
469 B.R. 415 (2012)
In re LEHMAN BROTHERS HOLDINGS INC., et al., Debtors.
Lehman Brothers Holdings Inc. and Official Committee of Unsecured Creditors of Lehman Brothers Holdings Inc., et al., Plaintiff and Plaintiff Intervenor,
v.
JPMorgan Chase Bank, N.A., Defendant.
Bankruptcy No. 08-13555 (JMP). Adversary No. 10-03266 (JMP).
United States Bankruptcy Court, S.D. New York.
April 19, 2012.
*419 Curtis, Mallet-Provost, Colt & Mosle, LLP, Joseph D. Pizzurro, Esq., Lynn P. Harrison, III, Esq., Cindi M. Giglio, Esq., Nancy E. Delaney, Esq., Peter J. Behmke, Esq., Michael Moscato, Esq., New York, NY, for Plaintiff Lehman Brothers Holdings Inc.
Wachtell, Lipton, Rosen & Katz, Harold S. Novikoff, Esq., Paul Vizcarrondo, Jr., Esq., Amy R. Wolf, Esq., Marc Wolinsky, Esq., Douglas K. Mayer, Esq., New York, NY, for Defendant JPMorgan Chase Bank, N.A.
Quinn Emanuel Urquhart & Sullivan, LLP, John B. Quinn, Esq., Erica P. Taggart, Esq., Los Angeles, CA, James C. Tecce, Esq., Daniel P. Cunningham, Esq., Andrew J. Rossman, Esq., New York, NY, for the Official Committee of Unsecured Creditors.

MEMORANDUM DECISION GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS BY DEFENDANT JPMORGAN CHASE BANK, N.A.
JAMES M. PECK, Bankruptcy Judge.

Introduction
The captioned adversary proceeding brought jointly by Lehman Brothers Holdings Inc. ("LBHI," and, together with its affiliated debtor entities, "Lehman") and its Official Committee of Unsecured Creditors (the "Committee," and, together with LBHI, the "Plaintiffs") seeks to recover $8.6 billion from JPMorgan Chase, N.A. ("JPMC") for the benefit of Lehman's creditors. The litigation relates to transactions that occurred shortly before LBHI's bankruptcy filing and highlights various defensive actions taken by JPMC as part of the bank's efforts to limit the impact on JPMC of a default by Lehman. The litigation touches on and illuminates the safe harbor provisions of the United States Bankruptcy Code, 11 U.S.C. § 101 et seq. (the "Bankruptcy Code").
The allegations and defenses present important questions as to what a lender can do in managing its exposure to potential losses and protect its interests at a time of intensifying concerns about systemic risk. Plaintiffs complain that JPMC abused the power of its position to improperly extract billions in incremental collateral and other concessions from Lehman before the LBHI bankruptcy, while JPMC contends that the litigation is baseless, that its credit and clearance services benefited Lehman and its customers and that, as a matter of law, its institutional conduct should be fully insulated from all ex post exposure.
*420 This decision resolves a broad-based motion to dismiss (the "Motion") brought by JPMC at the outset of the litigation. The Motion is quite ambitious in its scope and endeavors to preemptively dispose of all counts in Plaintiffs' First Amended Complaint (the "Amended Complaint").[1] In terms of the trajectory of the litigation itself, while the Motion has been pending, the parties have largely discounted the prospects of a complete win by JPMC at the pleading stage and have moved forward diligently under a series of pretrial orders that outline a protocol of extensive and mostly cooperative pretrial discovery. This discovery has been pursued actively while the Motion has been pending and is scheduled to be concluded within the next few months.[2]
As a result of these discovery efforts, the Court assumes that the parties have developed an intimate understanding of the facts. These facts are not presently available to the Court in its consideration of the Motion, but this accumulated information will serve as evidence to be offered at trial or in connection with any future dispositive motions that may be filed. And so the contours of the surrounding litigation have expanded while proceedings with respect to the Motion have remained constant with the exception of some supplemental briefing.
The ongoing discovery has resulted in a mismatch between the bare-bones motion practice on which this decision is based and the nuanced substance of the case that has been fleshed out through discovery. A prolonged procedural detour concerning the very authority of the bankruptcy court to decide the Motion has added more asymmetry to the mismatch between what is now being decided and the case as it has been experienced by the litigators. More time has elapsed between argument and this decision than is either typical or desirable.
Having considered the arguments of the parties, the Court grants the Motion to the extent that it relates to those counts that seek relief that is unavailable under terms of the applicable "safe harbor" sections of the Bankruptcy Code.[3] No relief may be granted with respect to these counts, and they are dismissed. The remaining counts of the Amended Complaint that are outside the scope of these immunities, described in section II, infra, and Exhibit A to this decision, shall survive the Motion for the reasons discussed in this decision and summarized in the exhibit.
In short, as a result of a count-by-count analysis, the Court has concluded that the safe harbors are applicable to all claims based on preference liability or constructively fraudulent transfers but that Plaintiffs are entitled to proceed with the remaining complex and fact-driven causes of action in the Amended Complaint. The safe harbors have trimmed the claims in the Amended Complaint but have not eliminated all of them. That seems appropriate: a regime that compels dismissal of certain claims based on express statutory *421 exemptions should be receptive to allowing all non-exempt claims to proceed so that they may be judged on their merits. Claims subject to the safe harbors are being dismissed because strict application of the law requires it; claims not subject to the safe harbors are proceeding because informed discretion permits it.
Content and context have played an important part in this decision. This is a case that examines the conduct of a giant lender at a time when the financial markets were in turmoil. JPMC grabbed assets for itself at a critical time in its banking relationship with Lehman. The timing aloneweeks before bankruptcyis reason enough to question the circumstances of what occurred. The issues presented are especially difficult ones that one day may help to define what constitutes acceptable conduct by major financial institutions during times of crisis. The case obviously also involves quite a lot of money. And with so much at stake, both in terms of issues and dollars, making a decision on the merits should occur after careful consideration of a full evidentiary record, and that will happen in time with respect to those counts that are not being dismissed.
The sections that follow this introduction provide a detailed discussion of the procedural background of the adversary proceeding, an analysis of the safe harbors as justification for dismissal of counts in the Amended Complaint for recovery of preferences and constructively fraudulent transfers, and a discussion of those counts that are surviving the Motion for adjudication at a later time. Before reaching those substantive sections, the Court will provide an overview of the litigation and offer some initial thoughts on the issues presented by the Amended Complaint and the Motion.
The multiple causes of action in the Amended Complaint are based on allegations that JPMC took unfair advantage of Lehman at a time when Lehman depended on JPMC as its main source of prepetition credit to sustain critical trading operations for customers. The claims all arise out of a series of actions taken by JPMC to mitigate the risks associated with advancing substantial liquidity each day to Lehmanmeasured in the tens of billions during the months leading up to the bankruptcy of LBHI.
These actions included "take it or leave it" demands to a submissive Lehman that additional entities within the Lehman enterprise agree to be liable to JPMC and that Lehman turn over multiple billions of dollars in incremental cash, liens and additional collateral as conditions to preserving JPMC's essential lending relationship. In combination, Lehman accepted changes imposed on it by JPMC that are claimed to have vastly improved JPMC's position relative to other creditors. This all happened urgently at a time of growing concerns and heightened anxiety as to Lehman's deteriorating financial condition and viability as an enterprise. Events proved that these concerns were justified.
The actions of JPMC during the months leading up to LBHI's bankruptcy filing, according to the Amended Complaint, were wrongful, constituted a deliberate abuse by JPMC of its position as a trusted commercial lender to Lehman and contributed to the severe liquidity constraints that ultimately doomed Lehman to fail in so spectacular a fashion. The Amended Complaint rests on a multitude of legal theories, but, when boiled down to its essence, states, under one theory or another, that JPMC should be found legally responsible for having engaged in a form of actionable economic coercion that compelled Lehman to yield to its unreasonable demands, thereby further weakening an already vulnerable Lehman and precipitating *422 LBHI's eventual bankruptcy and the disastrous consequences that followed.
JPMC has moved to dismiss all counts of the Amended Complaint, arguing that it acted reasonably and was justified in requiring a pledge of more assets from Lehman as a condition to providing ongoing clearance services and credit at a time of obviously greater financial risk and that its rights as a secured creditor must be fully protected under the documents executed by Lehman and the applicable language of the safe harbor provisions of the Bankruptcy Code that apply to all of the transactions described in the Amended Complaint.
JPMC submits that the safe harbors were enacted to provide needed incentives to lenders to extend credit without having to even consider the risk that a bankruptcy court might later review and order a "claw back" of assets that were transferred under any of these protected transactions. Because market participants rely upon the safe harbors, and this reliance promotes essential liquidity and market stability, JPMC also argues that covered transactions should be immunized from further scrutiny under any legal theory, including several theories of recovery arising under state law, because to allow the safe harbors to be circumvented by such indirect means would frustrate the central purpose of these protections.
Stated differently, JPMC submits that the safe harbors reflect a preemptive federal policy to protect the markets and eliminate the risk of ex post second-guessing and interference by the bankruptcy court in financial transactions that have been completed. Consistent with that policy, JPMC urges that the transactions in question should be exempt from challenges and not be subjected to collateral attacks of any kind.
The Court agrees with JPMC that the safe harbors apply here, and it is appropriate for these provisions to be enforced as written and applied literally in the interest of market stability. The transactions in question are precisely the sort of contractual arrangements that should be exempt from being upset by a bankruptcy court under the more lenient standards of constructive fraudulent transfer or preference liability: these are systemically significant transactions between sophisticated financial players at a time of financial distress in the marketsin other words, the precise setting for which the safe harbors were intended.
It is for that very reason that the Motion is being granted as to those counts seeking avoidance of the transfers made to JPMC as preferences or constructively fraudulent transfers during the months of August and September 2008. The safe harbors apply to these transactions and were designed to protect transfers from avoidance, but dismissal also is appropriate as to those counts seeking to avoid "obligations" even though that term does not appear in section 546(e) of the Bankruptcy Code.
Plaintiffs are correct that "obligations" are not specifically mentioned within the language of this safe harbor and that the term "obligations" has a different meaning from the word "transfers." As such, the incurrence of obligations is neither exempt nor protected from challenge under section 546(e). What might seem to be grounds for a victory for Plaintiffs fails upon further examination. The obligations remain shielded from avoidance because they are connected by the same transaction to transfers that are protected by the safe harbor language of section 546(e).
To say that obligations incurred may be avoided but the related transfers made in connection with such obligations are shielded from challenge creates a conundrum for the Plaintiffs. The theoretical *423 ability to possibly exclude obligations incurred by Lehman from safe harbor protection does not support a claim upon which relief may be granted because any successful avoidance of the obligations would not impair the protected validity of the related transfers made in connection with these obligations. It amounts to legal checkmate.
Although "obligations" may escape safe harbor protection and may be exposed hypothetically to claims for potential avoidance, that does not matter because the liens and other transfers made in connection with these obligations remain exempt from such claims. Thus, Plaintiffs' success in separating the term "obligations" from section 546(e) leads to a dead end for purposes of obtaining a recovery.
Claims based on obligations, at least in this case, do not yield a potential remedy because the obligations are tied to and support transfers that are connected to securities contracts and thereby exempt from further challenges. Allowing Plaintiffs to proceed with these claims would be a vain and wasteful exercise that also would inject needless uncertainty into a realm where predictability should reign.
Granting the Motion as to all counts based on constructively fraudulent transfers and preferential transfers is supported by the broad language of the Bankruptcy Code and helps to preserve market expectations, but denying the Motion as to all counts of the Amended Complaint that are not being dismissed (the "Remaining Counts") also is consistent with these exemptions and does nothing to impair the effectiveness or purpose of these provisions of the Bankruptcy Code.
JPMC is a systemically-important financial institution that routinely does business with other such institutions, but that status does not shield JPMC from potential liability for any wrongful acts that may be proven under the Remaining Counts. The safe harbors provide incentives and protections to market participants, but they are not a license for major institutions to act in a commercially unreasonable manner.
If JPMC crossed the line of permissible conduct and did anything wrongful that damaged Lehman, Plaintiffs have recourse by means of those counts that involve intentional misconduct or that are based on other claims that are not expressly subject to the protections of the safe harbors. The safe harbors specifically address certain stated bankruptcy-related risks and remedies but do not offer protection against exposure that exists under these alternative theories of recovery. Plaintiffs are entitled to pursue the Remaining Counts based on these theories and will have their chance to prove them.
While the Motion has been pending, the parties have engaged in robust pretrial discovery[4] and also have briefed and argued questions concerning the authority of the bankruptcy court to render decisions in this litigation and perform its judicial functions in light of the holding of the United States Supreme Court in Stern v. Marshall, ___ U.S. ___, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011) ("Stern"). These questions and related procedural steps taken to address them have contributed to the delay in deciding the Motion and, as explained in more detail in the next section of this decision, prompted the filing of a motion by JPMC to withdraw the reference that currently is pending in the United States District Court for the Southern District of New York (the "District Court"). JPMC confirmed at a pretrial *424 conference in January that it does not object to having this Court issue this decision on the Motion.
That certainly is some progress, but regardless of this concession, the Court always has had the authority to decide the Motion.[5] Due to its procedural character and the fact that the Court in deciding any motion to dismiss functions as a non-final gatekeeper in assessing the legal sufficiency of allegations in a complaint, any judicial determination of such a motion at the trial court level involves no factual findings and always is subject to a de novo standard of appellate review. As such, the Supreme Court's analysis in Stern is inapposite to this decision.

Factual Background and Procedural History
JPMC served as the principal clearing bank for Lehman Brothers Inc. ("LBI") as well as the agent for LBI's tri-party repurchase agreements. See First Am. Compl. ¶¶ 3, 18, 19. It is one of only two banks in the United States to provide tri-party repo agency services. See Wolf Decl.[6] Ex. 10 (Task Force on Tri-Party Repo Infrastructure, Report of Payments Risk Committee, dated May 17, 2010) at 3. In its capacity as LBI's clearing bank, JPMC facilitated the clearance and settlement of securities trades by LBI. See First Am. Compl. ¶¶ 3, 18. JPMC acted as agent and intermediary for LBI and its tri-party repo investors who purchased LBI's securities in the evening subject to LBI's agreement to repurchase those securities the next morning. Id. at ¶ 3.
In addition to providing clearing services, JPMC also had other significant business relationships with Lehman in the period before it filed for bankruptcy. It was the lead arranger and administrative agent for LBHI's $2 billion unsecured revolving credit facility, was one of Lehman's main depository banks for deposit accounts, and was one of Lehman's largest global counterparties for derivatives activity. See First Am. Compl. ¶ 16.

The Clearance Agreement
JPMC performed its clearing activities for LBI pursuant to a Clearance Agreement dated as of June 15, 2000. See Wolf Decl. Ex. 1 (Clearance Agreement between LBI and Chase Manhattan Bank, as predecessor-in-interest to JPMC) (the "Clearance Agreement"); First Am. Compl. ¶¶ 19, 20. The Clearance Agreement did not create any express obligation for JPMC to extend credit to LBI. Instead, section 5 provided that "[JPMC] may, solely at [its] discretion, permit [LBI] to use funds credited to the Account prior to final payment" and that "[a]ll loans, whether of *425 money or securities, shall be payable on demand...." Wolf Decl. Ex. 1 (Clearance Agreement) § 5. Section 5 further expressly preserves JPMC's right to decline a request by LBI for an extension of credit upon providing notice: "we may at any time decline to extend such credit at our discretion, with notice...." Id.
To secure any advances of credit, the Clearance Agreement granted JPMC a lien on the assets held in LBI's accounts at JPMC, other than segregated customer accounts. Wolf Decl. Ex. 1 (Clearance Agreement) § 11(a) ("In consideration of any advances or loans we may extend to [LBI] pursuant to this Agreement ..., you hereby: (a) Grant to us a continuing security interest in, lien upon and right of set-off as to (i) the balance of every existing or future deposit, and account which you ... maintain with [JPMC] (except for any Segregated Account containing customer securities or funds)...."). Because JPMC was the primary clearing bank for LBI, virtually all of LBI's securities and cash used in its trading activities were on deposit with JPMC or in JPMC accounts at depositories. See First Am. Compl. ¶ 22. JPMC's security rights to LBI's collateral were limited, however, to the assets in those accounts subject to JPMC's lien and did not extend to the accounts of other Lehman entities. Id. at ¶ 23.
The Clearance Agreement could not be terminated without proper notice. Section 17 provided that either party could terminate the agreement by written notice if, inter alia, (i) the other party filed for bankruptcy; (ii) the other party failed to comply with any material provision of the agreement, which failure was not cured within 30 days after notice of such failure; or (iii) any representation or warranty made in the agreement by the other party shall have proven to have been, at the time made, false or misleading in any material respect. See Wolf Decl. Ex. 1 (Clearance Agreement) § 17. LBI also agreed to limit JPMC's liability by waiving any claim for consequential damages under the Clearance Agreement: "In no event shall [JPMC] be liable for special, indirect, punitive or consequential damages, whether or not [JPMC has] been advised as to the possibility thereof and regardless of the form of action." Id. at § 13.
The initial term of the Clearance Agreement commenced on June 15, 2000 and ended on October 7, 2002. The parties continued to engage in transactions under terms of the Clearance Agreement from 2000 on, and did not amend it until 2008, as discussed in greater detail below. See First Am. Compl. ¶ 27.

The August Agreements
On or about August 18, 2008, JPMC presented LBHI with a set of documents that, once effective, materially changed the clearance relationship between the parties. See First Am. Compl. ¶ 28. The new documents were executed on or about August 26, 2008. They included an amendment to the Clearance Agreement (the "August Amendment"), a guaranty agreement (the "August Guaranty"), and a security agreement in favor of JPMC (the "August Security Agreement") (collectively, the "August Agreements"). Id. The August Security Agreement and the August Amendment were signed by Paolo Tonucci (LBHI's treasurer), and the August Guaranty was signed by Ian Lowitt (LBHI's chief financial officer). See id. at ¶ 34; Wolf Decl. Ex. 3 (August Amendment); Wolf Decl. Ex. 4 (August Guaranty); Wolf Decl. Ex. 5 (August Security Agreement). In accordance with the August Agreements, LBHI posted collateral with JPMC to secure JPMC's clearance exposure to LBI and other LBHI subsidiaries. See First Am. Compl. ¶ 30.
The August Amendment added LBHI and several LBHI subsidiaries as additional *426 customers under the Clearance Agreement, which originally was between only JPMC and LBI. Wolf Decl. Ex. 3 (August Amendment) § 1 ("The Agreement is hereby amended by adding Lehman Brothers Holdings Inc., Lehman Brothers International (Europe), Lehman Brothers OTC Derivatives Inc., Lehman Brothers Commercial Bank and Lehman Brothers Japan Inc. as additional customers."). The August Amendment further provided that the obligations of these affiliated entities to JPMC would be "several and not joint." See Wolf Decl. Ex. 3 (August Amendment) § 2 ("Notwithstanding anything provided for herein to the contrary, except for the obligations of Lehman Brothers Holdings Inc. under the [August Guaranty and August Security Agreement], the obligations and liabilities of each of the Lehman entities which are a party to this Agreement under this Agreement shall be several and not joint and any security interest, lien, right of set-off or other collateral accommodation provided by any Lehman entity pursuant to this Agreement shall not be available to support the obligations and liabilities of any other Lehman entity pursuant to this Agreement.").
The August Security Agreement granted JPMC a lien on certain LBHI accounts at JPMC in which LBHI had posted collateral "as security for the payment of all the Liabilities," as defined in the August Guaranty. Wolf Decl. Ex. 5 (August Security Agreement) at 2 ("As security for the payment of all the Liabilities, the undersigned hereby grant(s) to the Bank a security interest in, and a general lien upon and/or right of set-off of, the Security.").
To the extent that its collateral was no longer required to secure outstanding clearance obligations owed to JPMC, LBHI could transfer the collateral pledged under the August Security Agreement to a lien-free account at JPMC. See Wolf Decl. Ex. 5 (August Security Agreement) at 3 ("... at the end of a business day, if [LBHI] has determined that no Obligations (as defined in the Clearance Agreement) remain outstanding, [LBHI] may transfer to an account (the `Overnight Account') any and all Security held in or credited to or otherwise carried in the Accounts."); First Am. Compl. ¶ 31. Plaintiffs allege that because the intra-day clearance exposures between JPMC and the Lehman subsidiaries typically were reduced to zero at the close of business of each trading day, the "overnight account" provision of the August Security Agreement entitled LBHI to have access to substantially all of its collateral overnight. See First Am. Compl. ¶ 32.
Under the August Guaranty, LBHI guaranteed payment of all obligations and liabilities owed to JPMC under the Clearance Agreement of all of LBHI's subsidiaries that were parties to the Clearance Agreement, including LBI. See Wolf Decl. Ex. 4 (August Guaranty) § 1 ("The Guarantor unconditionally and irrevocably guarantees to the Bank the punctual payment of all obligations and liabilities (including without limitation the `Obligations' as defined in the Clearance Agreement) of the Borrowers to the Bank of whatever nature ... (all of the foregoing sums being the `Liabilities'), pursuant to the Clearance Agreement, dated as of June 15, 2000....").
The liability of LBHI under the August Guaranty was limited to the value, adjusted on a daily basis, of the collateral held or requested to secure the August Guaranty. Id. ("The Guarantor's maximum liability under this Guaranty shall adjust each day and for each such day shall be equal to the dollar amount of cash and securities ... (i) held on such day in the accounts of the Guarantor subject to the Clearance Agreement and the Security Agreement and (ii) that the Bank has notified the Guarantor *427 to be delivered to the Bank on such day in support of this Guaranty."); See also First Am. Compl. ¶ 30.
The preliminary statement to the August Guaranty stated that LBHI as guarantor expected to derive significant financial benefit from the continued extension of clearance services provided by JPMC to LBHI affiliates in reliance on that agreement. See Wolf Decl. Ex. 4 (August Guaranty) at 1 ("The Guarantor derives, and expects to continue to derive, substantial direct and indirect benefits from the business of the Borrowers and the credit, clearing advances, clearing loans and other financial accommodations provided by the Bank to the Borrowers.").
Plaintiffs allege that the August Agreements provided LBHI with neither actual nor reasonably equivalent value in exchange for granting JPMC significant legal rights. See First Am. Compl. ¶ 33 ("While the August Agreements purported to grant JPMorgan significant new rights against LBHI, they gave LBHI nothing of value in exchange ... [f]urther, LBHI did not even receive reasonably equivalent value....").

JPMC's access to confidential Lehman information in September 2008
In the days before LBHI's collapse, JPMC was able to gain knowledge of Lehman's financial conditions and prospects. See First Am. Compl. ¶ 35. As Lehman's most significant relationship bank, JPMC officers attended meetings with high-level Lehman personnel in connection with its financial distress. Id. For example, on September 4, 2008, senior management of LBHI met with senior officers of JPMC, including its senior risk officer, Barry Zubrow, to discuss Lehman's upcoming third quarter results, including the expected significant asset write-downs from Lehman's commercial and residential real estate assets, and Lehman's plans going forward. See id. at ¶ 36. Similarly, JPMC offered to assist Lehman by providing feedback on its draft presentations to the rating agencies. For example, on September 4, 2008, LBHI treasurer Paolo Tonucci solicited comments from JPMC officials to a draft presentation scheduled to be made to one of the ratings agencies. See id. at ¶ 37.
As a result of these and other meetings and correspondence, Plaintiffs allege that JPMC obtained access to confidential information, results, plans, and outlook. Id. at ¶¶ 35, 37. Tonucci himself warned JPMC that the draft presentation to the ratings agency contained "a lot of confidential info." Id. at ¶ 37. Moreover, Plaintiffs allege that officials at JPMC knew by the morning of September 5, 2008 that the proposed transaction between Lehman and Korean Development Bank was unlikely to be completed. Id. at ¶ 38.
In addition, during this same time period, senior executives of JPMC attended meetings with officials in Washington D.C. in connection with Lehman's increasingly dire financial situation. For example, on September 9, 2008, Jamie Dimon, JPMC's chief executive, attended meetings with Chairman of the Federal Reserve Ben Bernanke and Secretary of the United States Treasury Henry Paulson in connection with the unfolding financial turmoil. Id. at ¶ 39.
According to Plaintiffs, JPMC abused its access to and knowledge of Lehman's internal struggles as well as the government's plans to address the growing crisis. After gaining this information, Plaintiffs allege that JPMC embarked on an effort to "capitalize on" an LBHI bankruptcy. See id. at ¶ 40. On September 9, 2008, a team of senior risk managers from JPMC arrived at Lehman's offices under the pretense of conducting due diligence on a potential acquisition, but Plaintiffs claim that in reality they were there to probe *428 Lehman's confidential records and plans. See id. at ¶ 43.

The September Agreements
According to the Plaintiffs, JPMC exploited its access to nonpublic information about Lehman's financial condition to "maneuver to gain a preferred position over LBHI's other creditors." First Am. Compl. ¶ 44. According to JPMC's own calculations, as late as September 4, 2008, JPMC believed it was more than fully collateralized for intra-day clearing risk. Id. at ¶ 45. Nonetheless, on the night of September 9, 2008, on the eve of the public release by Lehman of its earnings, JPMC requested that LBHI sign a new set of agreements. Id. at ¶ 46. Specifically, that night, JPMC executives pressed Lehman to enter into a guaranty (the "September Guaranty"), a security agreement (the "September Security Agreement"), a further amendment to the Clearance Agreement (the "September Amendment"), and an account control agreement (the "Account Control Agreement") (together, the "September Agreements"). See id. at ¶ 46.
JPMC executives contacted their counterparts at LBHI and caused them to believe that if LBHI did not execute the proposed September Agreements immediately, JPMC would then immediately stop extending intra-day credit to and clearing trades for Lehman. Id. at ¶¶ 47, 48. During the course of the evening, JPMC's in-house counsel represented to Andrew Yeung of LBHI that Lehman's CEO Richard Fuld previously had agreed to the terms of the September Agreements. Yeung did not realize that this statement was untrue, and he was unable to verify its veracity at that time. Id. at ¶ 50. Yeung e-mailed Paolo Tonucci to advise him of the terms of the September Agreements, but ultimately was unable to reach him. Id. at ¶ 57. As a result, that night, neither Tonucci, Ian Lowitt, nor any other LBHI executive with the authority to bind LBHI to the September Guaranty reviewed or approved the September Guaranty or the other September Agreements. Id.
The next day, on September 10, 2008, LBHI agreed to the September Agreements. Id. at ¶ 59. Although Tonucci executed the September Agreements, Plaintiffs allege that he was not authorized to sign the September Guaranty. See id. at ¶¶ 59, 61. Plaintiffs further allege that JPMC was aware both that Tonucci lacked the authority to sign the agreements and that Lowitt, whose authorization was necessary, was unavailable. See id. at ¶ 61.
These agreements secured not only the exposure of JPMC in relation to clearing securities trades, but also essentially all exposure arising from other dealings of JPMC with LBHI's subsidiariesprincipally derivatives transactions. Id. at ¶ 51. According to Plaintiffs, LBHI received "nothing in exchange" for the legal rights granted to JPMC under the September Agreements. See id. at ¶ 56. Nonetheless, LBHI acceded to JPMC's demands and entered into the September Agreements to ensure that JPMC did not discontinue availability to credit and clearing services and to avoid disruptions that would devastate Lehman's business operations. See id. at ¶¶ 49, 58, 68.
The September Amendment (together with the August Amendment, the "Amendments") amended the Clearance Agreement by expanding the term "Obligations" to include all obligations, of whatever nature, of all Lehman entities to all JPMC entities, including clearance obligations, trading obligations, and derivatives obligations. See Wolf Decl. Ex. 6 (September Amendment) at 1; First Am. Compl. ¶ 51. The Account Control Agreement perfected JPMC's security interest in shares and related accounts of certain JPMC money market funds posted as collateral by *429 LBHI. See Wolf Decl. Ex. 9 (Account Control Agreement) at 1; First Am. Compl. ¶ 54.
The September Guaranty (together with the August Guaranty, the "Guarantees") expanded LBHI's liabilities (the "Obligations") by defining the guaranteed "Liabilities" as all obligations of LBHI and any of its subsidiaries to JPMC and any of its affiliates or subsidiaries. See Wolf Decl. Ex. 7 (September Guaranty) § 1 ("The Guarantor unconditionally and irrevocably guarantees to the Bank the punctual payment of all obligations and liabilities of the Borrowers to the Bank of whatever nature... (all of the foregoing sums being the `Liabilities')...."). The September Guaranty also expressly contemplated obligations arising from clearance, trading, and derivatives transactions. See Wolf Decl. Ex. 7 (September Guaranty) at 1 ("The Guarantor and each of the direct or indirect subsidiaries of the Guarantor ... desires to ... enter into derivative transactions with ... the Bank....").
The September Guaranty also specified that it was "absolute and unconditional irrespective of ... any lack of validity or enforceability of ... [the September Agreements,]" and that LBHI "irrevocably waived the right to assert ... defenses, setoffs, or counterclaims in any litigation or other proceeding related to ... [the September Agreements]." Wolf Decl. Ex. 7 (September Guaranty) § 2. Similar to the August Guaranty, LBHI's maximum liability under the September Guaranty was capped at the value of the collateral pledged as security under that agreement. See id. at § 1 ("The Guarantor's maximum liability under this Guaranty shall be THREE BILLION DOLLARS ($3,000,000,000) or such greater amount that the Bank has requested from time to time as further security in support of this Guaranty."); see also First Am. Compl. ¶ 52.
The September Security Agreement (together with the August Security Agreement, the "Security Agreements") granted a lien on all of LBHI's accounts at JPMC or its affiliates and the assets contained therein (except for the Overnight Account created under the August Security Agreement), as security for payment of the "Liabilities." See Wolf Decl. Ex. 8 (September Security Agreement) at 1-2 ("As security for the payment of all the Liabilities, the undersigned hereby grants to the Bank a security interest in, and a general lien upon ... the Security."); First Am. Compl. ¶ 53.
Importantly, the September Security Agreement deleted the provision from the August Security Agreement that had given LBHI the right to transfer its collateral from the pledged accounts to the lien-free overnight account. See First Am. Compl. ¶ 55. Instead, the September Security Agreement provided simply that LBHI could access its collateral "upon three days written notice to the Bank." See Wolf Decl. Ex. 8 (September Security Agreement) at 3 ("Notwithstanding anything provided for herein, the undersigned may upon three days written notice to the Bank transfer any Security...."); see also First Am. Compl. ¶ 55.

JPMC demands collateral pursuant to the September Agreements
JPMC promptly requested that LBHI deliver additional collateral under the September Agreements. See First Am. Compl. ¶¶ 62, 66. Plaintiffs allege that JPMC knew when making these requests that it already held sufficient collateral to secure its intra-day clearance risk, and used these agreements "as a pretext to improperly extract" additional collateral from LBHI. Id. at ¶¶ 62, 69. JPMC's demands were backed by the threat that if LBHI failed to comply, JPMC immediately would cease providing intra-day clearing services. Id. at ¶ 66. JPMC's collateral *430 demands "contributed significantly" to LBHI's inability to meet the liquidity needs of its business. Id.
In response to these demands, on September 9, 2008 LBHI posted with JPMC $1 billion in cash and $1.67 billion in money market funds. Id. The next day, on September 10, 2008, LBHI turned over another approximately $300 million in cash. Id. Similarly, on September 11, 2008, LBHI posted additional cash collateral with JPMC in the amount of $600 million. Id.
That same day, on September 11, 2008, JPMC made demand for $5 billion more cash collateral and threatened that, if LBHI did not post that collateral by the opening of business the following day, "we intend to exercise our right to decline to extend credit to you under the [Clearance] Agreement." Id. at ¶ 67. To further induce LBHI to accept this demand, Plaintiffs allege that Jamie Dimon of JPMC promised Richard Fuld that JPMC would return the $5 billion at the close-of-settlement on September 12, 2008. Id. at ¶ 70. LBHI had no choice but to post $5 billion in cash collateral the following day (together with the prior collateral transfers over the prior two-day period, the "Disputed Collateral Transfers"). Id. at ¶¶ 68, 71. Thereafter, JPMC transferred the cash component of the collateral (approximately $6.9 billion of the $8.6 billion in total collateral) out of the demand deposit account to which it had been delivered into a JPMC general ledger account (the "Funds Sweep"). Id. at ¶ 72.
JPMC retained the posted collateral after the close-of-trading on Friday, September 12, 2008, despite not having had any outstanding clearance exposure to Lehman. Id. at ¶ 73. Throughout that weekend, LBHI repeatedly requested that JPMC permit it access to its collateral to help it to stave off bankruptcy. Id. at ¶ 74. JPMC refused to grant LBHI access to its collateral, despite having concluded that it was overcollateralized with respect to clearance exposure by over $6 billion. Id. at ¶ 75. JPMC knew that Lehman was in danger of failing absent access to additional liquidity or collateral, and knew that any such failure would benefit JPMC's market share in trading and investment banking. Id. at ¶¶ 76, 77.

Lehman's chapter 11 cases
During the weekend of September 13-14, 2008, JPMC executives participated in meetings at the Federal Reserve Bank of New York (the "Federal Reserve") with government officials and representatives of major financial institutions regarding a potential sale and/or rescue of Lehman. See First Am. Compl. ¶ 76. LBHI filed a petition for relief under chapter 11 of the Bankruptcy Code in the early morning hours of September 15, 2008. Id. at ¶ 78.

JPMC's post-petition advances and LBHI's comfort order motion
Notwithstanding LBHI's bankruptcy, JPMC continued to provide massive amounts of credit to LBI even after LBHI had filed its chapter 11 petition. Indeed, beginning on September 15, 2008, just a few hours after the filing by LBHI of the largest bankruptcy in history, JPMC made clearing advances to unwind LBI's outstanding tri-party repurchase agreements in the total amount of $87 billion. See Wolf Decl. Ex. 11 (Motion of Lehman Brothers Holdings Inc. for Order, Pursuant to Section 105 of the Bankruptcy Code, Confirming Status of Clearing Advances, Case No. 08-13555, ECF No. 29, (Bankr. S.D.N.Y. Sept. 16, 2008)) (the "Comfort Order Motion") ¶ 9. These advances were made at the urging of the Federal Reserve to avoid a disruption of the financial markets. Id. The following day, JPMC advanced a "comparable amount" to unwind LBI's tri-party repurchase agreements. Id.
On September 16, 2008, the day after its bankruptcy filing, LBHI filed the Comfort *431 Order Motion for the purpose of inducing JPMC to continue to extend credit to settle and clear securities transactions for LBI. See Wolf Decl. Ex. 11 (Comfort Order Motion) ¶ 19. In that motion, LBHI explained to the Court that "[JPMC] may, in its sole discretion, make advances to or for the benefit of the respective Lehman Clearance Parties [under the Clearance Agreement,] which are payable . . . upon demand by [JPMC]." Id. at ¶ 6. LBHI emphasized that "[a]ny cloud on the guarantees vis-à-vis the Holding Company Collateral will inhibit [JPMC] from clearing advances to or for the benefit of the Lehman Clearance Parties to the detriment of public investors." Id. at ¶ 19. The Comfort Order Motion was intended to assure JPMC that it could continue to make clearing advances knowing that such advances "will be allowed as claims under the Guarantee Agreements secured by the Holding Company Collateral." Id. at ¶ 12. LBHI also acknowledged that the Amendments, the Guarantees, and the Security Agreements "are `securities contracts' within the meaning of section 741(7) of the Bankruptcy Code." Id. at ¶ 17.
At the hearing on the Comfort Order Motion, counsel for LBHI stated that it was "completely understandable" that JPMC needed assurances before continuing to perform the "critical function" of performing its clearance services. See Wolf Decl. Ex. 12 (Comfort Order Motion Hr'g Tr., Sept. 16, 2008) at 27:9-12, 27:25-28:1. Thus, LBHI told the Court that "we believe that the guaranty and the collateral covers [sic] not only those transactions which have already occurred but as well the future transactions." Id. at 28:6-8. The Federal Reserve supported the Comfort Order Motion, informing the Court that "the services that [JPMC] has been providing are critical to the smooth functioning of financial markets." Id. at 34:12-15. The Court granted the Comfort Order Motion, finding it "entirely appropriate and consistent with the need to provide market liquidity for this debtor and its affiliates. . . ." Id. at 35:1-2; Wolf Decl. Ex. 13 (Order Pursuant to Section 105 of the Bankruptcy Code Confirming Status of Clearing Advances, Case No. 08-13555, ECF No. 47 (Bankr.SDNY Sept. 16, 2008)) (the "Comfort Order").
As described in proofs of claim filed with this Court, JPMC asserts claims against the LBHI estate in the total amount of approximately $30 billion. See Wolf Decl. Ex. 14 (Proofs of claim filed by JPMC) (the "JPMC Proofs of Claim"). The JPMC Proofs of Claim include secured claims under the Guarantees for approximately $25 billion in connection with extensions of credit under the Clearance Agreement. Wolf Decl. Ex. 14 Ex. B (LBI Claims Annex) at 2.

Adversary Proceeding and the Motion to Dismiss
On May 26, 2010, LBHI commenced this adversary proceeding (the "Adversary Proceeding") by filing the Complaint. See Compl., ECF No. 1. That same day, LBHI and the Committee filed a joint motion to authorize the Committee's intervention in the litigation. The Court entered an order granting the intervention on June 24, 2010. See Order Authorizing Committee's Intervention, ECF No. 7. After an initial motion to dismiss filed by JPMC, the Plaintiffs filed the Amended Complaint on September 15, 2010. See First Am. Compl., ECF No. 19.
JPMC filed the Motion on October 19, 2010. See Mem. Supp. Mot. Dismiss, ECF No. 29. Extensive briefing ensued. See Pls.' Opp'n, ECF No. 41; Reply Br. Supp. Mot. Dismiss, ECF No. 53 ("Reply"); and Mem. Amici Curiae Supp. Mot. Dismiss, ECF No. 52 ("Amici Brief").[7]
*432 The Court heard oral argument on the Motion on May 10, 2011 (the "Hearing"). See generally, Hr'g Tr., May 10, 2011, ECF No. 77.


The Stern v. Marshall Detour

During the month following the Hearing, the United States Supreme Court decided Stern. In Stern the Supreme Court ruled that a bankruptcy court, as a non-Article III court, "lacked the constitutional authority to enter a final judgment on a state law counterclaim that [was] not resolved in the process of ruling on a creditor's proof of claim." Stern, 131 S.Ct. at 2620. Stern has led to a proliferation of litigation and procedural maneuvering nationwide as parties, especially defendants in adversary proceedings, have considered the impact of the decision on the authority of the bankruptcy courts to render final judgments. Many parties in pending adversary proceedings have taken steps to exploit some of the unsettled issues raised by Stern for procedural advantage.
A number of recent cases have clarified that the balance in workload between the bankruptcy court and district court due to the narrow ruling in Stern actually has not changed very much and that the bankruptcy system is continuing to function without as many disruptions as had been feared by some observers.[8] The standard order of reference in this district has been amended to resolve procedural issues in relation to the holding in Stern.[9]
The recent developments that have helped stabilize the bankruptcy system and make it more predictable in the aftermath *433 of Stern were not clearly foreseeable or understood in June of last year. In recognition that the holding in Stern might be applicable to the litigation, the Court asked counsel for Plaintiffs and for JPMC to submit papers addressing the effect of the decision on the claims asserted in the Adversary Proceeding. On August 5, 2011, the parties filed their position papers. See Pls.' Mem. Addressing Effect of Stern v. Marshall on Bankruptcy Court's Ability to Render Final J., ECF No. 89; Supplemental Mem. Supp. Mot. Dismiss, ECF No. 90.
The submissions of the parties reached totally different conclusions regarding the impact of Stern on the Adversary Proceeding and were not particularly helpful (one said the Court had the authority to do everything, while the other said that the Court could do nothing other than to dismiss the Amended Complaint). As a means to encourage further consideration of the issues, on August 15, 2011, the Court entered a case management order with respect to the unresolved questions raised by the parties' submissions (as subsequently amended on September 21, 2011, the "Case Management Order"). See Case Management Order in Relation to the Impact of Stern v. Marshall, ECF No. 93; Order Amending and Modifying the Case Management Order in Relation to the Impact of Stern v. Marshall, ECF No. 97.
Thereafter, in accordance with paragraph 4 of the Case Management Order, the parties filed additional briefs regarding the impact of Stern on each count of the Amended Complaint.[10]See Pls.' Statement in Accordance with Case Management Order in Relation to the Impact of Stern v. Marshall, ECF No. 98; JPMorgan's Submission in Resp. to Case Management Order, ECF No. 99. JPMC also filed a motion with the District Court for an order withdrawing the reference of the Adversary Proceeding to the United States Bankruptcy Court for the Southern District of New York (the "Withdrawal Motion").[11]See JPMorgan's Motion to Withdraw the Reference to the Bankruptcy Court of the Above-Captioned Adversary Proceeding, ECF No. 100.
The Withdrawal Motion was assigned to the Honorable District Court Judge Richard J. Sullivan. After full briefing by the parties, a hearing on the Withdrawal Motion was held before Judge Sullivan on December 30, 2011. At the hearing, Judge Sullivan determined, and the parties agreed, that in order to avoid further delays in deciding the Motion, he would reserve decision on the Withdrawal Motion until after a ruling by the bankruptcy court on the Motion. See Withdrawal Motion Hr'g Tr. 76-77, Dec. 30, 2011, No. 11 CV 6760, ECF No. 34; Order of Judge Richard J. Sullivan, December 30, 2011, No. 11 CV 6760, ECF No. 33.
In January, a chambers conference was convened in the bankruptcy court to discuss further proceedings. During that conference, lead trial counsel for JPMC indicated that he had no objection to having this Court decide the Motion. In addition, *434 due to the passage of time, the Court set a supplemental briefing schedule to allow the parties to address any legal developments since the close of briefing that were relevant to the Motion. Supplemental briefs were submitted on February 17, 2012. See Pls.' Br. of Supplemental Authorities in Further Opp'n to JPMorgan Chase Bank N.A.'s Mot. Dismiss, ECF No. 125; Supplemental Br. Addressing Recent Decisions Relating to JPMorgan's Mot. Dismiss, ECF No. 126.

Rule 12(b)(6) Standard
Federal Rule of Civil Procedure 8(a)(2) requires a complaint to contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R.Civ.P. 8(a)(2). Federal Rule of Bankruptcy Procedure 7012(b), which incorporates Federal Rule of Civil Procedure 12(b)(6) ("Rule 12(b)(6)"), permits a bankruptcy court to dismiss an adversary proceeding if a plaintiff's complaint fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). In reviewing a motion to dismiss under Rule 12(b)(6), the Court accepts the factual allegations of the complaint as true and draws all reasonable inferences in the plaintiff's favor. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007); E.E.O.C. v. Staten Island Sav. Bank, 207 F.3d 144, 148 (2d Cir.2000). To survive a challenge to the adequacy of a complaint under Rule 12(b)(6), the factual allegations in a complaint need to be supported by more than mere conclusory statements. Twombly, 550 U.S. at 555, 127 S.Ct. 1955. The allegations must be sufficient "to raise a right to relief above the speculative level," and provide more than a "formulaic recitation of the elements of a cause of action." Id. In other words, "only a complaint that states a plausible claim for relief survives a motion to dismiss." Iqbal, 556 U.S. at 679, 129 S.Ct. 1937.
Where a complaint alleges fraud, the pleading requirements imposed by Federal Rule of Civil Procedure 9(b) ("Rule 9(b)"), as incorporated in Federal Rule of Bankruptcy Procedure 7009, are even more demanding. The plaintiff "must state with particularity the circumstances constituting fraud or mistake," including, at a minimum, "facts that give rise to a strong inference of fraudulent intent." Fed. R.Civ.P. 9(b); Pereira v. Grecogas Ltd. (In re Saba Enters.), 421 B.R. 626, 642 (Bankr. S.D.N.Y.2009) (citations omitted).
In ruling on a motion to dismiss, the Court may consider documents omitted from the plaintiff's complaint but attached by a defendant to its motion to dismiss. See, e.g., Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 47-48 (2d Cir.1991) (district court may consider exhibits omitted from plaintiff's complaint but attached as exhibits to defendant's motion papers because "there was undisputed notice to plaintiffs of their content and they were integral to plaintiffs' claim").
It is important for the Court to rule on those counts of the Amended Complaint that implicate the safe harbor provisions of the Bankruptcy Code. See Amici Brief at 22 ("Prompt Disposition of Safe Harbor Cases is Essential to the Effectiveness of [Safe Harbor] Statutes"). Bankruptcy courts will enforce the safe harbor provisions of the Bankruptcy Code in appropriate cases by dismissing avoidance actions on the pleadings. See, e.g., Brandt v. B.A. Capital Co. L.P. (In re Plassein Int'l Corp.), 366 B.R. 318, 322-26 (Bankr.D.Del. 2007) (granting a motion to dismiss claims seeking to avoid transfers protected under safe harbor section 546(e)).

Discussion
The Amended Complaint sets forth forty-nine separate counts seeking relief on *435 multiple theories. See First Am. Compl. ¶¶ 87-369. These counts allege distinct causes of action that fit into a number of separate categories characterized by the underlying legal premises on which the claims are basedi.e., claims seeking (i) to avoid and recover actual fraudulent transfers under section 548 of the Bankruptcy Code; (ii) to avoid and recover constructively fraudulent and preferential transfers under sections 544, 547 and 548 of the Bankruptcy Code and applicable state law; (iii) relief under various common law legal doctrines; and (iv) relief under various other sections of the Bankruptcy Code, i.e., turnover of estate property under section 542, setoff under section 553, equitable subordination under section 510(c), and the disallowance of claims under section 502(d). For the reasons set forth below, the Court concludes that the claims for recovery of constructively fraudulent transfers and preferences under sections 544, 547 and 548 of the Bankruptcy Code should be dismissed.

I. The counts seeking to avoid and recover transfers made under the August and September Agreements as constructively fraudulent or preferential transfers are dismissed.
The bulk of the Amended Complaint alleges that the liens granted under the Security Agreements, the Obligations incurred under the Guarantees, and the Disputed Collateral Transfers made under the September Agreements constitute constructively fraudulent transfers and preferential transfers. Specifically:
 Counts V, X, XXI, and XXII seek to avoid liens granted under the September Agreements as constructively fraudulent transfers and preferences;
 Counts VIII, IX, XV, XVI, XVII, XVIII, XIX, XX, XXIII, and XXIV seek to avoid and recover the Disputed Collateral Transfers, including the Funds Sweep, as constructively fraudulent transfers and preferences; and
 Counts V, VI, VII, X, XI, XII, XIII, and XIV seek to avoid LBHI's Obligations arising under the Guarantees as constructively fraudulent transfers and preferences, and, by extension, indirectly avoid the transfers made under the August Security Agreement and the September Agreements.
These counts are premised on the estate's avoidance powers under sections 547 and 548(a)(1)(B) of the Bankruptcy Code. Section 547(b) provides that the trustee of a bankruptcy estate may avoid as a preferential transfer any transfer made by an insolvent debtor in the ninety days preceding bankruptcy, where the transfer (i) was made to or for the benefit of a creditor; (ii) was made for or on account of an antecedent debt owed by the debtor; and (iii) enabled the creditor to receive more than it otherwise would have under the provisions of the Bankruptcy Code. See 11 U.S.C. § 547(b). Section 548(a)(1)(B) provides that a trustee of a bankruptcy estate may avoid as a constructively fraudulent transfer any transfer or obligation incurred by a debtor within the two years before the date of the filing of the petition when made in exchange for "less than reasonably equivalent value" and that left the debtor insolvent. See 11 U.S.C. § 548(a)(1)(B).
JPMC seeks dismissal of these counts, arguing that they fail as a matter of law because the transfers are fully protected from avoidance under section 546(e) of the Bankruptcy Code. See Mem. Supp. Mot. Dismiss at 22 ("The safe harbors of section 546 mandate dismissal of [P]laintiffs' claims to avoid transfers to [JPMC] based on theories of constructive fraudulent transfer or preference."). The plausibility of the counts alleged in the Amended Complaint hinges on whether claims for avoidance *436 are permitted given the language of section 546(e) that appears to effectively shield the agreements, transfers, and obligations from avoidance.[12]
This Court most recently addressed section 546(e) in Official Comm. of Unsecured Creditors of Quebecor World (USA) Inc. v. American United Life Insurance Co. (In re Quebecor World (USA) Inc.), 453 B.R. 201 (Bankr.S.D.N.Y.2011). In Quebecor, the creditors' committee sought to avoid payments received by institutional noteholders in connection with the debtors' repurchase and subsequent cancellation of privately-placed notes. Relying on the Second Circuit decision in In re Enron Creditors Recovery Corp. v. Alfa, S.A.B. de C.V., 651 F.3d 329 (2d Cir.2011), the court granted summary judgment for the defendants, holding that the transfers of cash to complete a securities transaction were "settlement payments" that fall under the safe harbors. Quebecor, 453 B.R. at 206. While the definition of settlement paymentsat issue in both Enron and Quebecorhas no direct bearing on this adversary proceeding, these decisions nonetheless are relevant precedents for the proposition that the language of the safe harbors is to be strictly interpreted even when the outcome may be prejudicial to the interests of the estate and its creditors.
In Enron, the Second Circuit "decline[d] to address Enron's arguments regarding legislative history" because it was able to reach a conclusion based on the plain language of the statute. Enron, 651 F.3d at 339 (citing Lamie v. U.S. Trustee, 540 U.S. 526, 534, 124 S.Ct. 1023, 157 L.Ed.2d 1024 (2004) ("It is well established that when the statute's language is plain, the sole function of the courtsat least where the disposition required by the text is not absurdis to enforce it according to its terms.") (internal quotation marks omitted)). In Quebecor, the Court noted the influence of Enron on its deliberations, applied the language of section 546(e) to the payments at issue, and found that they were, indeed, "settlement payments." See Quebecor, 453 B.R. at 215. Consistent with its approach in Quebecor, the Court will strictly construe the plain meaning of section 546(e) in judging whether the claims set forth in the Amended Complaint are subject to the safe harbors of that section of the Bankruptcy Code.
Section 546(e) carves out an express exception to section 547(b) and 548(a)(1)(B):
Notwithstanding sections 544, 545, 547, 548(a)(1)(B), and 548(b) of this title, the trustee may not avoid a transfer . . . that is a transfer made by or to (or for the benefit of) a commodity broker, forward contract merchant, stockbroker, financial institution, financial participant, or securities clearing agency, in connection with a securities contract, as defined in section 741(7) . . . that is made before the commencement of the case, except under section 548(a)(1)(A)[13] of this Title."
11 U.S.C. § 546(e). Thus, section 546(e) exempts from avoidance "transfers" by or to "financial institutions" that are made "in connection with" a class of defined "securities *437 contracts." Once parsed, the language is clear, and, as further explained in the following paragraphs, prevents Plaintiffs from avoiding the August and September Agreements, the Disputed Collateral Transfers, and the Obligations on theories of constructively fraudulent transfer or preference.

A. JPMC qualifies for protection under section 546(e).
The Court first must consider whether JPMC is eligible for protection under section 546(e). That subsection, like the safe harbors generally, applies only to certain types of qualifying entities. Specifically, section 546(e) covers pre-petition transfers made by or to a "financial institution" or "financial participant" in connection with a "securities contract." 11 U.S.C. § 546(e).
JPMC, as one of the leading financial institutions in the world, quite obviously is a member of the protected class and qualifies as both a "financial institution" and a "financial participant." JPMC unquestionably fits the Bankruptcy Code's definition of "financial institution." See 11 U.S.C. § 101(22) (defining "financial institution" to include a "commercial bank"). JPMC also is a "financial participant" because it is a party to outstanding safe harbor contracts totaling at least $1 billion in gross notional or principal dollar amount. See 11 U.S.C. § 101(22A) (defining "financial participant"). That JPMC fits the applicable definitions for safe harbor protection is not in dispute, and the Amended Complaint concedes this point. See First Am. Compl. ¶ 10 (identifying JPMC as a "financial institution"); ¶ 76 (identifying JPMC as a "national banking association chartered under the laws of the United States"); ¶¶ 66-67 (recognizing the extent of JPMC's derivatives obligations to LBHI and its subsidiaries).

B. The Clearance Agreement, the August Agreements, and several of the September Agreements constitute "securities contracts" for purposes of section 546(e).
Section 546(e) of the Bankruptcy Code protects from avoidance any transfer to a financial institution made in connection with a "securities contract." 11 U.S.C. § 546(e). "Securities contracts," in turn, are defined by section 741(7) of the Bankruptcy Code:
`securities contract'(A) means
(i) a contract for the purchase, sale, or loan of a security . . . including any repurchase or reverse repurchase transaction on any such security . . . (whether or not such repurchase or reverse repurchase transaction is a `repurchase agreement' as defined in section 101);
. . .
(v) any extension of credit for the clearance or settlement of securities transactions;
. . .
(x) a master agreement that provides for an agreement or transaction referred to in clause (i) [or] . . . (v) . . . together with all supplements to any such master agreement, without regard to whether the master agreement provides for an agreement or transaction that is not a securities contract under this subparagraph, except that such master agreement shall be considered to be a securities contract under this subparagraph only with respect to each agreement or transaction under such master agreement that is referred to in clause (i) [or]. . . (v); . . . or
(xi) any security agreement or arrangement or other credit enhancement related to any agreement or transaction referred to in this subparagraph, including any guarantee . . . by or to a . . . financial institution, or financial participant in *438 connection with any agreement or transaction referred to in this subparagraph.. . .
11 U.S.C. § 741(7). The plain language of section 741(7) is very broad in its application and encompasses virtually any contract for the purchase or sale of securities, any extension of credit for the clearance or settlement of securities transactions, and a wide array of related contracts, including security agreements and guarantee agreements.
The Clearance Agreement (including the Amendments) constitutes a "securities contract" by virtue of being an "extension of credit for the clearance or settlement of securities transactions" under subsection (v) of section 741(7). See Wolf Decl. Ex. 1 (Clearance Agreement) at 1 (identifying JPMC as LBI's "non-exclusive clearance agent for securities transactions"); § 5 ("We may, solely at our discretion . . . advance funds to you prior to final payment."). As an agreement to extend credit to settle securities transactions, the Clearance Agreement constitutes a safe-harbored "securities contract."
Notably, the definition in subsection (v) of "securities contract" is transaction-based, not agreement-based. Accordingly, in addition to the Clearance Agreement itself, subsection (v) includes within the definition of "securities contract" each individual extension of credit made to LBI under that agreement. Each such extension of credit under the Clearance Agreement is an independent "securities contract" under subsection (v). For this reason, the Clearance Agreement governs other securities contracts and functions as a "master agreement" for purposes of subsection (x) of section 741(7)(A). Indeed, the definition is replete with so many "belts" and "suspenders" that there can be no doubt as to the conclusion here: the relevant documents in reference to the transfers made from Lehman to JPMC in August and September all fit the definition of securities contracts.
The August Agreements and several of the September Agreements qualify as "securities contracts" under subsection (xi) of section 741(7)(A) because of their role as credit enhancements "related to" and "in connection with" other "securities contracts." Subsection (xi) specifies that a security agreement is a "securities contract" to the extent that it secures debts "related to" another "securities contract." Similarly, that subsection states that a guaranty is a "security contract" to the extent that it guarantees debts incurred "in connection with" another "securities contract." See 11 U.S.C. § 741(7)(A)(xi) (identifying as a "securities contract" any "security agreement or arrangement or other credit enhancement related to any [protected] agreement or transaction . . . including any guarantee or reimbursement obligation . . . in connection with any agreement or transaction referred to in this subparagraph. . . .") (emphasis added). Thus, under subsection (xi) of section 741(7)(A), the Security Agreements and the Guarantees are "securities contracts" to the extent that they secure debts related to (or guarantee debts incurred in connection with) safe-harbored contracts.
Close inspection of the plain text of each agreement reveals this to be the case. The August Guaranty and the August Security Agreement, for example, expressly contemplated obligations owing from LBI to JPMC under the Clearance Agreement (itself, a "securities contract"). See Wolf Decl. Ex. 4 (August Guaranty) at 1 ("[certain Lehman entities] desire to transact business with and/or to obtain credit, clearing advances . . . from [JPMC] . . . under or in connection with the Clearance Agreement. . . ."); Wolf Decl. Ex. 5 (August *439 Security Agreement) at 1 (recognizing that the lien granted is "[i]n consideration of one or more loans, letters of credit or other financial accommodation made . . . by [JPMC]" pursuant to the Clearance Agreement).
The September Security Agreement and the September Guaranty also constitute credit enhancements in furtherance of "securities contracts" for purposes of subsection (xi) because they expressly contemplate "derivative transactions" and "clearing advances" between JPMC and LBHI subsidiaries. See Wolf Decl. Ex. 7 (September Guaranty) at 1 (granting guaranty "in order to induce the Bank from time to time . . . to continue to extend credit, clearing advances, clearing loans, or other financial accommodations to the Borrowers. . . ."); Wolf Decl. Ex. 8 (September Security Agreement) at 1 ("In consideration of [JPMC] . . . extending credit to and/or transacting business, trading, or engaging in derivative transactions with the undersigned and/or its subsidiaries, the undersigned hereby agrees. . . .").
The fact that the references to safe-harbored transactions within the September Guaranty and September Security Agreement do not appear in substantively operative clauses does not matter for purposes of the definition set forth in subsection (xi) of section 741(7)(A) because all that is required is that agreements be related to one another. See Pls.' Opp'n at 45 (arguing that the September Agreements were not "securities contracts" under section 741(7) because "the operative language of the September Guaranty and September Security Agreement did not connect to any safe-harbored transactions. . ."). There is no required language to connect agreements so that they will be deemed related, and the fact that these agreements recognize the otherwise safe-harbored derivatives transactions is sufficient for purposes of identifying a "securities contract" under subsection (xi) of section 741(7)(A).
The September Guaranty in particular expressly guarantees all obligations of LBI to JPMC "of whatever nature"an open-ended phrase that further confirms its status as a credit enhancement "related to" other "securities contracts" for purposes of subsection (xi). See Wolf Decl. Ex. 7 (September Guaranty) § 1 (guaranteeing to JPMC the "punctual payment of all obligations and liabilities of the Borrowers to the Bank of whatever nature. . . ."). The term "all" self-evidently encompasses safe-harbored derivative obligations to JPMC. This is especially pertinent given that most of JPMC's exposure to Lehman related to clearing advances and derivatives transactions. See 5/10/11 Hr'g Tr. 43:12-17 (JPMC counsel noting that "more than ninety percent of the collateral was used to pay what are obviously safe harbor claims. . . .").[14]


*440 C. The grant and perfection of liens under these "securities contracts" constitute "transfers" for purposes of section 546(e).


(Counts V, X, XXI, and XXII of the Amended Complaint)
Section 546(e) bars the avoidance of "transfers" made by or to eligible financial institutions in connection with a "securities contract." The term "transfer" includes the grant of a lien for purposes of section 546(e). See 11 U.S.C. § 101(54) (definition of "transfer" expressly includes "the creation of a lien"). Moreover, courts uniformly have treated a pledge or the attachment and perfection of a security interest as a "transfer" of an interest in property. See Permanent Mission of India to the United Nations v. City of N.Y., 551 U.S. 193, 198, 127 S.Ct. 2352, 168 L.Ed.2d 85 (2007) (liens are "interests in property").
The liens granted under the September Agreements, therefore, are "transfers" pursuant to safe-harbored "security contracts." For example, the September Security Agreement granted liens to secure all "Liabilities" (as defined in the September Guaranty) in consideration of, inter alia, JPMC's "trading or engaging in derivative transactions." Wolf Decl. Ex. 8 (September Security Agreement) at 1. Similarly, the September Amendment to the Clearance Agreement expanded the scope of the lien granted by section 11 of the Clearance Agreement to secure all of the "existing or future indebtedness, obligations and liabilities of any kind," including "arising in connection with trades, derivative transactions, settlement of securities [under the Clearance Agreement] or any other business. . . ." See Wolf Decl. Ex. 6 (September Amendment to Clearance Agreement) § 1.
The Amended Complaint includes counts to avoid these liens that are barred under section 546(e) of the Bankruptcy Code. These counts are Count V ("Avoidance of September Agreements as Constructively Fraudulent Under Section 548 of the Bankruptcy Code"), Count X ("Avoidance of September Agreements as Constructively Fraudulent under Section 544 and Applicable State Fraudulent Conveyance or Fraudulent Transfer Law"), and Count XXI ("Avoidance of Preferential Transfer of September Security Agreement Under Section 547 of the Bankruptcy Code"). They request relief to avoid the grant of liens under the September Security Agreement and the September Amendment, but such relief may not be granted as a matter of law because the challenged "transfers" are exempt from avoidance under section 546(e) of the Bankruptcy Code.
Similarly, the perfection under the Account Control Agreement of liens granted by certain other September Agreements constitutes a safe-harbored "transfer in connection with a securities contract." The Account Control Agreement confirms the perfection of the liens granted to JPMC under the other September Agreements. See Wolf Decl. Ex. 9 (Account Control Agreement) at 1 (Preamble ¶¶ 2, 3) (acknowledging that LBHI "has granted" JPMC a security interest under a separate agreement and stating that the parties are entering into the Account Control Agreement in part to perfect that security interest).
Such "perfection" of a lien constitutes a "transfer" for purposes of the Bankruptcy Code. See In re Badger Lines, Inc., 202 F.3d 945, 946 (7th Cir.2000) (describing the perfection of a lien as a "transfer"). In fact, the Amended Complaint recognizes that perfecting a lien is a transfer. See First Am. Compl. ¶ 210 (pleading that the Account Control Agreement "was a transfer made by LBHI to or for the benefit of JPMorgan"). Although the Account Control Agreement itself is not a "securities *441 contract" for purposes of section 741(7) of the Bankruptcy Code, the perfection under that agreement of liens granted by other "securities contracts" is a transfer "in connection with" protected securities contracts.
In seeking to avoid the perfection of liens under the Account Control Agreement, Count XXII of the Amended Complaint seeks to avoid a safe-harbored "transfer in connection with a securities contract." See First Am. Compl. Count XXII ("Avoidance of Preferential Transfer of Account Control Agreement under Section 547 of the Bankruptcy Code"). As a result, Count XXII of the Amended Complaint seeks relief that may not be granted as a matter of law.

D. The Disputed Collateral Transfers, including the Funds Sweep, were made "in connection with" safe-harbored "securities contracts."

(Counts VIII, IX, XV, XVI, XVII, XVIII, XIX, XX, XXIII, and XXIV of the Amended Complaint)
Several counts in the Amended Complaint seek to avoid the Disputed Collateral Transfers made by LBHI to JPMC in September 2008 as preferential and constructively fraudulent transfers. See First Am. Compl. Count VIII ("Avoidance of Collateral Transfers as Constructively Fraudulent under Section 548 of the Bankruptcy Code"); Count XV ("Avoidance of Collateral Transfers as Constructively Fraudulent Under Section 544 and Applicable State Fraudulent Conveyance or Fraudulent Transfer Law"); Count XVII ("Avoidance of Funds Sweep as Constructively Fraudulent Under Section 548 of the Bankruptcy Code"); Count XIX ("Avoidance of Funds Sweep as Constructively Fraudulent Under Section 544 and Applicable State Fraudulent Conveyance or Fraudulent Transfer Law"); and Count XXIII ("Avoidance of Preferential Transfer of September Transfers Under Section 547 of the Bankruptcy Code"). On this basis, Plaintiffs seek to recover the value of certain of the Disputed Collateral Transfers under section 550 of the Bankruptcy Code. See First Am. Compl. Counts IX, XVI, XVIII, XX, and XXIV.
Plaintiffs argue that the Disputed Collateral Transfers are not protected from avoidance by section 546(e) because they "had nothing to do with" any JPMC "exposure" under the Clearance Agreement or its various derivatives transactions and were not made "in connection with" a safe-harbored securities contract. See First Am. Compl. ¶ 62 (transfers "were not made in connection with exposure under the 2000 Clearance Agreement"); Pls.' Opp'n at 51 ("[N]either the September Agreements nor the $8.6 billion of collateral transfers acted as credit support for clearance and trading activity under the 2000 Clearance Agreement" because "JPMorgan had already determined that it had sufficient credit support in place. . . .").
Plaintiffs dispute the significance of the fact that much of the collateral posted with JPMC in September 2008 ultimately was applied by JPMC to cover exposure arising from safe-harbored transactions. See 5/10/11 Hr'g Tr. 100:18-24 (counsel for Committee) (". . . it's not the law that you can look back retrospectively and sanitize fraudulent transfer after the fact. Whether it's a fraudulent transfer and whether the safe harbor applies . . . should be decided at the time the transfer takes place. . . .").
Plaintiffs question the legitimacy of these JPMC claims and contest the calculation of these amounts purportedly owing. See Pls.' Opp'n 59; but see 5/10/11 Hr'g Tr. 42:10-13 (counsel for JPMC) (confirming that "an overwhelming amount of JPMorgan's exposures and ultimate claims . . . *442 were the clearance advances and derivatives claims"), 43:13-17 ("more than ninety percent of the collateral was used to pay what are obviously safe harbor claims . . . [and, therefore, it is] glaringly obvious that the September Agreements related to JPMorgan's safe harbor claims"). Plaintiffs submit that JPMC should not be able to exploit the recognition of this subsequent liability to "retroactively cloak" the collateral demands under the shelter of section 546(e). See Pls.' Opp'n at 59.
Plaintiffs have focused on whether the transfer of collateral related to exposure under a safe-harbored contract that existed at the time of the collateral demand. See 5/10/11 Hr'g Tr. 106:9-11 ("It's not entered into in connection with a protected contract because they had zero exposure at that time under the safe harbor contracts."); First Am. Compl. ¶ 62 (alleging that JPMC had enough collateral at that time to cover its intra-day clearing risk); id. at ¶ 69 (JPMC demanded the collateral not to cover then-existing exposure but rather to serve as an "extra cushion"); id. at ¶ 268 ("[The Disputed Collateral Transfer] was posted by LBHI at a time when JPMorgan did not have the contractual right to demand collateral under the derivatives or other contracts.") (emphasis added).
The "in connection with" requirement of section 546(e) does not contain any temporal or existential requirement that a transfer must be "in connection with" then-outstanding legal exposure. Indeed, section 546(e) does not include any language that refers either to exposure or timing. The formulation is quite simple: a transfer is safe-harbored if it is "in connection with" a securities contract. And the words "in connection with" are to be interpreted liberally.
It is proper to construe the phrase "in connection with" broadly to mean "related to." See Interbulk, Ltd. v. Louis Dreyfus Corp. (In re Interbulk, Ltd.), 240 B.R. 195, 202 (Bankr.S.D.N.Y.1999) (interpreting the plain language of section 546(g), an analogue to section 546(e), and concluding that "a natural reading of `in connection with' suggests a broader meaning similar to `related to'"); In re Keller Fin. Servs. of Fl., 248 B.R. 859, 879 (Bankr.M.D.Fl.2000) (citation omitted) (interpreting section 329 of the Bankruptcy Code and noting that "the scope of the phrase `in connection with' is broad"); In re Powell, 314 B.R. 567, 571 (Bankr. N.D.Tex.2004) (interpreting section 330(a) of the Bankruptcy Code and liberally construing the phrase "in connection with").
Given this liberal interpretation of "in connection with," the Disputed Collateral Transfers necessarily "relate to" safe-harbored securities contracts. For example, the Amended Complaint itself points out that JPMC demanded the Disputed Collateral Transfers under the September Agreements. See First Am. Compl. ¶ 62 (noting that the September collateral requests were "made pursuant to [the September Agreements]" but arguing that such a purported connection to clearance activity was a pretext and sham); id. at ¶ 82 (alleging that JPMC "demanded and received" $8.6 billion in collateral "pursuant to the September Agreements"). Furthermore, the agreements themselves expressly reference safe-harbored "derivative transactions" and safe-harbored "clearing advances." See Wolf Decl. Ex. 7 (September Guaranty) at 1; Ex. 8 (September Security Agreement) at 1. Without doubt, the disputed transfer of collateral "related to" the safe-harbored Clearance Agreement, the September Security Agreement, and the September Guaranty.
Additionally, the suggestion that there should be demonstrable exposure as a condition *443 to satisfying the "in connection with" language of section 546(e) advocated by Plaintiffs would make it difficult to assure safe harbor protections without making an impractical and burdensome inquiry as to the status of countless derivatives positions at arbitrary points in time in the multiple dealings between counterparties. Such a focus is not well-suited to analyzing liabilities under complex financial relationships with exposures that change materially and rapidly with movements of the markets. Therefore, the Court concludes that the Disputed Collateral Transfers are within the scope of section 546(e) and that Counts VIII, XV, and XXIII should be dismissed.
Counts XVII and XIX adopt the same approach and seek to avoid the Funds Sweep from the LBHI deposit account to JPMC's separate general ledger account in the week prior to LBHI's bankruptcy. See Pls.' Opp'n at 60 (arguing that Counts XVII and XIX state plausible claims for relief because "JPMC's subsequent unauthorized transfers [of the Funds Sweep] would not qualify for safe harbor status because they were not made as part of, or to facilitate, any securities contract. . . .").
These counts fail as well because the transfer of funds at issue constitutes a transfer "in connection with" a securities contract and is fully protected from avoidance by the language of section 546(e). The Funds Sweep involved the internal movement of funds deposited as collateral pursuant to JPMC's requests in September 2008transfers that fit within the scope of section 546(e). Because the original deposits were made "in connection with" safe-harbored securities contracts, the subsequent transfers within JPMC of those funds likewise are safe-harbored under section 546(e).

E. Section 546(e) also shields LBHI's Obligations from avoidance even though the word "obligations" does not appear in the text of section 546(e).

(Counts V, VI, VII, X, XI, XII, XIII, and XIV of the Amended Complaint)
In addition to claims to avoid the liens granted and the Disputed Collateral Transfers made under the August and September Agreements, the Amended Complaint seeks to avoid LBHI's Obligations under the Guarantees as constructively fraudulent transfers and preferences. See First Am. Compl. Counts VI, VII, XI, XII; Pls.' Opp'n at 19 ("The Guarantees themselves are not transfers covered by the safe harborsthey are incurrences of obligations.").
Plaintiffs endeavor to distinguish the incurrence of obligations under the Guarantees from the transfers themselves and thereby to transform a claim that otherwise would be exempt into one that escapes the preclusive impact of section 546(e). Plaintiffs contend that avoiding LBHI's Obligations would effectively nullify the August and September Agreements by rendering them "meaningless." See First Am. Compl. Counts XIII and XIV; Pls.' Opp'n at 19 ("Without those guarantees, JPMorgan has no valid lien on the LBHI deposits at JPMorgan. . . ."). These counts of the Amended Complaint are creative efforts to craft theories of recovery that are outside the ambit of the safe harbors and are subject to more lenient standards of proof.
Because the language of section 546(e) as written includes no express references to the incurrence of obligations, Plaintiffs are correct that the incurrence of obligations is not exempt from avoidance, and the following paragraphs in this section confirm that analysis. Plaintiffs are not correct that this notional ability to assert *444 that an obligation is not exempt from avoidance is an acceptable means to whittle away at or undermine the effectiveness of the safe harbors. Despite the linguistic exercise, the safe harbors still protect the transactions between Lehman and JPMC.
The exclusion of "obligations" from the statutory exemption, thus, becomes something of a Pyrrhic victory for Plaintiffs. The Guarantees are not transfers themselves, yet they are resistant to successful challenge because they connect so directly to transfers that are exempt and beyond reach. A transfer made in connection with a securities contract remains unavoidable regardless of whether the Guarantees could potentially be avoided.
In the Amended Complaint, Plaintiffs assert that section 546(e) cannot protect LBHI's Obligations from avoidance because that section does not refer to "obligations." See First Am. Compl. ¶¶ 116, 123, 130, 147, 155, 163. Their argument is textual: because the word "obligation" is missing from section 546(e), "obligations" such as LBHI's Obligations under the Guarantees are not protected. See Pls.' Opp'n at 20 ("[O]ne need look no further than the plain and unambiguous text of [section 546(e)] to determine that the section 546 safe harbors only shield from avoidance certain transfers and not the incurrence of obligations.").
This choice of language in the statute may reflect an intentional decision by Congress to differentiate between transfers and obligations. See 5/10/11 Hearing Tr. 86:2-19 (counsel for Committee) ("The Code treats transfers and obligations differently.. . . Congress has separately and specifically included the words `incurrence of obligation' in some statutes and not in others."). It is difficult to know what Congress actually meant with any confidence, although given the purposes of section 546(e) to immunize the markets from certain bankruptcy risks and the seemingly boundless definition of the term "transfer," this may be an example of a word that is supposed to transcend its ordinary meaning to include the incurrence of obligations.
Although the Bankruptcy Code does not define the term "obligation," it does define "transfer" to include "each mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing or parting with(i) property or (ii) an interest in property." 11 U.S.C. § 101(54)(D) (emphasis added). It follows, then, that section 546(e), in providing exemptions for "transfers," plainly protects "each mode" of "disposing or parting with" Lehman's property or interests in property, including modes that are merely "conditional."
Looking at this definition, the incurrence of an obligation by itself does not constitute a mode of "disposing or parting with" property. Instead, it is a preliminary aspect of a transactional process that must occur prior to or as a condition of transferring property or an interest in property. No doubt these two conceptstransfer and obligationare very closely related, but they are not identical.
The parsing of English can be difficult, but even when the word "transfer" is given a most expansive meaning that encompasses every conceivable means of disposing or parting with property or an interest in property, it still fails to capture the meaning of the undefined term "incurrence of an obligation." Becoming obligated to a counterparty is not the same as parting with property.
This conclusion is supported by several cases that have distinguished between "transfers" and "obligations" in other contexts not involving section 546(e), including sections 547 and 548. See Pls.' Opp'n at 19-35, citing, inter alia, In re Asia Global Crossing, Ltd., 333 B.R. 199, 203-204 (Bankr.S.D.N.Y.2005) (holding that a guaranty *445 was not a transfer in the context of section 502(d)); Covey v. Comm. Nat'l Bank of Peoria, 960 F.2d 657, 661 (7th Cir.1992) (noting that a guaranty was an obligation and not a transfer in the implied fraudulent transfer context).
These authorities confirm that the words "transfers" and "obligations" have different meanings and may be distinguished in construing other sections of the Bankruptcy Code. The word "transfer" also happens to be one of those chameleon-like terms that may be interpreted differently depending on context. Courts interpreting section 547 have recognized that "what constitutes a `transfer' under one subsection of § 547 does not necessarily constitute a transfer under a different subsection." Hall-Mark Elecs. Corp. v. Sims (In re Lee), 108 F.3d 239, 240 (9th Cir.1997).
Regardless of these nuanced interpretations, the language used in section 546(e) uses the word "transfer" but omits any reference to the incurrence of obligations. The missing words may not be supplied by any reasonable construction. One possibility would be to blur the distinctions between "transfer" and "obligation" and find that the words are so closely tied together that they effectively merge into a single concept that fits into the open-ended definition of transfer in section 101(54)(D).
That does not work and would lead to the absurd articulation that to the incurrence of a contingent guaranty obligation is equivalent to a conditional mode of disposing of property or an interest in propertya kind of inchoate transfer from the moment that an obligation is incurred. The words themselves are distinct, however, and cannot be so easily merged. Just because an obligation has been incurred does not mean that any property or interest in property will ever be transferred. It simply means that the legal prerequisite for a possible future transfer has occurred.
This interpretation of the term "transfer" in section 546(e) is consistent with a decision issued last year by my colleague, United States Bankruptcy Judge Robert Drain. See Geltzer v. Mooney (In re MacMenamin's Grill Ltd.), 450 B.R. 414 (Bankr.S.D.N.Y.2011) ("MacMenamin's Grill"). In MacMenamin's Grill, a trustee sought to avoid three payments made to individual owners of a bar and grill, the restaurant's incurrence of a loan obligation, and the grant of a security interest in favor of a bank, in connection with a private leveraged buyout. Both the bank and the shareholder defendants moved for summary judgment, conceding that the challenged payments, incurrence of obligation, and grant of security interest satisfied the requirements for a constructively fraudulent transfer but were nonetheless shielded from avoidance by section 546(e) as protected "settlement payments." See 11 U.S.C. § 546(e).
In denying the motions for summary judgment, Judge Drain also addressed the argument that section 546(e) applied to protect the loan obligation from avoidance. The court noted that within the Bankruptcy Code as a whole "[t]here clearly is a difference between making a transfer and incurring an obligation. . . ." MacMenamin's Grill, 450 B.R. at 429. MacMenamin's Grill, therefore, supports the interpretation of the term "transfer" urged by Plaintiffs: "[i]t is clearly proper . . . to presume that section 546(e) does not implicitly adopt a definition of `transfer' that somehow includes the `incurrence of an obligation'." MacMenamin's Grill, 450 B.R. at 430.
Despite the fact that the term "transfer" as used in section 546(e) does not explicitly encompass obligations such as those incurred by LBHI under the Guarantees, certain observations in MacMenamin's Grill confirm the logic of extending *446 safe harbor protection for transactions that involve transfers that are connected to obligations. As Judge Drain noted ". . . any payments and any lien that the [bank] received in connection with the securities contract would not be avoidable, because they were transfers." MacMenamin's Grill, 450 B.R. at 430.[15] Similarly, the transfers in question here are not avoidable because they were additional steps that took place in connection with the incurrence of obligations.
Although the Plaintiffs are correct that the obligations themselves are not shielded by section 546(e), they still are unable to prevail on these counts of the Amended Complaint and have failed to state claims upon which relief may be granted. The reason for this is that the liens and related collateral transfers remain independently immune from avoidance regardless of whether Plaintiffs can succeed in avoiding the Guarantees. Dismissal is appropriate because pursuit of these counts ultimately leads to safe-harbored transfers that may not be avoided.

II. The counts in the Amended Complaint seeking to avoid and recover actual fraudulent transfers survive the Motion.

(Counts I, II, III, and IV of the Amended Complaint)
Plaintiffs allege in Counts I, II, and III of the Amended Complaint that the September Agreements, the August Guaranty, the August Security Agreement, and Disputed Collateral Transfers constitute avoidable fraudulent transfers under section 548(a)(1)(A) of the Bankruptcy Code because they were made with the "actual intent to hinder, delay or defraud." On this basis, Count IV asserts that the estate may recover the value of the Disputed Collateral Transfers under section 550 of the Bankruptcy Code. These counts state plausible claims for relief that survive the Motion.
Section 548(a)(1)(A) provides that:
(a)(1) The trustee may avoid any transfer (including any transfer to or for the benefit of an insider under an employment contract) of an interest of the debtor in property, or any obligation (including any obligation to or for the benefit of an insider under an employment contract) incurred by the debtor, that was made or incurred on or within 2 years before the date of the filing of the petition, if the debtor voluntarily or involuntarily(A) made such transfer or incurred such obligation with actual intent to hinder, delay or defraud any entity to which the debtor was or became, on or after the date that such transfer was made or such obligation was incurred, indebted . . .
11 U.S.C. § 548(a)(1)(A). When alleging such an actual fraudulent transfer, a plaintiff must "state with particularity the circumstances constituting fraud." See Fed. *447 R.Civ.P. 9(b). To plead fraud with the required degree of particularity, a "party asserting an intentional fraudulent transfer claim under either the Bankruptcy Code [and/or New York state fraudulent conveyance law] must normally allege (1) the property subject to the transfer, (2) the timing and, if applicable, frequency of the transfer and (3) the consideration paid with respect thereto." See In re Saba Enters., Inc., 421 B.R. at 640 (citations omitted).
"In contrast to the particularity requirement for pleading fraud under Rule 9(b), the intent element of an intentional fraudulent conveyance claim may be alleged generally so long as the plaintiff alleges `facts that give rise to a strong inference of fraudulent intent'." In re Saba Enters., Inc., 421 B.R. at 642 (citation omitted); see also Sharp Int'l Corp. v. State St. Bank & Trust Co. (In re Sharp Int'l Corp.), 403 F.3d 43, 56 (2d Cir.2005) (citation omitted) (noting that, "[d]ue to the difficulty of proving intent . . . [a plaintiff] may rely on `badges of fraud' to support his case"). This strong inference of fraudulent intent, in turn, may be established either "(1) by alleging facts demonstrating that the Defendants had both the motive and the opportunity to commit fraud or (2) by alleging facts that constitute strong circumstantial evidence of conscious misbehavior or recklessness." See In re Saba Enters., Inc., 421 B.R. at 642 (internal quotation marks and citations omitted).
The following badges of fraud, when present in a complaint, may create a strong inference of fraudulent intent: (i) a close relationship among the parties to the transaction; (ii) a questionable or hasty transfer not in the ordinary course of business; (iii) the existence of an unconscionable discrepancy between the value of the property transferred and the consideration received therefor; (iv) the chronology of the events and transactions under inquiry; (v) the existence or cumulative effect of a pattern or series of transactions or course of conduct after the incurrence of debt, onset of financial difficulties, or pendency or threat of suits by creditors; and (vi) whether the debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred. See, e.g., In re Kaiser, 722 F.2d 1574, 1582-83 (2d Cir.1983) (upholding an intentional fraudulent transfer claim based on the presence of multiple badges of fraud); In re Enron Corp., 328 B.R. 58, 73-75 (Bankr.S.D.N.Y.2005) (denying motion to dismiss where plaintiff alleged sufficient badges of fraud so as to satisfy pleading standard).
The Amended Complaint pleads sufficient "badges of fraud" to satisfy Rule 9(b) and create a "strong inference of fraudulent intent."[16] Specifically, the Amended Complaint alleges the existence of the following factors: (i) LBHI was wholly dependent on JPMC for the conduct of its business, and JPMC was an insider with unparalleled access to information regarding LBHI's state of affairs and future plans (¶¶ 2, 4, 35); (ii) each transaction occurred on a rushed basis prior *448 to LBHI's bankruptcy, with little or no negotiation, and was unprecedented in the prior course of business between the parties, and the industry generally (¶¶ 46-48, 58, 66-67); (iii) LBHI received no consideration in exchange for incurring billions of dollars in potential obligations pursuant to the agreements, or for transferring billions of dollars in LBHI assets to JPMC (¶¶ 5, 33, 56); (iv) these transactions resulted in a massive drain of LBHI liquidity and an unjustified transfer of property to JPMC prior to LBHI's bankruptcy petition (¶ 74); and (v) each transaction occurred at a time when LBHI was insolvent and/or undercapitalized (¶¶ 5, 30, 60, 66). See First Am. Compl.
JPMC argues that the Court may not apply the so-called "relaxed" pleading standards that would permit a complaint seeking to avoid an actual fraudulent transfer to survive a motion to dismiss based solely on allegations of circumstantial badges of fraud. See 5/10/11 Hr'g Tr. 55:13-56:13. JPMC argues that: (i) this approach ceases to be valid in light of the recent Supreme Court decisions of Twombly and Iqbal, and (ii) such an approach is not available to a debtor-in-possession. See Reply 34-5.
While Twombly and Iqbal together have toughened the pleading standards for purposes of judging the adequacy of a complaint under Rule 12(b)(6), those cases do not speak directly to questions as to the sufficiency of a complaint that alleges badges of fraud as a means to infer fraudulent intent for purposes of Rule 9(b). To support its position, JPMC relies on a single recent decision issued by a bankruptcy court in Texas. See Reply 34 (citing Airport Blvd. Apartments, Ltd. v. NE 40 Partners, Ltd. P'ship (In re NE 40 Partners, Ltd. P'ship), 440 B.R. 124, 127-8 (Bankr.S.D.Tex.2010) (declining to adopt a "more flexible approach" to Rule 9(b) when analyzing actual fraud claims asserted by third-party bankruptcy trustees in light of Twombly and Iqbal)); 5/10/11 Hr'g Tr. 55:13-21.
This isolated case is insufficient to cause the Court to break from other persuasive authority confirming that the Rule 9(b) standard may be relaxed in appropriate circumstances. See, e.g., Official Comm. of Unsecured Creditors of Fedders N. Am., Inc. v. Goldman Sachs Credit Partners L.P. (In re Fedders N. Am. Inc.), 405 B.R. 527, 544-45 (Bankr.D.Del.2009) (citation omitted) (post-Twombly and Iqbal,[17] recognizing that courts continue to relax pleading standards and allow plaintiff trustees to allege "badges of fraud" because "actual fraud is rarely proven by direct-evidence, as individuals are rarely willing to admit such an intent"); Chase Bank, U.S., N.A. v. Vanarthos (In re Vanarthos), 445 B.R. 257, 263 (Bankr.S.D.N.Y.2011) (Glenn, J.) (post-Twombly and Iqbal, concluding that a complaint alleging fraud and seeking non-dischargeability of debt under section 523(a)(2)(A) satisfied the "particularity" requirement of Rule 9(b) by alleging a number of "circumstantial factors").
Pleading the badges of fraud has been found to satisfy the intent requirement of section 548(a)(1)(A). See, e.g., Enron, 328 B.R. at 73, 74 (denying motion to dismiss claims brought by a debtor-in-possession to avoid an actual fraudulent transfer, and concluding that those claims satisfied the "relaxed" pleading requirements of Rule 9(b), when the complaint alleged badges of fraud). Applying such a relaxed standard for Lehman also is appropriate in view of the enormous disruption caused by the bankruptcy filing and the immediate loss of so many senior level employees with *449 institutional memory. See id. (finding that the debtor-in-possession was operating under "the same disadvantage" usually faced by a trustee with second-hand knowledge of the relevant facts because personnel and senior management with first-hand knowledge of the relevant facts departed the company early in the company's bankruptcy). Moreover, the transactions at issue are so extraordinarily complicated and intertwined that describing them with any further detail would pose a special challenge.
In this respect, the Lehman cases are exceptional and distinguishable from other cases that have declined to permit a relaxed pleading standard under Rule 9(b) because of the ability to take an examination pursuant to Federal Rule of Bankruptcy Procedure 2004 ("Rule 2004") prior to the filing of a complaint. See Liquidation Trust v. Daimler AG (In re Old CarCo LLC), 435 B.R. 169, 191-92 (Bankr. S.D.N.Y.2010) (in dicta, noting that under the "circumstances of this case," relaxed pleading standards under Rule 9(b) were inappropriate because, inter alia, the trust plaintiff had prior access to Rule 2004 discovery).
Under the circumstances presented here, it is sufficient for purposes of Rule 9(b) for the Plaintiffs to have alleged the badges of fraud in the Amended Complaint, and the Motion is denied with respect to those counts that seek to avoid and recover actual fraudulent transfers.

III. The twenty-five other counts survive the Motion.
In addition to the claims under Bankruptcy Code sections 544, 547, 548 and 550 discussed in this decision, Plaintiffs have pleaded twenty-five other counts under both the common law and the Bankruptcy Code (the "Other Remaining Counts"),[18] which, like Plaintiffs' claims related to section 548(a)(1)(A) of the Bankruptcy Code, are not protected by the safe harbors of the Bankruptcy Code and thus survive the Motion.[19] JPMC posits various *450 theories pursuant to which the Other Remaining Counts should be dismissed including, among other arguments, that certain of Plaintiffs' common law claims are preempted by federal bankruptcy law, Plaintiffs fail to allege fraud with particularity, Plaintiffs have failed to plead sufficient facts to support their claims, and generally, that many of Plaintiffs' claims fail to state a claim upon which relief can be granted. None of these arguments, however, is sufficient to prevent Plaintiffs from pursuing the Other Remaining Counts.
For the purposes of the Motion, the allegations of the Amended Complaint must be accepted as true. It alleges that JPMC, using its "unique position as primary clearing bank to Lehman's broker-dealer business," put a "financial gun to LBHI's head" by threatening to stop crucial clearing services to LBHI's subsidiaries, including LBI, and further used such threats to "extract extraordinarily one-sided agreements from LBHI literally overnight" and to "siphon billions of dollars in critically needed assets" in order to "leapfrog JPMorgan over other creditors. . . ." See First Am. Compl. ¶¶ 1-8.
While the safe harbors of section 546(e) exist to protect the capital markets and should be strictly construed as written to carry out their salutary objectives, they are not so exalted as to trump and preemptively block every other legal theory that a creative adversary might choose to employ when seeking relief from conduct of a market participant that is outside the norms of ordinary market behavior and that is claimed to be egregious. Plaintiffs have made such claims here.
The Amended Complaint represents something of a laundry list approach to litigation. It identifies a wide-ranging variety of causes of action with the goal of obtaining redress for the harms allegedly suffered due to the actions of JPMC. This multi-pronged approach is what lawyers tend to do in complex disputes like this: they look for theories that may gain traction, but at the start of a case it is tough to predict which of the various theoretical constructs that may apply will prove in practice to be the most suitable means to remedy the alleged wrongdoing.
This expansive approach to identifying other workable theories of recovery is not impacted by the safe harbors. The safe harbors are not all encompassing and do not offer "fail safe" protection against every cognizable claim made in relation to transactions that may fit within the statutory framework. The safe harbors necessarily do not extend to the open waters of litigation and are not an impenetrable barrier to other claims against a market participant that has behaved in a manner that may expose the actor to potential liability. In sum, these important protections do not grant complete immunity from every conceivable claim made by Plaintiffs. Indeed, how could they?
The plain language of section 546(e), read literally, provides limited immunity but does not bar Plaintiffs from maintaining all common law claims, intentional fraud claims and any other claims not expressly embraced by section 546(e). As to these causes of action that are outside the scope of the safe harbors, Plaintiffs, for present pleading purposes, have adequately set forth claims that survive the Motion and that should proceed to a determination on the merits based on facts to be presented in any dispositive motions or at trial.
This is true not only as a general proposition but also based on a count-by-count assessment of the arguments made by the parties, as reflected in Exhibit A. This summary evaluates the Motion in reference to the Other Remaining Counts and shows that these claims survive because, in each instance, the Plaintiffs have given more persuasive arguments concerning the *451 plausibility and viability of their legal theories, at least for purposes of moving ahead with their case against JPMC.
Without limiting the points made in Exhibit A, the Court is satisfied that the Amended Complaint pleads sufficient "badges of fraud" and complies with the requirements of Rule 9(b) for purposes of pleading fraudulent intent with particularity. Also, consistent with earlier comments in this section regarding the safe harbors, JPMC's argument that federal bankruptcy law preempts certain of the Plaintiffs' unjust enrichment and conversion claims falls short.[20]
JPMC cites two cases in support of its argument, Contemporary Indus. Corp. v. Frost (In re Contemporary Indus. Corp.), 564 F.3d 981 (8th Cir.2009) and Official Comm. of Unsecured Creditors of Hechinger Inv. Co. of Del., Inc. v. Fleet Retail Fin. Group (In re Hechinger Inv. Co. of Del., Inc.), 274 B.R. 71 (D.Del.2002). In both of these cases, however, the unjust enrichment claims were identical to the plaintiffs' constructively fraudulent transfer claims under the Bankruptcy Code and also were based upon the same facts as these constructive fraud claims. See Contemporary Indus., 564 F.3d at 984, 988; Hechinger, 274 B.R. at 96.
This litigation is different. The claims that JPMC argues should be preempted by federal bankruptcy law are unlike classic avoidance claims for constructively fraudulent transfers. Instead, these claims have more in common with claims grounded in actual fraudulent intent. See 5/10/11 Hr'g Tr. 147:18-20, 148:4-10. These claims are not to be treated as replicas of claims to recover constructively fraudulent transfers, and, along with the rest of the Other Remaining Counts, they survive the Motion for further adjudication.[21]

Conclusion
This decision enforces a blanket exemption taken directly from the language of section 546(e): notwithstanding the right that otherwise exists to avoid transfers under the Bankruptcy Code, no transfer may be avoided that is made by or to a financial institution in connection with a securities contract. That declarative statement is an overriding principle that mandates dismissal of those counts in the Amended Complaint that seek avoidance of such transfers made to JPMC.
The Remaining Counts survive the Motion to be resolved at a later stage of this adversary proceeding. The parties are directed to submit an agreed form of order that dismisses Counts V through XXIV and that denies the Motion as to the Remaining Counts.


*452 Exhibit A

Analysis of the Other Remaining Counts

Turnover of Excess Collateral


Claim              JPMC's Argument                                   Plaintiffs' Argument                             Reason Claim Survives
                                                                                                                      Motion to Dismiss
Count XXV          The claim for turnover is based on the          & The September Agreements are invalid            Plaintiffs state a claim
Turnover of        theory that the September Agreements are          and unenforceable. (Pls.' Opp'n Point            for turnover of the
Property Held      "void and invalid," which they are not.           II.B.1).                                         Excess Collateral. They
by JPMC            (Mem. Supp. Mot. Dismiss Point III.C.3;           & The Amended Complaint demonstrates             have adequately alleged
Under Section      Reply Point II.C).                                that LBHI owned the Excess Collateral and        that the September
542 of the          Plaintiffs do not allege facts showing that     transferred it to JPMC. (Pls.' Opp'n Point       Agreements are void and
Bankruptcy         the Excess Collateral is property of the          II.B.1).                                         invalid and that
Code               estate. Property that has been fraudulently       & There has been no determination in the         therefore JPMC had no
(Turnover of       or preferentially transferred does not            case yet as to whether the property was          right to hold the Excess
Excess             become property of the estate until it has        fraudulently or preferentially transferred.      Collateral.
Collateral)[1]  been recovered. (Mem. Supp. Mot. Dismiss          Plaintiffs should not be denied the               The Court agrees with
                   Point III.C.3; Reply Point II.C).                 alternative basis for relief that because the    Plaintiffs that the
                     Any claim for turnover under Bankruptcy        September Agreements are void and                Collateral Disposition
                   Code section 542 is barred by the Collateral      invalid. Plaintiffs are entitled to the return   Agreement does not bar
                   Disposition Agreement,[2] which provides       of the Excess Collateral pursuant to             this claim.
                   that Bankruptcy Code sections 502(d), 541,        Bankruptcy Code section 542. (Pls.' Opp'n
                   and 542 shall not apply until a final             Point II.B.1).
                   non-appealable order or settlement agreement       The Collateral Disposition Agreement
                   resolves all claims of JPMC and its               simply governs the timing of certain
                   affiliates against the Debtors (as defined in     payments that may result from any claim
                   the Collateral Disposition Agreement) and         for relief; it does not govern the timing of



Claim              JPMC's Argument                                   Plaintiffs' Argument                             Reason Claim Survives
                                                                                                                      Motion to Dismiss
                   all potential actions, proceedings, and           any such claims. (Pls.' Opp'n Point II.D).
                   challenges with respect to such claims, the
                   collateral posted by Lehman to JPMC in
                   respect of such claims, and payment on the
                   claims. (Mem. Supp. Mot. Dismiss Point
                   III.C.4; Reply Point II.C).


Setoff Related Claims


Claim              JPMC's Argument                                   Plaintiffs' Argument                             Reason Claim Survives
                                                                                                                      Motion to Dismiss
Count XXVI          Plaintiffs do not allege facts showing that      Bankruptcy Code section 542(b)                  Plaintiffs state a claim
 Avoidance        a setoff occurred. (Mem. Supp. Mot.               provides that property of the estate must be     for the avoidance of the
of September       Dismiss Point III.B.1; Reply Point II.B.1).       turned over except to the extent that such       September Transfers as
Transfers[3] as   Bankruptcy Code section 553(a)(3) does          debt may be offset under Bankruptcy Code         transfers made for the
Transfers          not give the debtor a right to "avoid"            section 553. (Pls.' Opp'n Point II.B.2).         purposes of obtaining a
Made for the       pre-petition setoffs, it simply describes          The purpose of sections 553(a) and (b) is      right of setoff under
Purposes of        exceptions to the rule that the Bankruptcy        to prevent a creditor from intentionally         Bankruptcy Code
Obtaining a        Code does not effect a party's right to set       accumulating the debtor's property on the        section 553(a)(3). They
Right to Setoff    off claims. (Mem. Supp. Mot. Dismiss              eve of bankruptcy. The Amended                   have adequately alleged
under Section      Point III.B.2; Reply Point II.B.1).               Complaint describes how JPMC's purpose           that JPMC's purpose in
553(a)(3) of        If a setoff did in fact occur, it was           in making its collateral demands in the          making the collateral
the                authorized and protected by the Bankruptcy        week before LBHI's bankruptcy was to put         demands that led to the
Bankruptcy         Code's safe harbors. (Mem. Supp. Mot.             itself ahead of other creditors and to use       September Transfers the
Code               Dismiss Point III.B.3; Reply Point II.B.1).       such collateral to satisfy its claims in an      week before LBHI's
                                                                     LBHI bankruptcy. The fact that JPMC did          bankruptcy was to put
                                                                     not exercise a prepetition setoff has no         itself ahead of other
                                                                     bearing on whether JPMC built up an              creditors and to use such
                                                                     LBHI asset pool for the improper goal of         collateral to satisfy



*453
Claim              JPMC's Argument                                   Plaintiffs' Argument                             Reason Claim Survives
                                                                                                                      Motion to Dismiss
                                                                     improving its position over LBHI's other         JPMC's bankruptcy-
                                                                     creditors. (Pls.' Opp'n Point II.B.2).           related claims.
                                                                      The safe harbors do not apply to the            See Count XXXIII
                                                                     transactions at issue. (Pls.'s Br. Point         regarding safe harbor
                                                                     II.B.2).                                         arguments.
                                                                      In response to JPMC's argument that
                                                                     553(a)(3) does not give an avoidance
                                                                     power, Plaintiffs argue that Counts XXVI
                                                                     and XXVIII function as an independent
                                                                     challenge to any assertion by JPMC that it
                                                                     is entitled to withhold LBHI's property in
                                                                     order to set off against its claims against
                                                                     the bankruptcy estate. (Pls.' Opp'n Point
                                                                     II.B.2).
Count XXVII         The claim for turnover is based on the           The September Agreements are invalid            If Plaintiffs are
 Turnover of      theory that the September Agreements are          and unenforceable (Pls.' Opp'n Point             successful on their claim
September          "void and invalid," which they are not.           II.B.1)                                          that the September
Transfers          (Mem. Supp. Mot. Dismiss Point III.C.3;            The Amended Complaint demonstrates             Transfers were made for
under Section      Reply Point II.C).                                that LBHI owned the property and                 the improper purpose of
542 of the          Plaintiffs do not allege facts showing that     transferred it to JPMC (Pls.' Opp'n Point        obtaining a right to set
Bankruptcy         the property sought is property of the estate.    II.B.1).                                         off, they are entitled to a
Code               Property that has been fraudulently or             There has been no determination in the         turnover of the
                   preferentially transferred does not become        case yet as to whether the property was          September Transfers.
                   property of the estate until it has been          fraudulently or preferentially transferred.       Plaintiffs state a claim
                   recovered. (Mem. Supp. Mot. Dismiss Point         Plaintiffs should not be denied the              for turnover of the
                   III.C.3; Reply Point II.C).                       alternative basis for relief that because the    September Transfers.
                    Any claim for turnover under Bankruptcy         September Agreements are void and                They have adequately
                   Code section 542 is barred by the Collateral      invalid Plaintiffs are entitled to the return    alleged that the
                   Disposition Agreement, which provides that        of the September Transfers pursuant to           September Agreements
                   Bankruptcy Code sections 502(d), 541, and         Bankruptcy Code section 542. (Pls.' Opp'n        are void and invalid and
                   542 shall not apply until a final non-            Point II.B.1).                                   that therefore JPMC had



Claim              JPMC's Argument                                   Plaintiffs' Argument                             Reason Claim Survives
                                                                                                                      Motion to Dismiss
                   appealable order or settlement agreement           The Collateral Disposition Agreement           no right to hold the
                   resolves all claims of JPMC and its               simply governs the timing of certain             September Transfers.
                   affiliates against the Debtors (as defined in     payments that may result from any claim           The Court agrees with
                   the Collateral Disposition Agreement) and         for relief; it does not govern the timing of     Plaintiffs that the
                   all potential actions, proceedings, and           any such claims. (Pls.' Opp'n Point II.D).       Collateral Disposition
                   challenges with respect to such claims, the                                                        Agreement does not bar
                   collateral posted by Lehman to JPMC in                                                             this claim.
                   respect of such claims, and payment on the
                   claims. (Mem. Supp. Mot. Dismiss Point
                   III.C.4; Reply Point II.C).
Count XXVIII        Plaintiffs do not allege facts showing that      Bankruptcy Code section 542(b)                  Plaintiffs state a claim
 Avoidance        a setoff occurred. (Mem. Supp. Mot.               provides that property of the estate must be     for the avoidance of the
of September       Dismiss Point III.B.1; Reply Point II.B.1).       turned over except to the extent that such       September Transfers as
Transfers as        Plaintiffs have abandoned "avoidance" of        debt may be offset under Bankruptcy Code         transfers made for the
Improvement        the September Transfers under section             section 553. (Pls.' Opp'n Point II.B.2).         purposes of obtaining an
in Position        553(b). (Reply Point II.B.1).                      The purpose of sections 553(a) and (b) is      improvement of position
under Section       If a setoff did in fact occur, it was           to prevent a creditor from intentionally         under Bankruptcy Code
553(b) of the      authorized and protected by the Bankruptcy        accumulating the debtor's property on the        section 553(b). They
Bankruptcy         Code's safe harbors. (Mem. Supp. Mot.             eve of bankruptcy, the Amended                   have adequately alleged
Code               Dismiss Point III.B.3; Reply Point II.B.1).       Complaint describes how JPMC's purpose           that JPMC's purpose in
                                                                     in making its collateral demands in the          making the collateral
                                                                     week before LBHI's bankruptcy was to put         demands that led to the
                                                                     itself ahead of other creditors and to use       September Transfers the
                                                                     such collateral to satisfy its claims in an      week before LBHI's
                                                                     LBHI bankruptcy. The fact that JPMC did          bankruptcy was to put
                                                                     not exercise a pre-petition setoff has no        itself ahead of other
                                                                     bearing on whether JPMC built up an              creditors and to use such
                                                                     LBHI asset pool for the improper goal of         collateral to satisfy
                                                                     improving its position over LBHI's other         JPMC's bankruptcy-
                                                                     creditors (Pls.' Opp'n Point II.B.2).            related claims.
                                                                      The safe harbors do not apply to the            See Count XXXIII



*454
Claim              JPMC's Argument                                   Plaintiffs' Argument                             Reason Claim Survives
                                                                                                                      Motion to Dismiss
                                                                     transactions at issue. (Pls.'s Br. Point         regarding safe harbor
                                                                     II.B.2, citing Pls.' Opp'n Points I and          arguments.
                                                                     II.C.1).
Count XXIX         The failure of Plaintiffs' claim alleging        Plaintiffs' claim for the avoidance of the      Plaintiffs' claim
Recovery of        improper setoff precludes any recovery            September Transfers as an improvement of         pursuant to Bankruptcy
Avoided            pursuant to Bankruptcy Code section 550           position under Bankruptcy Code section           Code section 553(b) is
Transfers as       based on those claims. (Mem. Supp. Mot.           553(b) is well-plead and not subject to          not subject to dismissal,
Impermissible      Dismiss Point III.C.1; Reply Point II.D).         dismissal, therefore Plaintiffs' claim for       therefore Plaintiffs'
Improvement                                                          recovery of the September Transfers under        related claim pursuant to
in Position                                                          Bankruptcy Code section 550 is not subject       Bankruptcy Code
under Section                                                        to dismissal. (Pls.' Opp'n Point II.D).          section 550 is not
550 of the                                                                                                          subject to dismissal.
Bankruptcy
Code


Violation of Automatic Stay


Claim              JPMC's Argument                                   Plaintiffs' Argument                             Reason Claim Survives
                                                                                                                      Motion to Dismiss
Count XXXIII        Plaintiffs do not adequately allege that         Whether Bankruptcy Code section                 The Court agrees with
 Violation of     JPMC effected a setoff. Plaintiffs claim          362(b)(17) applies to safe harbor a transfer     Plaintiffs that whether
the Automatic      that JPMC liquidated collateral in which it       is a highly fact-specific inquiry regarding      the safe harbors apply to
Stay               had a security interest to pay obligations.       the agreement, why the transfer was made,        protect a particular
                   Where a creditor has a security interest use      the terms of the agreement and whether or        setoff is a highly fact-
                   of its collateral to satisfy a debt it is not a   not the action taken by the financial            specific inquiry.
                   setoff, at most it is a transfer subject to       institution after the automatic stay is in        Furthermore,
                   avoidance. (Mem. Supp. Mot. Dismiss               effect, relate back to that contract. (5/10/11   regardless of whether
                   Point III.B.4; Reply Point II.B.2).               Hr'g Tr. 129:25-130:1-6).                        the safe harbors might
                    The Amended Complaint alleges that it            The Amended Complaint adequately               apply to protect a setoff
                   was JPMC's setoffs that violated the              alleges an unauthorized post-petition setoff     of the $1.9 billion in
                   automatic stay and Bankruptcy Code                of $1.9 billion of claims under swap             derivatives obligations



                   section 362(a)(7). Bankruptcy Code section        agreements against funds transferred in          against the collateral
                   362(a)(7), however, only applies to setoffs,      connection with the September                    posted under the
                   therefore Plaintiffs' argument that the           Agreements. (Pls.' Opp'n Point II.C).            September Agreements
                   foreclosure of a security interest violates the    None of these agreements qualify as a          if the September
                   stay fails. (Mem. Supp. Mot. Dismiss Point        protected contract for the purposes of the       Agreements are valid,
                   II.B.2).                                          safe harbors. (Pls.' Opp'n Point II.C.1).        should the Court
                    In any event, whether JPMC set off funds         Whether the $1.9 billion was the               determine that the
                   or foreclosed a security interest, the            foreclosure of a security interest or a setoff   September Agreements
                   Amended Complaint fails to plead a                is irrelevant because either action is a         are invalid, than a setoff
                   plausible basis as to how such action was         violation of the automatic stay. (Pls.'          against collateral posted
                   not protected by the Bankruptcy Code's            Opp'n Point II.C.II).                            in connection with such
                   safe harbors. (Mem. Supp. Mot. Dismiss                                                             invalid agreements
                   Point III.B.4; Reply Point II.B.2).                                                                would not be a valid
                                                                                                                    setoff.
Count XXXIV         Plaintiffs' claim for turnover is based on       JPMC improperly set off the $1.9 billion        If Plaintiffs are
 Turnover of      the theory that JPMC violated the automatic       of funds, and consequently, Plaintiffs are       successful on their claim
Funds Seized       stay, which is not adequately alleged.            entitled to the turnover of such funds. (Pls.'   for violation of the
in Violation of    (Mem. Supp. Mot. Dismiss Point III.C.3;           Opp'n Point II.C).                               automatic stay, they are
the Automatic      Reply Point II.C).                                 The Amended Complaint demonstrates             entitled to a turnover of
Stay                 Plaintiffs do not allege facts showing that    that LBHI owned the property and                 the related funds.
                   the property sought is property of the estate.    transferred it to JPMC (Pls.' Opp'n Point         The Court agrees with
                   Property that has been fraudulently or            II.B.1).                                         Plaintiffs that the
                   preferentially transferred does not become         There has been no determination in the         Collateral Disposition
                   property of the estate until it has been          case yet as to whether the property was          Agreement does not bar
                   recovered. (Mem. Supp. Mot. Dismiss Point         fraudulently or preferentially transferred.      this claim.
                   III.C.3; Reply Point II.C).                       Plaintiffs should not be denied the
                    Any claim for turnover under Bankruptcy         alternative basis for relief that because
                   Code section 542 is barred by the Collateral      JPMC improperly set off the $1.9 billion in
                   Disposition Agreement, which provides that        funds, Plaintiffs are entitled to the return of
                   Bankruptcy Code sections 502(d), 541, and         such funds pursuant to Bankruptcy Code
                   542 shall not apply until a final                 section 542. (Pls.' Opp'n Point II.B.1).
                   non-appealable order or settlement agreement       The Collateral Disposition Agreement
                   resolves all claims of JPMC and its               simply governs the timing of certain



*455
                   affiliates against the Debtors (as defined in     payments that may result from any claim
                   the Collateral Disposition Agreement) and         for relief; it does not govern the timing of
                   all potential actions, proceedings, and           any such claims. (Pls.' Opp'n Point II.D).
                   challenges with respect to such claims, the
                   collateral posted by Lehman to JPMC in
                   respect of such claims, and payment on the
                   claims. (Mem. Supp. Mot. Dismiss Point
                   III.C.4; Reply Point II.C).


Equitable Subordination Claim


Claim              JPMC's Argument                                   Plaintiffs' Argument                             Reason Claim Survives
                                                                                                                      Motion to Dismiss
Count XXX          JPMC is not an insider of LBHI; therefore        The Amended Complaint alleges that              The Court agrees with
Equitable          Plaintiffs must allege a heightened degree        JPMC was an insider because it had               Plaintiffs; the Amended
Subordination      of inequitable conduct to state a claim for       "unparalleled access" to information about       Complaint alleges
Under              equitable subordination. Plaintiffs have not      LBHI's financial status and future               inequitable conduct
Sections           adequately alleged that JPMC engaged in           prospects, including a preview of what           sufficient to support a
510(c) and         inequitable conduct, let alone the egregious      LBHI would announce to the markets on            claim for equitable
105(a) of the      inequitable conduct sufficient to support a       its earnings call scheduled for September        subordination.
Bankruptcy         claim for equitable subordination against a       10, 2008, an opportunity to review and
Code               non-insider. (Mem. Supp. Mot. Dismiss             comment on proposed presentations to
                   Point V; Reply Point IV).                         rating agencies, was invited to diligence
                                                                     sessions that JPMC in turn used to probe
                                                                     into LBHI's confidential records and plans,
                                                                     and had access to key government financial
                                                                     policy officials and their plans for Lehman
                                                                     as well as insider access to potential suitors
                                                                     for the purchase of Lehman. (Pls.' Opp'n
                                                                     Point IV.A).
                                                                      Even if JPMC was not an insider, the
                                                                     Amended Complaint pleads conduct
                                                                     sufficient to justify equitable subordination



Claim              JPMC's Argument                                   Plaintiffs' Argument                             Reason Claim Survives
                                                                                                                      Motion to Dismiss
                                                                     as the Amended Complaint details
                                                                     numerous examples of how JPMC abused
                                                                     its position as Lehman's clearing bank to
                                                                     impose the massively overreaching
                                                                     September Agreements and siphon billions
                                                                     of dollars of LBHI cash to get ahead of
                                                                     other creditors and capitalize on LBHI's
                                                                     bankruptcy. (Pls.' Opp'n Point IV.B).


Disallowance of Claims Under Bankruptcy Code Section 502(d) and Avoidance of Liens Under Section 506(d)


Claim              JPMC's Argument                                   Plaintiffs' Argument                             Reason Claim Survives
                                                                                                                      Motion to Dismiss
Count XXXI         Plaintiffs' avoidance claims fail, therefore     Plaintiffs' avoidance claims are not            As discussed in
Disallowance       their claims based on sections 502(d) and         subject to dismissal, therefore Plaintiffs       Section II of this
of Claims          506(d) of the Bankruptcy Code also fail.          claim for disallowance of claims under           decision, supra, certain
Under Section      (Mem. Supp. Mot. Dismiss Point III.C.4;           Bankruptcy Code section 502(d) and               of Plaintiffs' avoidance
502(d) of the      Reply Point II.D).                                avoidance of the liens securing such claims      claims are surviving the
Bankruptcy          Any claim for disallowance under section        under Bankruptcy Code section 506(d)             Motion. As such,
Code and           502(d) is barred by the Collateral                similarly survive the Motion. (Pls.' Opp'n       Plaintiffs' claim under
Avoidance of       Disposition Agreement, which provides that        Point II.D).                                     Bankruptcy Code
Liens              Bankruptcy Code sections 502(d), 541, and          The Collateral Disposition Agreement           section 502(d) similarly
Securing Such      542 shall not apply until a final non-            simply governs the timing of certain             survives the Motion.
Claims Under       appealable order or settlement agreement          payments that may result from any claim           The Court agrees with
Section 506(d)     resolves all claims of JPMC and its               for relief; it does not govern the timing of     Plaintiffs that the
                   affiliates against the Debtors (as defined in     any such claims. (Pls.' Opp'n Point II.D).       Collateral Disposition
                   the Collateral Disposition Agreement) and                                                          Agreement does not bar
                   all potential actions, proceedings, and                                                            this claim.
                   challenges with respect to such claims, the
                   collateral posted by Lehman to JPMC in
                   respect of such claims, and payment on the



*456
Claim              JPMC's Argument                                   Plaintiffs' Argument                             Reason Claim Survives
                                                                                                                      Motion to Dismiss
                   claims. (Mem. Supp. Mot. Dismiss Point
                   III.C.4; Reply Point II.C).


Common Law Fraud Claim


Claim              JPMC's Argument                                   Plaintiffs' Argument                             Reason Claim Survives
                                                                                                                      Motion to Dismiss
Count XLIX         Plaintiffs fail to allege fraud with             Plaintiffs have adequately pleaded fraud        For the reasons
Fraud With         particularity under Rule 9(b). (Mem. Supp.        with particularity. The Amended                  discussed in Section II
Respect to the     Mot. Dismiss Point IV.E; Reply Point              Complaint alleges that on or about               of this decision, supra,
September 12,      III.E).                                           September 11-12th Jamie Dimon personally         the Court finds that
2008 Demand         Plaintiffs fail to plead facts giving rise to   assured Richard Fuld that the $5 billion in      Plaintiffs have
for $5 Billion     a strong inference of fraudulent intent.          collateral would be returned to LBHI at the      adequately pleaded
Cash               Instead Plaintiffs simply make a conclusory       end of the trading day on Friday,                fraud for the purposes of
                   assertion that at the time Jamie Dimon            September 12, 2008. (Pls.' Opp'n Point           Rule 9(b). The Court
                   promised that JPMC would return the $5            III.F)                                           agrees that the Amended
                   billion in collateral at the end of the trading    Plaintiffs have pleaded facts giving rise      Complaint pleads facts
                   day on September 12, 2008 JPMC had no             to strong inference of fraudulent intent by      sufficient to give rise to
                   intention of returning the collateral to          describing how (i) contrary to JPMC's            a strong inference of
                   LBHI. (Mem. Supp. Mot. Dismiss Point              representation that it was requesting the $5     fraudulent intent.
                   IV.E; Reply Point III.E).                         billion in collateral to support intra-day       Furthermore, whether
                    Plaintiffs cannot allege reasonable             clearance-related credit, it already had         LBHI's reliance on any
                   reliance on the alleged fraudulent promise        decided to prevent LBHI from accessing           such fraudulent promise
                   by Jamie Dimon that JPMC would return             the $5 billion and to withhold the funds to      by JPMC was
                   the $5 billion in collateral at the end of the    pay itself on any and all claims arising         reasonable under the
                   trading day on September 12, 2008 because         from an LBHI bankruptcy, (ii) JPMC's             circumstances is a
                   it was inconsistent with the express terms of     last-minute demand for $5 billion was the        question of fact that is
                   the September Security Agreement. (Mem.           culmination of a campaign to coerce a            not appropriately
                   Supp. Mot. Dismiss Point IV.E; Reply Point        guaranty and collateral from LBHI for all        decided in the context of
                   III.E).                                           claims JPMC anticipated would arise upon         a motion to dismiss.
                                                                     an LBHI bankruptcy filing, (iii) after



Claim              JPMC's Argument                                   Plaintiffs' Argument                             Reason Claim Survives
                                                                                                                      Motion to Dismiss
                                                                     obtaining the $5 billion in funds, JPMC
                                                                     swept such funds into its own general
                                                                     ledger account to make sure that LBHI
                                                                     would not have access to the funds and (iv)
                                                                     JPMC then issued firm-wide instructions
                                                                     not to release any LBHI cash or securities
                                                                     for any reason. (Pls.' Opp'n Point III.F).
                                                                      It is inappropriate for the Court to
                                                                     determine in a motion to dismiss whether
                                                                     LBHI's reliance on Jamie Dimon's alleged
                                                                     fraudulent promise was reasonable. In any
                                                                     event, such reliance was reasonable given
                                                                     the rushed circumstances of the case, the
                                                                     fact that Lehman senior management was
                                                                     not aware of the terms of the September
                                                                     Agreements, and given that such reliance
                                                                     was consistent with Lehman's right to
                                                                     obtain overnight access to clearance-
                                                                     related collateral for eight years under the
                                                                     Clearance Agreement. (Pls.' Opp'n Point
                                                                     III.F).


Common Law Claims Allegedly Preempted by Federal Bankruptcy Law


Claim              JPMC's Argument                                   Plaintiffs' Argument                             Reason Claim Survives
                                                                                                                      Motion to Dismiss
Count XXXII        Federal Preemption Argument                       Federal Preemption Argument                      Federal Preemption
 Imposition        Plaintiffs' state-law claims seeking             The cases cited by JPMC, Contemporary          Argument
of                 recovery of collateral transfers are              Indus. Corp. v. Frost (In re Contemporary         The Court is not
Constructive       preempted by federal bankruptcy law.              Indus. Corp.), 564 F.3d 981 (8th Cir. 2009)      persuaded by JPMC's
Trust and          Courts have held that claims that seek to         ("Contemporary Industries") and Official         argument that certain of



*457
Claim              JPMC's Argument                                   Plaintiffs' Argument                             Reason Claim Survives
                                                                                                                      Motion to Dismiss
Turnover of        recover the same payments and the same            Comm. of Unsecured Creditors of                  Plaintiffs' claims are
$5 Billion of      remedy as those that are protected by             Hechinger Inv. Co. of Del., Inc. v. Fleet        preempted by federal
Cash               Bankruptcy Code section 546(e), such as           Retail Fin. Group (In re Hechinger Inv.          bankruptcy law.
                   Counts XXXII, XXXVI, XXXVII, XXXIX,               Co. of Del., Inc.), 274 B.R. 71 (D. Del.          JPMC relies upon the
                   and XL of the Amended Complaint are               2002), are distinguishable from the case at      holdings in
                   preempted by section 546(e) and should be         bar because unlike the claims in those           Contemporary
                   dismissed. (Mem. Supp. Mot. Dismiss               cases, the claims here that JPMC argues          Industries and
                   Point IV.A; Reply Point III.A).                   are preempted by federal bankruptcy law          Hechinger for its
                   Constructive Trust Argument                       are not merely "relabeled" avoidance             argument that certain of
                    Plaintiffs' constructive trust claim is         claims. (Pls.' Opp'n Point III.H.2).             Plaintiffs' claims are
                   effectively based on the same allegations as       In fact, the claims that JPMC argues are       preempted by federal
                   their fraud claim, and, as with their common      preempted by federal bankruptcy law have         bankruptcy law. In each
                   law fraud claim, Plaintiffs have failed to        nothing to do with the classic avoidance         of these cases the
                   plead fraud with particularity. (Mem. Supp.       claims. The claims do not hinge on               plaintiffs sought the
                   Mot. Dismiss Point IV.F.1; Reply Point            whether LBHI was insolvent at the time of        avoidance of transfers
                   III.F).                                           the transfers, whether the transfers were        related to certain
                    Plaintiffs' attempts to plead a constructive    made within the preference period or             leveraged buyouts under
                   fraud claim based on an alleged breach of         whether LBHI received adequate                   Bankruptcy Code
                   an oral agreement to return the collateral        consideration. Instead, the claims focus on      section 544, and
                   fail because a written agreement, the             the conduct of JPMC, whether JPMC acted          additionally made state
                   September Security Agreement, governs the         wrongfully, whether there was lack of            law claims for unjust
                   alleged conduct, and because Plaintiffs have      authority to enter into the transactions and     enrichment, and in
                   an adequate remedy at law. (Mem. Supp.            JPMC knew it, whether there was collusion        Contemporary
                   Mot. Dismiss Point IV.F.1; Reply Point            and whether the agreements were exercised        Industries, a claim for
                   III.F).                                           under duress. (5/10/11 Hr'g Tr. 147:21-          excessive/illegal
                    The parties were sophisticated parties          149:13).                                         distributions. In
                   engaged in an arms' length lending and             If the claims at issue have something in       Contemporary
                   financial transactions; as such, Plaintiffs'      common with any of the Plaintiffs' claims        Industries, the Eighth
                   allegation of a "confidential relationship"       under the Bankruptcy Code it is the actual       Circuit Court of Appeals
                   between JPMC and LBHI is insufficient as          fraudulent conveyance claims. (5/10/11           and the District Court
                   a matter of law. (Mem. Supp. Mot. Dismiss         Hr'g Tr. 148:4-10).                              for the District of



Claim              JPMC's Argument                                   Plaintiffs' Argument                             Reason Claim Survives
                                                                                                                      Motion to Dismiss
                   Point IV.F.2; Reply Point III.F).                  The safe harbors do not immunize all           Nebraska both affirmed
                                                                     transfers under security contracts from          the finding of the
                                                                     attack, rather they provide that particular      bankruptcy court that
                                                                     avoidance remedies cannot be used. If            plaintiff's claims for
                                                                     Congress wanted to immunize all transfers        unjust enrichment and
                                                                     under securities contracts it would have         illegal/excessive
                                                                     said so and it has not. (5/10/11 Hr'g Tr.        distributions were
                                                                     148: 16-21).                                     preempted by federal
                                                                     Constructive Trust Argument                      bankruptcy law
                                                                      The Amended Complaint clearly alleges          "inasmuch as those
                                                                     that the September Security Agreement is         claims sought
                                                                     invalid and unenforceable, and therefore it      essentially the same
                                                                     cannot serve as a bar to Plaintiffs'             relief as the avoidance
                                                                     constructive trust claim. (Pls.' Opp'n Point     claims barred by §
                                                                     III.G.1).                                        546(e)." Contemporary
                                                                      Plaintiffs' constructive trust claim should    Indus., 564 F.3d at 984,
                                                                     not be dismissed because the $5 billion in       988. In Hechinger the
                                                                     cash is the subject of other claims pursuant     court found that the
                                                                     to which Plaintiffs seek a legal remedy.         purpose of Bankruptcy
                                                                     Plaintiffs are permitted to seek an              Code section 546(e)
                                                                     alternative equitable remedy. (Pls.' Opp'n       would be frustrated if
                                                                     Point III.G.2) .                                 plaintiff was allowed to
                                                                      The Amended Complaint pleads fraud             "circumvent section
                                                                     with particularity and specifically alleges      546(e) by asserting a
                                                                     that late in the evening of September 11,        state law claim for
                                                                     2008, JPMC demanded that LBHI provide            unjust enrichment based
                                                                     $5 billion in additional cash collateral the     on the same facts and
                                                                     next morning, JPMC's CEO Jamie Dimon             seeking essentially the
                                                                     falsely promised LBHI's CEO Richard              same relief' in
                                                                     Fuld that JPMC would return the $5 billion       connection with a
                                                                     at the close-of-settlement the next evening,     transaction the court



*458
Claim              JPMC's Argument                                   Plaintiffs' Argument                             Reason Claim Survives
                                                                                                                      Motion to Dismiss
                                                                     notwithstanding that JPMC had no                 already has found to be
                                                                     intention of returning any of LBHI's             an unavoidable
                                                                     collateral. (Pls.' Opp'n Point III.G.3).         settlement payment.
                                                                      A confidential or fiduciary relationship is    Hechinger, 274 B.R. at
                                                                     not a prerequisite for a constructive trust      96.  These cases are
                                                                     claim. Moreover, the Amended Complaint           distinguishable from the
                                                                     pleads sufficient facts to show a                case at bar because it
                                                                     confidential relationship between JPMC           appears that the
                                                                     and LBHI, specifically with respect to           plaintiffs in both cases
                                                                     JPMC's dominant position, LBHI's                 were solely seeking to
                                                                     dependence on JPMC for the survival of its       recover alleged
                                                                     business, and JPMC's insider access to           constructively
                                                                     LBHI's confidential information. (Pls.'          fraudulent transfers
                                                                     Opp'n Point III.G.4).                            under the Bankruptcy
                                                                                                                      Code and that the unjust
                                                                                                                      enrichment and
                                                                                                                      excessive/illegal
                                                                                                                      distribution claims
                                                                                                                      sought the same relief
                                                                                                                      based on the same facts
                                                                                                                      as the constructive fraud
                                                                                                                      claims under
                                                                                                                      Bankruptcy Code
                                                                                                                      section 544. See
                                                                                                                      Contemporary Indus.,
                                                                                                                      564 F.3d at 983, 988;
                                                                                                                      see also Hechinger, 274
                                                                                                                      B.R. at 82, 98. Here,
                                                                                                                      however, as Plaintiffs
                                                                                                                      have pointed out, if the
                                                                                                                      state law claims in



Claim              JPMC's Argument                                   Plaintiffs' Argument                             Reason Claim Survives
                                                                                                                      Motion to Dismiss
                                                                                                                      question have something
                                                                                                                      in common with any of
                                                                                                                      Plaintiffs' Bankruptcy
                                                                                                                      Code-related fraudulent
                                                                                                                      transfer claims, it is with
                                                                                                                      the claims under
                                                                                                                      Bankruptcy Code
                                                                                                                      section 548(a)(1)(A),
                                                                                                                      claims for the recovery
                                                                                                                      of intentionally
                                                                                                                      fraudulent transfers, that
                                                                                                                      the Court holds survive
                                                                                                                      the Motion, and not the
                                                                                                                      claims for alleged
                                                                                                                      constructively
                                                                                                                      fraudulent transfers
                                                                                                                      under Bankruptcy Code
                                                                                                                      section 548(a)(1)(B) that
                                                                                                                      the Court holds are
                                                                                                                      protected by the safe
                                                                                                                      harbors.
                                                                                                                       This distinction is
                                                                                                                      observed by the court in
                                                                                                                      Hechinger. While
                                                                                                                      plaintiff's claims under
                                                                                                                      the Bankruptcy Code
                                                                                                                      were to recover
                                                                                                                      allegedly constructively
                                                                                                                      fraudulent transfers, in
                                                                                                                      its unjust enrichment
                                                                                                                      claim plaintiff alleged



*459
Claim              JPMC's Argument                                   Plaintiffs' Argument                             Reason Claim Survives
                                                                                                                      Motion to Dismiss
                                                                                                                      that defendants
                                                                                                                      consummated the
                                                                                                                      leveraged buyout with
                                                                                                                      knowledge that
                                                                                                                      company was insolvent
                                                                                                                      in order to loot the
                                                                                                                      company for their own
                                                                                                                      gain before its financial
                                                                                                                      failure. Hechinger, 274
                                                                                                                      B.R. at 94. Plaintiff
                                                                                                                      argued that Congress
                                                                                                                      expressly exempted
                                                                                                                      section 548(a)(1) claims
                                                                                                                      for intentionally
                                                                                                                      fraudulent transfers and,
                                                                                                                      as such, intended to
                                                                                                                      permit claims under the
                                                                                                                      facts alleged in the
                                                                                                                      unjust enrichment claim.
                                                                                                                      Id. at 98. The court
                                                                                                                      noted that it could not
                                                                                                                      agree that the exemption
                                                                                                                      demonstrates Congress's
                                                                                                                      intent to allow unjust
                                                                                                                      enrichment claims that
                                                                                                                      effectively act as section
                                                                                                                      544 claims and not as
                                                                                                                      section 548(a)(1) claims.
                                                                                                                      Id. Here, however, the
                                                                                                                      state law claims that
                                                                                                                      JPMC argues should be



Claim              JPMC's Argument                                   Plaintiffs' Argument                             Reason Claim Survives
                                                                                                                      Motion to Dismiss
                                                                                                                      preempted are not based
                                                                                                                      on the same facts or
                                                                                                                      seeking the same relief
                                                                                                                      as the claims that are
                                                                                                                      protected by Bankruptcy
                                                                                                                      Code section 546(e).
                                                                                                                      State law claims based
                                                                                                                      on facts that are entirely
                                                                                                                      distinct from those
                                                                                                                      necessary to state a
                                                                                                                      claim for the kinds of
                                                                                                                      constructively
                                                                                                                      fraudulent transfer under
                                                                                                                      Bankruptcy Code
                                                                                                                      sections 544 or 548 that
                                                                                                                      are protected by the safe
                                                                                                                      harbor of section 546(e)
                                                                                                                      should not be wiped out
                                                                                                                      by the safe harbors.[4]Constructive Trust
                                                                                                                      Argument
                                                                                                                       Plaintiffs state a claim
                                                                                                                      for constructive trust.
                                                                                                                      All of JPMC's



*460
                                                                                                                      arguments to the
                                                                                                                      contrary fail. Plaintiffs
                                                                                                                      have adequately pleaded
                                                                                                                      fraud, have adequately
                                                                                                                      pleaded that the
                                                                                                                      September Security
                                                                                                                      Agreement, the written
                                                                                                                      agreement JPMC alleges
                                                                                                                      governs the conduct in
                                                                                                                      question, is void and
                                                                                                                      invalid, Plaintiffs are
                                                                                                                      entitled to plead in the
                                                                                                                      alternative, and whether
                                                                                                                      there is a confidential or
                                                                                                                      fiduciary relationship
                                                                                                                      between LBHI and
                                                                                                                      JPMC involves issues of
                                                                                                                      fact that are
                                                                                                                      inappropriate to
                                                                                                                      determine on a motion
                                                                                                                      to dismiss.
Count XXXVI         See Count XXXII: Federal Preemption            See Count XXXII: Federal Preemption            See Count XXXII:
 Unjust           Argument.                                         Argument.                                        Federal Preemption
Enrichment:                                                                                                           Argument.
All Collateral
Count               See Count XXXII: Federal Preemption            See Count XXXII: Federal Preemption            See Count XXXII:
XXXVII            Argument.                                         Argument.                                        Federal Preemption
Conversion:                                                                                                           Argument.
All Collateral
Count XXXIX         See Count XXXII: Federal Preemption            See Count XXXII: Federal Preemption             See Count XXXII:
 Unjust           Argument.                                         Argument.                                        Federal Preemption



Enrichment:         See Count XXXVIII.                             See Count XXXVIII.                            Argument.
$8.6 Billion in     Plaintiffs' claim to invalidate JPMC's lien      JPMC lost its security interest in the $6.9     See Count XXXVIII.
Cash and           on $1.7 billion in money market funds is          billion in funds (See Count XXVIII) and its
Money              redundant of Counts XXXV through                  security interest in the remaining $1.7
Market Funds       XXXVII and should be dismissed as                 billion is based exclusively on the invalid
                   duplicative. (Mem. Supp. Mot. Dismiss             September Agreements. (Pls.' Opp'n Point
                   Point IV.B; Reply Point III.B.4).                 III.A.5).
Count XL           See Count XXXII: Federal Preemption            See Count XXXII: Federal Preemption             See Count XXXII:
Conversion:        Argument.                                         Argument.                                        Federal Preemption
$8.6 Billion in     See Count XXXVIII.                             See Count XXXVIII.                             Argument.
Cash and            Plaintiffs' claim to invalidate JPMC's lien      JPMC lost its security interest in the $6.9     See Count XXXVIII.
Money              on $1.7 billion in money market funds is          billion in funds (See Count XXVIII) and its
Market Funds       redundant of Counts XXXV through                  security interest in the remaining $1.7
                   XXXVII and should be dismissed as                 billion is based exclusively on the invalid
                   duplicative. (Mem. Supp. Mot. Dismiss             September Agreements. (Pls.' Opp'n Point
                   Point IV.B; Reply Point III.B.4).                 III.A.5).


Declaratory Judgment  No Lien Over $6.9 Billion Transferred to JPMC General Ledger Account


Claim              JPMC's Argument                                   Plaintiffs' Argument                             Reason Claim Survives
                                                                                                                      Motion to Dismiss
Count               The Security Agreements authorized               A security interest is enforceable only if     JPMC's arguments
XXXVIII           JPMC to transfer into JPMC's own general          the debtor has rights in the collateral or the   regarding the dismissal
Declaratory        ledger account the $6.9 billion in funds          power to transfer rights in the collateral to    of Counts XXXVIII,
Judgment that      LBHI posted as collateral in order to             a secured party. Since LBHI had no               XXXIX and XL are
JPMorgan Has       preserve such collateral, and the Uniform         interest in the JPMC general ledger              unpersuasive. Plaintiffs
No Lien Over       Commercial Code (the "U.C.C.") confirms           account, LBHI could not grant a security         state a claim for a
LBHI's $6.9        that JPMC's lien continued as a lien on           interest in the general ledger account.          declaratory judgment
Billion            proceeds of the LBHI account from which           (Pls.' Opp'n Point III.A.I, citing U.C.C. §      that JPMC lost its lien
Pursuant to        the collateral was transferred. (Mem. Supp.       9-203).                                          on the $6.9 billion in
Either the         Mot. Dismiss Point IV.B; Reply Point               Pursuant to the terms of the Security          collateral posted by



*461
Claim             JPMC's Argument                                  Plaintiff's Argument                             Reason Claim Survives
                                                                                                                      Motion to Dismiss
August             III.B).                                           Agreements, the lien LBHI granted to             LBHI when JPMC
Agreements or       The Security Agreements provided that           JPMC was a floating lien in certain LBHI         unilaterally transferred
the September      JPMC had the right, without LBHI's                accounts, not in the funds or securities         such funds into JPMC's
Agreements         consent to issue instructions and direct          generally. Therefore, when funds are             own general ledger
                   disposition of any and all funds in the LBHI      transferred out of the account, the lien no      account. Moreover,
                   deposit accounts. Therefore JPMC's sweep          longer attaches to those funds. This is          there are factual issues
                   of the $6.9 billion into its general ledger       confirmed by U.C.C. section 9-332, which         with respect to this
                   account was simply an exercise of its rights      provides that when funds are transferred         claim regarding the
                   under the agreements. (Mem. Supp. Mot.            out of a deposit account they are                proper reading of the
                   Dismiss Point IV.B).                              transferred free of any lien on the account.     Security Agreements
                    The cash sweep was appropriate since the        (Pls.' Opp'n Point III.A.I).                     and whether the
                   Security Agreements also provide that              The Security Agreements did not provide        collateral transferred to
                   JPMC can "use or operate any of the               JPMC with an unencumbered right to               JPMC's general ledger
                   Security for the purpose of preserving the        unilaterally transfer LBHI's property. The       account constitutes
                   Security or its value in the manner and to        prefatory clause cited by JPMC provided          proceeds of the LBHI
                   the extent [JPMC] deems appropriate."             that it could only issue instructions "as the    deposit account under
                   (Mem. Supp. Mot. Dismiss Point IV.B).             secured party hereunder," and therefore          the U.C.C. that are
                    Under U.C.C. section 9-312(b)(1) a              only had a right to unilaterally transfer        inappropriate to
                   secured party may perfect a security interest     funds as set forth in the specific provisions    determine in the context
                   in a deposit account only by obtaining            of the Security Agreements that                  of a motion to dismiss.
                   "control" of that account. One way a              immediately followed and only in the event
                   secured creditor can obtain such control is       of a default under the Security Agreements
                   by obtaining from the debtor the right to         or to preserve the security or its value.
                   "direct disposition of the funds in the           (Pls.' Opp'n Point III.A.2).
                   deposit account without further consent by         It is undisputed that LBHI was not in
                   the debtor." (Mem. Supp. Mot. Dismiss             default when JPMC transferred the $6.9
                   Point IV.B. quoting U.C.C. §§ 9-312(b)(1),        billion to its own general ledger account.
                   9-104(a)(2)).                                     Moreover, JPMC cannot rely on the
                    If JPMC's purpose in sweeping the cash          provisions of the Security Agreements that
                   into its general ledger account was to            authorize JPMC to take action "to preserve
                   prevent LBHI from gaining access to the           the Security or its value" as the



Claim             JPMC's Argument                                    Plaintiff's Argument                             Reason Claim Survives
                                                                                                                      Motion to Dismiss
                   funds, that purpose is proper under the           preservation of collateral or its value is a
                   U.C.C. The official comments to U.C.C.            duty placed on a secured party, not the
                   section 9-104 actually provide that "the          right of a secured party against a debtor.
                   arrangements giving rise to control may           Therefore JPMC was not authorized to
                   themselves prevent, or may enable the             transfer the $6.9 billion under the Security
                   secured party at its discretion to prevent the    Agreements. (Pls.' Opp'n Point III.A.2).
                   debtor from reaching funds on deposit ... ."       Pursuant to U.C.C. section 9-601, the
                   (Mem. Supp. Mot. Dismiss Point IV.B.              grant of security interest and of "control"
                   quoting U.C.C. § 9-104(a)(2), Official cmt.       over collateral is intended to give the
                   3).                                               secured party the right to direct the
                    Under the U.C.C., when a secured party          disposition of collateral in agreed-upon
                   transfers funds from a deposit account in         circumstances, generally upon default.
                   which it has a security interest into another     U.C.C. section 9-104 does not supersede
                   account, the second account constitutes           the Security Agreements or create an
                   proceeds of the first account and the secured     independent right to dispose of collateral,
                   creditor's security interest attaches to the      and in fact contemplates that a party's right
                   second account. Consequently, the transfer        to dispose of collateral typically would not
                   of the funds into JMPC's general ledger           be absolute and that the secured party's
                   account resulted in proceeds on which             "control" of the funds can co-exist with the
                   JPMC retained a continuing and perfected          debtor's access to the collateral. (Pls.'
                   lien. (Mem. Supp. Mot. Dismiss Point IV.B         Opp'n Point III.A.3).
                   citing U.C.C. §9-332, Official cmt. 2,             JPMC's reliance on Comment 2,
                   Example 2; U.C.C. §9-315(a)).                     Example 2 to U.C.C. section 9-332 for the
                    Plaintiffs' theory ignores the automatic        proposition that the transfer of the cash into
                   grant of a lien on cash "proceeds" under          its general ledger account resulted in
                   U.C.C. section 9-315 which provides that          proceeds on which JPMC's lien continued
                   "[A] security interest attaches to any            is misplaced. Because JPMC gave LBHI
                   identifiable proceeds of collateral." (Reply      no rights in the general ledger account,
                   Point III.B).                                     funds transferred into that account do not
                                                                     constitute proceeds of the collateral to
                                                                     which JPMC's security interest can attach.



*462
Claim             JPMC's Argument                                  Plaintiff's Argument                             Reason Claim Survives
                                                                                                                      Motion to Dismiss
                                                                     (Pls.' Opp'n Point III.A.4).


Breach of Contract Claims


Claim              JPMC's Argument                                   Plaintiffs' Argument                             Reason Claim Survives
                                                                                                                      Motion to Dismiss
Count XLI          Plaintiffs do not allege that the Clearance      Plaintiffs should be permitted to plead in      If all of the allegations
In the             Agreement governed the $8.6 billion in            the alternative that should the Clearance        in the Amended
Alternative,       cash and money market fund collateral. As         Agreement or August Security Agreement           Complaint are accepted
Breach of the      such, these claims are hypothetical claims.       control, JPMC breached those agreements.         as true, Plaintiffs'
2000               Furthermore, Plaintiffs allege elsewhere in       (Pls.' Opp'n Point III.D).                       breach of contract
Clearance          the Amended Complaint that the September           The Clearance Agreement and the                claims with respect to
Agreement:         Agreements governed the $8.6 billion in           August Security Agreement both expressly         the Clearance
Improper           collateral. (Mem. Supp. Mot. Dismiss Point        provided that JPMC could only request            Agreement and the
Collateral         IV.C.1.a; Reply Point III.C.1).                   collateral in order to secure clearance-         August Security
Demands             Plaintiffs do not identify any provision of     related obligations arising under the            Agreement each state a
                   the Clearance Agreement that governed             Clearance Agreement and neither gave             claim upon which relief
                   JPMC's requests for collateral and it is clear    JPMC the right to be overcollateralized for      may be granted. Issues
                   from the Amended Complaint that the $8.6          clearance-related credit extensions. (Pls.'      of fact regarding the
                   billion in collateral was not posted pursuant     Opp'n Point III.D.1).                            proper reading and
                   the Clearance Agreement. (Mem. Supp.               LBHI guaranteed the obligations of             interpretation of the
                   Mot. Dismiss Point IV.C.1.a; Reply Point          Lehman subsidiaries arising under the            agreements are not
                   III.C.2).                                         Clearance Agreement in the August                properly resolved in the
                    The only provision of the Clearance             Guaranty. In the August Security                 context of a motion to
                   Agreement Plaintiffs appear to rely on in         Agreement LBHI pledged specific LHBI             dismiss.
                   support of their breach of contract claims is     accounts as security for LBHI's obligations
                   Section 3, which has nothing to do with           under the August Guaranty. The August
                   requests for collateral, but rather deals with    Security Agreement provided that JPMC
                   the transfer of funds between accounts in         "may from time to time request further
                   the course of clearing. (Mem. Supp. Mot.          security or payments on account of any of
                   Dismiss Point IV.C.1.a; Reply Point               the Liabilities." "Liabilities" are defined in



Claim              JPMC's Argument                                   Plaintiffs' Argument                             Reason Claim Survives
                                                                                                                     Motion to Dismiss
                   III.C.2).                                         the August Security Agreement as
                     Section 2.5 of the Clearance Agreement,        liabilities under the August Guaranty,
                   relied upon by Plaintiffs, does not address       which, in turn, defined liabilities as
                   requests for collateral by JPMC, but rather       clearance-related obligations. Therefore
                   limits cross-collateralization, providing that    JMPC had the right to request and retain
                   any "collateral accommodation provided by         collateral, but only for the purpose of
                   any Lehman entity pursuant to [the                securing clearance-related obligations.
                   Clearance] Agreement shall not be available       (Pls.' Opp'n Point III.D.1).
                   to support the obligations and liabilities of      LBHI also entered into the August
                   any other Lehman entity pursuant to [the          Amendment to the Clearance Agreement,
                   Clearance Agreement]." (Reply Point               which added LBHI as a party to the
                   III.C.1).                                         Clearance Agreement and added new
                    The Clearance Agreement contains a              section 2.5 to ensure that any rights of
                   waiver of consequential damages. Section          JPMC to LBHI collateral arising under the
                   13 provides, "In no event shall we [JPMC]         Clearance Agreement would be limited to
                   be liable for special, indirect, punitive or      those set forth in the August Guaranty and
                   consequential damages, whether or not we          the August Security Agreement (i.e.,
                   have been advised as to the possibility           clearance-related obligations). In addition,
                   thereof and regardless of the form of             Section 3 of the Clearance Agreement
                   action." Any claim for additional damages         confirmed that JPMC had no right to
                   beyond return of collateral is therefore          demand collateral beyond what it needed to
                   barred. (Mem. Supp. Mot. Dismiss Point            "fully collaterize[ ]" clearance-related
                   IV.C.1.b; Reply Point III.C.4).                   obligations under the agreement. (Pls.'
                    LBHI waived any claim for breach of             Opp'n Point III.D.1).
                   contract by accepting JPMC's extensions of         Nothing in either the August Security
                   tens of billions of dollars of credit. (Mem.      Agreement or the Clearance Agreement
                   Supp. Mot. Dismiss Point IV.C.3; Reply            authorized JPMC to request or retain
                   Point III.C.6).                                   collateral to cover anything other than
                                                                     clearance-related obligations, and,
                                                                     therefore, JPMC's demand and retention of
                                                                     the $8.6 billion in collateral to cover an



*463
Claim              JPMC's Argument                                   Plaintiffs' Argument                             Reason Claim Survives
                                                                     anticipated and improper windfall under
                                                                     derivatives contracts, to pay JPMC
                                                                     customer claims, and to have an "extra
                                                                     cushion" available for any other potential
                                                                     claims was a breach of those agreements.
                                                                     (Pls.' Opp'n Point III.D.1).
                                                                      LBHI did not waive its claims for breach
                                                                     of contract. It received no benefits or
                                                                     consideration for posting the additional
                                                                     $8.6 billion in collateral since JPMC was
                                                                     fully collateralized and under a contractual
                                                                     duty to extend clearance-related credit to
                                                                     Lehman pursuant to Clearance Agreement.
                                                                     Moreover, the $8.6 billion in collateral
                                                                     transferred was not related to clearance
                                                                     activity. (Pls.' Opp'n Point III.D.3).
                                                                      LBHI protested JPMC's excessive
                                                                     collateral demands, preserving any later
                                                                     claim for breach of contract. (Pls.' Opp'n
                                                                     Point III.D.3).
Count XLII         See Count XLI.                                 JPMC was obligated under both the               See Count XLI
In the              Plaintiffs do not identify any provision of     Clearance Agreement and the August
Alternative,       the Clearance Agreement that required             Security Agreement to allow LBHI to
Breach of the      JPMC to return the collateral to LBHI after       access its collateral at the end of the
2000               the close of trading on September 12, 2008.       business day if there were no outstanding
Clearance          (Mem. Supp. Mot. Dismiss Point IV.C.1.a;          clearance-related obligations. (Pls.' Opp'n
Agreement:         Reply Point III.C.3).                             Point III.D.2.a).
Improper                                                              When LBHI became a party to the
Withholding                                                          Clearance Agreement pursuant to the
of Collateral                                                        August Amendment, Section 3 of the
                                                                     Clearance Agreement obligated JPMC to



Claim              JPMC's Argument                                   Plaintiffs' Argument                             Reason Claim Survives
                                                                                                                      Motion to Dismiss
                                                                     follow LBHI's instructions regarding the
                                                                     movement of any of LBHI's assets subject
                                                                     to the Clearance Agreement. In the
                                                                     absence of any outstanding clearance-related
                                                                     obligations at the close of the
                                                                     business day, JPMC had no right under the
                                                                     Clearance Agreement to refuse LBHI's
                                                                     instructions that it be given access to its
                                                                     own cash or securities. (Pls.' Opp'n Point
                                                                     III.D.2.a).
                                                                      The August Security Agreement created
                                                                     an intra-day lien only over certain defined
                                                                     LBHI accounts and specifically granted
                                                                     LBHI the right to transfer assets held in
                                                                     those accounts into a lien-free overnight
                                                                     account at the end of the business day.
                                                                     (Pls.' Opp'n Point III.D.2.a).
                                                                      JPMC has admitted that, as of the close
                                                                     of settlement on September 12, 2008, it had
                                                                     no clearance-related obligations to the
                                                                     Lehman subsidiaries. As such, JPMC was
                                                                     obligated to permit LBHI to access its
                                                                     collateral and its refusal to do so was a
                                                                     breach of the Clearance Agreement and the
                                                                     August Security Agreement. (Pls.' Opp'n
                                                                     Point III.D.2.b).
                                                                      LBHI did not waive its claims for breach
                                                                     of contract. It received no benefits or
                                                                     consideration for posting the additional
                                                                     $8.6 billion in collateral since JPMC was
                                                                     fully collateralized and under a contractual



*464
                                                                                                                      Motion to Dismiss
                                                                     duty to extend clearance-related credit to
                                                                     Lehman pursuant to Clearance Agreement.
                                                                     Moreover, the $8.6 billion in collateral
                                                                     transferred was not related to clearance
                                                                     activity. (Pls.' Opp'n Point III.D.3).
                                                                      LBHI protested JPMC's excessive
                                                                     collateral demands, preserving any later
                                                                     claim for breach of contract. (Pls.' Opp'n
                                                                     Point III.D.3).
                                                                      JPMC's failure to allow LBHI access to
                                                                     its collateral on Sept. 12, 2008 plainly did
                                                                     not provide any benefits to LBHI as they
                                                                     served to push LBHI into bankruptcy.
                                                                     (Pls.' Opp'n Point III.D.3).
Count XLIII        Plaintiffs do not allege that the August         See Count XLI.                                  See Count XLI
In the             Agreements governed the $8.6 billion in
Alternative,       cash and money market fund collateral. As
Breach of the      such, these claims are hypothetical claims.
August             Furthermore, Plaintiffs allege elsewhere in
Agreements:        the Amended Complaint that the September
Improper           Agreements governed the $8.6 billion in
Collateral         collateral. (Mem. Supp. Mot. Dismiss Point
Demands            IV.C.1.c; Reply Point III.C.1).
                    JPMC had no obligations under the
                   August Security Agreement, and, therefore,
                   it could not have breached it. (Mem. Supp.
                   Mot. Dismiss Point IV.C.1.c; Reply Point
                   III.C.1).
                    Plaintiffs do not identify any provision of
                   the August Agreements that governed



                                                                                                                      Motion to Dismiss
                   JPMC's requests for collateral. The only
                   provision that addresses requests for
                   collateral merely states that "the Bank may
                   from time to time request further security or
                   payments on account of any Liabilities."
                   (Mem. Supp. Mot. Dismiss Point IV.C.1.c;
                   Reply Point III.C.2).
                    LBHI waived any claim for breach of
                   contract by accepting JPMC's extensions of
                   tens of billions of dollars of credit. (Mem.
                   Supp. Mot. Dismiss Point IV.C.3; Reply
                   Point III.C.6).
Count XLIV         See Count XLIII.                                 See Count XLII.                                 See Count XLI
In the              Plaintiffs do not identify any provision of
Alternative,       the August Agreements that required JPMC
Breach of the      to return the collateral to LBHI after the
August             close of trading on September 12, 2008.
Agreements:        The only contract language cited in the
Improper           Amended Complaint simply provides that
Withholding        LBHI may transfer the collateral overnight
of Collateral      to a different account at JPMC, it does not
                   provide LBHI with any right to withdraw
                   the collateral from JPMC, or obligate JPMC
                   to return any of the collateral. (Mem. Supp.
                   Mot. Dismiss Point IV.C.1.c; Reply Point
                   III.C.3).



*465 Claims for Breach of Implied Covenant of Good Faith and Fair Dealing



Claim              JPMC's Argument                                   Plaintiffs' Argument                             Reason Claim Survives                                                                                                                     Motion to Dismiss
                                                                                                                      Motion to Dismiss
Count XLV          The implied covenant claim is duplicative        JPMC's abuse of discretion in                   Plaintiffs have alleged
In the             of Plaintiffs' claims for breach of the           demanding and receiving billions of dollars      that JPMC breached the
Alternative,       express terms of the August Agreements.           in collateral that far exceeded what was         implied covenant of
Breach of the      (Mem. Supp. Mot. Dismiss Point IV.C.2;            reasonably required to secure both the           good faith and fair
Implied            Reply Point III.C.5.a).                           clearance-related obligations under the          dealing by interfering
Covenant of         To state a claim for breach of the implied      August Agreements and the non-clearance          with and frustrating
Good Faith         covenant of good faith and fair dealing           obligations arising under the September          LBHI's express rights
and Fair           Plaintiffs must allege an express contractual     Agreements constitutes a breach of the           under the August and
Dealing:           right that was breached. Plaintiffs fail to       covenant of good faith and fair dealing.         September Agreements.
August             identify any contractual rights that JPMC         (Pls.' Opp'n Point III.E.1).                     Accepting all of the
Agreements         prevented LBHI from realizing. (Mem.               It is irrelevant whether JPMC's                allegations in the
                   Supp. Mot. Dismiss Point IV.C.2; Reply            excessive collateral demands frustrated          complaint as true,
                   Point III.C.5.b).                                 some express right under the agreements, it      Plaintiffs have plead
                    The August Security Agreement did not           is enough under New York law to state a          adequate facts to state a
                   provide LBHI with any right to access the         claim for the breach of the implied              claim upon which relief
                   collateral overnight; it only allowed LBHI        covenant of good faith and fair dealing that     can be granted with
                   to transfer the collateral to a different         JPMC abused its discretionary right to           respect to these claims.
                   account and even that right was subject to        request and retain collateral. (Pls.' Opp'n
                   JPMC's right to issue instructions to direct      Point III.E. 1).
                   disposition of the funds without the consent       JPMC additionally breached the implied
                   of LBHI. Plaintiffs' breach of the implied        covenant by threatening to stop clearing if
                   covenant of good faith and fair dealing           additional collateral was not provided,
                   claim cannot be based on conduct expressly        which deprived LBHI of its right to refuse
                   allowed by the August Security Agreement.         unreasonable or excessive collateral
                   (Mem. Supp. Mot. Dismiss Point IV.C.2;            demands. (Lehman Br. Point III.E.2).
                   Reply Point III.C.5.a).                            Plaintiffs' claim related to JPMC's
                    No provision in the August or September         breach of the implied covenant of good
                   Agreements governed how much collateral           faith and fair dealing in connection with
                   JPMC could request or whether LBHI                the August Agreements is not duplicative



Claim              JPMC's Argument                                   Plaintiffs' Argument                             Reason Claim Survives
                                                                                                                      Motion to Dismiss
                   could, or could not refuse any such               of their breach of contract claims with
                   requests. (Mem. Supp. Mot. Dismiss Point          respect to such agreements. The breach of
                   IV.C.2; Reply Point III.C.5.a).                   the implied covenant claim is based on
                    LBHI waived any claim for breach of the         facts and conduct different from those
                   implied covenant of good faith and fair           underlying the breach of contract claims
                   dealing by accepting JPMC's extensions of         and it is appropriate to plead these claims
                   tens of billions of dollars of credit. (Mem.      in the alternative under New York law
                   Supp. Mot. Dismiss Point IV.C.3; Reply            where, as here, a defendant takes the
                   Point III.C.6).                                   position that its conduct was not prohibited
                                                                     by an express provision of the contract.
                                                                     (Lehman Br. Point III.E.2).
                                                                      See Counts XLI and XLII regarding
                                                                     waiver argument.
Count XLVII         To state a claim for breach of the implied       See Count XLV.                                  See Count XLV.
 In the           covenant of good faith and fair dealing
Alternative,       Plaintiffs must allege an express contractual
Breach of the      right that was breached. Plaintiffs fail to
Implied            identify any contractual rights that JPMC
Covenant of        prevented LBHI from realizing. (Mem.
Good Faith         Supp. Mot. Dismiss Point IV.C.2; Reply
and Fair           Point III.C.5.b).
Dealing:            The September Agreements did not give
September          LBHI any right to access its collateral at the
Agreements         end of the trading day. JPMC's retention of
                   the collateral was expressly permitted by
                   the three-day notice provision in the
                   September Security Agreement. (Mem.
                   Supp. Mot. Dismiss Point IV.C.2).
                    No provision in the August or September
                   Agreements governed how much collateral



*466
Claim              JPMC's Argument                                   Plaintiffs' Argument                             Reason Claim Survives
                                                                                                                      Motion to Dismiss
                   JPMC could request or whether LBHI
                   could, or could not refuse any such
                   requests. (Mem. Supp. Mot. Dismiss Point
                   IV.C.2; Reply Point III.C.5.a).
                    LBHI waived any claim for breach of the
                   implied covenant of good faith and fair
                   dealing by accepting JPMC's extensions of
                   tens of billions of dollars of credit. (Mem.
                   Supp. Mot. Dismiss Point IV.C.3; Reply
                   Point III.C.6).


Claims that September Agreements are Invalid for Coercion or Duress, Lack of Authority, or Lack of Consideration


Claim              JPMC's Argument                                   Plaintiffs' Argument                             Reason Claim Survives
                                                                                                                      Motion to Dismiss                                                                                                                     Motion to Dismiss
Count XXXV         Waiver Argument                                   Waiver Argument                                   Waiver Argunt:
 Declaratory       The waiver-of-defenses clause in the             JPMC's argument that LBHI is                   The Court agrees with
Judgment           September Guaranty precludes Plaintiffs           precluded from challenging the validity of       the arguments advanced
Invalidating       from challenging the validity of the              the September Agreements relies on               by the Plaintiffs. Based
the September      September Agreements. (Mem. Supp. Mot.            boilerplate provision in the September           upon the facts alleged in
Agreements         Dismiss Point IV.D.1; Reply Point III.D.1).       Guaranty, which was unsupported by               the Amended
Based on            New York courts (or courts applying New         consideration. (Pls.' Opp'n Point                Complaint, including
theories of: 1)    York law) widely give effect to "hell or          III.C.2.a).                                      that the September
Coercion           high water" clauses and have found waiver-         To be enforceable a waiver must be             Agreements were the
and/or Duress,     of-defense clauses to bar assertions that a       "knowing and voluntarily entered into" and       product of coercion
2) Lack of         guaranty lacked consideration, that a             not be the "product of fraud, duress, or         and/or duress and were
Authority or       guaranty was the product of coercion or           undue influence." (Pls.' Opp'n Point             entered into without
Apparent           duress, and that the party executing a            III.C.2.a).                                      authority and after
Authority, and     guaranty lacked authority. (Mem. Supp.             A waiver is unenforceable when entered         minimal negotiation,
3) Lack of         Mot. Dismiss Point IV.D.1; Reply Point            into by an agent without authority to do so      JPMC's argument that
Consideration      III.D.1).                                         on behalf of the principal. (Pls.' Opp'n         the waiver-of-defenses



Claim             JPMC's Argument                                   Plaintiffs' Argument                             Reason Claim Survives
                                                                                                                     Motion to Dismiss
                   Ratification Argument                           Point III.C.2.a).                                clause bars Plaintiffs
                    LBHI ratified the September Agreements           The cases cited by JPMC do not address         claim to invalidate the
                   by its representations to the Court in            the situation where the party who waived         September Agreements
                   connection with the Comfort Order Motion          defenses was itself under duress. Nor do         fails at this stage in the
                   and by inducing JPMC to extend tens of            they address the situation where an              proceedings.
                   billions of dollars of credit. (Mem. Supp.        unauthorized agent executes the waiver            Ratification
                   Mot. Dismiss Point IV.D.2; Reply Point            without the principal's knowledge or             Argument: The Court
                   III.D.2).                                         consent. Furthermore, in half of the cases       agrees that whether a
                    Under New York law, a contract executed         cited by JPMC, the court actually declined       party has ratified an
                   under duress or by a party who lacked             to enforce the waiver clause and allowed         agreement is a question
                   authority is voidable, not void ab initio. A    the issue to proceed to trial. (Pls.' Opp'n      of fact and whether the
                   party seeking to avoid a contract for duress      Point III.C.2.a).                                allegedly ratifying
                   must have acted promptly to repudiate the          JPMC fails to cite to any controlling          conduct is sufficient to
                   contract. (Mem. Supp. Mot. Dismiss Point          authority where a court ruled that a waiver      imply such intent to
                   IV.D.2; Reply Point III.D.2).                     provision contained in a contract while          ratify, whether a party
                    LBHI was not under continuing duress.           signed under duress and without authority        acted promptly to
                   After filing for bankruptcy and when it was       waived a meritorious duress or lack of           repudiate and whether a
                   under the protection of this Court and free       authority defense. (Pls.' Opp'n Point            party is under continuing
                   to invoke its assistance to extricate itself      III.C.2.a).                                      duress should not be
                   from the contracts in question, LBHI               The September Guaranty does not waive          determined on a motion
                   instead moved for an order to ensure that         the defenses of lack of authority, duress or     to dismiss.
                   JPMC would extend credit under the                lack of consideration because it does not         Lack of Consideration
                   September Agreement. (Mem. Supp. Mot.             specifically address them and a relaxed          Argument: The
                   Dismiss Point IV.D.2; Reply Point III.D.2).       specificity standard does not apply where        Amended Complaint
                    Plaintiffs misread Bankruptcy Code              there was no negotiation of the September        adequately states a claim
                   section 558, which does not prevent a             Guaranty whatsoever. (Pls.' Opp'n Point          for a declaratory
                   debtor from ratifying agreements post-petition.   III.C.2.b).                                      judgment invalidating
                   (Reply Point III.D.2).                            Ratification Argument                            the September
                   Lack of Consideration Argument                   JPMC was under a pre-existing                  Agreements for lack of
                    JPMC provided both present and past             contractual duty to provide clearing             consideration.
                   consideration for the September                   services and related extensions of credit.



*467
Claim              JPMC's Argument                                   Plaintiffs' Argument                             Reason Claim Survives
                                                                                                                      Motion to Dismiss
                   Agreements. (Mem. Supp. Mot. Dismiss              The continuation of the parties' benefits
                   Point IV.D.3; Reply Point III.D.3).               and obligations under the Clearance
                    Where a third party such as LBHI seeks          Agreement is not ratification of the
                   to guarantee obligations of a principal           September Agreements. (Pls.' Opp'n Point
                   obligor consideration need only pass to the       III.C.3).
                   principal obligor. Further, under the U.C.C.       Whether a party has ratified an
                   a party granting a security interest to secure    agreement is a question of fact. A party's
                   the debts of another need not receive             intent and whether the allegedly ratifying
                   consideration to support the security             conduct is sufficient to imply such intent
                   agreement. (Mem. Supp. Mot. Dismiss               should not be decided on a motion to
                   Point IV.D.3; Reply Point III.D.3).               dismiss. (Pls.' Opp'n Point III.C.3).
                    JPMC was not obligated to extend credit          The transfer of $8.6 billion of collateral
                   to LBI, but could do so solely at its             while under duress is not ratification and
                   discretion. JPMC did extend credit to LBI,        where a party is under continuing duress
                   performing an act it was under no                 there is no duty to repudiate. (Pls.' Opp'n
                   obligation to perform and surrendering a          Point III.C.3.a).
                   privilege which it had the legal right to          A bankruptcy filing is sufficient
                   assert (declining to extend credit) and           repudiation to preserve an estate's right to
                   thereby providing consideration. (Mem.            rescind a disputed agreement. LBHI filed
                   Supp. Mot. Dismiss Point IV.D.3; Reply            for bankruptcy only three days after
                   Point III.D.3).                                   executing the agreements, and LBI only
                    There is indisputable evidence of past          accepted JPMC's clearing services and
                   consideration, which is sufficient                related credit for five days following
                   consideration under N.Y. General                  LBHI's bankruptcy filing. (Pls.' Opp'n
                   Obligation Law § 5-1105. (Mem. Supp.              Point III.C.3.a).
                   Mot. Dismiss Point IV.D.3; Reply Point             In connection with the Comfort Order,
                   III.D.3).                                         LBHI expressly reserved its rights to
                                                                     challenge the September Agreements and
                                                                     the transfer of $8.6 billion in collateral and
                                                                     counsel made clear at the time that no one
                                                                     was seeking a validation of the agreements



Claim              JPMC's Argument                                   Plaintiffs' Argument                             Reason Claim Survives
                                                                                                                      Motion to Dismiss
                                                                     or the guaranty. (Pls.' Opp'n Point
                                                                     III.C.3.b).
                                                                      LBHI cannot waive defenses to the
                                                                     September Agreements or the Disputed
                                                                     Collateral Transfers by virtue of any
                                                                     postpetition conduct pursuant to
                                                                     Bankruptcy Code section 558. (Pls.' Opp'n
                                                                     Point III.C.3.d).
                                                                     Lack of Consideration Argument
                                                                      Under New York's pre-existing duty
                                                                     rule, where a party is under an existing
                                                                     duty to perform a certain service or act,
                                                                     promising to perform that same service or
                                                                     act cannot be consideration for a new
                                                                     agreement. (Lehman Br. Point III.C.1).
                                                                      Pursuant to the Clearance Agreement,
                                                                     JPMC agreed to provide clearing services
                                                                     to LBI and was required to give notice
                                                                     before refusing to extend credit, which
                                                                     means commercially reasonable notice
                                                                     under New York law, arguably enough
                                                                     notice for LBI to seek alternative
                                                                     financing. JPMC gave no notice before
                                                                     refusing to extend credit and demanded
                                                                     that the September Agreements be ratified
                                                                     late in the evening on September 9, 2008
                                                                     before the earnings call scheduled for 7:30
                                                                     a.m. the next day. (Lehman Br. Point
                                                                     III.C.1).
                                                                      JPMC's argument regarding the New
                                                                     York General Obligations Law fails



*468
Claim              JPMC's Argument                                   Plaintiffs' Argument                             Reason Claim Survives
                                                                                                                      Motion to Dismiss
                                                                     because the Clearance Agreement required
                                                                     JPMC to provide clearance services and
                                                                     related credit and, therefore, JPMC doing
                                                                     so prior to the September Agreements
                                                                     cannot constitute consideration.
                                                                     Furthermore, daily extensions of credit
                                                                     ended at the close of each trading day.
                                                                     Accordingly, there was no outstanding loan
                                                                     to act as the past consideration for the
                                                                     September Agreements. (Lehman Br.
                                                                     Point III.C.1).
Count XLVI         See Count XXXV: Waiver Argument.               See Count XXXV: Waiver Argument.              See Count XXXV:
Coercion            See Count XXXV: Ratification                   See Count XXXV: Ratification                 Waiver Argument.
and/or Duress      Argument.                                         Argument.                                         See Count XXXV:
With Respect                                                                                                          Ratification Argument.
to the
September
Agreements
Count XLVIII        See Count XXXV: Ratification                   See Count XXXV: Ratification                  See Count XXXV:
 Coercion         Argument.                                         Argument.                                        Ratification Argument.
and/or Duress
With Respect
to Demands
for $8.6
Billion in
Cash and Cash
Equivalents

NOTES
[1]  First Am. Compl., ECF No. 19.
[2]  Pursuant to the Seventh Amended Scheduling Order and Discovery Plan, so ordered on March 23, 2012, all fact discovery, including depositions, will be completed on or before April 27, 2012. See Seventh Am. Scheduling Order and Disc. Plan, ECF No. 129. The Parties reached agreement on the terms of a Proposed Eighth Amended Scheduling Order and Discovery Plan, which is noticed for presentment to this Court on April 20, 2012. See Notice of Presentation of [Proposed] Eighth Am. Scheduling Order and Disc. Plan, ECF No. 132. Pursuant to the Proposed Eighth Amended Scheduling Order and Discovery Plan, all fact discovery, including depositions, shall be completed on or before June 14, 2012.
[3]  Such counts include Counts V through XXIV.
[4]  Discovery has been taken both domestically and in multiple foreign jurisdictions; it also has involved questions directed to present and former officials of the Department of the Treasury with personal knowledge of the events of the financial crisis.
[5]  See O'Toole v. McTaggart (In re Trinsum Group, Inc.), ___ B.R. ___, ___ (Bankr. S.D.N.Y. 2012) (noting that "both before and after Stern v. Marshall, it is clear that the bankruptcy court may handle all pretrial proceedings, including the entry of an interlocutory order dismissing fewer than all of the claims in an adversary complaint"); Kirschner v. Agoglia (In re Refco Inc.), 461 B.R. 181, 185 (Bankr. S.D.N.Y. 2011) (citing Retired Partners of Coudert Bros. Trust v. Baker & McKenzie LLP (In re Coudert Bros. LLP), 2011 WL 5593147, at *13, 2011 U.S. Dist. LEXIS 110425, at *36-37 (S.D.N.Y. 2011)) (explaining that "the denial of [defendant's] motion to dismiss in whole or in part, would be only an interlocutory order, and thus could not in any event be subject to Stern's prohibition of this Court's entry of final judgments" [because] "an order and judgment granting [defendant's] motion to dismiss, like an order granting summary judgment, would contain no factual findings and would be subject to the same de novo standard of review on appeal as proposed conclusions of law and a recommendation to the district court").
[6]  Citations to "Wolf Decl." are to that certain Declaration of Amy R. Wolf in Support of Defendants' Motion to Dismiss, dated October 19, 2010, ECF No. 30.
[7]  On December 15, 2010 JPMC filed counterclaims against LBHI; JPMC amended these counterclaims on February 17, 2011. See Countercls. of JPMorgan Chase Bank, N.A., ECF No. 39; Am. Countercls. of JPMorgan Chase Bank, N.A., ECF No. 63. The amended counterclaims are the subject of a separate motion to dismiss filed by the Plaintiffs and are not the subject of this memorandum decision.
[8]  See Adelphia Recovery Trust v. FLP Group, Inc., 11 Civ. 6847(PAC), 2012 WL 264180, at *7-8, 2012 U.S. Dist. LEXIS 10804, at *22 (S.D.N.Y. Jan. 30, 2012) (stating that "maintaining the reference to [the] Bankruptcy Court is in line with the Supreme Court's intent [set forth in Stern] to not `meaningfully change[ ] the division of labor in the current statute'"); Walker, Truesdell, Roth & Assocs. v. Blackstone Group, L.P. (In re Extended Stay, Inc.), 466 B.R. 188, 202 (S.D.N.Y.2011) ("Requiring withdrawal of such actions would be contrary to the language of Stern, which categorizes itself as a `narrow' decision that does not `meaningfully change[] the division of labor' between bankruptcy courts and district courts."); see also Weisfelner v. Blavatnik (In re Lyondell Chem. Co.), 11 Civ. 8251(DLC), 11 Civ. 8445(DLC), 2012 WL 1038749, at *11-12, 2012 U.S. Dist. LEXIS 44329, at *35 (S.D.N.Y. Mar. 29, 2012) (noting that, despite the fact that defendants were correct that the bankruptcy court could not enter final judgment on most of the fraudulent conveyance claims at issue, "withdrawal at this stage [where the bankruptcy court had done significant work preparing the matters for trial and the district court wished to benefit from its expertise via a non-final determination of the merits] would result in significant inefficiencies and is inappropriate").
[9]  On January 31, 2012, the District Court issued its Amended Standing Order of Reference Re: Title 11, stating that,

If a bankruptcy judge or district judge determines that entry of a final order or judgment by a bankruptcy judge would not be consistent with Article III of the United States Constitution in a particular proceeding referred under this order and determined to be a core matter, the bankruptcy judge shall, unless otherwise ordered by the district court, hear the proceeding and submit proposed findings of fact and conclusions of law to the district court. The district court may treat any order of the bankruptcy court as proposed findings of fact and conclusions of law in the event the district court concludes that the bankruptcy judge could not have entered a final order or judgment consistent with Article II of the United States Constitution.
Amended Standing Order of Reference Re: Title 11, dated January 31, 2012 (Preska, C.J.).
[10]  Paragraph 4 of the Case Management Order directed the parties to provide a more detailed statement in writing regarding why each count of the Amended Complaint either was or was not susceptible to (i) a ruling by the bankruptcy court with respect to the pending motion to dismiss, (ii) final adjudication by the bankruptcy court and (iii) the issuing of a report and recommendation to the district court regarding each such count.
[11]  The Case Management Order provided that to avoid any lingering overhang of uncertainty as to the Court's authority to enter final judgments in the Adversary Proceeding, if JPMC chose to move for withdrawal of the reference, it should do so promptly. See Order Amending and Modifying the Case Management Order in Relation to the Impact of Stern v. Marshall, ECF No. 97.
[12]  As with section 546(e), sections 546(f) and (g) similarly protect from avoidance transfers made "in connection with" certain classes of financial contractsi.e., safe-harbored "repurchase agreements" and "swap agreements," respectively. See 11 U.S.C. §§ 546(f), (g). In light of the Court's determination that the challenged transfers are protected from avoidance by section 546(e), it is unnecessary for the Court to consider the question of the applicability of these other safe harbors.
[13]  Notably, section 546(e) expressly excludes from its protection any actual fraudulent transfers. The counts in the Amended Complaint seeking to avoid the Disputed Collateral Transfers as actual fraudulent transfers are discussed in Section II of this decision, infra.
[14]  LBHI itself publicly recognized at the outset of these cases that the "Clearance Agreements, Guarantee Agreements, and Security Agreements are `securities contracts' within the meaning of section 741(7) of the Bankruptcy Code." Wolf Decl. Ex. 11 (Comfort Order Motion) ¶ 17. During oral argument on the Comfort Order Motion, the parties publicly assured the Court that they were not seeking a substantive legal determination with respect to whether these agreements constituted "securities contracts." See 5/10/11 Hr'g Tr. 19:11-20:16. At the Hearing, counsel for JPMC admitted that the Comfort Order Motion was undertaken at JPMC's request and clarified that JPMC is not arguing "in any way that that order precludes this action. . . ." Id. at 20:17-21; 21:13-20. Thus, while public statements made in connection with the Comfort Order Motion demonstrate that LBHI has changed its position with respect to whether these contracts are legally-protected "securities contracts," this inconsistency is of no consequence for the purpose of this decision.
[15]  The Second Circuit's decision in Roswell Capital Partners LLC v. Beshara, 436 Fed. Appx. 34 (2d Cir.2011) has no bearing on this conclusion. In Roswell, the Court noted that "[i]t is black letter law that extinguishing a debt obligation terminates any accompanying security interest because `[a] security interest cannot exist independent of the obligation it secures'." Roswell, 436 Fed.Appx. at 35 (citations omitted). However, Roswell was decided in a completely different context from the circumstances presented here. The Second Circuit confirmed a district court holding that a defendant that sought to reinstate its senior security interest by unwinding a debt-to-equity conversion had lost its security interest by extinguishing the debt obligation (via the debt-to-equity conversion, which in turn, resulted in full payment on the promissory note) to which the security interest attached. The obligation at issue in Roswell was not tied to an otherwise safe-harbored transfer or lien. Accordingly, its holding has no bearing on the interpretation of section 564(e).
[16]  Plaintiffs argue that two other independent bases exist for the Court to infer fraudulent intent: (i) that the Amended Complaint sufficiently alleged that JPMC "supplanted" its will for that of LBHI and that its intent to hinder, delay or defraud LBHI's creditors should be "imputed" to LBHI for purposes of the actual fraud claims; and (ii) that the Amended Complaint sufficiently demonstrated that "the certain and foreseeable consequences of the conveyances was to hinder, delay, or defraud creditors of LBHI." See Pls.' Opp'n at 61, 65-70. Because the alleged badges of fraud are sufficient to create a "strong inference of fraudulent intent," it is unnecessary to address the Plaintiffs' alternative legal arguments for the survival of these counts of the Amended Complaint.
[17]  Iqbal was decided on May 18, 2009; In re Fedders N. Am. Inc. was decided on May 21, 2009. Given the close proximity in timing, the court in Fedders appears not to have considered Iqbal in its decision.
[18]  These counts are included in the earlier-defined Remaining Counts.
[19]  Such Other Remaining Counts include the following claims under the common law: (i) a common law fraud claim (Count XLIX), (ii) claims for the imposition of a constructive trust and turnover, unjust enrichment, and conversion (Counts XXXII, XXXVI, XXXVII, XXXIX, and XL), (iii) a claim seeking a declaratory judgment that JPMC has no lien over a certain $6.9 billion in funds pursuant to either the August or the September Agreements (Count XXXVIII), (iv) a claim seeking a declaratory judgment invalidating the September Agreements based on theories of coercion and/or duress, lack of authority or apparent authority, and lack of consideration, as well as other claims for coercion and/or duress (Counts XXXV, XLVI, and XLVIII), and (v) various claims in the alternative for breaches of the Clearance Agreement and the August Agreements and breaches of the implied covenant of good faith and fair dealing with respect to the August Agreements and the September Agreements (Counts XLI, XLII, XLIII, XLIV, XLV, and XLVII). Such Other Remaining Counts also include the following claims under the Bankruptcy Code: (i) a claim for turnover of excess collateral under Bankruptcy Code section 542 (Count XXV); (ii) setoff claims, including the avoidance of the September Transfers (as defined in Exhibit A to this decision) as transfers made for the purposes of obtaining a right of setoff under Bankruptcy Code section 553(a) (Count XXVI), the avoidance of the September Transfers (as defined in Exhibit A to this decision) as an improvement in position under Bankruptcy Code section 553(b) (Count XXVIII), and related claims for turnover (Count XXVII) and recovery of avoided transfers (Count XXIX); (iii) a claim for equitable subordination under Bankruptcy Code sections 510(c) and 105(a) (Count XXX); (iv) claims alleging a violation of the automatic stay (Counts XXXIII and XXXIV); and (v) disallowance of claims under Bankruptcy Code section 502(d) and avoidance of liens securing such claims under Bankruptcy Code section 506(c) (Count XXXI).
[20]  The claims affected by JPMC's federal preemption argument include Counts XXXII, XXXVI, XXXVII, XXXIX, and XL.
[21]  See Exhibit A to this decision for a specific claim-by-claim analysis that states the reasons for denial of the Motion applicable to the Other Remaining Counts.
[1]  Excess Collateral is defined in the Amended Complaint as collateral that, on the evening of September 12, 2008 was held by JPMC and posted by LBHI that did not secure any obligations of LBHI to JPMC.
[2]  The Collateral Disposition Agreement refers to the agreement approved by this Court's Order Pursuant to Sections 363 of the Bankruptcy Code and Bankruptcy Rule 6004 Approving Collateral Disposition Agreement Among the Debtors and JPMorgan Chase Bank, N.A., et al., dated March 24, 2010, Case No. 08-13555, ECF No. 7785.
[3]  The Amended Complaint defines the September Transfers as the $8.6 billion in transfers from LBHI to JPMC in September 2008.
[4]  The court in Hechinger finds in the alternative that the unjust enrichment claim is preempted "because the Bankruptcy Code, particularly sections 544 and 546(e), provide an exclusive framework for addressing claims that seek to avoid transfers made more than one year before bankruptcy. Thus the Code preempts the field and precludes supplemental state remedies because the Code alone comprehensively addresses such claims." Hechinger, 274 B.R. at 97 (emphasis in original). However, in the Reply, JPMC notes that "JPMorgan does not ask the Court to hold that the safe harbors `wipe out a company's right to seek relief for preexisting state law violations' or that they occupy the `field' and displace all state-law remedies." Reply at 47. Instead, JPMC argues that these particular claims should be preempted because, like the claims in Contemporary Industries and Hechinger, they seek the turnover or return of the collateral transferred to JPMC, and accordingly, the same payments that are unavoidable under Bankruptcy Code section 546(e). This argument fails because, as discussed, the claims JPMC argues are preempted are based on separate and distinct facts from the claims protected by section 546(e).
