In 2008, Lehman Brothers, Inc. (Lehman) entered into a liquidation proceeding in the U.S. Bankruptcy Court for the Southern District of New York, in accordance with the Securities Investor Protection Act (SIPA).  A number of banks that had sold securities to Lehman under various repurchase agreements (repos) filed claims in the proceeding seeking to be treated as “customers” of Lehman, which would have given them priority claims in respect of the securities covered by the repos.  Lehman’s bankruptcy trustee determined that the banks were not “customers” within the meaning of SIPA.  Both the Bankruptcy Court and the U.S. District Court for the Southern District of New York affirmed the trustee’s determination.  See “U.S. District Court Rules on Whether a Party to a Repurchase Agreement with a Broker-Dealer That Enters Liquidation Is a ‘Customer’ of the Broker-Dealer under SIPA,” Hedge Fund Law Report, Vol. 7, No. 18 (May 8, 2014).  In what is likely to be the last judicial word on the subject, the U.S. Court of Appeals for the Second Circuit recently ruled on the District Court’s decision.  This article summarizes the facts and circumstances surrounding the Lehman repos; examines the Second Circuit’s legal reasoning; and discusses possible implications of the decision on the hedge fund industry as a whole.  For coverage of a dispute over “customer” status in a liquidation of a futures commission merchant, see “Bankruptcy Court Rules on Whether Funds Held by Bankrupt Futures Commission Merchant for Retail Forex and OTC Metals Trading Are ‘Customer Property’ Entitled to Priority Distribution,” Hedge Fund Law Report, Vol. 7, No. 20 (May 23, 2014).