By Jonathan Stempel

Dec 31 (Reuters) - Canadian Imperial Bank of Commerce has agreed to pay $149.5 million to the estate of Lehman Brothers Holdings Inc to resolve litigation over a collateralized debt obligation tied to the bankruptcy of the former Wall Street bank.

The settlement announced Monday resolves litigation that began on Sept. 14, 2010, when Lehman sued CIBC and dozens of others to recover more than $3 billion it said it had been deprived of due to its Chapter 11 filing two years earlier.

Lehman sought to hold CIBC responsible for much of the more than $1.3 billion due under an agreement requiring the Canadian bank to cover payment shortfalls tied to a large CDO transaction.

In addition, Lehman contended its contracts gave it senior payment priority, but that the bankruptcy caused it to be improperly replaced with junior payment priority.

CIBC, Canada's fifth largest bank, recognized a gain of $841 million following Lehman's bankruptcy on Sept. 15, 2008, when it had reduced to zero its financial commitment related to a note issued by the CDO.

It has said in regulatory filings that Lehman was the guarantor of a related credit default swap agreement. Monday's payment amounts to $110.3 million after taxes, CIBC said.

Lehman spokeswoman Kimberly Macleod declined to comment.

Once Wall Street's fourth largest investment bank, Lehman emerged from bankruptcy protection on March 6 and has paid out roughly half of the estimated $65 billion it hopes to return to creditors. Its bankruptcy is the largest in U.S. history.

The case is Lehman Brothers Special Financing Inc v. Bank of America NA et al, U.S. Bankruptcy Court, Southern District of New York, No. 10-ap-03547. The main bankruptcy case is In re: Lehman Brothers Holdings Inc in the same court, No. 08-13555.

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