In Re: Lehman Brothers Holdings Inc.

Background

The court had previously dismissed Rex Wu’s bankruptcy appeal on September 30, 2021. It ruled that Wu lacked appellate standing—the required legal interest to bring the appeal—and stated that, even if he had standing, his claims were meritless. Wu then moved for relief from that judgment under Federal Rules of Civil Procedure 60(b)(3), 60(b)(6), 60(d)(1), and 60(d)(3). He primarily argued that Lehman Brothers Holdings Inc. had committed fraud during the bankruptcy proceeding and later appeals.

Wu’s Fraud Arguments

Wu alleged that Lehman repeatedly omitted language from trust prospectuses when quoting them in its filings. The omitted language stated that Lehman’s guarantees would be unsecured obligations, subordinate to Lehman’s other liabilities, equal in payment priority with Lehman’s most senior preferred or preference stock and certain guarantees involving affiliates’ preferred securities, and senior to Lehman’s common stock. Wu argued that the omissions and related statements misrepresented the nature of the guarantees and influenced rulings in the bankruptcy case and appeals.

Court’s Analysis

The court held that Wu did not present a sufficient claim of fraud under Rule 60(b)(3), which permits relief from a judgment for fraud, misrepresentation, or misconduct by an opposing party, or under Rule 60(d)(3), which addresses fraud that seriously damages the integrity of the court’s adjudicative process. The court first determined that the prospectus language had no bearing on the grounds for its earlier dismissal: Wu’s lack of appellate standing and the independent reasons his claims failed.

The court alternatively concluded that Lehman’s quotations were not misleading. It found that the quoted language accurately established that the guarantees were subordinate to Lehman’s liabilities, equal in priority with its most senior preferred or preference stock, and senior to its common stock. The omitted language merely clarified that the guarantees also had equal priority with certain guarantees involving affiliates’ preferred securities. The court added that the complete prospectuses had repeatedly been submitted to the record and were available to the parties and courts. Wu’s remaining allegations about Lehman’s motives and deliberate misrepresentations were conclusory and did not meet the requirement of clear and convincing evidence.

The court also treated Wu’s references to Mission Products Holdings, Inc. v. Tempnology, LLC, as a request for reconsideration under Local Rule 6.3. That rule allows reconsideration when a party identifies controlling decisions the court overlooked that could reasonably change the result. The court stated that Wu could have cited the decision earlier and, in any event, found that the decision—concerning a debtor-licensor’s rejection of a trademark license—was unrelated to the grounds for dismissing Wu’s appeal.

Additional Rules Invoked

The court explained that Rule 60(b)(6), a provision allowing relief for other reasons justifying it, was unavailable because Wu’s arguments fit more specific provisions of Rule 60. It also found no basis for relief under Rule 60(d)(1), which permits an independent action to prevent a grave miscarriage of justice.

Disposition

Judge Ronnie Abrams denied Wu’s motion for reconsideration. The order directed the Clerk of Court to terminate the motion at docket number 12 and mail a copy of the order to Wu.