Case Title: Caspian Alpha Long Credit, Fund, L.P., et al. v. GS Mezzanine Partners 2006, L.P., et al.

Citation: 

Docket Number: 472, 2013

State: delaware

Court: Delaware Supreme Court

Date: 2014-05-22T00:00:00Z

Document:
IN THE SUPREME COURT OF THE STATE OF DELAWARE 
 
CASPIAN ALPHA LONG CREDIT 
§ 
FUND, L.P., CASPIAN SELECT  
§ 
CREDIT MASTER FUND, LTD.,  
§ 
CASPIAN CAPITAL PARTNERS, 
§ 
L.P., and MARINER LDC, 
§ 
 
 
§ 
No. 472, 2013 
 
Plaintiffs-Below, 
§ 
 
 
Appellants, 
§ 
Court Below: 
 
  
§ 
 
 
v.  
§ 
Court of Chancery of 
 
 
§ 
the State of Delaware 
GS MEZZANINE PARTNERS 2006, 
§ 
  
L.P., and GS MEZZANINE  
§ 
C.A. No. 5941-VCL  
PARTNERS V, L.P.,  
§ 
 
 
 
§ 
 
 
Defendants-Below, 
§ 
 
Appellees. 
§ 
 
 
 
 
Submitted: April 30, 2014   
Decided:  May 22, 2014 
 
 
Before STRINE, Chief Justice, BERGER, and RIDGELY, Justices.  
 
Upon appeal from the Court of Chancery.  AFFIRMED. 
Neal J. Levitsky, Esquire, Seth A. Niederman, Esquire, Carl D. Neff, Esquire, Fox 
Rothschild LLP, Wilmington, Delaware; 
 
Of Counsel:  Daniel P. Goldberg, Esquire, Holwell Shuster & Goldberg, LLP, New 
York, New York, for Appellants Caspian Alpha Long Credit Fund, L.P., Caspian 
Select Credit Master Fund, Ltd., Caspian Capital Partners, L.P., and Mariner LDC. 
 
Kevin G. Abrams, Esquire, Derrick Farrell, Esquire, Abrams & Bayliss LLP, 
Wilmington, Delaware; 
 
 
Of Counsel:  Irwin H. Warren, Esquire, Lauren B. Hoelzer, Esquire, Weil, Gotshal 
& Manges LLP, New York, New York; and Christine T. DiGuglielmo, Esquire, 
Weil, Gotshal & Manges LLP, Wilmington, Delaware, for Appellees GS 
Mezzanine Partners 2006, L.P., and GS Mezzanine Partners V, L.P. 
 
 
 
STRINE, Chief Justice: 
 
1 
 
In 2007, Marisco Superholdco, LLC and Marisco Superholdco Notes Corp. 
(collectively, the “Issuer”) issued notes (the “Superholdco Notes”) through a private 
placement under an indenture dated December 14, 2007 (the “Indenture”) between the 
Issuer and Wells Fargo Bank, N.A., as Trustee.  In 2010, as part of a financial 
restructuring, the Issuer proposed amendments to the Indenture that were approved by a 
majority of the Superholdco noteholders.  The appellees, GS Mezzanine Partners 2009, 
L.P. and GS Mezzanine Partners V, L.P. (collectively, “GS Mezzanine”), who owned a 
majority of the Superholdco Notes, voted in favor of the amendments. 
The appellants, Caspian Alpha Long Credit Fund L.P., Caspian Select Master 
Fund, LTD., Caspian Capital Partners, L.P., and Mariner LDC (collectively “Caspian”), 
are Superholdco noteholders who brought suit in the Court of Chancery contending that 
they were injured by the amendments to the Indenture.  Caspian’s complaint included 
claims against GS Mezzanine, which were premised on the theory that Section 6.06 of the 
Indenture gave Caspian a basis to sue its fellow noteholder for voting to approve the 
amendments to the Indenture that Caspian believed were unfavorable to it.  GS 
Mezzanine moved to dismiss the claims against it under Court of Chancery Rule 
12(b)(6), and the Court of Chancery granted that motion, finding that Section 6.06 could 
not reasonably be read to provide Caspian with a basis to sue GS Mezzanine for voting to 
approve amendments to the Indenture.  On appeal, Caspian argues that the Court of 
Chancery erred and that Section 6.06 can be reasonably read to provide it with a basis to 
sue GS Mezzanine for breach of contract.  For the following reasons, we affirm the Court 
of Chancery’s dismissal of the claims Caspian brought against GS Mezzanine. 
2 
 
We review the Court of Chancery’s dismissal of a claim under Rule 12(b)(6) de 
novo.1  In deciding a motion to dismiss under Rule 12(b)(6), a trial court must accept as 
true all well-pled allegations of fact and draw reasonable inferences in the plaintiff’s 
favor, but a court is not required to accept every strained interpretation proposed by the 
plaintiff.2   Dismissal of a claim based on contract interpretation is proper “if the 
defendants’ interpretation is the only reasonable construction as a matter of law.”3   
Section 6.06 of the Indenture reads in its entirety as follows: 
Section 6.06 Limitation on Suits.   
A Holder may pursue a remedy with respect to this Indenture or the Notes 
only if: 
 
(1) Such Holder has previously given the Trustee notice that an event of 
Default is continuing; 
(2) Holders of at least 25% in aggregate principal amount of the then 
outstanding Notes have requested the Trustee to pursue the remedy; 
(3) Such Holders have offered the Trustee reasonable security or 
indemnity against any loss, liability, or expense; 
(4) The Trustee has not complied with such request within 60 days after 
the receipt of the request and the offer of security or indemnity; and 
(5) Holders of a majority in aggregate principal amount of the then 
outstanding Notes have not given the Trustee a direction 
inconsistent with such request within such 60-day period.   
 
A holder of a Note may not use this Indenture to prejudice the rights of 
another Holder of a Note or to obtain a preference or priority over another 
Holder of a Note.4 
 
                                              
1 In re General Motors S’holder Litig., 897 A.2d 162, 167-68 (Del. 2006). 
2 Id. at 168.   
3 Vanderbilt Income & Growth Assocs., LLC v. Arvida/JMB Managers, Inc., 691 A.2d 609, 613 
(Del. 1996) (internal citations omitted) (emphasis in original); VLIW Tech., LLC v. Hewlett-
Packard Co., 840 A.2d 606, 615 (Del. 2003).  
4 Appendix to Opening Br. at A443-44 (Indenture).   
3 
 
Caspian’s argument on appeal is based on the notion that the last sentence of Section 6.06 
stands for the proposition that if a noteholder votes to approve amendments to the 
Indenture that are injurious to a dissenting noteholder, then it has breached contractual 
duties it owes under the Indenture and must pay damages to the dissenting noteholder. 
But, as the Court of Chancery held, Caspian’s reading of the Indenture is not a 
reasonable one.5  The Indenture is governed by New York law.6  Under New York law, 
when interpreting a contract the task of a court is to read the contract as a whole and 
“give to each clause its intended purpose in the promotion of the primary and dominant 
purpose of the contract.”7  A court will only find a contract to be ambiguous when “the 
terms of the contract could suggest more than one meaning when viewed objectively by a 
reasonably intelligent person who has examined the context of the entire integrated 
agreement and who is cognizant of the customs, practices, usages and terminology as 
generally understood in the particular trade or business.”8  As a matter of public policy, 
New York courts endeavor to give commercial contracts that use standard language a 
consistent meaning.9  To that end, in considering whether a contract, such as an 
                                              
5 Although the Court of Chancery’s discussion of Section 6.06 during its bench ruling was terse, 
the extensive colloquy between the Court of Chancery, Caspian, and GS Mezzanine throughout 
the hearing on the motion to dismiss reveals the Court of Chancery’s reasoning, and the brief 
ruling is understandable in view of that lengthy discussion.  See, e.g., Appendix to Opening Br. 
at 1342-43, Tr. at 18-19; Appendix to Opening Br. at 1345, Tr. at 21; Appendix to Opening Br. 
at 1354, Tr. at 30; Appendix to Opening Br. at 1378, Tr. at 54.   
6 Appendix to Opening Br. at 458 (Indenture, Section 11.06).   
7 Empire Properties Corp. v. Mfrs. Trust Co., 43 N.E.2d 25, 28 (N.Y. 1942).    
8 Law Debenture Trust Co. of N.Y. v. Maverick Tube Corp., 595 F.3d 458, 466 (2d Cir. 2010) 
(internal citations omitted). 
9 Sharon Steel Corp. v. Chase Manhattan Bank, N.A., 691 F.2d 1039, 1048 (2d Cir. 1982) 
(“[U]niformity in interpretation is important to the efficiency of the capital markets. . . . Whereas 
participants in the capital market can adjust their affairs according to a uniform interpretation, 
4 
 
indenture, is ambiguous, courts may consider commercial usage and sources such as 
model contracts, like the Model Debenture Indenture Provisions adopted by the 
Corporate Debt Financing Project of the American Bar Association (the “Model 
Indenture”).10 
In this case, the Court of Chancery properly applied New York law principles and 
determined that Section 6.06 did not give Caspian a basis to sue GS Mezzanine for voting 
to approve amendments to the Indenture that Caspian disagreed with.  The Court of 
Chancery properly read the last sentence of Section 6.06 in the context of the rest of the 
language used in that section, which deals with a situation in which a noteholder, rather 
than the Trustee, is permitted to take on the special role of enforcing the Indenture.  The 
language, when read in full context rather than in isolation, makes it clear that the last 
sentence of Section 6.06 provides that when a noteholder is acting in a representative 
capacity as a fiduciary for all noteholders, the noteholder may not use that position to 
advantage itself to the detriment of the other noteholders it is representing. 
The Court of Chancery’s conclusion that Caspian’s contrary interpretation of 
Section 6.06 was not a reasonable reading of the Indenture’s language was further 
                                                                                                                                                  
whether it be correct or not as an initial proposition, the creation of enduring uncertainties as to 
the meaning of boilerplate provisions would decrease the value of all debenture issues and 
greatly impair the efficient working of capital markets.  Such uncertainties would vastly increase 
the risks and, therefore, the costs of borrowing with no offsetting benefits either in the capital 
market or in the administration of justice.”).   
10 Bank of New York v. First Millennium, Inc., 598 F. Supp. 2d 550, 564-54 (S.D.N.Y. 2009) 
(rejecting an argument that the Commentaries to the Model Indentures were parol evidence and 
holding that reliance on the Commentaries to interpret contracts is consistent with New York 
law); see also Sharon Steel Corp. v. Chase Manhattan Bank, N.A., 691 F.2d 1039, 1048 (2d Cir. 
1982) (relying on commentaries to the Model Indenture to interpret an indenture); Feder v. 
Union Carbide Corp., 141 A.2d 799, 800 (N.Y. App. Div.2d Dept. 1988) (relying on 
commentaries to the Model Indenture to interpret an indenture).  
5 
 
supported by the Model Indenture and its various iterations, which the Court of Chancery 
properly examined and relied on.  The Court of Chancery correctly determined that the 
commentary to the Model Indenture contradicted Caspian’s reading and supported the 
conclusion that the last sentence of Section 6.06 focused on the specific situation 
addressed by that section — when a noteholder, rather than the Trustee, was permitted to 
sue — and was not a broad provision subjecting noteholders to potential liability when 
they voted to approve an Indenture amendment that did not have unanimous 
support.  The Court of Chancery’s conclusion that the commentary to the original Model 
Indenture remained relevant to interpreting the language of the Indenture, which closely 
tracks the language of the Model Indenture now in effect, was also correct.  The 
commentaries to the three iterations of the Model Indenture are consistent and explain 
that the last sentence of Section 6.06 is related to that section’s status as a no-action 
clause and does not create a wide-ranging contractual basis for suit against noteholders 
who support Indenture amendments that other noteholders do not favor.11  Indeed, to read 
                                              
11 The Commentaries to the 1965 Model Indenture state that the limitations contained in what is 
now Section 6.06 apply “only on suits under the Indenture.” AMERICAN BAR FOUNDATION, 
COMMENTARIES ON MODEL DEBENTURE INDENTURE PROVISIONS 1965, § 5.7, at 232-33 (1971). 
The Commentaries explain that the last sentence of Section 6.06 prohibits a noteholder who has 
otherwise fulfilled the requirements of Section 6.06 — which allows a noteholder to stand in the 
shoes of the indenture trustee and bring a suit under the indenture — from, for example, bringing 
a suit for reformation of an indenture if it would disturb or prejudice the rights of other 
noteholders under the indenture.  Id. at 234.  Although the language of Section 6.06 was revised 
in the subsequent Model Indentures, the Commentaries continued to describe Section 6.06 only 
as a “no action” clause and have never indicated that the last sentence of Section 6.06 applies to 
anything other than the situation where a noteholder has been permitted to act in the place of the 
trustee to bring a suit under the indenture.  See Revised Model Simplified Indenture, 38 BUS. 
LAW. 741, 794 (1983) (describing Section 6.06 as a “no action” clause that limits the security 
holders’ right to sue in the stead of the indenture trustee); Revised Model Simplified Indenture, 
55 BUS. LAW. 1115, 1191 (2000) (describing Section 6.06 as a “no action” clause that applies to 
6 
 
Section 6.06 in the novel way that Caspian now advances would unsettle the marketplace 
by reading into the standard no-action clause a powerful cudgel for dissenting 
noteholders that has never been previously recognized in generations of prior cases 
involving those clauses.  The Delaware courts are not the proper forum for this sort of 
judicial innovation in New York law, which seems contrary to New York’s public policy 
of giving commercial instruments a consistent and predictable meaning. 
Moreover, the Court of Chancery’s conclusion is supported by the effect that 
Caspian’s reading of Section 6.06 would have on other provisions of the Indenture. 
Section 9.02 specifically permitted the amendments at issue in this case to be approved 
by a majority of the noteholders and did not require unanimous consent, as the Indenture 
requires for certain other amendments.  To read Section 6.06 as subjecting noteholders 
who exercised their voting rights by voting in favor of an amendment to liability when 
that vote is not unanimous would place noteholders at risk simply for voting in their self-
interest.  This toll on voting rights would be odd, not only because the Indenture writers 
knew how to require unanimous approval, but because the Indenture writers also 
expressly subjected the amendment power to certain limitations contained in other 
sections of the Indenture, but did not subject the ability to adopt amendments to Section 
6.06.12  Additionally, as GS Mezzanine points out, the Indenture is not reasonably read to 
                                                                                                                                                  
suits brought by indenture noteholders to enforce rights under the indenture that would typically 
be enforceable by the indenture trustee). 
12 Appendix to Opening Br. at A453 (Indenture, Section 9.02) (granting the Issuer and the 
Trustee the power to amend or supplement the Indenture “with the consent of the Holders of at 
least a majority in aggregate principal amount of the then outstanding Notes voting as a single 
class . . . subject to Sections 6.04 and 6.07 hereof . . .”).   
7 
 
hold a noteholder liable for the adoption of amendments, because a noteholder who is 
simply voting on an amendment proposed by the Issuer is not exercising any fiduciary 
authority.13  
For the foregoing reasons, there is no reasonable reading of Section 6.06 of the 
Indenture that supports Caspian’s argument that Section 6.06 provided it with a basis to 
sue its fellow noteholders because those noteholders voted to approve amendments to the 
Indenture that Caspian disagreed with.14 Thus, the judgment of the Court of Chancery is 
AFFIRMED. 
 
                                              
13 As GS Mezzanine points out, only the Issuer and Trustee owe obligations to the noteholders 
under Section 9.02 of the Indenture, which addresses amendments to the Indenture, or Section 
2.09, which addresses how votes should be counted.  See Appendix to Opening Br. at A453 
(Indenture, Section 9.02); Appendix to Opening Br. at A413 (Indenture, Section 2.09).   
14 There are additional grounds that could be cited that support the Court of Chancery’s 
conclusion that Caspian’s reading of Section 6.06 of the Indenture is not a reasonable 
one.  Because the grounds we have cited are sufficient to explain why the Court of Chancery was 
correct, we do not articulate them all.