounts was 17 a matter between Barclays and Lehman, not the DTCC. 18 extent that there appears to be conflict between these 19 provisions, the specific governs the general. 20 Hancock Mut. Life Ins. Co. v. Caroline Power and Light Co., 717 21 F.2d 664, 669 n.8 (2d Cir. 1983)( [P]articularized contract 22 language takes precedence over expressions of intent that are 23 general . . . . ); accord Liberty Surplus Ins. Corp. v. Segal 24 Co., 142 Fed. App x 511, 515 (2d Cir. 2005) (summary order). 25 26 The DTCC Accounts The CBAs, on the To the See, e.g., John As the bankruptcy court found, [t]he unambiguous text of the Clarification Letter contains more detail and is more 19 1 specific with respect to the Clearance Box Assets than the DTCC 2 Letter. 3 Clarification Letter specifically identifies individual Clearance 4 Box Assets, whereas the DTCC Letter has no similar itemized list 5 of securities. 6 445 B.R. at 202. That is, Schedule B to the Id. The Trustee s argument on appeal that, under APA Section 7 2.2, the conflict between the Agreements must be resolved in 8 favor of the dictates of the DTCC Letter, is not compelling. 9 Section 2.2 provides: Nothing herein contained shall be deemed 10 to sell, transfer, assign or convey the Excluded Assets to the 11 Purchaser. 12 at all, let alone with the specificity required for the operation 13 of Section 2.2's preference for the APA s designation of Excluded 14 Assets. 15 Letter, or as between the agreements, must be resolved by 16 extrinsic evidence. 17 However, the DTCC Letter does not reference the CBAs For that reason, any ambiguity that remains in the DTCC We do not find clear error in the bankruptcy court s 18 assessment of extrinsic evidence. There was at least some 19 extrinsic evidence in support of each party s contention. 20 example, the Deputy General Counsel of the DTCC testified 21 regarding telephonic negotiations in which Barclays purportedly 22 agreed to give up the CBAs. 23 found, and we agree, that the weight of evidence tipped markedly 24 in Barclays s favor. 25 conduct in approving the CL and finalizing Schedule B evinced an 26 intent to transfer the CBA assets. For Nonetheless, the bankruptcy court Specifically, the parties post-closing 20 This intent is supported by 1 the testimony of Barclays s lawyers as well as an email of DTCC s 2 outside counsel to the effect that DTCC agreed to accept 3 Barclays s $250 million limited guarantee and in turn relinquish 4 the CBAs. 5 extrinsic evidence also comports with the commercial reality of 6 the deal, which saw DTCC incur losses far below the $250 million 7 guarantee provided by Barclays, who took on the lion s share of 8 the risk.7 9 10 As the bankruptcy court noted, the weight of the CONCLUSION For the reasons stated above, we affirm the district court. 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 and signed 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