Client Highlight: Barclays
S&C litigation team wins trial and appeal, leading Barclays to victory in contract case.
With their training as generalists, Sullivan & Cromwell litigators can handle all aspects of a dispute, from pretrial proceedings through trials and appeals. Recently, an S&C team represented Barclays Bank in a high-stakes breach-of-contract dispute with a hedge fund by winning a bench trial and preserving that result on appeal.
In 2018, after a bench trial, the team obtained a ruling from a New York Supreme Court judge that Barclays did not default in performing its contract with BDC Finance LLC. In October 2019, they convinced a New York State appeals court to uphold that ruling and find that Barclays has no liability to the hedge fund on its $1 billion lawsuit.
In addition to giving Barclays a complete victory, the decision sets valuable precedent for the interpretation of standardized contracts published by the International Swaps and Derivatives Association. These contracts govern trillions of dollars of derivatives transactions, but are rarely the subject of dispositive court rulings.
The dispute traces back to 2005, when Barclays and BDC entered into a “total return swap” agreement under which BDC obtained from Barclays the economic performance of high-yield corporate debt held by Barclays. In 2008, the facility covered more than $1 billion in assets. In October 2008, at the height of the financial crisis, BDC and Barclays exchanged competing collateral calls, and BDC claimed that Barclays had defaulted under the agreement.
In affirming, the appeals court held that Barclays substantially complied with the parties’ agreement and provided BDC with the full benefit of the amount it was owed.