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Less than a month after Deutsche Bank filed a complaint against Finepoint Capital regarding Lehman Brothers’ bankruptcy estate claims, the defendants have made it clear they intend to challenge the complaint.

In a letter submitted at the New York Southern District Court on July 9, 2024, Finepoint stated its intent to file a motion pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure to dismiss Deutsche Bank’s complaint.

This is an action for breach of contract and breach of the implied covenant of good faith and fair dealing. The parties in this action entered into a trade nearly six years ago in which the defendants agreed to acquire from Deutsche Bank claims against the bankruptcy estate of Lehman Brothers Holdings, Inc., with a face amount of $906 million, in return for a purchase price of approximately $14.6 million.

Deutsche Bank argues that, for more than five years, the defendants have frustrated the parties’ ability to settle the Trade by unreasonably refusing to execute an assignment of claim.

Finepoint argues that DB’s attempt to hold Finepoint liable for refusing to complete a nearly six-year-old trade—a trade as to which DB failed to fulfill an express condition precedent—should be rejected.

After the parties initially agreed to the basic terms of the trade, DB discovered—and tried to shift to Finepoint—a particular, previously unknown risk (the “Impairment Risk”).

Finepoint says it never agreed to accept the Impairment Risk and was under no obligation to do so. Indeed, the signed trade confirmations (which DB itself prepared and executed) expressly allocated the Impairment Risk to DB by specifically requiring DB to represent that no such risk existed. The trade confirmations made it an express condition precedent to a final agreement that DB supply either that exact representation or an acceptable indemnity.

The defendant says that, when DB refused to supply either the requisite representation or an indemnity, the condition precedent failed and, thus, no binding contract to consummate the trade ever arose.

Finepoint concludes that DB’s current effort to re-trade the parties’ deal by means of litigation should be rejected and its claims against Finepoint dismissed.

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