A federal judge in New York – the Hon. Richard J. Sullivan – mostly granted JP Morgan Chase Bank’s motion to dismiss claims brought on behalf of unsecured creditors of Lehman Brothers Holdings Inc. related to JPM’s requirement that Lehman Brothers Inc., LBH’s broker-dealer subsidiary, pledge and post extra collateral in September 2008, shortly before LBI filed for bankruptcy protection on September 15, 2008. At the time, JPM required that LBI pledge or post US $8.6 billion of extra collateral with it in order for JPM to continue to maintain a credit and liquidity facility for LBI to process triparty repurchase agreements where JPM served as agent. Following LBI’s bankruptcy, JPM used this collateral to offset LBH’s obligations to it. LBH’s unsecured creditors claimed that JPM used its “‘life or death’ leverage to extract virtually all of Lehman’s remaining liquidity [prior to its bankruptcy filing] and establish a $8.6 billion ‘slush fund’ for its own use.” The judge claimed such a position rested on the “fundamental premise” that JPM was obligated to extend credit to LBI and thus its demands for additional collateral were wrongful. Reviewing the relevant customer agreement, the judge said this premise was not correct. According to the judge, the relevant contract between JPM and LBI “unambiguously permitted [JPM] to cease extending credit to LBI even without an extended notice period.” The judge said that “[a]lthough one could argue in hindsight that notice of several months or a year would have been preferable for an entity with Lehman’s exposure [to have been warned by JPM it intended to cease extending credit], it is not the notice Lehman bargained for, and the Court is not in a position to enhance Lehman’s contractual rights after the fact.”