S&C Prevails for Barclays in Dispute With Hedge Fund

November 18, 2020

In its latest victory in a contractual dispute with a hedge fund, Barclays Bank secured summary judgment on the issues of liability and damages on its counterclaims against BDC Finance. In a ruling from the bench after oral argument, New York State Supreme Court Justice Andrea Masley of the Commercial Division held that Barclays is entitled to more than $2.6 million in damages, with pre-judgment interest, as well as attorneys' fees. She entered the judgment on November 5. Previously, Barclays defeated BDC's breach-of-contract claims seeking significant damages after a trial in 2017.
The dispute traces back to 2005, when Barclays and BDC entered into a “total return swap” agreement through 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 and sued for breach of contract. Barclays filed counterclaims against BDC for its failure to perform its contractual obligations after improperly terminating the agreement.
More than a decade of litigation followed. The parties' cross-motions for summary judgment resulted in a 2015 decision by the New York Court of Appeals remanding for trial certain limited factual issues. During the ensuing bench trial, S&C persuaded the court that Barclays did not default in responding to BDC's 2008 collateral call. In October 2019, the First Department of New York's Appellate Division unanimously affirmed, and the Court of Appeals denied BDC's request for leave to appeal.
Beyond the immediate victory for Barclays, this litigation has produced 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 S&C team representing Barclays was led by Jeffrey Scott and Marc De Leeuw, who handled all aspects of the case from pretrial proceeding through trial, multiple appeals, and the pursuit of counterclaims.