Bloomberg News

Lehman Brothers Unit Sues Goldman Sachs Unit for Failed Deal

October 06, 2011

(Updates with excerpt from filing in third paragraph.)

Oct. 6 (Bloomberg) -- A unit of Lehman Brothers Holdings Inc., the bankrupt investment bank, sued a unit of Goldman Sachs Group Inc. over a failed $1.25 billion real estate deal.

Rosslyn LB Syndication Partner LLC, a Lehman unit not in bankruptcy, accused USREO/Rosslyn Investors LLC, a Goldman Sachs unit, of terminating a transaction related to an office building portfolio in Arlington, Virginia, according to a filing today in U.S. Bankruptcy Court in Manhattan.

The Goldman unit’s “obligations (which it failed to perform) are absolute,” according to the filing. Rosslyn LB is seeking more than $100 million in damages.

Michael DuVally, a spokesman for New York-based Goldman Sachs, declined to comment on the lawsuit.

Lehman Brothers filed the largest bankruptcy in U.S. history on Sept. 15, 2008. The U.S. brokerage went into liquidation four days later.

The judge overseeing Lehman’s bankruptcy approved the proposed sale of its 78.5 percent interest in the 3 million- square-foot commercial real estate project on Aug. 17, court papers show. Two days before the scheduled closing date USREO/Rosslyn terminated the agreement based on “pretextual reasons,” Lehman lawyers said in court papers.

Goldman’s “unilateral” termination of the agreement wrongfully prevented the Lehman unit from exercising its right to extend the closing date, court papers show.

Fees and Relief

Lehman lawyers characterized Goldman’s action as “unjustified repudiation,” and also asked a judge to award legal fees and “further relief” deemed appropriate, according to the complaint.

Rosslyn LB is a non-debtor unit of New York-based Lehman Brothers Holdings and its Lehman Commercial Paper unit, according to the filing. USREO/Rosslyn Investors LLC is a unit of U.S. Real Estate Opportunities LP, a joint venture in which Goldman Sachs is the general partner.

Shares of Lehman were unchanged at 3 cents in over-the- counter trading in New York today. Goldman Sachs rose $3.64 or 3.8 percent to $97.93 in NYSE trading.

The case is Rosslyn LB Syndication Partner LLC v. USREO/Rosslyn Investors, LLC, 11-02764, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

--With assistance from Phil Milford in Wilmington, Delaware. Editors: Andrew Dunn, John Pickering

To contact the reporter on this story: Dawn McCarty in Wilmington at dmccarty@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net


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