FI L ED U.S. COURT OF APPEAL S EL EVENTHCI RCUI T APRI L25, 2012 J OHN L EY CL ERK [PUBLISH]

IN THE UN ITED STATES COURT OF APPEALS FOR THE ELE VENTH CIRCUIT

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AKANTHO S CAPITAL MANAGEMENT, LLC, ARIA OPPORTUNITY FUND LTD., CNH CA MASTER ACCOUNT, L.P., GLG INVESTMENTS PLC: SUB-F UND GLG GLOBAL CONVERTIBLE UCITS FUND, GLG INVESTMENTS IV PLC: SUB-F UND GLG GLOBAL CONVERTIBLE UCITS (DISTRIBUTING) FUND, etal., ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll Pl ai nt iff s - Ap pe ll ees , CC ARB ITRAGE, LTD, et a l., ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll Pl ai nt iff s, vers us COMP UCREDIT HOLDINGS CORPORATION, DAVID G. H ANNA, FRANK J. HANNA, III, RICHAR D R. HOUSE, JR., RICHAR D W . GILBERT, K. K. SRINIVASAN, J. PAUL W HITEHEAD, III,THOMAS G. ROSENCRANTS,

GREGORY J. CORONA, ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll Defen da nt s - Ap pe ll an ts .

__ __ __ __ __ __ __ __ __ __ __ __ App eal fro m

th e Uni te d S ta te s Di st ric t Co urt forth e North ernDis tri ctof Ge or gi a

__ __ __ __ __ __ __ __ __ __ __ __ (Ap ril 25 , 20 12 ) Befo re WILSON andMARTIN, Ci rcu itJu dg es , andALBRITTON, Dis tri ctJu dg e. * W ILSON, Cir cu itJu dg e: Thi s ca se co nc ern s t he ap pl ic ab il it y of ast an da rd“no -act io n c laus e” i n a tru stin de ntur e g ov ern in g aco m pa ny’ s n ot es . The cl au se at i ss ue st at es th ata no te ho ld er cann ot“pu rs ue any rem edy with re sp ectto th is Ind en tu re o r th e Secu rit ie s” un le ss th e n ot eh ol de r fal ls withi n o ne of t wo ex cep ti on s. Th is ap pe al as ks whet he r no te ho ld ers who do no t fa ll withi n ast at edex cep ti on to th e cl au se m ay no ne th el es s b rin g fr au du le nttrans fer c la im s ag ai ns t the is su er o f th e se cu rit ie s an d i ts di rect or s an d o ffi cers . Alth ou gh th e d is tri ctco urt fo un d the no act io n c laus e in ap pl ic ab le to th e cl ai m s, we d is ag ree a ndho ldth atth e la ng ua ge of

Honora ble W. Harold Albritton, United States District J udg e for the Middle District of * Alabama , sitti ngby

designation. 2th e n o- act io n c laus e co nt ro ls , barrin g n ot eh ol de rs fro m bri ng in g t hi s s ui t. I. The di stric t co urt i n i ts Marc h 1 5, 2 01 1 o rd er l ai d o utth e lo ng an d l it ig io us hi st ory am on g t he pa rti es inth is ap pe al , so we co nf in e o urreci ta ti on of t he fact s t o th os e m os t re le va ntto th is ap pe al . Defen da nt -Ap pe ll an t Co m pu Cred itHol di ng s Co rp or at io n (“ Co m

pu Cred it ”) i s a p ub li cl y

tra de d fi nanc ia l s erv ic es pro vi de r th at se rv es th e subp rime m ark et . Add it io na l Def en dant s- App el la nt s ar e Co m pu Cred it in si de rs th atfal l wi th in two gro up s: Offic ers an d Di rect or s. Pl ai nt iff s ar e a co ll ect io n o f he dg e fu nd s t ha t h ol d n ot es is su edby Com pu Cred it ; the y

all eg e to co ll ect iv el y

own th e m ajor ity

of C om pu Cred it ’s no te s an d c la im st atus as Co m pu Cred it ’s cred it or s u nd er the Uni fo rm Frau du le ntTran sf

ers Act (“ UFTA”). Se e O.C.G.A. § 18 -2 -7 0 e t s eq . 1 Each ser ie s o f Co m

pu Cred it ’s no te s was is su edpu rs ua ntto a trus t i nd en tu re co nt ai ni ng a st an da rd“ no -act io n c laus e.” The cl au se st at es th atno te ho ld ers “ m ay 2 no t p ur su e an y

rem edy with re sp ectto th is Ind en tu re o r th e Sec ur it ie s.” Ho wev er, th e cl au se als o c on ta in s t wo ex cep ti on s t ha t a n ot eh ol de r m ay fal l wi th in if i t

Geor g ia’s Unifor

m Fra udulent Transf

ers Ac t is based upon and substantially simil ar to 1 the Uniform F raudule nt Transfe r Ac t, succe ssor to the Uniform F raudule nt Conveyance Act. For the purposes of

this appeal, the trust indenture s g overningeac h series of notes held 2 by Plaintiffs are ide ntical and sha ll be collectively discussed. 3sa ti sf

ie s ce rta in co nd it io ns pre ced en t. The fir stex cep ti on , referredto by the pa rti es as t he “ tru st ee d em an d e xc ep ti on ,” is sat is fie d i f: ( 1) a no te ho ld er g iv es th e Trus te e wri tt enno ti ce tha t a Def au lt ha s o ccu rredan d i s co nt in ui ng ; (2 ) ho ld ers 3 of at l eas t 2 5% o f th e n ot es m ak e a wri tt ende m an d t o t he Trus te e to pu rs ue a rem edy ; (3 ) a n ot eh ol de r ag rees to in de m ni fy or o ffersec ur ity

to th e Tru st ee fo r an y co st s i nc urred ; (4 ) th e Tru st ee d oe s n otres po ndto th e reque stof t he no te ho ld ers withi n s ix ty day s o f rec ei ptof t he no ti ce an d the off er o f se cu rit y

or in de m ni ty; (5) du rin g t he si xt y -d ay win do w, th e m ajor ity

of t he no te ho ld ers do no t gi ve th e Tru st ee an in st ru ct io n i nc on si st en t wi th th e reque stfor a rem edy . The se co ndex cep ti on to th e n o- act io n c laus e is th e “ rig htto pa ym en t” ex cep ti on , whi chis no t atis su e h ere. Th e tr us t i nd en tu res ha ve a ch oi ce-o f-l aw pr ov is io n sp eci fy in g t ha t New Yo rklaw g ov ern s the ag reem en t. InDecem be r 20 09 , Pla in ti ffs bro ug htUFTA clai m s ag ai ns t Co m pu Cred it . 4 Pl ai nt iff s al le ge d t ha t Co m

pu Cred itwas i n fi na nc ia l d is tre ss bu t h adne ve rth el es s is su eda di vi de ndto sh areh ol de rs —the m ajor it y of wh om were co m

pany in si de rs —an d p la nn edto sp in off th e co m pa ny’ s p ro fit ab le m ic ro lo anlen di ng bu si ne ss . Plai nt iff

s ar gu edth atth es e act io ns were fraudul en t tran sf ers in te nd edto Section 1.01 of the Indenture s defines the term “D efa ult.” The pa

rties agree that no 3 Def ault has occ urre d here . Direc tors and Of

fice rs wer e adde d as def

endants in May

2010. 4 4be ne fitco m

pa ny ins id ers . Plai nt iff

s al so ass ert edth atCo m

pu Cred itwas o pe rat in g on th e b rin k o f in so lv en cy an d d ep le ti ng it s av ai labl e fu nd s, en da ng eri ng it s ab il it y to red eem Pla in ti ffs ’ no te s wh enth ey cam e due . In J un e 2 01 0, ea ch of t he th ree gr oups of De fen da nt s— Co m pu Cred it , Direc to rs , andOffic ers —i nd iv idua ll y fil ed a m ot io n t o d is m is s. Th e Offi cers rai se d i n t he ir m ot io n t he arg um en t tha t i s at is su e in th is ap pe al : tha t the no -act io n c laus e in th e trus t i nd en tu res go ve rn in g Co m pu Cred it ’s no te s b arre d P la in ti ffs fro m bri ng in g t he ir c la im s. Th e Dir ect or s ad op te d a ndjoi ne d t he m ot io ns to di sm is s fi le d b y th e o th er Defe nd an ts . Co m pu Cred itdi d n otrefe ren ce the no -act io n c laus e in it s i ni ti al m ot io n, b utit st at edinit s re pl y

bri ef: “ As s etforth inth e o pe ni ng bri ef an d re pl y bri ef i n s up po rt of [Offi cers ’] Mo ti onto Dis m is s t he Seco ndAm en de d C om pl ai nt , Pla in ti ffs ’ cl ai m al so sh ou ldbe di sm is se d b ecau se Pla in ti ffs ha ve no t co m pl ie d wi th th e In de ntur es ’ requi rem en ts forbri ng in g s ui t.” On M arch 15 , 20 11 , th e d is tri ctco urt ru le d o n a ll th e m ot io ns joi nt ly, fin di ng th atalt ho ug h n o- act io n c laus es are g en eral ly uph el d, the claus e d idno t b ar Pl ai nt iff s’ UFTA clai m s u nd er the cir cu m st an ces of t hi s ca se . The co urt pr ed ic at edit s ru li ng on th ree f act or s i t fo un d t o b e d et erm in at iv e: (1) th e no te ho ld ers bri ng in g t he su itco ns ti tu te d am ajor ity of t he no te ho ld ers , th eref or e sa ti sf y in g t he pu rp os e o f th e cl au se to pre ve ntsu it s n otinth e m ajor it y ’s bes t 5in te res t; (2) Co m pu Cred itan no un cedit s i nt en t t o p ay a di vi de ndles s t ha n s ix ty da y s i n a dv an ce, the reb y

m ak in g i t i m

pr act ic ab le forPla in ti ffs to sat is fy th e si xt y da y wait in g p eri odrequi rem en t o f th e trus te e d em an d e xc ep ti on ; an d (3 ) Pl ai nt iff s’ cla im s wer e ex tra -co nt ractua l an d t he term s o f th e cl au se co nt em pl at ed a co nt ractua ll y -d efi ne d Def au ltpre di cat in g asu it . On Ap ril 1, 2 01 1, the di st ric t co urt p ur su an t t o 2 8 U.S.C. § 12 92 (b ) certi fie d th e fo ll owi ng qu es ti on of l aw fo r in te rlo cu to ry rev ie w: Und er New Yo rkLaw, m ay no te ho ld ers su e und er Geo rg ia ’s Uni fo rm Frau du le ntTran sf

er Actwher e th e n ot eh ol de rs ha ve no t co m pl ie d with t he co nd it io ns pre ced en t t o fi li ng su itsp eci fie d i n t he “no -act io n cl au se ” in th e trus t i nd en tu res go ve rn in g t he no te s? Defen da nt s t he n p et it io ne d t hi s co urt fo r pe rm is si onto fil e anin te rlo cu to ry ap pe al reg ard in g t he cert ifi edqu es ti on , andwe gr an te d Def en da nt s the rig htto ap pe al . II. As an in it ia l m at te r, we m us t s ort o utwhi ch parti es are p ro pe r parti ci pa nt s in th is ap pe al . Plai nt iff

s fi rs t ch al le ng e whe th er Co m pu Cred itm ay

ap pe al , gi ve n th atit(1) di d n otjoi n i ts co -Ap pe ll an ts inpe ti ti on in g the di st ric t co urt t o c ert ify its Mar ch15 , 20 11 ord er fo r in te rlo cu to ry rev ie w and(2) on ly dis cu ss edth e n oact io n c laus e init s re

pl ybri ef i n s up po rt o f it s m ot io n t o d is m is s Pl ai nt iff s’ cla im s. Pla in ti ffs als o c on te stwhet he r Dire ct or s an d Off ic ers have th e ab il it y

to arg ue for

6th e ap pl ic ab il it y of t he no -act io n c laus e, gi ve n t ha t the y are n otpa rti es to th e trus t in de ntur es . For t he reas on s s ta te d b el ow, we fi ndth atCo m pu Cred it , Direc to rs , an d Off ic ers are al l p ro pe r pa rti es to th is ap pe al . A. Pl ai nt iff s p oi ntou t tha t o nl y

Offic ers , no t Co m

pu Cred it , pet it io ne d t he di st ric t co urt t o c ert ify its Marc h 1 5, 2 01 1 o rd er d en y in g Def en da nt s’ m ot io ns to di sm is s; Pla in ti ffs arg ue th atCo m pu Cred itth eref

or e can no t p art ic ip at e in th is ap pe al . Thi s co urt g en eral ly onl y rev ie ws fi na l o rd ers of t he di st ric t co urt, b ut 5 un de r so m e ci rcu m st an ces we ha ve juri sd ic ti on ov er i nt erl oc ut ory ap pe al s. Rel ev an tl y , we hav e juri sd ic ti on ov er a d is tri ctco urt o rd er n otot he rwis e ap pe al ab le if (1 ) a d is tri ctjud ge st at es inth e o rd er tha t h e is “ of th e o pi ni on th at su ch ord er i nv ol ve s a c on tro ll in g que st io n o f la w as t o wh ic h t he re i s s ub st an ti al gr ou ndfordi ffer en ce o f op in io n a ndth atanimm ed ia te ap pe al fro m th e o rd er m ay m at eri al ly adv an ce the ul ti m at e te rm in at io n o f th e li ti ga ti on ,” an d (2 ) ap pl ic at io n to ap pe al is m ad e to th is co urt wi th in ten da y s o f su chanord er. Se e 28 U.S.C. § 12 92 (b ). On Ap ril 1, 2 01 1, the di st ric t co urt, re sp on di ng to Offic ers ’ m ot io n t o Plaintiffs actually

state in their brie f that Off icer s and Dire ctors filed a motion for 5 interlocutory

appea l, but that moti on bear s only Offic ers’ names. Reg ardle ss, as our discussion below evide nces, it is immaterial which pa rties filed the motion at the district cour t level. We include both CompuCredit and Direc tors in our discussion of this matter for the sake of completene ss. 7cert ify its ord er fo r in te rlo cu to ry rev ie w un de r § 1 29 2( b) , is su edanord er g ran ti ng Offi cers ’ m ot io n fo r certi fic at io n a ndam en de d i ts Marc h 1 5, 2 01 1 o rd er t o s ta te th atth e n o- act io n c laus e que st io n p res en te d “ a co ntro ll in g que st io n o f la w as t o whi chth ere i s s ub st an ti al gro un d fo r di ffer en ce o f op in io n a ndth atanimm ed ia te ap pe al fro m

th e o rd er m ay

m at eri al ly adv an ce the ul ti m at e te rm in at io n o f th e li ti ga ti on .” On Ap ril 11 , Com pu Cred it , Direc to rs , andOffic ers joi nt ly file d a no ti ce o f ap pe al to th is co urt, re qu es ti ng pe rm is si on to ap pe al th e am en de d o rd er. W e g ran te d p erm is si onto ap pe al to all Defen da nt s. We hadjuri sd ic ti on to do so be cau se bo th pro ng s o f § 1 29 2( b) ha d b een sat is fie d: th e d is tri ctco urt h adst at ed th e requi redlan gu ag e in it s o rd er an d Ap pe ll an ts ha d t he n fi le d an app li cat io n fo r in te rlo cu to ry

ap pe al withi n t enda y s o f th atst at em en t. Fo r pu rp os es of de te rm in in g p ro pe r pa rti es to th is ap pe al , itis si m pl y no t re le vantth atth e d is tri ct co urt am en de d i ts Orde r atth e reque stof Off ic ers alo ne be cau se we pr op erl y gr an te d a ll Defen da nt s t he rig htto ap pe al . Pl ai nt iff s n ex t co nt es t wh ethe r Co m pu Cred itha s t he ab il it y

to m ak e it s n oact io n c laus e arg um en t g iv enth atiton ly curs or il y di sc us se d t he is su e in it s re pl y br ie f in supp ort o f it s m ot io n t o d is m is s Pl ai nt iff s’ cla im s. Pl ai nt iff

s re ly on Th oma s v. C

ro sb yforth e p ro po si ti on th atanap pe ll an t’s fa il ur e to pre ss an arg um en t b efo re the di stric t co urt fo recl os es th atap pe ll an t’s ri gh t t o p res en t the
8arg um en t o n app eal . 37 1 F .3d78 2, 8 00 (11 th Cir . 20 04 ). Howev er, ev enif we 6 were t o a gr ee wi th Pla in ti ffs ’ pr op os it io n t ha t the is su e was no t s uf fic ie nt ly rais ed be lo w, we do no t jo in init s co nc lu si on th atap pe al of the is su e is pro hi bi te d. Th oma s , to whi chPla in ti ffs cit e, in st ru ct s t ha t o urcir cu it ’s “ru le for ecl os in g rev ie w of i ss ue s n otpre se nt edbe lo w is no t a ju ris di ct io na l l im it at io n b utis in st ead a ru le whi ch m ay

be ab ro ga te d i n o urso un d d is cret io n.” Id
. ; se e a ls o Fi rs t Ala. Ban k o f Mo nt go mer y, N.A. v. Fir

st Stat e In s. Co
. , 89 9 F .2d10 45 , 10 60 n.8 (11 th Ci r. 19 90 )
. At the he artof t hi s ru le is th e co nc ep t tha t “ a co urt wi ll no t co ns id er o n ap pe al forth e fi rs t t im e a que st io n t ha t re qu ire s de vel op men t o f f ac tu al is su es .” Tr ox le r v. Owe ns -Il li no is , Inc
. 71 7 F .2d53 0, 5 33 (11 th Cir . 19 83 ) (em ph as is ad de d) . As th e Supr em e Co urt h as art ic ul at ed , our pr oc edur al sch em e m ak es itth e so le pro vi nc e o f lo wer co urts to de ve lo p t he factua l re co rd , anditis ess en ti al th at th e is su es of acas e b e fu ll y arg ue d b el ow “ in ord er tha t l it ig an ts m ay no t b e su rp ris edon ap pe al by fina l d eci si on th ere o f is su es up on whi ch th ey ha ve ha d n o op po rtu ni ty to i ntro du ce ev id en ce . ” Hormel v . Helve ri ng , 31 2 U.S. 5 52 , 55 6, 6 1

Her e, it is unclear

whether the district court c onsidered the issue adequately raised. 6 Although O ffice rs, Dire ctors, and CompuCredit all filed se para te motions to di smiss, the district court’s or der a ddresse d all Def endants jointly

and did not specify

that any of its holdings reg ardingthe no-a ction clause wer e spec ific to any one par ty . Additionally , the district court’s conclusions wer e roote d in principles of lawthat would have a pplied to all Defe ndants. 9S. Ct . 71 9, 7 21 (19 41 ). Ess en ti al ly, we se ekto av oi d p reju di ci ng th e p art ie s. Se e

Och ra n v . Uni te d Sta tes , 11 7 F .3d49 5, 5 03 (11 th Cir . 19 97 ). A seco ndreas on for th e ru le is a “ co nc ernforjud ic ia l ec on omy .” Id
. ; se e a ls o Ro of

in g & Sh eet

Meta l Se rvs. v. La Qui nt a Mo to r In ns , Inc
. , 68 9 F .2d98 2, 9 90 (11 th Cir . 19 82 ). Inth e in st an t ca se , Offic ers an d Di rect or s ra is edth e n o- act io n c laus e is su e be lo w, arg ui ng th e sa m e p oi nt s t ha t Co m pu Cred itno w wis he s t o a ss ert . Co m pu Cred itsee ks to ad dr es s o nl y is su es alr eady

rai se d b efo re the di st ric t co urt; no ne of i ts arg um en ts wou ldrequi re d ev el op m en t o f th e fac tu al reco rd . Plai nt iff s ha d t he op po rtu ni ty bel ow t o re sp on d t o a ndpre se ntev id en ce re gard in g t he no act io n c laus e que st io n, an d t he di st ric t co urt h adth e o pp ortu ni ty to m ak e fi nd in gs of factan d l eg al co nc lu si on s. Th eref or e, Pl ai nt iff

s wo ul d n otbe pre

jud ic edwere we to co ns id er the pre ci se is su e rai se d b y Co m pu Cred it ’s co- ap pe ll an ts . Se e Och ra n , 11 7 F .3dat 5 03 (“ The re i s n o p reju di ce t o t he [de fen da nt ] in th is cas e si nc e itful ly brie fedall th e is su es th atwe ad dr es s.”) Furth erm or e, in th is cas e co ns id erat io ns of ju di ci al eco no m y wou ldweig h ag ai ns t

de cl in in g t o c on si de r th is arg um en t b ecau se th e is su es are fu ll y bri efedan d ri pe forap pe ll at e rev ie w. W e h av e p rev io us ly ide nt ifi edso m e ci rcu m st an ces un de r whi ch we ha ve fo un d i t ap pr op ria te to ex erci se ou r di sc ret io n t o h ear i ss ue s n otarg ue d b el ow: Fir st , an app el la te co urt wi ll co ns id er an is su e n otrai se d i n t he di st ric t co urt i f itin vo lv es a pu re que st io n o f la w, andif re fu sa l t o 10co ns id er i t wo ul d re su ltina m is carr ia ge of ju st ic e. Seco nd , th e ru le

m ay be rel ax edwher e th e ap pe ll an t ra is es anob jecti on to anord er whi ch he ha d n o o pp ortu ni ty to ra is e atth e d is tri ctco urt l ev el . Thir d, th e ru le do es no t b ar co ns id erat io n b y th e ap pe ll at e co urt i n the fir st in st an ce wh ere t he in te res t o f subs ta nt ia l ju st ic e is at s ta ke . Fou rth , a fed eral ap pe ll at e co urt i s ju st ifi edinres ol vi ng anis su e n otpa ss edon be lo w wher e th e p ro pe r res ol ut io n i s b ey on d a ny do ub t. Fi na ll y , it m ay be ap pr op ria te to co ns id er an is su e fi rs t ra is edon ap pe al if t ha t is su e p res en ts si gn ifi can t que st io ns of g en eral im pa ctor o f gr eat publ ic co nc ern . Dean W it te r Rey no ld

s, In c. v. Fern an de

z , 74 1 F .2d35 5, 3 60 –6 1 (1 1t h C ir. 1 98 4) (al te rat io n, fo otno te s, an d quo ta ti on m ark s o m it te d) . This cas e p res en ts a pu re qu es ti on of l aw th atwe be li ev e was an swe redin co rrec tl y be lo w. Furthe rm or e, th e si gn ifi can t que st io n p res en te d i n t hi s ap pe al ha s g en eral im pa ct , gi ve n t ha t i t rel at es to a st an da rdclaus e p res en t i n m os t i nd en tu res of t hi s t y pe . For t he fo reg oi ng reas on s, we fi nditap pr op ria te to co ns id er Co m pu Cred it ’s app eal . B. Pl ai nt iff s al so arg ue th atth e ap pl ic ab il it y of t he no -act io n c laus e can no t pr op erl y be ass ert edby pers on s— su ch as Off ic ers an d Di rect or s—who are n ot pa rti es to th e in de ntur es co nt ai ni ng th atclaus e. A nu m be r of co urts ap pl y in g New Yorklaw h av e ad dr es se d t hi s ar gu m en t, b ot h e xp li ci tl y an d i m pl ic it ly, an d ha ve he ldth atno n- pa rty defe nd an ts m ay st il l as se rt t he no -act io n c laus e. Se e Pea k Par tn er s, LP v. Rep ub li c Ban k, 19 1 F . App ’x 11 8, 1 26 –2 7 (3 d C ir. 2 00 6) (ap pl y in g New Yo rklaw) (fi nd in g n o- act io n c laus e ap pl ic ab le de sp it e p la in ti ff’s 11arg um en t tha t d efen da ntwas n ota pa rty to t he tru stin de ntur e); St er li ng Fed. Ban k, F.S.B. v. DLJ Mo rt g. Ca pi ta l, In c. , 20 10 W L 33 24 70 5, at*7 (N.D. Ill . Aug . 20 , 20 10 ) (ap pl y in g New Yo rk law) (ho ld in g t ha t n o- act io n c laus e b arre d p la in ti ff fro m bri ng in g s ui t ag ai ns t m ortg ag e-s erv ic er d efen da ntwho was n otpa rty to t he tru stin de ntur e); In r e Enr on Co rp . Sec ., Deri va ti ve & “ERISA” L it ig . , 20 08 W L 74 48 23 , at * 17 (S.D. Tex. M ar. 1 9, 2 00 8) (ap pl y in g New Yo rklaw) (st at in g t ha t co urts ha ve all owe d n on -p art ie s t o e nf or ce n o- act io n c laus es an d c it in g i n s up po rt La ng e v. Ci ti ba nk

, N.A. , 20 02 W L 20 05 72 8, at*6 –7 (Del . Ch. Au g. 1 3, 2 00 2) (ap pl y in g New Yo rklaw) an d Feld ba um v. McC

ro ryCo rp . , 19 92 W L 11 90 95 , at *8 (Del . Ch. J un e 2 , 19 92 ) (ap pl y in g New Yo rklaw) ). In Feld ba um , th e co urt ex pl ai ne d t ha t “ in co ns en ti ng to no -act io n c laus es by pur ch as in g b on ds , pl ai nt iff s waiv e th ei r ri gh ts to bri ng cla im s t ha t ar e co m m onto all bo nd ho ld ers ,” an d t ha t waiv er “ ap pl ie s equa ll y

to cla im s ag ai ns t n on -is su er d efen da nt s as to cla im s ag ai ns t i ss ue rs .” 19 92 W L 11 90 95 , at * 7. Th e co urt al so po in te d o utth atth e cl au se s atis su e in Feld

ba um , li ke th e cl au se s h ere, “ ex pl ic it ly m ak e th ei r sc op e de pe ndon th e n atur e o f th e cl ai m s b ro ug ht , no t o n t he id en ti ty of th e d efen da nt .” Id
. Here, Pl ai nt iff

s ag reedto th e te rm s o f th e n o- act io n c laus e whe n t he y pu rch as edth e n ot es , andth atclaus e b ars th e p ur su itof “ an yrem edy with re sp ect to th is Ind en tu re o r th e Sec ur it ie s” (em ph as is ad de d) . W e th eref or e fi ndth at
12Offi cers an d Di rect or s m ay ass ertth atth e n o- act io n c laus e p rev en ts Pla in ti ffs fro m br in gi ng th is su it . III. Co m pu Cred it , Offic ers , andDire ct or s ar gu e th atth e d is tri ctco urt erredin de nyin g t he ir m ot io ns to di sm is s Pl ai nt iff s’ cla im s b ecau se th e co urt re li edup on anin co rrec t fi nd in g o f la w—n am el y , th atth e n o- act io n c laus e d idno t b ar Pl ai nt iff s’ cla im s. We revi ew de no vo a di st ric t co urt’s d en ia l o f a m ot io n t o di sm is s. Se e Oxf

or d As se t Mgmt., Ltd. v. Ja ha ris , 29 7 F .3d11 82 , 11 87 (11 th Cir . 20 02 ). It i s u nd is pu te d t ha t the lan gu ag e o f th e n o- act io n c laus e st at es th at no te ho ld ers m ay

no t b rin g a ny acti on s wi th res pe ctto th e “ In de ntur e o r th e Secu rit ie s.” Itis als o c le ar tha t Pl ai nt iff s’ su itrel at es to th e trus t i nd en tu res or t he se cu rit ie s. Th e cl au se it se lf l is ts on ly two p os si bl e ex cep ti on s t o i ts pro hi bi ti on on su it s—th e trus te e d em an d e xc ep ti on an d t he rig htto pa ym en t ex cep ti on—an d Pl ai nt iff s ac kn owl ed ge th atth ey

ha ve no t t ak enth e st ep s re qu ire d t o qua li fy for ei th er o f th e ex cep ti on s. Th eref or e, th e que st io n b efo re u s i s wh ethe r th e d is tri ct co urt was co rrec t i n re lying up on th ree a lt ern at iv e rea so ns to fin d t he claus e in ap pl ic ab le , des pi te th e b ack gr ou ndpri nc ip le th atno -act io n c laus es ha ve

“ ge ne ral ly been up he ldby cou rts .” Mur ra y v. U.S. Ba nk

Tru st Na t’l Ass ’n , 36 5
13F.3 d 1 28 4, 1 28 9 n .9 (1 1t h C ir. 2 00 4) . A.

Fi rs t, we m

us t an swe r whe th er und er New Yo rklaw ex tra -co nt ractua l frau du le nttrans fer c la im s ar e ex em pt edfro m th e o pe rat io n o f th e n o- act io n cl au se . Thi s i ss ue was a ddres se d d ire ct ly in Feld ba um , inwhi ch pl ai nt iff

s 7 br in gi ng frau du le ntco nv ey an ce cl ai m s ar gu edth atno -act io n c laus es ap pl y on ly to cl ai m s fo r br each es of e xp res s i nd en tu re p ro vi si on s . 19 92 W L 11 90 95 , at * 6. Th e Dela ware Ch an cery Cou rt r eject edth atarg um en t, co nc is el y st at in g: “ The claus e in qu es ti on ba rs all act io n ‘with re sp ectto ’ th e in de ntur e o r th e se cu rit ie s. A frau du le ntco nv ey an ce ac ti on is su ch anact io n.” Id
. , at * 7. Itex pl ai ne d t ha t

“ ‘no- act io n’ claus es inth e in de ntur es co ns ti tu te waiv ers by pla in ti ffs ” o f th ei r rig ht s t o b rin g c la im s re la ti ng to th e se cu rit ie s, id
. at * 5, an d i ns te adve stth os e rig ht s i n t he tru st ee (o r in “ th e h ol de rs of asubs ta nt ia l am ou ntof b on ds ,” pr ov id ed th atth e tr us te e h as “ th e ri gh t t o p ro se cu te su ch a su itinth e fi rs t i ns ta nc e”), id
. at *6 . The co urt re as on edth atbe cau se th e p la in ti ffs ’ frau du le nttra ns fer c la im s

“ al le ge dl y

ari se fro m

tra ns act io ns by iss ue rs of t he ir b on ds an d a ss ertin juri es ari si ng fro m

th e b on dh ol de r st atus of p la in ti ffs . . . [,] [p la in ti ffs ] are h urt Plaintiffs argue (a

nd the district court found) that beca use the trustee demand e x ception 7 contemplates a

n event of Def ault, the entire no-ac tion clause only applies to claims pre dicated on a De fault. We do not agreethat the scope of an exc eption to a rule should nec essarily define the scope of the rule itself. 14de riv at iv el y

. . . . andth us sh ou ldsh are a ny rem edy th ey rece iv e o n a pa ri pa ss u ba si s wi th ot he r bo nd ho ld ers .” Id
. at * 8. Th eref or e, th e cl ai m s co ul d o nl y be pr op erl y be bro ug htby the tru st ee. Id
. The Dela ware Ch an cery Cou rt i n La ng e als o d is m is se d fr au du le nttra ns fer cl ai m s o f se curit yho ld ers , fin di ng th ata no -act io n c laus e p rev en te d t he ir s ui t. 20 02 W L 20 05 72 8, at*5 . In tha t ca se , pl ai nt iff s wer e h ol de rs of F ai rwo od Co rp or at io n’s (“ Fai rwo od ”) d eb en tu res an d b ro ug htanact io n a ga in stth e d ire ct or s of Fai rwo od ; Co ns ol id at edFurn itur e Co m pa ny (“ Co ns ol id at ed ”), a s ub si di ary of Fai rwo od ; an d a ffi li at es of aco m pa ny tha t al le ge dl y

co nt ro ll edFai rwo od . Id
. at *1 . Plai nt iff

s al le ge d t ha t d efen da nt s h adm ad e fraudul en t tran sf ers by sell in g so m e subs id iarie s o f Co ns ol id at edat u nf ai rly low p ric es . Id
. at * 4. Pl ai nt iff s ackno wled ge d t ha t the ir d eb en tures co nt ai ne d ano -act io n c laus e b utarg ue d t ha t th e cl au se di d n otap pl y

to th ei r cl ai m s. Id
. at*6 . The co urt s umm ari zed Pl ai nt iff s’ arg um en t t o b e “ th atth e [n o- act io n c laus e] som eh ow d oe s n otap pl y to th ei r cl ai m s, b ecau se th e am en de d c om pl ai ntatt em

pt s t o s ta te frau du le nt co nv ey an ce cl ai m s an d b ecau se th e co m pl ai ntall eg es th atFai rwo odan d Co ns ol id at edwere ei th er i ns ol ve ntor o n t he bri nkof i ns ol ve nc y at a ll rel ev an t ti m es .” Id
. The co urt re sp on de d t ha t “ [n ]eith er o f th e Deb en tu reh ol de rs ’ arg um en ts he lp s t he m

esc ap e th e cl ear i m

po rt o f [the no act io n- cl au se .] ” Id
. It
15ex pl ai ne d t ha t Feld ba um co nt ro ll edan d tha t “ th e p art ic ul ar n atur e o f a cl ai m th at is ass ert edon be ha lf o f th e Deb en tureh ol de rs as acla ss is no t d et erm in at iv e o f th e ap pl ic ab il it y

of [ th e n o- act io n c laus e]; wha t i s d et erm in at iv e is whet he r th e cl ai m is on e wit h re sp ectto th e In de ntur e o r th e Deb en tu res th em se lv es .” Id
. at*7 . Ern st v. Film Pro du ct io n C

or p. , 26 4 N.Y.S. 2 27 (N.Y. Sup . Ct. 1 93 3) em pl oyed a s im il ar l og ic . Ern st featur edbo nd ho ld er p la in ti ffs th at —wi sh in g t o se t as id e al le ge dl y

frau du le ntco nv ey an ces of c on tra ct s an d p ro pe rty by th e is su er to th e d efen da nt—p et it io ne d t he co urt t o app oi nta rece iv er o f th e p ro pe rty at is su e. Id
. at 2 28 . Defen da nt s ar gu edth atby the term s o f th e trus t i nd en tu re, pl ai nt iff s co ul d n otbri ng su itun le ss a pr io r de m an d h adbe enm ad e upo n t he tru st ee b y th e h ol de rs of aqu art er o f th e o ut st an di ng bo nd s— a co nd it io n an al og ou s t o aco nd it io n o f th e trus te e d em an d e xc ep ti oninth e in st an t ca se . Id
. The co urt fr am edth e is su e as : “ If p la in ti ffs ha ve no cap aci ty to b rin g an a ct io n un de r th e in de ntur e, th e que st io n a ris es whethe r un de r th e p res en t fo rm of a ct io n th ey m ay ob ta in a rece iv er p en de nt e li te [.]” Id
. It d et erm in edth atth e p la in ti ffs ’ cl ai m rel at edto th e b on ds an d tha t p la in ti ffs were “pr es um in g t o s pe akforall th e bo nd ho ld ers an d n otforth em se lv es alo ne .” Id
. at22 9. Ther efo re, the co urt fo un d th atth e in de ntur e co nd it io n b arri ng su itap pl ie d t o t he act io n a ndul ti m at el y de ni ed pl ai nt iff s’ m ot io n. Id
. Co urts ap pl y in g New Yo rklaw h av e co ns is te nt ly hel d, i n 16acco rd an ce wi th th e rat io na le of Feld ba um , La ng e , and Ern st , th atno -act io n cl au se s b ar fraudul en t co nv ey an ce cl ai m s. Se e, e.g . , Enr on , 20 08 W L 74 48 23 , at *9 ; McMah an &Co . v. W he re ho us e Entm’t, In c. , 85 9 F . Sup p. 7 43 , 74 9 (S .D.N.Y. 19 94 ), re v’d

in pa rt on othe r gro un ds , 65 F.3d10 44 (2dCir . 19 95 ); Vict or v. Rikl is , 19 92 W L 12 29 11 , at * 6 (S .D.N.Y. May 15, 1 99 2) . Altho ug h c ou rts ap pl y in g New Yo rklaw h av e fo un d n o- act io n c laus es ap pl ic ab le as age ne ral rul e, th ey ha ve be enwil li ng to ab ro ga te th atrul e u nd er o ne co ns is te nt ly ackn owl ed ge d e xc ep ti on : wh enth e trus te e, by reas on of c on fli ctof in te res t o r un

jus ti fiabl e u nwi ll in gn es s, cann otpro pe rly pu rs ue a rem edy fortru st be ne fic ia rie s. Se e, e.g . , CFIP Mas te r Fu nd , Ltd. v. Cit ib an k, N.A. , 73 8 F . Sup p. 2 d 45 0, 4 77 –7 8 (S .D.N.Y. 20 10 ) (“ [I]t is well est ab li sh edun de r New York l aw th at whe re . . . tru st ees are u nd er a dut y to en fo rce [ a] clai m

an d h av e im

pr op erl y an d un jus ti fiabl y

fai le d t o d o s o, the be ne fic ia rie s m ay bri ng a su iton be ha lf o f th e tru st , ana lo go us to st oc kh ol de rs ’ de riv at iv e su it s o n b eh al f of a co rp or at io n.” (in te rn al qu ot at io n m ark s o m it te d) ) (ex cu si ng fai lure t o c om pl y with t he no -act io n cl au se wher e trus te e al le ge dl y vi ol at edit s fi du ci ary du ti es ); Feld ba um , 19 92 W L 11 90 95 , at * 7 (“ I do no t m ean to im pl y th atco urts wil l ap pl y

no -act io n c laus es to ba r cl ai m s wh ere m is co nduc t b y th e trus te e is all eg ed ”). Bec au se a st an da rdno act io n c laus e v es ts inth e trus te e al l o f th e se cu rit y ho ld ers ’ rig ht s t o b rin g s ui t,
17m ak in g the tru st ee the on ly path t o arem edy , cou rts ha ve be enun wil li ng to

en fo rce s uc h c laus es when th e trus te e’s co nf li ct s o r irrat io na li ty bar tha t p ath t o rel ie f. As the Feld

ba um co urt ex pl ai ne d: Fo r th e sa m e rea so n t ha t equi ty has lo ng reco gn iz edth at , inso m e ci rcu m st an ces , cor

po rat e sh areh ol de rs wil l b e ex cu se d fr om m ak in g a de m an d t o s ue up on co rp or at e d ire ct or s, b utwil l b e p erm it te d t o s ue in th e co rp or at io n’s n am e th em se lv es , bo ndho ld ers wil l b e ex cu se d fro m co m pl ia nc e wit h ano -act io n p ro vi si on wher e th ey all eg e sp eci fic fact s wh ic h i f true est ab li sh th atth e trus te e it se lf h as br each edit s dut y

un de r th e in de ntur e o r is in cap ab le of di si nt eres te dl y

pe rfo rm in g t ha t dut y . 19 92 W L 11 90 95 , at * 7. Giv enth is est ab li sh edtru st ee m is co nduc t ex cep ti on , we fin d the pre se nt cas e—i nv ol vi ng no all eg at io ns of m is de ed s b y th e Tru st ee— factua ll y di st in gu is habl e fro m

cas es inwhi ch cla im s ar e b ro ug htag ai ns t the tru st ee. The refo re, we rejec t Pl ai nt iff s’ rel ia nc e o n How e v. Ban k o f N.Y . Mell on , 78 3 F . Supp . 2d46 6 (S .D.N.Y. 20 11 ) an d Metro po li ta n West

Ass et Man ag emen t, LLC

v. Magnu s Fu nd in g, Ltd. , 20 04 W L 14 44 86 8 (S .D.N.Y. Ju ne 25 , 20 04 ) (“ Met ro W es t” ) be cau se bo th of tho se cas es in vo lv edall eg at io ns th atth e trus te e h ad br each edit s fi du ci ary du ti es . The co urt i n Metro W es t ackno wled ge d t ha t the pr es en ce o f trus te e m is co nduc t was a de te rm in at iv e fac to r in it s d eci si on , st at in g

“ Feld ba um . . . is in ap pl ic ab le be cau se th ere was no cla im inth atcas e th atth e Trus te e p art ic ip at edinany wron gd oi ng , as o pp os edto th is cas e, whe re s uc h

18al le ge d wro ng do in g i s a c en tra l i ss ue .” 20 04 WL 14 44 86 8, at*5 n.4 . How e rel ie d

ex pl ic it ly on Metro W

es t inpe rm it ti ng pl ai nt iff

s t o b rin g c la im s ag ai ns t the tru st ee, an d t he co urt ex pl ai ne d i t wo ul d “ no t p res um e th atth e p art ie s i nt en de d t o l im itth e no te ho ld ers ’ rig ht s t o s ue on cla im s ar is in g o utof the Tru st ee al le ge dl y tak in g ex tra -co nt ractua l ac ti on or b reac hi ng it s fi du ci ary du ti es to th e n ot eh ol de rs .” 78 3 F. Supp . 2dat 4 74 (em

ph as is ad de d) . Becau se co urts inth e ab se nc e o f al le ga ti on s of tru st ee m is co nduc t h av e adhe redto th e g en eral rul e th atno -act io n c laus es ba r frau du le ntco nv ey an ce cl ai m s, we fi ndno pe rs ua si ve reas on to de vi at e fro m th at ru le inth e p res en t ca se . B. Seco nd , we m

us t ad dr es s wh ethe r Pl ai nt iff s’ m ajor it y

own ers hi p o f th e no te s s ho ul d s erv e as gro un ds to refu se to ap pl y th e n o- act io n c laus e. InNew York, co nt ract s ar e co ns tru edto effe ctua te th ei r pu rp os es . Bij an Desi gn er fo r Men , Inc . v. Fir ema n’

s Fu nd Ins . Co. , 70 5 N.Y.S.2 d 3 0, 3 3 (N.Y. Ap p. Di v. 2 00 0) . An i m po rta ntpu rp os e o f no -act io n c laus es is to “pr ot ectag ai ns t the ex erci se of po orjud gm en t b y

a si ng le bo nd ho ld er o r a s m al l g ro up of b on dh ol de rs , who m ig ht ot he rwis e b rin g asu itag ai ns t the is su er tha t m os t b on dh ol de rs wou ldco ns id er n ot to be inth ei r co ll ect iv e eco no m ic in te res t.” Feld ba um , 19 92 W L 11 90 95 , at * 5– 6 (rec it in g ra ti on al e fo r cl au se st at edin Co mment ar ies o n In de nt ur es § 5 .7 at23 2
19(1 97 1) ). Ther efo re, Pl ai nt iff s urg e th at“ [e]nfo rci ng th e n o- act io n c laus e in th e in st an t ca se wou ldno t s erv e th e p ur po se s fo r whi ch itwas p la cedinth e In de ntur e.” W

hi te bo x Co nv er ti bl e Arb itra ge Par tn er s , L.P. v. W

or ld Airwa ys , Inc
. , 20 06 W L 35 82 70 , at * 4 (N.D. Ga. Feb . 15 , 20 06 ). 8 The re ar e two pro bl em s wi th th is arg um en t u rg in g u s t o l oo k i nt o t he pu rp os es of t he no -act io n c laus e. Fir st , “ a co urt m us t b e co nc ern edwith wh atth e pa rti es in te nd ed , bu t o nl

y to th e ext en t tha t the

y evi de nc ed

wh at th ey i nt en de d b

y wh at th ey wr ot e .” Bro ad

v. Rock wel l In t’l Co rp . , 64 2 F .2d92 9, 9 47 (5t h C ir. Ap r. 19 81 ) (en ba nc ) (ap pl y in g New Yo rklaw) (em ph as is ad de d) . In o th er wo rd s, 9

“ [t]he be stev id en ce o f wha t p art ie s t o awrit te n a gr eem en t i nt en d i s wh atth ey say in th ei r writ in g. Th us , a writ te n a gr eem en t tha t i s co m pl et e, cl ear and Plaintiffs also argue that bec ause Sec tion 6.05 of the indentures g ives the majority the 8 ability to direct the “ time, method and place of conduc ting a ny proce edingfor a

ny reme dy available to the Trustee ” and Sec tion 6.06(e) of the indenture s g ives the majority veto power

over Trustee actions, the majority de facto controls litigation proc eeding s. Plainti ffs re ason that demandingcompliance with the other c onditions of the trustee demand exception to the noaction cla use is futile and ser

ves no purpose beca

use Plaintiffs hold ultim ate c ontrol. Howeve r, Section 6.05 of the indenture s also states that “the T rustee ma y ref use to follow any

direc tion [ by the majority] that conf

licts with law or this Indenture s or that Trusteedeter mines is unduly prejudicia l to the rig hts of other Sec urity holders or w ould involve the Trustee in personal liability . . . .” The ref

ore, the majority ’s right to control the manner in which a suit is brought and to veto suits brought by

the Trustee does not equate to empower ment to direct a ll lit iga

tion decisions; majority

owner ship alone is not sufficient to evisce ratethe nee d for c ompliance with the conditions of the trustee demand e x ception. In Bonner v. City of Prichard, 661 F.2d 1206, 1209 ( 11th Cir. 1981) (en ba nc), w e 9 adopted a s binding pre cede nt all decisions of the for mer F ifth Circuit handed down prior to October 1, 1981. 20un am

bi gu ou s o n i ts face m

us t b e en fo rcedacco rd in g t o t he pl ai n m ean in g o f it s te rm s.” Gre en

fi eld v . Phi ll es Reco rd

s, In c. , 78 0 N.E.2d16 6, 1 70 (N.Y. 20 02 ) (ci ta ti on an d i nt ern al qu ot at io n m ark s o m it te d) . Here, th e n o- act io n c laus e’s te rm s are abs ol ut e: no te ho ld ers “ m ay no t p ur su e an y

rem edy with re sp ectto th is In de ntur e o r th e Sec ur it ie s” un le ss th ey co m pl et e th e co nd it io ns pre ced en t al lo win g t he m

to fal l wi th in on e o f th e two st at edex cep ti on s. Itis tru e th at m ajor it y own ers hi p i s o ne of t he ne ces sa ry ele m en ts to qu al ify for the tru st ee de m an d exce

pt io n to th e cl au se . Yet i n a dd it io n t o m ajor it y own ers hi p, the ex cep ti on als o re qu ire s tha t n ot eh ol de rs (1) gi ve th e Tru st ee n ot ic e o f a Defaul t, (2 ) m ak e a d em an d o n t he Trus te e to pu rs ue a rem edy , (3) off er the Trus te e reas on ab le sec ur it y

or i nd em ni ty, an d (4 ) gi ve th e Tru st ee s ix ty day s t o t ak e act io n be fo re n ot eh ol de rs pu rs ue rem ed ie s i nd ep en de nt ly of th e Tru st ee. Loo ki ng at t he un am bi gu ou s t ex t o f th e cl au se , we see no in te ntto all ow n ot eh ol de rs to fal l withi n a n exce

pt io n if t he y

have no t s at is fie d a ll th e st at edpre -co nd it io ns to th at ex cep ti on . Seco nd , eve n i f we were t o l oo k o ut si de th e te xtof t he claus e an d e va lu at e whe th er i ts pu rp os es were fu lfi ll ed , Pla in ti ffs ’ arg um en ts wou ldrem ai n un co nv in ci ng . Alth ou gh on e p ur po se of t he no -act io n c laus e is to de te r su it s br ou gh t b y

th e m in or it y , othe r pu rp os es of t he claus e are to “pr ev en t ra sh , 21pr eci pi ta te , or h aras si ng su it s b y bo nd ho ld ers who di srup t co rp or at e aff ai rs ,” W at ts v. Mis so ur i-K

an sa s- Texa s R.R. Co ., 38 3 F .2d57 1, 5 74 (5t h C ir. 1 96 7) , andto pr ot ectth e is su er fro m

a m ul ti pl ic it y of l aws ui ts , Qui rk

e v. St. Lo uis- Sa n Fra nc is co Ry. Co. , 27 7 F .2d70 5, 7 09 (8t h C ir. 1 96 0) . Major it y own ers hi p o ffer s no gu aran te e th atth os e p ur po se s ar e fu lfi ll ed . W e co nc lu de th atth e p la in la ng ua ge of t he no -act io n c laus e g iv es no in di cat io n t ha t m ajor ity own ers hi p i n an d o f it se lf i s re as on to all ow n ot eh ol de rs to bri ng su itwhen th ey do no t fa ll withi n ast at edex cep ti on , andanex am in at io n o f th e p ur po se s o f th e cl au se co nf irms th atou r co nc lu si on is co rrec t. We the refo re re ject t he “ no ve l p ro po si ti on th ata pa rty to aco nt ractsh ou ldbe ex cu se d fr om co m pl y in g wi th a co nd it io n pr eced en t m erel y

be cau se itwas ca

pa bl e of co m pl ia nc e.” McMa ha n , 85 9 F . Sup p. at74 9 (quo ti ng th e m ag is tra te jud ge ’s rep ort an d re co m m en da ti on ). C. Thi rd , we m

us t ad dr es s wh ethe r itis rel ev an t tha t Co m pu Cred itm ad e it im po ss ib le for

Pla in ti ffs to co m

pl y with o ne of t he co nd it io ns of the tru st ee de m an d e xc ep ti on . Plai nt iff s ar gu e th atbe cau se th e trus te e d em an d e xc ep ti on requi res no te ho ld ers to waitsi xt y da y s af te r m ak in g ade m an d o n the tru st ee an d Co m pu Cred itan no un cedit s d iv id en ds les s tha n s ix ty day s i n a dv an ce, Pl ai nt iff s were es to pp edfro m

co m pl y in g wi th th e n o- act io n c laus e whe n t he y so ug htto
22en

joi n t he is su an ce o f di vi de nd s. Th e “pr ev en ti on do ctrin e,” upo n wh ic h Pl ai nt iff s’ arg um en t re li es , di ct at es th ata pa rty cann otin si stth ata co nd it io n pr eced en t b e p erfo rm edwhen th e n on -p erfo rm an ce was cau se d b y th e p arty it se lf. Se e Ban k o

f N.Y . v. Tyco Int ’l Gr ou

p, S.A. , 54 5 F . Sup p. 2 d 3 12 , 32 4 n .81 (S.D.N.Y. 20 08 ). “ Und er s uc h c irc um st an ces , th e p rev en ti on do ctrin e wil l o pe rat e to ex cu se [a] con di ti on pre ced en t wh ic h was wr on gf ul lypre ve nt edfro m

oc cu rri ng

. . . . ” Loma gl io Ass oc s. In c. v. LBK Mkt g. Co rp . , 89 2 F . Sup p. 8 9, 9 3 (S .D.N.Y. 19 95 ) (em

ph as is ad de d) . The “pr ev en ti on do ctrin e is subs ta nt ia ll y rel at edto th e im pl ie d c ov en an t o f go odfai th an d fa ir d eal in g i m pl ic itinev ery co nt ract .” Ca uf f, Li pp man &Co . v. Apo ge e Fin . Gro up , Inc
. , 80 7 F . Sup p. 1 00 7, 1 02 2 (S .D.N.Y. 19 92 ). Howev er, “ th e p rev en ti on do ctrin e d oe s n otap pl y wher e, un de r th e co nt ract , on e p arty

ass um es th e ri skth atful fil lm en t o f th e co nd it io n p rece de ntwil l be pre ve nt ed .” Mob il e Co mmc’n s C or p. o f Am. v. MCI Co mmc’n s C or p. , 19 85 W L 11 57 4, at*4 (Del . Ch. Au g. 1 7, 1 98 5) ; se e a ls o Do he rt y v. Am. Home Pro ds
. Co rp . , 20 00 WL 77 79 48 , at * 2 (2 d C ir. J un e 1 5, 2 00 0) . The re ar e a num

be r of gro un ds up on whi chwe fin d the pre ve nt io n d oc tri ne in ap pl ic ab le to th e cas e athand . Firs t, the rat io na le be hi ndth e d oc tri ne is th at : One who un

jus tl y pre ve nt s t he pe rfo rm an ce o r th e h ap pe ni ng of a co nd it io n o f hi s o wn p ro m is so ry du ty the reb y

eli m in at es itas s uc h a co nd it io n. He wi ll no t b e p erm it te d t o t ak e ad va nt ag e o f hi s o wn wro ng , andto esc ap e fro m li ab il it y forno t re nd eri ng hi s p ro m is ed 23pe rfo rm an ce b y pre ve nt in g t he happ en in g o f th e co nd it io n o n wh ic h i t was pro m is ed . Ell en be rg

Mor ga n C or p. v. Ha rd

Rock Ca fé Ass oc s ., 50 0 N.Y.S.2 d 6 96 , 69 9 (N.Y. App . Div . 19 86 ) (quo ti ng 3A Co rb in on Co ntra ct s § 7 67 , p. 5 40 ). Here, Co m pu Cred itesc ap edno du ty by fai li ng to gi ve si xt y -d ay s n ot ic e; infact , th e co nd it io ns pre ced en t atis su e in th is cas e are no t p re-c on di ti on s t o c on tra ctua l du ti es of e ithe r pa rty. Inst ead , th ey are co nd it io ns all owi ng Pla in ti ffs to fal l wi th in anex cep ti on to anag reed -upo n c on tra ctua l b ar t o s ui ts bro ug htby Plai nt iff s. Pl ai nt iff s fa il to off

er— an d we c an no t fi nd—an y cas es to jus ti fy

ex te nd in g the pr ev en ti on do ctrin e farbe y on d i ts est ab li sh edli m it s t o app ly und er the se ci rcu m st an ces . Seco nd , “ [t]he ke y

op erat iv e la ng ua ge inth e d efi ni ti on of t he pre ve nt io n do ctrin e is th e te rm

‘ wro ng fu ll y

pre ve nt ed .’ If . . . defen da nt ’s all eg ed ‘prev en ti on ’ is au th or iz edby the co nt ract , th enna tural ly it d oe s n otco ns ti tu te a br each an d c an no t b e co ns id ered‘ wro ng fu l.’” A.I.C. Ltd. v. Map co Petr ol eu m Inc
. , 71 1 F . Sup p. 1 23 0, 1 23 8 n .24 (D. Del. 1 98 9) . Evenif t he pre ve nt io n d oc tri ne were t o app ly in thi s ca se , Sect io n 1 0.0 1 o f th e trus t i nd en tu res requi res Co m pu Cred itto gi ve on ly twent y -d ay s n ot ic e b efo re i t i ss ue s a d iv id en d. Co m pu Cred itga ve su ch no ti ce. The refo re, Co m pu Cred itco m

pl ie d wi th th e te rm s of th e co nt ractan d i ts actof g iv in g l es s t ha n s ix ty-days no ti ce o f a d iv id en d was 24no t wro ng fu l. IV.

W e fi ndunpe rs ua si ve all of t he pro ffer edreas on s fo r de vi at in g fr om th e pl ai n l an gu ag e o f th e n o- act io n c laus e b arri ng ho ld ers of s ecu rit ie s fr om bri ng in g an y cla im s “ with re sp ectto th is Ind en tu re o r th e Sec ur it ie s.” Th e cl au se it se lf id en ti fie s t wo ex cep ti on s t o t ha t ru le —the tru st ee d em an d e xc ep ti on an d t he rig ht to pa ym en t ex cep ti on—an d we h av e id en ti fie d o ne jud ic ia l ex cep ti on to th e ru le —wh enth e trus te e is accu se d o f m is co nduc t. No ne of the se ex cep ti on s ap pl y to th e p res en t ca se , bu t Pl ai nt iff s u rg e u s t o fi ndne w exc ep ti on s. We fin d t he ir arg um en ts un co nv in ci ng . The no -act io n c laus e h ere i s n otanin di vi du al iz edco nt ractco nd it io n pa rti cu la r to th es e p art ie s; itis a st an da rdpro vi si on pre se ntinm an y tru st in de ntur es . As su ch , it“ m us t b e g iv ena co ns is te nt , un ifo rm in te rp ret at io n.” Sh ar on St eel

Co rp . v. Cha se Man ha ttan Ban k, N.A. , 69 1 F .2d10 39 , 10 48 (2dCir . 19 82 ) (d is cu ss in g “ bo il erp la te ” co nt ractlan gu ag e). Su ch un ifo rm in te rp ret at io n o f st an da rdco nt ractlan gu ag e en su res effec ti ve fun ct io ni ng of o urfin an ci al m ark et s, Bro ad , 64 2 F .2dat 9 43 , an d b eg et s s tabi li ty, Sh ar on St eel , 69 1 F .2dat 1 04 8. Bec au se we fin d n o p ers ua si ve , leg al ly gro un de d re as on to de pa rt f ro m th e es tabl is he d l aw th atno -act io n c laus es are g en eral ly app li cab le , we REVERSE an d
25REMAND fo r di sm is sa l o f Pl ai nt iff s’ cla im s. REVERSED a nd REMANDED.

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