Lehman Bankruptcy Court Declines To Hold That The Safe Harbor Provisions Of Sections 560 and 561 Of The Bankruptcy Code Permit An Exception To Mutuality In Setoff

This Alert Memo reviews the May 5th decision of the Bankruptcy Court for the Southern District of New York holding that mutuality is a prerequisite to the exercise in bankruptcy of a contractual right of setoff under a derivatives contract, notwithstanding the absence of an explicit mutuality requirement in Sections 560 and 561.