Following its collapse in 2008, broker-dealer Lehman Brothers Inc. (Lehman) entered a liquidation proceeding administered by the U.S. Bankruptcy Court for the Southern District of New York (Bankruptcy Court) in accordance with the Securities Investor Protection Act of 1970 (SIPA).  Under SIPA, “customers” of a failed broker-dealer are entitled to special protection in the broker-dealer’s liquidation.  In that regard, several banks that had entered into repurchase agreements with Lehman prior to its collapse sought to have their claims categorized by Lehman’s liquidation trustee as “customer” claims under SIPA.  The trustee refused to do so; and the Bankruptcy Court concurred.  The banks then appealed the Bankruptcy Court’s decision to the U.S. District Court for the Southern District of New York.  This article offers a detailed discussion of the District Court’s decision.  Although broker-dealer liquidations are rare, the Court’s decision should inform the drafting of hedge funds’ prime brokerage and repurchase agreements.  See “Prime Brokerage Arrangements from the Hedge Fund Manager Perspective: Financing Structures; Trends in Services; Counterparty Risk; and Negotiating Agreements,” Hedge Fund Law Report, Vol. 6, No. 2 (Jan. 10, 2013).