By Patrick Fitzgerald 

A federal judge denied Lehman Brothers Inc.'s bid to carve out $1.3 billion from an earlier court decision that awarded $4 billion in disputed assets to Barclays PLC stemming from the U.K. bank's purchase of Lehman's brokerage business.

Judge Katherine B. Forrest of the U.S. District Court in New York said Wednesday that Barclays was entitled to all of the so-called margin assets--some billions of dollars in cash and collateral--securing derivatives positions. The ruling is a win for Barclays, which purchased Lehman's brokerage business days after Lehman's 2008 collapse.

The legal fight over the sale began in 2009, when Lehman sued Barclays saying the British bank negotiated a secret discount when it bought Lehman's brokerage. A bankruptcy judge concluded that Barclays didn't receive an improper "windfall" from the sale, but that Lehman's brokerage was entitled to the approximately $4 billion in margin assets.

Both sides appealed, and the district court ruled that Barclays was entitled to both groups of assets. James W. Giddens, the trustee winding down Lehman's brokerage, appealed to the Second U.S. Circuit Court of Appeals, which last year affirmed the district court ruling.

"The issues raised by the trustee on this motion come too late," said Judge Forrest in a 17-page order. "Both appeals--that of the bankruptcy court's order and that of this court--have occurred. And both appeals encompassed determinations that Barclays is entitled to all margin assets."

Judge Forrest's order, in effect, clarifies the earlier rulings that awarded all the margin assets to Barclays. The trustee had sought to narrow the scope of those decisions, arguing that only those assets that were securing open trading positions at the time of 2008 sale were included in the deal. Mr. Giddens has appealed the broader decisions awarding all the margin assets to Barclays to the U.S. Supreme Court.

A spokesman for Mr. Giddens said, "The trustee is reviewing the decision, and he continues to move ahead with winding down the estate and maximizing assets available for future distributions."

Previously, Mr. Giddens has said the decisions overturning the bankruptcy court ruling have frustrated the purpose of the liquidation by reducing the amount available for the estate by $4 billion.

Lehman brokerage customers received about $92.3 billion almost immediately after Lehman collapsed, and since then total distributions have exceeded $112 billion, representing a 100% recovery for customers and priority creditors. However, unsecured creditors are receiving much less--$5.9 billion, or 27% of their claims. A Lehman victory in the appeal would increase those recoveries.

Lehman Brothers Holdings Inc., the bank's New York-based holding company, which itself has paid back about $100 billion to unsecured creditors, is still winding down and selling off its remaining holdings, a process that is expected to continue for several more years.

Write to Patrick Fitzgerald at patrick.fitzgerald@wsj.com

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