Sept. 16 (Bloomberg) -- The luck of the draw gave the biggest bankruptcy in history to the second-most junior bankruptcy judge in Manhattan.

Lehman Brothers Holdings Inc.'s case was randomly assigned to U.S. Bankruptcy Judge James Peck, second in tenure, putting the fate of $613 billion in claims before a judge whose largest case since going on the bench in January 2006 was the $3 billion reorganization of Quebecor Corp.

In his courtroom, Peck, 62, who taught at Rutgers University, will be giving orders to Harvey Miller, 75, the dean of the bankruptcy bar and a lecturer at Yale, Columbia and New York Universities. Also subject to Peck's gavel will be Martin Bienenstock, 55, representing some of Lehman's creditors. He was chief lawyer for Enron Corp., which in 2001 filed what was then the largest bankruptcy in U.S. history.

Peck ``knows time is money,'' said Jack Williams, a professor of law at Georgia State University and resident scholar at the American Bankruptcy Institute. ``He's an outstanding judge for this case because he has a deep appreciation for markets.''

Peck and his staff decline to comment on pending cases. Miller didn't return phone calls and e-mails.

Before becoming a judge, Peck, a native New Yorker, worked for 16 years as a bankruptcy litigator at Schulte Roth & Zabel, a New York law firm that specializes in representing hedge funds. Before that, he was a partner at Duane Morris in Philadelphia.

Deference to the Market

Since his appointment, Peck has developed a reputation among bankruptcy lawyers for thoroughness and his deference to the market in his rulings. In a 2007 decision related to the bankruptcy of satellite-phone maker Iridium LLC, he broke legal ground in a decision that may offer clues as to how he'll approach the Lehman case.

Iridium creditors, represented by Miller's New York firm, Weil Gotshal & Manges LLP, had sought to recover $3.45 billion by claiming the money was fraudulently transferred before the bankruptcy because the company was already insolvent.

Peck ruled against the creditors and their expert witnesses, using market value instead as the arbiter of solvency. Because the company had a strong valuation at the time of the transfer, the transaction couldn't be annulled.

``He took on one of the longest and most difficult bankruptcy trials,'' said Matt Dundon, managing director of distressed analysis at Miller Tabak Roberts Securities, ``and delivered a scholarly and thoughtful opinion.'' Dundon followed the effects of Peck's ruling on Iridium bonds during the case.

Fraudulent Transfer

Creditors haven't yet asserted any claims about fraudulent transfers by Lehman. One notable deal that might draw their attention: The investment bank sold $5 billion of its assets to its distressed investment firm, R3 Capital Partners. Creditors might challenge the valuation of the sale, if other bankruptcies are an indication.

The 158-year-old Lehman, which survived railroad bankruptcies of the 1800s, the Great Depression in the 1930s and the collapse of Long-Term Capital Management a decade ago, filed a Chapter 11 petition with U.S. Bankruptcy Court in Manhattan yesterday. The collapse of the firm dwarfs WorldCom Inc.'s 2002 $103.9 billion insolvency -- also handled by Weil Gotshal.

Peck, who graduated from Dartmouth College in 1967 and received his law degree from New York University in 1971, has shown a willingness to stand up to hedge funds and other creditors when they attempt to assert too much influence.

No `Gun to the Head'

In the bankruptcy of Sirva Inc., the owner of Allied Van Lines, he told lenders they couldn't ``put a gun'' to his head by threatening to withdraw needed lending if he didn't approve a reorganization plan on their timeline.

``I have seen courtrooms fill up with people who look like they're traders or analysts and they're there to see if it's a buy, sell or hold -- people who won't be able to know too much about how I'm thinking in a case, because I don't even know sometimes,'' Peck said at the 2008 American Bankruptcy Institute conference in New York, on a panel Bienenstock moderated.

Bienenstock, who left Weil Gotshal in November to join New York's Dewey & LeBoeuf, represents Lehman creditors that include Royal Bank of Scotland and Bank of New York. Should he become chief creditor counsel, he would be facing off against Miller, who left Weil Gotshal for five years to join merger-advisory firm Greenhill & Co. Miller advised companies on acquisitions, governance and corporate crises at Greenhill.

``Harvey has gravitas -- he's tall, thin and imposing, not a backslapper,'' said David Henderson, president of conference company Renaissance American Management Inc., which named Miller ``the lawyer of the century.''

`Not Adversarial'

While creditors and the bankrupt company typically disagree about how much will be paid on claims, Bienenstock, who called Miller a mentor, said there might not be ``a lot to fight about'' in the Lehman case.

``I don't really look at this as an adversarial situation,'' he said. ``It's basically just a sad situation.''

Miller, who acts as a financial, restructuring and bankruptcy adviser to companies, has been hired as counsel by retailers R.H. Macy & Co. and W.T. Grant Co., airlines AMR Inc. and Delta Air Lines Inc., energy company Texaco Inc., and automaker General Motors Corp., which he is advising in the bankruptcy case of auto-parts maker Delphi Corp.

Weil Gotshal last year was the 10th-largest grossing U.S. law firm, with revenue of $1.17 billion, according to the American Lawyer, a trade publication.

Having both Miller and Bienenstock in court on opposite sides ``will be a drama inside a drama,'' said Mark T. Power of New York law firm Hahn & Hessen, who is also representing some Lehman creditors.

Directing the drama will be the man with the gavel.

The case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporters on this story: Thom Weidlich in New York at tweidlich@bloomberg.net; Tiffany Kary in New York bankruptcy court at tkary@bloomberg.net.

Last Updated: September 16, 2008 12:06 EDT