Title: Quadrant Structured Products Co., Ltd. v. Vertin, et al.
Citation: N/A
Docket Number: 338, 2012
State: Delaware
Issuer: Delaware Supreme Court
Date: November 7, 2013

IN THE SUPREME COURT OF THE STATE OF DELAWARE 
 
QUADRANT STRUCTURED 
§ 
PRODUCTS CO., LTD.,  
§  
No. 338, 2012 
Individually and Derivatively on 
§ 
behalf of Athilon Capital Corp., 
§  
Court Below: Court of Chancery of 
 
 
§  
the State of Delaware 
 
Plaintiff Below, 
§ 
 
Appellant, 
§  
C.A. No. 6990 
 
 
§ 
 
v. 
 
§ 
 
 
§ 
VINCENT VERTIN, MICHAEL 
§ 
SULLIVAN, PATRICK B.  
§ 
GONZALEZ, BRANDON JUNDT, § 
J. ERIC WAGONER, ATHILON 
§ 
CAPITAL CORP., ATHILON  
§ 
STRUCTURED INVESTMENT 
§ 
ADVISORS LLC, EBF &  
§ 
ASSOCIATES, LP, 
§ 
 
 
§ 
 
Defendants Below, 
§ 
 
Appellees. 
§ 
 
 
 
Submitted: October 23, 2013 
 
 
Decided: 
November 7, 2013 
 
Before HOLLAND, BERGER, JACOBS and RIDGELY, Justices, and SCOTT, 
Judge* constituting the Court en Banc. 
Upon appeal from the Court of Chancery.   CERTIFICATION 
OF 
LEGAL 
QUESTIONS TO THE NEW YORK COURT OF APPEALS. 
Lisa A. Schmidt, Catherine G.  Dearlove, and Russell C. Silberglied, Esquires, 
Richards, Layton & Finger, P.A., Wilmington, Delaware; Of Counsel:  Harold S. 
Horwich, Sabin Willett (argued), and Samuel R. Rowley, Esquires, Bingham 
McCutchen LLP, Boston, Massachusetts, for Appellants. 
                                                 
* Sitting by designation pursuant to art. IV, § 12 of the Delaware Constitution and Delaware 
Supreme Court Rules 2 and 4(a) to constitute the quorum required. 
 
2 
Collins J. Seitz, Jr., Garrett B. Moritz, and Eric D. Selden, Esquires, Seitz Ross 
Aronstam & Moritz LLP, Wilmington, Delaware; for Appellees EBF & 
Associates, LP. 
Philip A. Rovner, Esquire, Potter Anderson & Corroon LLP, Wilmington, 
Delaware; Of Counsel:  Philippe Z. Selendy, Nicholas F. Joseph (argued), and 
Sean P. Baldwin, Esquires, Quinn Emanuel Urquhart & Sullivan, LLP, New York, 
New York, for Appellees Athilon Capital Corp., Athilon Structured Investment 
Advisors LLC, Vincent Vertin, Michael Sullivan, Patrick B. Gonzalez, Brandon 
Jundt and J. Eric Wagoner. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
JACOBS, Justice: 
 
 
 
3 
 
Pending before this Court is an appeal from an order of the Delaware Court 
of Chancery dismissing a complaint.  The plaintiff below, appellant, Quadrant 
Structured Products Company, Inc. (“Quadrant”), holds certain Notes issued by 
Athilon Capital Corp. (“Athilon”), an allegedly insolvent Delaware corporation.  
The Notes are long term obligations covered by two separate trust indentures that 
are governed by New York law.  The defendants-below are EBF & Associates, LP 
(“EBF”), which indirectly owns 100% of Athilon’s equity;1 Athilon Structured 
Investment Advisors (“ASIA”), an affiliated EBF entity, Athilon’s board of 
directors, and (as a nominal defendant) Athilon. 
 
In a two paragraph order issued on June 5, 2012, the Court of Chancery 
granted the defendants’ motion to dismiss Quadrant’s complaint, on the ground 
that all claims alleged therein were barred for failure to comply with the “no-
action” clauses in the Athilon trust indentures.  The dismissal order, a copy of 
which is attached to this Certificate as Exhibit A, cited two Court of Chancery 
decisions that the court found “directly on point”:  Feldbaum v. McCrory Corp., 
1992 WL 119095 (Del. Ch. June 1, 1992) and Lange v. Citibank, N.A., 2002 WL 
2005728 (Del. Ch. Aug. 13, 2002).  In both cited cases the Court of Chancery, 
applying New York law, held that those bondholder actions were barred by the no-
action clauses of the respective trust indentures that governed the bonds at issue. 
                                                 
1 EBF disputes that it is the ultimate parent of Athilon. 
 
4 
 
The plaintiff, Quadrant, appealed to this Court.  By order dated February 12, 
2013, this Court remanded the case to the Court of Chancery with directions to 
analyze the significance under New York law (if any) of the differences between 
the wording of the no-action clauses at issue in the two cited cases and in this 
Athilon case.  A copy of this Court’s remand order is attached to this Certificate as 
Exhibit B. 
 
On June 20, 2013, the Court of Chancery, in a detailed and highly textured 
analysis of relevant New York case law, issued a Report on Remand, a copy of 
which is attached to this Certificate as Exhibit C.  In its Report, the Court of 
Chancery held that: (i) “the language of the Athilon no-action clause distinguishes 
this case from Feldbaum and Lange,” and (ii) the motion to dismiss should be 
denied except as to two (and part of a third) of the ten Counts of the Quadrant 
complaint.  The matter was then returned to this Court, and was re-argued before 
us on October 23, 2013.  
 
Section 500.27(a) of the Court of Appeals Rules of Practice authorizes 
certification of cases to the New York Court of Appeals “[w]henever it appears 
to . . . a court of last resort of any other state that determinative questions of New 
York law are involved in a case pending before that court for which no controlling 
precedent of the Court of Appeals exists . . . .”2 We have concluded that a 
                                                 
2 N.Y. COMP. CODES R. & REGS., tit. 22 § 500.27(a) (2013).  
 
5 
resolution of the appeal before us depends on dispositive and unsettled questions of 
New York law that, in our view, are properly answered in the first instance by the 
New York Court of Appeals.  Our reasons for so concluding are set forth below. 
I. 
STATEMENT OF FACTS3 
 
A. Nature of the Case 
 
 
Athilon, a Delaware corporation, was formed in 2004 and (through a 
subsidiary) sold credit derivative products—in the form of “credit default swaps”4 
covering senior tranches of collateralized debt obligations to large financial 
institutions.  To finance those activities, Athilon raised (in addition to its initial 
equity capital) $600 million of debt capital consisting of $350 million in senior 
subordinated notes, $200 million in subordinated notes, and $50 million in junior 
notes (collectively, the “Notes”).  The Notes are long term obligations covered by 
two separate indentures; one created in 2004 between Athilon and Deutsche Bank 
Trust Company Americas as Indenture Trustee; and the other, created in 2005 
between Athilon and The Bank of New York, as Indenture Trustee.  Because for 
                                                 
3 The facts are drawn from the allegations of the complaint filed in the Court of Chancery. 
4 Athilon and its subsidiary are referred to collectively as “Athilon.”  Credit swaps are contracts 
in which a credit derivative product company, such as Athilon, promises to make one or more 
defined payments should a specified degree of losses be sustained on a reference portfolio, as a 
result of defaults or other “credit events” by one or more designated obligors during a specified 
(typically, multi-year) period of time. 
 
6 
present purposes the indentures are substantively identical, they are referred to 
singly as “the Indenture.”  
 
Athilon’s organizational documents limit its permissible lines of business to 
selling credit default swaps, and require compliance with strict operating 
guidelines.  Those guidelines mandate that if a “Suspension Event”5 occurs and 
remains uncured, then Athilon must enter into “runoff” mode, meaning that 
Athilon cannot write new business and must pay off existing credit default swaps 
as they mature. 
 
Before the financial crisis of 2008, Athilon underwrote over $50 billion in 
nominal credit default risk, but on a highly leveraged basis.  Measured against 
Athilon’s equity, Athilon’s leverage ratio was a stratospheric 506:1.  At that level, 
a 0.2% loss on the collateralized debt obligations covered by Athilon’s credit 
default swaps would wipe out its equity cushion and render Athilon insolvent, at 
least on paper.  Even so, the rating agencies gave Athilon “AAA/Aaa” 
counterparty credit ratings and investment grade debt credit ratings. 
 
In 2008, Athilon found itself in distress and by the end of that year had lost 
its AAA/Aaa ratings.  By 2010, Athilon had unwound two credit default swaps at a 
cost of approximately $370 million—more than three times Athilon’s equity 
                                                 
5 Generally, a Suspension Event involves, inter alia, capital shortfalls, leverage ratios, or 
insolvency.  
 
7 
capital.  By August 2010, Athilon no longer held any investment grade debt or 
counterparty credit ratings.  Under its operating guidelines, Athilon entered 
permanent “runoff” mode. 
 
With Athilon in distress, the trading prices of its debt securities fell 
precipitately.  That enabled EBF to acquire a large position in the junior notes at a 
significant discount.  In August 2010, EBF acquired control of 100% of Athilon’s 
equity, and installed Athilon’s current board of directors.  Those directors, the 
complaint alleges, are dominated and controlled by EBF.  Quadrant acquired its 
position in the Notes in May 2011, nine months after EBF took control. 
 
In its complaint Quadrant alleges that as of September 30, 2011, Athilon’s 
shareholders’ equity, measured according to GAAP, stood at a negative $660 
million.  Quadrant alleges that Athilon is insolvent and has no prospect of 
returning to solvency, because it can only sell credit default swaps and because the 
market for that business has collapsed for enterprises, like Athilon, that hold no 
collateral. 
 
At the heart of Quadrant’s lawsuit is its claim that in these circumstances, a 
properly motivated board of directors would preserve Athilon’s value for orderly 
liquidation in 2014, when the last credit default swap expires.  The EBF board 
designees, however, are (according to Quadrant) pursuing strategies designed to 
benefit EBF and its affiliates at the expense of the remaining classes of Note 
 
8 
holders.  Specifically, the directors have caused Athilon to continue paying interest 
on the junior notes (which EBF holds), even though Athilon had a contractual right 
to defer those interest payments and those notes would receive nothing in an 
orderly liquidation.  Athilon’s directors also allegedly agreed to pay ASIA above-
market fees to manage Athilon’s day-to-day operations.  The Court of Chancery 
characterized Quadrant’s claim thusly: 
Together, the EBF designees and ASIA have embarked on a high-risk 
investment strategy, contrary to the terms of Athilon’s governing 
documents, that amounts to a “heads EBF wins, tails everyone else 
loses” bet.  If the high-risk investments succeed, then the underwater 
Junior Notes and equity will benefit.  If the investments fail, then the 
more senior tranches of Notes will bear the loss.”6  
 
 
In October 2011, Quadrant filed this Court of Chancery action against EBF 
and its affiliates and against Athilon and its officers and directors.  As amended, 
the complaint contained ten Counts.  For present purposes, the relevant fact is that 
only two of those Counts—Counts VII and VIII—and part of a third, Count X, 
seek to enforce rights under the Indenture.7  The balance of Quadrant’s claims for 
relief are based on either Delaware fiduciary or statutory law. 
 
                                                 
6 Report on Remand, Exhibit C, at p. 5. 
7 Count VII claimed that Athilon breached the Indenture’s implied covenant of good faith and 
fair dealing, and Count VIII asserted that EBF had tortiously interfered with Athilon’s 
obligations under the Indenture.  Count X charged EBF and ASIA with civil conspiracy for 
actions taken in concert with the individual defendants.  
 
9 
B. 
Circumstances  Out  of Which The 
 
Questions of New York Law Arise  
 
 
The circumstances out of which the questions of New York law arise are as 
follows:  The basis of the defendant’s motion to dismiss the complaint was (and is) 
that all of the claims asserted in Quadrant’s complaint are barred by the no-action 
clause of the Indenture, which is governed by New York law.  The no-action 
clause pertinently provides that: 
No holder of any Security shall have any right by virtue or by availing 
of any provision of this Indenture to institute any action or proceeding 
at law or in equity or in bankruptcy or otherwise upon or under or 
with respect to this Indenture, or for the appointment of a trustee, 
receiver, liquidator, custodian or other similar official or for any other 
remedy hereunder, unless such holder . . . [complies with specified 
conditions]. 
 
 
It is undisputed that Quadrant did not comply with the conditions set forth in 
the Athilon no-action clause before filing suit.  In support of their motion to 
dismiss the complaint, the defendants relied on the two cases previously cited, 
Feldbaum v. McCrory Corp. and Lange v. Citibank, N.A.  In those cases, the 
Delaware Court of Chancery, applying New York law, dismissed both actions on 
the ground that they were barred by the respective indenture no-action clauses.  In 
its June 5, 2012 order (Exhibit A to this Certificate), the court granted the motion 
to dismiss, citing Feldbaum and Lange as “directly on point,” but without engaging 
in any analysis.  
 
10 
 
On appeal to this Court, Quadrant argued that the no-action clauses in 
Feldbaum and Lange indentures were “substantially different” from the no-action 
clause in the Athilon Indenture.  Specifically, the no-action clauses in Feldbaum 
and Lange barred actions to enforce not only rights arising under the respective 
indentures, but also “any remedy with respect to this Indenture or the Securities.”8  
In contrast, the Athilon no-action clause bars only actions to enforce rights “upon 
or under or with respect to this Indenture.”9  Absent from the Athilon no-action 
clause is the phrase “or the Securities”—language that was contained in the no-
action clauses in the Feldbaum and Lange indentures. 
 
By Order dated February 12, 2013 (Exhibit B to this Certificate), this Court 
determined that the current record was insufficient for appellate review, and 
remanded the case to the Court of Chancery with instructions “to issue an opinion 
analyzing the significance (if any) under New York law of the differences between 
the no-action clauses in the Lange and Feldbaum indentures and the Athilon 
Indenture.”  The Remand Order further instructed that “[t]he analysis should 
include a discussion of decisions by New York courts, and other courts applying 
New York law, that bear on the issue presented here.”  This Court retained 
jurisdiction to consider the implications of the Report on Remand. 
                                                 
8 Italics added. 
9 Italics added. 
 
11 
 
On June 20, 2013, the Court of Chancery issued its 55 page Report on 
Remand (Exhibit C to this Certificate).  In that Report the Court of Chancery, after 
extensively analyzing the New York case law, concluded—contrary to its earlier 
conclusion—that: 
[A]s a matter of New York law, the differences between the Athilon 
[no-action] 
[c]lause 
and 
the 
Feldbaum/Lange 
clause 
are 
significant. . . . the Athilon Clause does not apply to Counts I through 
VI and IX of the Complaint, or to Count X to the extent it seeks to 
impose liability on secondary actors for violations of the other counts.  
The clause applies to Counts VII and VIII of the Complaint, subject to 
the outcome of Quadrant’s other arguments on appeal.10 
 
 
The case was then returned to this Court, which held a supplemental oral 
argument on October 23, 2013, to enable the parties to argue the implications of 
the Report on Remand.  Quadrant argued that the Report on Remand correctly 
decided the dispositive New York law issues, and that the order of dismissal 
should be modified to conform to the conclusions in that Report.  The defendants, 
however, maintained that that Report was legally incorrect and that the Court of 
Chancery’s June 5, 2012 order of dismissal reflected the correct construction of 
New York law.  Neither party was able to identify any decision by the New York 
Court of Appeals (or any lower New York court) that directly addresses, let alone 
disposes, of the questions of New York law this Court is being asked to decide.11  
                                                 
10 Exhibit C to this Certificate, at 54-55. 
11 Gen. Inv. Co. v. Interborough Rapid Transit Co., 193 N.Y.S. 903 (N.Y. App. Div. 1922) aff'd, 
139 N.E. 216 (N.Y. 1923), which was decided before the adoption of the Trust Indenture Act, 
 
12 
Those questions are not controlled by precedent.  Moreover, however those 
questions may be resolved, the answers will be determinative of the case before us.  
For those reasons, and because of the need for certainty in the law controlling the 
instruments that govern publicly traded bonds, this Court unanimously determined 
that the New York Court of Appeals should have the opportunity to decide those 
questions in the first instance.  
II. 
THE QUESTIONS OF NEW YORK LAW,  
 
NOT CONTROLLED  BY  PRECEDENT,  
 
THAT MAY BE DETERMINATIVE 
 
 
A resolution of the appeal before us depends upon the answer to two 
questions of New York law that are not controlled by precedent.  This Court 
certifies the following questions to the New York Court of Appeals: 
(1) 
A trust indenture no-action clause expressly precludes a security 
holder who fails to comply with that clause’s preconditions, from 
initiating any action or proceeding upon or under or with respect to 
“this Indenture,” but makes no reference to actions or proceedings 
pertaining to “the Securities.”  
 
The question is whether, under New York law, the absence of any 
reference in the no-action clause to “the Securities” precludes 
enforcement only of contractual claims arising under the Indenture, or 
whether the clause also precludes enforcement of all common law and 
statutory claims that security holders as a group may have. 
 
(2) 
In its Report on Remand (Exhibit C), the Court of Chancery found 
that the Athilon no-action clause, which refers only to “this 
                                                                                                                                                             
addressed whether a no-action clause with no reference to “the Securities” precluded a security 
holder’s action to collect outstanding principal and interest due under the securities.  
 
13 
Indenture,” precludes enforcement only of contractual claims arising 
under the Indenture.  The question is whether that finding is a correct 
application of New York law to the Athilon no-action clause. 
 
III. 
WHY THESE ISSUES SHOULD BE ADDRESSED 
 
BY  THE  COURT  OF  APPEALS AT THIS TIME 
 
 
In our national securities markets, the law governing many (if not most) 
publicly traded debt securities is a creature of New York law.  Important rights and 
requirements pertaining to those securities are expressed in indentures that are, and 
for over a century have been, governed by New York law.  As a consequence, New 
York has a very strong interest in assuring that those markets function properly.  
An important requirement for properly functioning public debt security markets is 
that the rights pertaining to those securities be certain and predictable to both 
investors and issuers.  The New York Court of Appeals is the most authoritative 
tribunal empowered to adjudicate definitively the rights and requirements 
contained in indentures governed by New York law.  For that reason, and because 
New York has the stronger interest in this issue, in contrast to that of Delaware, it 
is appropriate that the Court of Appeals be afforded the opportunity to adjudicate 
the certified issues in the first instance.  
 
Moreover, the certified questions, which test the boundaries of a no-action 
clause’s coverage, are most frequently raised in actions asserting non-contractual 
claims that arise under the law of the issuer’s state of organization.  As a 
consequence, those questions are often decided by non-New York courts—as 
 
14 
evidenced by the Delaware cases interpreting the no-action clauses contained in 
New York bond contracts.  Because the certified questions have not been raised 
directly before New York courts (as the dearth of case law suggests)—but are 
raised frequently before courts in sister states—it is particularly important that the 
New York Court of Appeals give guidance to those latter courts by addressing 
these questions on certification at this time. 
* * * * 
 
We direct the Clerk of this Court to send this opinion to the Clerk of the 
New York Court of Appeals, as our certificate, together with the parties’ briefs and 
appendices.  We will take no further action in this appeal until after the New York 
Court of Appeals acts on this certification request. 
 
 
 
EXHIBIT A 
 
 
 
 
 
EXHIBIT B 
 
 
IN THE SUPREME COURT OF THE STATE OF DELAWARE 
 
QUADRANT STRUCTURED 
§ 
PRODUCTS CO., LTD.,  
§  
No. 338, 2012 
Individually and Derivatively on 
§ 
behalf of Athilon Capital Corp., 
§  
Court Below: Court of Chancery of 
 
 
§  
the State of Delaware 
 
Plaintiff Below, 
§ 
 
Appellant, 
§  
C.A. No. 6990 VCL 
 
 
§ 
 
v. 
 
§ 
 
 
§ 
VINCENT VERTIN, MICHAEL 
§ 
SULLIVAN, PATRICK B.  
§ 
GONZALEZ, BRANDON JUNDT,  § 
J. ERIC WAGONER, ATHILON 
§ 
CAPITAL CORP., ATHILON  
§ 
STRUCTURED INVESTMENT 
§ 
ADVISORS LLC, EBF &  
§ 
ASSOCIATES, LP, 
§ 
 
 
§ 
 
Defendants Below, 
§ 
 
Appellees. 
§ 
 
 
 
Submitted:  February 5, 2013 
 
 
Decided:     February 12, 2013 
 
Before  STEELE,  Chief  Justice,  HOLLAND,  BERGER,  JACOBS  and 
RIDGELY, Justices, constituting the Court en Banc. 
 
 
 
         O R D E R 
 
 
This  12th  day  of  February  2013,  upon  consideration  of  the  briefs  of  the 
parties, and their contentions in oral argument, it appears to the Court that: 
1. 
Quadrant 
Structured 
Products 
Co., 
Ltd., 
the 
plaintiff­below 
(“Quadrant”), appeals from a Court of Chancery order granting a motion to dismiss 
 
 
 
EFiled:  Feb 12 2013 12:26PM EST  
Filing ID 49482383 
Case Number 338,2012 
 
2
by the defendants, who are Athilon Capital Corp. (“Athilon”), Athilon’s officers 
and directors, EBF & Associates, LP (“EBF”), and Athilon Structured Investment 
Advisors  LLC  (“ASIA”)  (collectively,  “defendants”).    We  conclude  that  the 
current record is insufficient for appellate review.  Accordingly, the case must be 
remanded  to  the  Court  of  Chancery  to  issue  an  opinion  stating  its  reasons  for 
concluding  that  Quadrant’s  claims  are  barred  by  the  no­action  clause  in  the 
indenture governing the Athilon securities that Quadrant holds. 
2. 
In October 2011, Quadrant, a holder of Athilon debt securities, brought 
this  action  asserting  claims  against  Athilon  and  its  officers  and  directors,  and 
against  EBF  (a  partnership  that  indirectly  controls  Athilon)  and  ASIA  (an  EBF 
affiliate  that  manages  Athilon  on  a  day­to­day  basis).    On  June  5,  2012,  based 
solely on the parties’ briefs, the Court of Chancery granted the defendants’ motion 
to dismiss Quadrant’s Amended Complaint.1 
3. 
The  order  dismissing  the  Amended  Complaint  consists  of  two  short 
paragraphs which conclude that dismissal was warranted “in light of the plaintiff’s 
failure to comply with the no­action clauses in the indentures governing the debt 
instruments that the plaintiff holds.”2  The order cited, as “directly on point,” 3 two 
                                                 
1 Quadrant v. Vertin, C.A. 6990­VCL, slip op. (Del. Ch. June 5, 2012) (Laster, V.C.). 
2 Id. 
3 Id. 
 
3
Court of Chancery opinions decided under New York law, Lange v. Citibank, N.A.4 
and  Feldbaum  v.  McCrory  Corp.5    No  reasons  were  stated  to  support  the 
conclusion that those cases were directly on point.  This appeal followed. 
4. 
This Court reviews de novo a trial court’s grant of a motion to dismiss.6  
On appeal, Quadrant claims that Lange and Feldbaum are not controlling, because 
the no­action indenture clause in those cases were critically different from the no­
action  clause  in  the  Athilon  indenture  at  issue  here  (“Athilon  Indenture”).  
Therefore, Quadrant argues, by concluding that the Athilon no­action clause barred 
this lawsuit, the Court of Chancery erred as a matter of law. 
5. 
In Feldbaum, the Court of Chancery, applying New York law, held that 
a no­action clause in an indenture constituted a waiver by the bondholder­plaintiffs 
of  their  right  to  prosecute  an  action  against  the  debtor­defendants  without  first 
satisfying  the  conditions  prescribed  by  the  no­action  clause.7    The  Feldbaum 
indenture  provided  that  “[a]  Securityholder  may  not  pursue  any  remedy  with 
respect  to  this  Indenture  or  the  Securities”  unless  certain  conditions  were  first 
satisfied.8    Because  the  bondholder­plaintiffs  had  not  complied  with  those 
                                                 
4 2002 Del. Ch. LEXIS 101, 2002 WL 2005728 (Del. Ch. Aug. 13, 2002). 
5 1992 Del. Ch. LEXIS 113, 1992 WL 119095 (Del. Ch. June 1, 1992). 
6 Account v. Hilton Hotels Corp., 780 A.2d 245, 248 (Del. 2001). 
7 Feldbaum, 1992 WL 119095, at *5, *7­8. 
8 Id. (italics added). 
 
4
conditions,  the  court  dismissed  the  claims  covered  by  the  indenture’s  no­action 
clause.9 
 
6. 
In  Lange,  the  Court  of  Chancery  granted  the  defendants’  motion  for 
judgment on the pleadings, similarly because the plaintiffs, a group of debenture 
holders, had failed to comply with a no­action clause in the applicable indenture, 
which  also  was  governed  by  New  York  law.10    The  no­action  clause,  which 
contained language identical to that in Feldbaum, provided that “[a] Securityholder 
may not pursue a remedy with respect to this Indenture or the Securities” unless 
the debenture holder first satisfied certain conditions.11 
7. 
In  this  case,  the  Athilon  Indenture,  which  is  also  governed  by  New 
York  law,  is  worded  differently  from  the  indentures  at  issue  in  Lange  and 
Feldbaum.  The Athilon Indenture provides that “[n]o holder of any Security shall 
have  any  right  by  virtue  or  by  availing  of  any  provision  of  this  Indenture  to 
institute any action or proceeding at law or in equity or in bankruptcy or otherwise 
upon or under or with respect to this Indenture,” unless certain conditions are first 
satisfied.12    Unlike the  no­action  clauses  in  Lange  and  Feldbaum,  the  no­action 
                                                 
9 Id. at *3. 
10 2002 WL 2005728, at *6. 
11 Id. at *5­6 (italics added).  
12 App. to Appellant’s Op. Br. at A­229 (emphasis added) (§ 7.06 of the Indenture). 
 
5
clause in the Athilon Indenture does not contain the phrase “or the Securities.”13  
The  absence  of  that  phrase,  Quadrant  argues,  critically  distinguishes  Lange  and 
Feldbaum  and  renders  them  noncontrolling.    That  argument  presents  a  litigable 
issue that merits analysis by the Court of Chancery in the first instance. 
8. 
The  Court  of  Chancery  order  of  dismissal  did  not  address  the 
differences between the respective no­action clauses in the  Lange and Feldbaum 
indentures  and  the  Athilon  Indenture.    Presumably  the  court  found  those 
differences to be not legally significant, but the order does not explain why.  Nor 
does the order cite to, or discuss, applicable New York case law that would support 
the court’s implicit view that the New York courts would find those differences 
legally insignificant.14  For these reasons, and at this juncture, the record does not 
adequately lend itself to informed appellate review. 
9. 
Accordingly, we remand this action to the Court of Chancery to issue 
an  opinion  analyzing  the  significance  (if  any)  under  New  York  law  of  the 
differences between the no­action clauses in the Lange and Feldbaum indentures 
and the Athilon Indenture.  The analysis should include a discussion of decisions 
                                                 
13 Id. 
14 Both Lange and Feldbaum cited federal and New York cases concerning the interpretation of 
no­action clauses in contracts and indentures governed by New York law.  In this case, the Court 
of Chancery order did not cite, or discuss the applicability of those decisions or any other New 
York cases decided after Feldbaum and Lange. 
 
6
by New York courts, and other courts applying New York law, that bear on the 
issue presented here. 
NOW, THEREFORE, IT IS ORDERED that the judgment of the Court of 
Chancery is REMANDED for further proceedings in accordance with this Order.  
Jurisdiction is retained. 
 
 
   
 
 
 
 
BY THE COURT: 
 
 
 
   
 
 
 
 
/s/ Jack B. Jacobs 
 
 
   
 
 
 
 
        Justice 
 
 
 
EXHIBIT C 
 
 
 
 
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE 
QUADRANT STRUCTURED 
PRODUCTS COMPANY, LTD., 
Individually and Derivatively on Behalf 
of Athilon Capital Corp., 
 
Plaintiff, 
 
v. 
 
VINCENT VERTIN, MICHAEL 
SULLIVAN, PATRICK B. GONZALEZ, 
BRANDON JUNDT, J. ERIC 
WAGONER, ATHILON CAPITAL 
CORP., ATHILON STRUCTURED 
INVESTMENT ADVISORS LLC, and 
EBF & ASSOCIATES, LP, 
 
Defendants. 
) 
) 
) 
) 
) 
) 
) 
) 
) 
) 
) 
) 
) 
) 
) 
) 
) 
) 
 
 
 
 
 
 
 
C.A. No. 6990-VCL 
 
 
 
  
 
 
 
 
REPORT PURSUANT TO  
DELAWARE SUPREME COURT RULE 19(c) 
 
Date Submitted:  March 22, 2013 
Date Decided:  June 20, 2013 
 
Lisa A. Schmidt, Catherine G. Dearlove, Russell C. Silberglied, Cory D. Kandestin, 
Robert L. Burns, Susan M. Hannigan, RICHARDS, LAYTON & FINGER, P.A., 
Wilmington, Delaware; Harold S. Horwich, P. Sabin Willett, Samuel R. Rowley, 
BINGHAM McCUTCHEN LLP, Boston, Massachusetts; Attorneys for Plaintiff 
Quadrant Structured Products Company, Ltd. 
 
Philip A. Rovner, Jonathan A. Choa, POTTER ANDERSON & CORROON LLP, 
Wilmington, Delaware; Philippe Z. Selendy, Nicholas F. Joseph, Sean P. Baldwin, 
QUINN EMANUEL URQUHART & SULLIVAN, LLP; New York, New York; 
Attorneys for Defendants Vincent Vertin, Michael Sullivan, Patrick B. Gonzalez, Brandon 
Jundt, J. Eric Wagoner, Athilon Capital Corp., and Athilon Structured Investment 
Advisors LLC. 
 
 
 
 
EFiled:  Jun 20 2013 04:40PM EDT  
Filing ID 52938928 
Case Number 338,2012 
 
 
Collins J. Seitz, Jr., Garrett B. Moritz, Eric D. Selden, SEITZ ROSS ARONSTAM & 
MORITZ LLP, Wilmington, Delaware; Attorneys for Defendant EBF & Associates, LP. 
 
 
LASTER, Vice Chancellor. 
 
 
 
 
 
 
1 
 
Plaintiff Quadrant Structured Products Company, Ltd. (“Quadrant”) owns notes 
issued by defendant Athilon Capital Corp. (“Athilon”).  Before filing this lawsuit, 
Quadrant did not comply with the no-action clauses in the indentures governing its notes.  
The defendants moved to dismiss on that basis, and Quadrant responded with arguments 
that this Court rejected in Feldbaum v. McCrory Corp., 1992 WL 119095 (Del. Ch. June 
1, 1992), and Lange v. Citibank, N.A., 2002 WL 2005728 (Del. Ch. Aug. 13, 2002).  At 
the time, Quadrant did not distinguish the language of the Athilon no-action clause from 
the clause at issue in Feldbaum and Lange.  I granted the motion, observing that 
Feldbaum and Lange were “directly on point.”   
On appeal, Quadrant argued that the Athilon clause differs critically from the 
Feldbaum/Lange clause because the former refers only to claims under the indenture, but 
the latter referred to both the indenture and the notes.  By order dated February 12, 2013, 
the Delaware Supreme Court directed me “to issue an opinion analyzing the significance 
(if any) under New York law of the differences between the no-action clauses.”   
For the reasons set forth herein, Quadrant has persuaded me that the language of 
the Athilon no-action clause distinguishes this case from Feldbaum and Lange.  Had 
Quadrant previously made this argument, I would have relied on the no-action clause to 
dismiss only Counts VII-VIII and part of Count X, and then reached the defendants‟ 
other grounds for dismissing the remaining counts. 
2 
 
I. 
FACTUAL BACKGROUND 
The facts are drawn from Quadrant‟s verified amended complaint (the 
“Complaint” or “CC”) and the documents it incorporates by reference, including (i) an 
indenture dated as of December 21, 2004, between Athilon and Deutsche Bank Trust 
Company Americas, as Trustee, governing the Subordinated Deferrable Interest Notes, 
Series A and B, and (ii) an indenture dated as of July 26, 2005, between Athilon and The 
Bank of New York, as Trustee, governing the Senior Subordinated Deferrable Interest 
Notes, Series A, B, C and D.  For present purposes, the indentures are substantively 
identical, so I refer to them singly as the “Indenture.”  Quotations are from the 2004 
indenture. 
A. 
Athilon’s Corporate Structure And Business Model 
Athilon is a Delaware corporation with its principal place of business in New 
York, New York.  Athilon and its wholly owned subsidiary, Athilon Asset Acceptance 
Corp. (jointly, the “Companies”), were formed in 2004 to sell credit default swaps to 
financial institutions.  Through its subsidiary, Athilon wrote credit default swaps 
covering senior tranches of collateralized debt obligations.  At the parent level, Athilon 
guaranteed the swaps. 
Athilon was financed originally with $100 million of equity capital.  It raised 
another $600 million of debt capital, comprising $350 million in senior subordinated 
notes, $200 million in subordinated notes, and $50 million in junior notes (collectively, 
the “Notes”).  The Notes are long-term obligations that will mature, depending upon the 
series, in 2035, 2045, or 2047.  Interest payments on the Notes are deferrable for up to 
3 
 
five years at Athilon‟s option.  All of the Notes rank in priority below Athilon‟s credit 
default swap obligations. 
The Companies‟ organizational documents limit their permissible lines of business 
to selling credit default swaps and require compliance with strict operating guidelines.  
The Companies only can invest in high quality securities of short duration, and their 
portfolios must be sufficient at all times to cover any credit default swaps and the Notes.  
The guidelines mandate that if a “Suspension Event” occurs and remains uncured, then 
the Companies must enter “runoff” mode.  When in that status, the Companies cannot 
write new business and must pay off existing credit default swaps as they mature. 
B. 
The Business Model Fails. 
Before the financial crisis of 2008, market participants discounted the risks faced 
by credit derivative product companies, enabling Athilon to underwrite over $50 billion 
in nominal credit default risk.  Measured against its $700 million in committed capital, 
Athilon operated with a vertiginous leverage ratio of 71:1.  Measured against Athilon‟s 
equity, Athilon‟s leverage ratio was a stratospheric 506:1.  At that level, a 0.2% loss on 
the collateralized debt obligations covered by Athilon‟s credit default swaps would wipe 
out its equity cushion and render Athilon insolvent, at least on paper.  The rating agencies 
gave the Companies “AAA/Aaa” debt ratings and investment grade counterparty credit 
ratings. 
In 2008, the Companies found themselves in distress, and they lost their AAA/Aaa 
ratings at the end of that year.  By early 2009, the Companies had sustained several 
Suspension Events.  In 2010, Athilon unwound two credit default swaps at a cost of $370 
4 
 
million, more than three times its equity capital.  By August, the Companies no longer 
held any investment grade debt or counterparty credit ratings.  Under the operating 
guidelines, the Companies entered permanent runoff mode. 
C. 
The EBF Takeover 
With Athilon in distress, the trading prices of its debt securities fell precipitously.  
EBF & Associates, LP (“EBF”) seized the opportunity to purchase a large position in the 
riskiest tranche of Notes (the “Junior Notes”) at a significant discount.  In August 2010, 
EBF acquired 100% of Athilon‟s equity.  EBF installed the current board of directors, 
which the Complaint alleges is dominated and controlled by EBF.  In May 2011, nine 
months after EBF took control, Quadrant acquired its position in the Notes.   
Quadrant alleges that Athilon is insolvent.  Excluding its outstanding credit default 
swaps, Athilon continues to carry $600 million of debt, but its assets allegedly have a fair 
market value of only $426 million.  As of September 30, 2011, Athilon‟s shareholder‟s 
equity, measured according to GAAP, stood at negative $660 million.  The Complaint 
alleges that Athilon has no prospect of returning to solvency because it can only sell 
credit default swaps, and the market for that business has collapsed.   
Quadrant argues that under the circumstances, a properly motivated board of 
directors would preserve Athilon‟s value for orderly liquidation in 2014, when the last 
credit default swap expires.  The EBF designees on the Athilon board, by contrast, are 
pursuing strategies designed to benefit EBF and its affiliates.  They have caused Athilon 
to continue paying interest on the Junior Notes, notwithstanding the right to defer those 
payments and the fact that the Junior Notes would receive nothing in an orderly 
5 
 
liquidation.  They also agreed to pay Athilon Structured Investment Advisors LLC 
(“ASIA”), an EBF affiliate, above-market service fees to manage Athilon‟s day-to-day 
operations.  Together, the EBF designees and ASIA have embarked on a high-risk 
investment strategy, contrary to the terms of Athilon‟s governing documents, that 
amounts to a “heads EBF wins, tails everyone else loses” bet.  If the high-risk 
investments succeed, then the underwater Junior Notes and equity will benefit.  If the 
investments fail, then the more senior tranches of Notes will bear the loss.   
D. 
The Quadrant Complaint 
In October 2011, Quadrant filed suit against Athilon, its officers and directors, 
EBF, and ASIA.  As amended, the Complaint contained ten counts: 
• 
Count I asserted a derivative claim on behalf of Athilon against the 
individual defendants for breaching their fiduciary duties by (i) 
continuing to pay interest on the Junior Notes; (ii) paying above-
market service and license fees to EBF; (iii) departing from an 
appropriately conservative capital investment strategy; and (iv) 
causing Athilon to violate its organizational documents and 
operating guidelines. 
• 
Count II asserted a derivative claim against EBF for aiding and 
abetting the breaches of fiduciary duty alleged in Count I. 
• 
Count III sought a permanent injunction barring the individual 
defendants from causing Athilon to pay the interest and fees 
identified in Count I. 
• 
Counts IV and V challenged the payment of interest and fees under 
the Delaware Fraudulent Transfer Act (“DFTA”). 
• 
Count VI sought a permanent injunction under the DFTA against the 
continuing payment of interest and fees. 
• 
Count VII contended that by taking the actions detailed in Count I 
and elsewhere in the complaint, Athilon breached the implied 
covenant of good faith and fair dealing that inheres in the Indenture. 
6 
 
• 
Count VIII asserted that EBF had tortiously interfered with Athilon‟s 
obligations under the Indenture. 
• 
Count IX asserted that Athilon paid constructive dividends in 
violation of Delaware law and sought to recover those payments 
from the individual defendants. 
• 
Count X asserted a claim for civil conspiracy against EBF and ASIA 
for actions taken in concert with the individual defendants. 
Quadrant brought Counts I-III derivatively in its capacity as a creditor of an insolvent 
corporation.  Quadrant brought Counts IV-VIII directly in its capacity as a creditor.  
Quadrant brought Counts IX and X both directly and derivatively.  In Counts I-VI and 
IX, Quadrant relied solely on its status as a holder of the Notes.  In Counts VII and VIII, 
Quadrant relied on the Indenture.  In seeking to impose secondary liability under Count 
X, Quadrant relied on the Notes and the Indenture to the same degree as the related 
primary counts. 
The defendants moved to dismiss the Complaint on a variety of substantive and 
procedural grounds.  In their lead argument, the defendants invoked the no-action clause 
in the Indenture, which states: 
Limitations on Suits by Securityholder.  No holder of any 
Security shall have any right by virtue or by availing of any 
provision of this Indenture to institute any action or 
proceeding at law or in equity or in bankruptcy or otherwise 
upon or under or with respect to this Indenture, or for the 
appointment of a trustee, receiver, liquidator, custodian or 
other similar official or for any other remedy hereunder, 
unless such holder previously shall have given to the Trustee 
written notice of default in respect of the series of Securities 
held by such Securityholder and of the continuance thereof, 
as hereinbefore provided, and unless also the holders of not 
less than 50% of the aggregate principal amount of the 
relevant series of Securities at the time Outstanding shall have 
7 
 
made written request upon the Trustee to institute such action 
or proceedings in its own name as trustee hereunder and shall 
have offered to the Trustee such reasonable indemnity as it 
may require against the costs, expenses and liabilities to be 
incurred therein or thereby and the Trustee for 60 days after 
its receipt of such notice, request and offer of indemnity shall 
have failed to institute any such action or proceedings and no 
direction inconsistent with such written request shall have 
been given to the Trustee pursuant to Section 7.08 hereof 
within such 60 days . . . . 
Dkt. 32 Ex. A. § 7.06 at 51-52 (the “Athilon Clause”).  Quadrant admittedly did not 
comply with the Athilon Clause before filing suit.  Relying on Feldbaum, Lange, and 
their progeny, the defendants pointed out that no-action clauses have resulted in 
pleadings-stage dismissals of precisely the types of claims that Quadrant asserted.   
To avoid the Athilon Clause, Quadrant argued that it governs “only those suits that 
arise from a default” and not other types of claims.  Ans. Br. at 10.  Quadrant also argued 
that to enforce the Athilon Clause “would operate to ban (not merely channel through a 
particular plaintiff) a range of personal noteholder claims that spring from the law of 
fiduciary duties, fraudulent transfer, securities, and other sources of law, none of which 
requires a note default as a prerequisite to suit,” thereby converting the Athilon Clause 
into a covert release of claims and leaving noteholders without a remedy.  Id. at 13.  
Quadrant likewise contended that the Athilon Clause applied only to suits against the 
issuer and not to derivative actions brought by creditors on the issuer‟s behalf.  Id. at 15.  
In its only response to Feldbaum, Quadrant asserted that under that decision, a no-action 
clause would bar a noteholder suit only “so long as „the trustee is capable of satisfying its 
obligations.‟”  Id. at 10 (quoting Feldbaum, 1992 WL 119095, at *6).  According to 
8 
 
Quadrant, the trustee could not fulfill its obligations because the trustee only could sue 
following an “Event of Default,” and no “Event of Default” had yet occurred.  Id. at 10-
11.  Quadrant did not contend that the language of the Athilon Clause differed 
meaningfully from the language of the clause at issue in Feldbaum and Lange. 
After reviewing the briefing and the authorities cited by the parties, I concluded 
that Feldbaum and Lange addressed the points Quadrant had raised.  By order dated June 
5, 2012, I dismissed the action with prejudice, observing that Feldbaum and Lange were 
“directly on point.”  Dkt. 60 (the “Dismissal Order”). 
E. 
The Appeal 
Quadrant appealed.  Before the Delaware Supreme Court, Quadrant reiterated the 
arguments rejected in Feldbaum and Lange, noting that both were Court of Chancery 
decisions and that the issues presented questions of first impression for the high court.  
See Appellant‟s Op. Br. at 1.  Quadrant also argued for the first time that Feldbaum and 
Lange “construed substantially different contracts” and that the Athilon Clause applied 
“only to claims that arise from the governing indenture itself.”  Id. at 2.  In support of this 
new contention, Quadrant observed that the Feldbaum/Lange clause “applied not only to 
rights under its indenture, but also to „any remedy with respect to . . . the Securities.‟”  Id. 
at 16-17 (quoting Feldbaum, 1992 WL 119095, at *5-6; citing Lange, 2002 WL 2005728, 
at *5).  Quadrant also relied on Victor v. Riklis, 1992 WL 122911 (S.D.N.Y. May 15, 
1992), as giving dispositive meaning to the absence of the phrase “or the Securities.” 
Appellant‟s Op. Br. at 19-20.  Quadrant had not cited Victor before this Court.   
9 
 
By order dated February 12, 2013, the Delaware Supreme Court determined that 
“the current record is insufficient for appellate review.”  Quadrant Structured Prods. Co. 
v. Vertin, No. 388, 2012, ¶ 1 (Del. Feb. 12, 2013) (the “Remand Order”).  The Delaware 
Supreme Court explained that “[o]n appeal, Quadrant claims that Lange and Feldbaum 
are not controlling, because the no-action indenture clause in those cases were [sic] 
critically different from the no-action clause in the Athilon indenture at issue here.”  Id. ¶ 
4.  The high court observed that the no-action clauses in both Lange and Feldbaum 
provided that “[a] Securityholder may not pursue a remedy with respect to this Indenture 
or the Securities” without satisfying the conditions set forth in the clause.  Id. ¶ 5 
(quoting Feldbaum, 1992 WL 119095, at *5 (emphasis in original)), ¶ 6 (quoting Lange, 
2002 WL 2005728, at *5 (emphasis in original)).  The Delaware Supreme Court observed 
that the Athilon Clause “is worded differently from the indentures at issue in Lange and 
Feldbaum” and that “[u]nlike the no-action clauses in Lange and Feldbaum, the no-action 
clause in the Athilon Indenture does not contain the phrase „or the Securities.‟”  Id. ¶ 7.  
The Delaware Supreme Court remanded the case to this Court with instructions “to issue 
an opinion analyzing the significance (if any) under New York law of the differences 
between the no-action clauses in the Lange and Feldbaum indentures and the Athilon 
indentures.”  Id. ¶ 9.  The Remand Order stressed that “[t]he analysis should include a 
discussion of decisions by New York courts, and other courts applying New York law, 
that bear on the issue presented here.”  Id.  The Remand Order did not instruct this Court 
to address any of the other arguments raised by Quadrant on appeal.  Pursuant to 
10 
 
Supreme Court Rule 19(c), the Delaware Supreme Court retained jurisdiction to consider 
the implications of this Court‟s report.     
II. 
LEGAL ANALYSIS 
In accordance with the Remand Order, this opinion first considers the plain 
language of the Athilon Clause and the Feldbaum/Lange clause.  It then reviews (i) 
authorities that have construed no-action clauses under New York law, (ii) other 
instructive Delaware precedents, and (iii) authoritative commentary.  Because the 
linguistic distinction that Quadrant raised on appeal appears to have analytical heft, the 
opinion concludes by applying the language of the Athilon Clause to the ten counts in the 
Complaint.  
A. 
The Plain Language Of The Clauses 
“[U]nder New York law interpretation of indenture provisions is a matter of basic 
contract law.”  U.S. Bank Nat’l Ass’n v. U.S. Timberlands Klamath Falls, L.L.C., 2004 
WL 1699057, at *2 (Del. Ch. July 29, 2004) (internal quotation marks omitted).  “The 
best evidence of what parties to a written agreement intend is what they say in their 
writing.  Thus, a written agreement that is complete, clear and unambiguous on its face 
must be enforced according to the plain meaning of its terms.”  Greenfield v. Philles 
Records, Inc., 780 N.E.2d 166, 170 (N.Y. 2002) (citation and internal quotation marks 
omitted).   
 
 
11 
 
For purposes of plain language analysis, the Athilon Clause can be parsed as 
follows: 
No holder of any Security 
1.0 
shall have any right by virtue or by availing of any provision 
of this Indenture 
2.0. 
to institute any action or proceeding at law or in equity or in 
bankruptcy or otherwise 
3.0  
upon or under or with respect to this Indenture, or  
4.0 
for the appointment of a trustee, receiver, liquidator, 
custodian or other similar official or for any other remedy 
hereunder, 
unless [the holder complies with specified conditions]. 
See Dkt. 32 Ex. A. § 7.06 at 51-52.  The Feldbaum/Lange clause used different language:  
“A Securityholder may not pursue any remedy with respect to this Indenture or the 
Securities unless [the Securityholder complies with specified conditions].”  Feldbaum, 
1992 WL 119095, at *5; accord Lange, 2002 WL 2005728, at *5 (“A Securityholder may 
not pursue a remedy with respect to this Indenture or the Securities unless [the 
Securityholder complies with specified conditions].”).  The operative question posed by 
the Remand Order is whether subparts 1.0 through 4.0 of the Athilon Clause give it a 
different scope than the simpler language of the Feldbaum/Lange clause.   
Subpart 1.0 of the Athilon Clause defines the sources of rights governed by the 
clause.  Under this subpart, no “holder of any Security shall have any right by virtue or 
by availing of any provision of this Indenture.”  As a matter of plain language, the 
Athilon Clause does not speak to other rights that the holder of a Security may have, such 
12 
 
as rights under or by virtue of the Security itself.  It likewise does not address rights that 
might exist under the common law, state statutes, or federal statutory schemes like civil 
RICO or the federal securities laws.  The Feldbaum/Lange clause does not contain 
language resembling subpart 1.0 and is not limited to any subset of potential rights.  It 
applies to any right that any Securityholder might have, regardless of its source, to the 
extent the Securityholder invokes it to “pursue any remedy with respect to this Indenture 
or the Securities.”  In this respect, the Athilon Clause is narrower than the 
Feldbaum/Lange clause. 
Subpart 2.0 of the Athilon Clause identifies the types of actions or proceedings 
that would fall within the clause if the “holder of any Security” asserted a right “by virtue 
or by availing of any provision of this Indenture.”  This aspect of the Athilon Clause 
encompasses “any action or proceeding at law or in equity or in bankruptcy or otherwise” 
that falls within the scope of the clause.  The Feldbaum/Lange clause does not contain 
language resembling subpart 2.0.  Just as the Feldbaum/Lange clause is not limited to any 
subset of potential rights, it is not limited to any particular type of action or proceeding.  
It rather applies to any action or proceeding that any Securityholder might bring to the 
extent the Securityholder “seeks to pursue any remedy with respect to this Indenture or 
the Securities.”  Along this dimension, given the broad language of the Athilon Clause, 
the two provisions appear equivalent. 
Subparts 3.0 and 4.0 of the Athilon Clause impose additional limitations on its 
scope.  As noted, under subparts 1.0 and 2.0, the Athilon Clause extends to any “action or 
proceeding” in which the plaintiff asserts a “right by virtue or by availing of any 
13 
 
provision of this Indenture.”  Under subparts 3.0 and 4.0, the “action or proceeding” also 
must be one in which the plaintiff (i) sues “upon or with respect to this Indenture” (3.0) 
or (ii) seeks as a remedy “the appointment of a trustee, receiver, liquidator, custodian or 
other similar official or for any other remedy hereunder” (4.0).  As a matter of plain 
language, the Athilon Clause only applies to actions or proceedings involving certain 
types of claims (those “upon or under or with respect to this Indenture”) or those seeking 
certain types of remedies (“the appointment of a trustee, receiver, liquidator, custodian or 
other similar official or for any other remedy hereunder”).  The plain language of the 
term “hereunder” refers to the Indenture, which appears in both the immediately 
preceding subpart (3.0) and in the first subpart (1.0).  The Feldbaum/Lange clause does 
not contain any language limiting the types of claims a Securityholder might bring, nor 
does it call out specific remedies.  Rather, it applies broadly to any action or proceeding 
to the extent that a Securityholder “seeks to pursue any remedy with respect to this 
Indenture or the Securities.”  Here too, the Athilon Clause is narrower than the 
Feldbaum/Lange clause. 
As a matter of plain language, the differences between the Athilon Clause and the 
Feldbaum/Lange clause appear significant.  The Athilon Clause applies only when the 
holder of a Security asserts “any right by virtue or by availing of any provision of this 
Indenture” and only to an “action or proceeding” in which the holder sues “upon or under 
or with respect to this Indenture,” seeks a particular remedy available under the 
Indenture, or otherwise seeks “appointment of a trustee, receiver, liquidator, custodian or 
other similar official.”  The Feldbaum/Lange clause applies broadly to any action or 
14 
 
proceeding that any Securityholder might bring to the extent that the Securityholder 
“seeks to pursue any remedy with respect to this Indenture or the Securities.”  Under the 
Feldbaum/Lange clause, it does not matter what source of rights the Securityholder 
invokes or the nature of the claim that the Securityholder asserts.   
B. 
Cases Addressing Athilon Clauses Under New York Law 
The Remand Order calls for “a discussion of decisions by New York courts, and 
other courts applying New York law, that bear on the issue presented here.”  Remand 
Order ¶ 9.  New York courts have been interpreting no-action clauses for over one 
hundred years.1  Under New York law, no-action clauses are “strictly construed.”2  New 
York decisions indicate that the specific language of the no-action clause matters and that 
a no-action clause will not encompass causes of action, theories, or remedies that do not 
fall within its terms. 
                                              
 
1 See, e.g., McClelland v. Norfolk S. R.R. Co., 18 N.E. 237, 241 (N.Y. 1888); 
Rothschild v. Rio Grand W. Ry. Co., 32 N.Y.S. 37, 39-40 (Sup. Ct. 1895).  Two 
American Law Report annotations collect and summarize no-action clause cases, 
including numerous New York decisions.  See C.T. Foster, Validity, construction, and 
application of express restrictions on right of action by individual holder of one or more 
of a series of corporate bonds or other obligations, 174 A.L.R. 435 (1948 & Supp.) 
(including updates through current day); P.V. Smith, Validity, construction, and 
application of express restrictions on right of action by individual holder of one or more 
of a series of corporate bonds or other obligations, 108 A.L.R. 88 (1937 & Supp.) 
(including updates through 1948).  
2  McMahan & Co. v. Wherehouse Entm’t, Inc., 65 F.3d 1044, 1050 (2d Cir. 
1995); accord Cruden v. Bank of N.Y., 957 F.2d 961, 968 (2d Cir. 1992) (“Cruden II”); 
Metro W. Asset Mgmt., LLC v. Magnus Funding, Ltd., 2004 WL 1444868, at *5 
(S.D.N.Y. June 25, 2004); UPIC & Co. v. Kinder-Care Learning Ctrs., Inc., 793 F. Supp. 
448, 454 (S.D.N.Y. 1992); see also Revised Model Simplified Indenture, 55 Bus. Law. 
1115, 1191 (2000) (“No action clauses are strictly construed against the issuer.”). 
15 
 
Before the adoption of the Trust Indenture Act of 1939 (the “TIA”), New York 
courts frequently considered whether a no-action clause in an indenture could restrict a 
bondholder from seeking to recover on the bond for past due payments of principal and 
interest.3  New York courts consistently held that absent contractual language to the 
contrary, the holder of a debt instrument enjoyed creditors‟ rights derived from the debt 
instrument (whether labeled “bonds,” “notes,” or “debentures”) distinct from the trustee‟s 
rights against the underlying collateral derived from the security instrument (whether 
labeled an “indenture,” “mortgage,” or “deed of trust”).  As in the current case, the no-
action clause almost invariably appeared in the security instrument and not in the debt 
instrument.   
Anyone who has purchased a home using traditional bank financing will recognize 
the distinction between a debt instrument and the security instrument:  the borrower signs 
a debt instrument in the form of a promissory note reflecting the debt, and the borrower 
separately executes a mortgage that secures the debt by creating a lien against the home.  
See 1 Mortgages and Mortgage Foreclosure in N.Y. § 4:8 (2012) (“[A] corporation bond 
is a promise to pay, exactly as is the mortgage bond signed by the individual homeowner; 
                                              
 
3 The issue rarely arises today, because Section 316(b) of the TIA establishes that 
the holder of a note governed by the act has an absolute and unconditional right to sue on 
the note for past due payments of principal and interest.  See 15 U.S.C. § 77ppp(b).  Since 
the passage of the TIA, even those indentures not covered by the act typically contain 
language paralleling Section 316(b).  See generally American Bar Association, 
Commentaries on Model Debenture Indenture Provisions 1965, Model Debenture 
Indenture Provisions All Registered Issues 1967, and Certain Negotiable Provisions  
233-34 (1971) [hereinafter Commentaries]; Churchill Rodgers, The Corporate Trust 
Indenture Project, 20 Bus. Law. 551, 563, 565-66 (1965). 
16 
 
the mortgage securing it is a securing lien on designated property in exactly the manner 
of the mortgaged homestead.”).  If the borrower defaults, the bank can proceed in rem by 
foreclosing on the mortgage, sue the borrower in personam on the promissory note, or 
both.  See, e.g., Manley v. MAS Assocs., LLC, 968 A.2d 492 (Del. 2009) (TABLE) (dual 
in personam and in rem proceeding); Wells Fargo Bank, N.A. v. Williford, 2011 WL 
5822630, at *3 (Del. Super. Nov. 17, 2011) (in rem proceeding); Louis S. Posner, The 
Trustee and the Trust Indenture:  A Further Study, 46 Yale L.J. 737, 768 (1937) 
(“[B]onds and mortgages, though evidencing but one debt, nevertheless constitute two 
distinct promises giving rise to two separate causes of action, [such that] the trustee, 
whose legal relations are held confined to the mortgage, has no enforceable rights at law 
on the indebtedness”). 
Nineteenth century lawyers used the traditional real estate mortgage as a model 
when their corporate clients needed to raise long-term debt to fund major infrastructure 
projects like canals and railroads.  See Commentaries, supra note 3 at 4.  “The adaptation 
of the traditional real estate mortgage to this purpose was a work of marvelous ingenuity 
and a development of the greatest significance in the economic growth of the United 
States.”  Id. at 5.  A further practical problem for publicly traded debt was the need to 
afford bondholders the benefits of a mortgage lien on the 
assets and yet provide in an orderly fashion for a multiplicity 
of bondholders holding . . . securities, subject to change of 
ownership through trading in the bonds.  The answer was 
found in the conveyance of the real estate and other 
mortgageable assets of the corporation to a trustee for the 
benefit of all bondholders.   
 
17 
 
Id.; see 1 Ralph A. McClelland & Frederick S. Fisher, Jr., The Law of Corporate 
Mortgage Bond Issues In Conjunction With A Typical Indenture Of Mortgage And Deed 
Of Trust Securing Bonds 2 (1937) [hereinafter Bond Issues] (“The use of trustees to take 
and hold the mortgaged property as security for the benefit of the bondholders affords a 
device for unified action which otherwise would be impossible, especially since the 
holders of the bonds are numerous and of changing identity.”).  Over time, a true 
corporate mortgage that recorded a lien on real property “was found to be awkward if not 
impossible for many types of corporate borrowers,” and it was “dispensable in many 
cases if adequate contractual protections were included in the debt instrument or the 
related indenture.”  Commentaries, supra note 3 at 6.  “The solution was to take the 
corporate mortgage indenture form, delete the conveyancing and other provisions relating 
to the collateral, and insert covenants designed to protect the debentureholders. . . .  Other 
provisions of an administrative nature remained much the same in a debenture instrument 
as those in a mortgage indenture.”  Id. at 7.  The result was the now-familiar 
bond/indenture structure at issue in this case. 
Because of the distinction between debt instruments and security instruments, 
New York courts held that if the bond did not contain language making it subject to the 
indenture or sufficiently incorporating the terms of the indenture by reference, then the 
 
 
 
18 
 
creditor could sue freely on the bond.4  More importantly for present purposes, New York 
courts held that even if the language of the bond sufficiently referenced the terms of the 
                                              
 
4 See, e.g., Enoch v. Brandon, 164 N.E. 45, 47 (N.Y. 1928) (holding that 
references in bond to aspects of indenture “all have to do with the trust mortgage. They 
refer to the rights conferred by it upon the bondholders and limit and explain those rights. 
They are so linked together as to indicate that the obligor was speaking solely of the 
security.”); Cunningham v. Pressed Steel Car Co., 265 N.Y.S. 256, 259 (App. Div. 1933) 
(“We do not find that the reference to the indenture constitutes a bar to the maintenance 
of this action [on the bonds].”), aff’d, 189 N.E. 750 (N.Y. 1934); Lubin v. Pressed Steel 
Car Co., 263 N.Y.S. 433, 436-37 (City Ct. 1933) (holding that where bonds referred 
generally to the indenture for the “rights of the holders of said bonds,” language was not 
sufficiently specific to make no-action clause in indenture applicable to bonds (internal 
quotation marks omitted)); Berman v. Consol. Nev.-Utah Corp., 230 N.Y.S. 421, 424 
(Sup. Ct. 1928) (holding that reference in bond to indenture was insufficient to make 
bond subject to no-action clause found in indenture); Brown v. Mich. R.R. Co., 207 
N.Y.S. 630, 631 (City Ct. 1924) (“There is nothing on the face of the bond to show that 
there is any provision in the mortgage preventing the owner of any bond from 
maintaining an action at law for the money when the same becomes due.”); see also 
Marlor v. Tex. & Pac. Ry. Co., 19 F. 867, 868 (C.C.S.D.N.Y. 1884) (applying New York 
law; finding “nothing in the language of the mortgage to qualify the promise of the bond” 
and noting that “[w]hether [a bondholder‟s] interest can be collected through a 
foreclosure of the mortgage is a different inquiry, and not relevant now [to the suit on the 
bond]”), aff’d, 123 U.S. 687 (1887). 
Other jurisdictions reached the same result.  See, e.g., Kimber v. Gunnell Gold 
Mining & Milling Co., 126 F. 137, 138 (8th Cir. 1903) (“A mortgage . . . does not, in the 
absence of an express stipulation or of a statute to that effect, constitute any defense to an 
action at law against the mortgagor by each of the creditors upon the bonds or primary 
obligations thus secured.”); Manning v. Norfolk S. Ry. Co., 29 F. 838, 839 (C.C.E.D. Va. 
1887) (“The common-law right of suing to judgment upon a written obligation admitted 
to be valid is of too high a character to be taken away by implications, especially if these 
are drawn from instruments other than that which is given in direct and positive 
acknowledgement of the debt.”); Mendelson v. Realty Morg. Corp., 241 N.W. 154, 154 
(Mich. 1932) (“[I]t is a fact, recognized alike by business and the law, that a bond and its 
securing mortgage have different functions, are governed by different legal principles, 
and, for some purposes at least, are separate contracts.”); Reitz v. Pontiac Realty Co., 293 
S.W. 382, 385 (Mo. 1927) (“The [no-action] provisions of the mortgage . . . deal with 
remedies provided for in the mortgage, and have no reference to respondent‟s right of 
19 
 
indenture, a no-action clause in the indenture that only referred to the indenture would 
not limit a creditor from suing on the bond.5   
For example, in General Investment Co. v. Interborough Rapid Transit Co., 193 
N.Y.S. 903 (App. Div. 1922), aff’d, 139 N.E. 216 (N.Y. 1923), the plaintiff sought to 
recover on five promissory notes.  Each of the notes referred to an indenture for the 
holder‟s rights.  The issuer invoked the no-action clause in the indenture, which stated:  
“No holder of any note hereby secured shall have any right to institute any suit, action or 
proceeding in equity or at law for the enforcement of this indenture, or for the execution 
                                                                                                                                                  
 
action [on the bonds] at common law.”); Putnam v. Pittsburgh Rys. Co., 199 A. 211, 212 
(Pa. 1938) (“The right of the individual owner of bonds to sue thereon is not affected by 
provisions of the mortgage securing them unless such provisions exclude the right in 
express terms or by necessary implication.”); Phila. & Balt. Cent. R.R. Co. v. Johnson, 54 
Pa. 127, 129 (1867) (holding that in an action not “upon the mortgage” but for default in 
payment on the bonds, a “limitation” in the mortgage was “irrelevant”).  See generally 
Leonard A. Jones, A Treatise on the Law of Corporate Bonds and Mortgages § 196a (3d 
ed. 1907) (“A provision restraining proceedings for foreclosure on the part of individual 
bondholders until after a requisition made upon trustees by a certain proportion of the 
bondholders and a refusal to comply therewith is valid and obligatory upon the individual 
bondholders as respects the enforcement of the security.” (emphasis added)).   
5 See, e.g., Hibbs v. Brown, 190 N.Y. 167, 173 (1907) (“[T]he clauses [of the 
indenture] . . . only relate to and control procedure under the trust indenture itself for the 
purpose of enforcing payment of coupons and do not for any other purposes work or 
permit a postponement of the time of payment of the coupons or prevent a bondholder 
from enforcing his ordinary and general remedies at law for the collection of such 
obligations.”); Barnes v. United Steel Works Corp., 11 N.Y.S.2d 161, 163 (Sup. Ct. 1939) 
(accepting that bond sufficiently incorporated terms of indenture but holding that no-
action clause did not apply to suit on the bond when it only addressed suits under the 
indenture); Deutsch v. Gutehoffnungshutte, 6 N.Y.S.2d 319, 322 (Sup. Ct. 1938) (holding 
that no-action clause in the indenture “relates solely to the enforcement of collateral 
security for the repayment of the bonds and in no way affects the action on the bonds 
themselves”).   
20 
 
of any trust hereof, or for the appointment of a receiver, or for any other remedy 
hereunder . . . .”  Id. at 905.  The court held that the no-action clause 
merely denied the holders of the notes “any right to institute 
any suit, action or proceeding in equity or at law for the 
enforcement of this indenture.”  . . . But the action at bar is 
not to affect, disturb, or prejudice the lien of the collateral 
indenture or to enforce any right thereunder.  The action is 
solely for the purpose of recovering on defendant‟s primary 
obligation to pay said moneys, with interest. . . .  The 
remedies are entirely separate and distinct. . . .  [T]he present 
action is not barred by the clause in question, as the action is 
not to enforce the indenture or any rights thereunder, or to 
secure any remedy or relief therein provided. . . .  Said clause 
relates solely to the enforcement of the collateral security for 
the payment of said notes, and in no manner affects the action 
upon the notes themselves.   
Id. at 909 (emphasis in original) (citation omitted).  By contrast, if the note sufficiently 
referenced the terms of the indenture and the no-action clause encompassed the rights of 
holders under the bonds, then the no-action clause applied to a suit on the bonds.6  Courts 
applying New York law adhere to these rules today.7   
                                              
 
6 See, e.g., Lidgerwood v. Hale & Kilburn Corp., 47 F.2d 318, 320 (S.D.N.Y. 
1930) (applying New York law; finding that note sufficiently incorporated terms of 
indenture and that no-action clause in indenture barred suit on the notes after maturity 
where it applied to “the enforcement of any of the covenants or agreements herein or in 
the Notes contained” (internal quotation marks omitted)); Friedman v. Am.-Nat’l Co., 16 
N.Y.S.2d 887, 887 (Sup. Ct. 1939) (holding that debenture sufficiently incorporated 
indenture and that no-action clause governed suit for principal due where clause stated 
that “[a]ll rights of action on this debenture and the annexed interest coupons, except as 
otherwise provided by said agreement, are vested in said trustee, and the enforcement 
thereof is governed by the provisions of said trust agreement” (internal quotation marks 
omitted)); Rudick v. Ulster & Del. R.R., 263 N.Y.S. 498, 500 (1928) (holding that bonds 
sufficiently incorporated by reference the no-action clause in the indenture and that “the 
language thereof plainly states that no holder shall have the right to institute any action at 
law or in equity for the collection of the principal or interest [absent compliance with its 
21 
 
Since the adoption of the Trust Indenture Act, it has rarely been necessary for 
holders of a covered issue to litigate whether they could assert a direct right to recover 
past due payments of principal or interest notwithstanding the language of a no-action 
clause.  Bondholders instead have attempted to assert other types of direct claims.  A 
series of illustrative decisions have construed no-action clauses in indentures governed by 
New York law to determine whether the bondholder claims could proceed.   
The first major decision was Cruden, where holders of debentures sought to assert 
fraud and civil RICO claims.  The no-action clauses in the governing indenture provided 
that unless its procedural requirements were followed, the holders did not have  
any right by virtue or by availing of any provision of this 
Indenture to institute any action or proceedings at law or in 
equity or in bankruptcy or otherwise, upon or under or with 
respect to this Indenture, or for the appointment of a receiver 
or trustee, or for any other remedy hereunder . . . . 
                                                                                                                                                  
 
conditions]”); 1 Mortgages and Mortgage Foreclosure in N.Y. § 4:8 (2012) (“If in fact 
appropriate notice is given to the bondholder in his bond, provisions restricting and 
limiting the rights of bondholders to sue and enforce their obligations may be legally 
imposed, depending upon the wording of the instrument.”); Posner, supra, at 775 (noting 
before the passage of the TIA that “the bondholder‟s power to sue at law on his matured 
bond, as well as upon his matured interest coupons, is at times nullified by references to 
the indenture made in the bond.  In such cases, the reference clauses must be explicit . . . 
.”). 
7 See RJ Capital, S.A. v. Lexington Capital Funding III, Ltd., 2011 WL 3251554, 
at *6 n.7 (S.D.N.Y. July 28, 2011) (applying plain language of no-action clause that 
extended to suits for payment of interest or principal on the bonds where plaintiffs did not 
argue that the TIA overrode the provision); In re Envirodyne Indus., Inc., 174 B.R. 986, 
994 (N.D. Ill. 1994) (interpreting no-action clause governed by New York law; holding 
that action to recover past due interest is a claim “under the Notes” and not governed by 
the no-action clause, which applied to claims “under the Indenture”). 
22 
 
Cruden II, 957 F.2d at 967 (emphasis omitted).  The district court held that the no-action 
clause did not bar the fraud and RICO claims:  “Plaintiffs‟ other claims are not made 
under the Indenture, such as the RICO and fraud claims.  The Court finds that plaintiffs 
do have standing to bring suit on these claims as well, any restrictive provision of the 
Indentures being inapplicable to these claims.”  Cruden v. Bank of N.Y., 1990 WL 
131350, at *12 (S.D.N.Y. Sept. 4, 1990) (“Cruden I”), aff’d in part, rev’d in part, Cruden 
II, 957 F.2d 961 (2d Cir. 1992).  The district court then dismissed the fraud and RICO 
claims under statutes of limitations.  Id. at *16, *18.  On appeal, without commenting on 
the no-action clause analysis, the United States Court of Appeals for the Second Circuit 
reversed the limitations-based dismissal of the RICO claims and remanded the case for 
trial.  See 957 F.2d at 974, 978.  By directing the case to go forward, the Second Circuit 
indicated that it accepted the district court‟s interpretation of the no-action clause, which 
otherwise would have barred the claims. 
The next significant decision was Victor v. Riklis, 1992 WL 122911 (S.D.N.Y. 
May 15, 1992), where debentureholders argued that Cruden I permitted them to bring 
fraud and RICO claims.  The district court distinguished Cruden I because the no-action 
clauses in the two cases differed.  The Cruden I clause only referred to the indenture, but 
the Victor clause added the phrase “or the Securities.”  The Victor court held that the 
difference was dispositive: 
Victor relies on the district court‟s decision in Cruden, which 
held that a debentureholder‟s RICO and fraud claims were not 
barred by a no-action provision.  Cruden is distinguishable 
from this case, however, because that no-action clause was 
not as broad as the one contained in the E-II indentures. . . . 
23 
 
Accordingly, we find that the E-II indenture‟s reference to 
actions with respect to the securities as well as the indenture 
itself broadens the scope of the no-action clause to include 
Victor‟s RICO and fraud claims. 
1992 WL 122911, at *6 n.7 (citations omitted).   
Perhaps the most influential decision for no-action clause jurisprudence was 
Feldbaum, in which Chancellor Allen applied New York law.  Bondholders whose 
securities were governed by the same indentures considered in Victor v. Riklis contended 
that a restructuring (i) breached the implied covenant of good faith and fair dealing in the 
indentures, (ii) violated New York‟s prohibition against fraudulent transfers, and (iii) was 
the product of fraudulent misrepresentations.  See Feldbaum, 1992 WL 119095, at *2-3.  
The defendants moved to dismiss, arguing that the no-action clause barred the claims.  As 
Quadrant argued originally in this case, the Feldbaum plaintiffs asserted that the no-
action clause applied only to claims for breach of express indenture provisions.  
Chancellor Allen disagreed: 
Given the purposes for which no-action clauses are designed, 
I cannot accept plaintiffs‟ position.  No principled reason or 
factual particularity of this case is advanced that would justify 
this view.  In my opinion, no matter what legal theory a 
plaintiff advances, if the trustee is capable of satisfying its 
obligations, then any claim that can be enforced by the trustee 
on behalf of all bonds, other than a claim for recovery of past 
due interest or [principal], is subject to the terms of a no-
action clause of this type. 
Id. at *6.  Chancellor Allen later explained that the trustee would not be “capable of 
satisfying its obligations” if the suit alleged misconduct by the trustee.  Absent such 
circumstances, “courts systematically conclude that, in consenting to no-action clauses by 
24 
 
purchasing bonds, plaintiffs waive their rights to bring claims that are common to all 
bondholders, and thus can be prosecuted by the trustee . . . .”  Id. at *7.   
Turning to the claims before him, Chancellor Allen held that the no-action clause 
governed the plaintiffs‟ implied covenant claims and the fraudulent conveyance claims.  
The harms those claims sought to address affected all bondholders proportionately, so it 
was up to the trustee to prosecute the claims on behalf of all bondholders.  Id. at *7-8.  
The Chancellor reached the same conclusion about the fraud claims to the extent the 
complaint alleged that the bondholders were deprived of an opportunity to seek injunctive 
relief against the restructuring.  Id. at *9.  Such an injunction would have been sought on 
behalf of and inured to the benefit of all bondholders, making it relief that only the trustee 
could seek.  To the extent the complaint alleged fraud that deprived the bondholders of an 
opportunity to sell their bonds in the market, the Chancellor held that the no-action clause 
would not apply.  In Feldbaum, however, the alleged fraud consisted of the defendants‟ 
failure to disclose that the restructuring violated the indentures.  The fraud claim 
therefore constituted an effort “to transmute a contract claim litigable only by the 
indenture trustee into an individual fraud claim.”  Id. at *10.  Chancellor Allen refused to 
credit this stratagem and dismissed the fraud claim as well.  In substance, Feldbaum held 
that a no-action clause would apply to any remedy sought on behalf of all bondholders, 
but given the expansive language of the Feldbaum clause, that reading was entirely 
appropriate.   
In Lange, another decision by this Court interpreting New York law, Chancellor 
Strine, then-Vice Chancellor, relied on Feldbaum when confronted with an identical no-
25 
 
action clause.  Lange, 2002 WL 2005728, at *5-6.  The plaintiff debentureholders 
contested the leveraged buyout of an allegedly insolvent issuer, contending that the 
defendants breached their fiduciary duties, effected fraudulent transfers, and aided and 
abetted the primary violations.  Id. at *5.  Chancellor Strine held that the no-action clause 
barred the claims. 
Per Feldbaum, the particular nature of a claim that is asserted 
on behalf of the Debentureholders as a class is not 
determinative of the applicability of [the no-action clause]; 
what is determinative is whether the claim is one with respect 
to the Indenture or the Debentures themselves.  Each of the 
claims pled in the amended complaint clearly satisfies that 
test, as the Debentureholders‟ ability to press those claims 
depends entirely on their ownership of the Debentures and the 
adverse effect that certain actions have allegedly had on each 
Debentureholder, pro rata to her ownership of those 
securities. 
Id. at *7.   Because each of the claims could be asserted by the trustee, the plaintiffs could 
not proceed without complying with the no-action clause. 
Two more recent decisions followed Feldbaum and Lange.  In the Wherehouse 
Entertainment litigation, the issuing corporation failed to redeem outstanding debentures 
at a premium after the occurrence of an event that the plaintiffs contended triggered the 
redemption obligation.  The plaintiffs asserted claims for breach of contract, breach of the 
implied covenant of good faith and fair dealing, tortious interference with contract, and 
fraudulent conveyance.  See McMahan & Co. v. Wherehouse Entm’t, Inc., 859 F. Supp. 
743, 745-46 (S.D.N.Y. 1994), aff’d in part, rev’d in part, 65 F.3d 1044 (2d Cir. 1995).  
Like the Feldbaum/Lange clause, the Wherehouse Entertainment clause barred the 
debentureholders from seeking “any remedy with respect to [the] Indenture or the 
26 
 
Securities” unless they first complied with its terms.  Id. at 747.  The court held that the 
state law claims sought a remedy with respect to the securities and dismissed the claims.  
Id. at 747-48. 
Similarly in the Akanthos litigation, bondholders argued that certain transactions 
engaged in by the issuing corporation constituted illegal fraudulent transfers.  See 
Akanthos Capital Mgmt., LLC v. CompuCredit Hldgs. Corp., 677 F.3d 1286 (11th Cir. 
2012).  Like the Feldbaum/Lange clause, the Akanthos clause stated that noteholders 
“„may not pursue any remedy with respect to the Indenture or the Securities‟” without 
first complying with the requirements of the clause.  Id. at 1289.  The United States Court 
of Appeals for the Eleventh Circuit held that the clause applied, finding it “clear that 
Plaintiffs‟ suit relates to the trust indentures or the securities.”  Id. at 1293.  In reaching 
this conclusion, the court relied on and quoted extensively from Feldbaum and Lange.  
Consistent with the pre-TIA decisions, the foregoing authorities indicate that the 
effect of a no-action clause depends on its language.  In Cruden, where the no-action 
clause paralleled the Athilon Clause and applied only to attempts to assert rights 
grounded in the indenture, the district court permitted the plaintiffs to assert claims 
arising from their status as noteholders, and the Court of Appeals implicitly agreed with 
this analysis.  The other decisions all involved much broader no-action clauses like those 
in Feldbaum and Lange, and the courts consistently applied those expansive no-action 
clauses in accordance with their terms.   
For their part, the defendants rely on two inapposite cases: Walnut Place LLC v. 
Countrywide Home Loans, Inc., 948 N.Y.S.2d 580 (App. Div. 2012), and Greenwich 
27 
 
Financial Services Distressed Mortgage Fund 3, LLC v. Countrywide Financial Corp., 
No. 650474/2008 (N.Y. Sup. Ct. Oct. 7, 2010).  In both cases, the defendants issued 
certificates, analogous to notes, pursuant to pooling and service agreements (“PSAs”), 
analogous to an indenture.  Holders of certificates alleged that the defendants breached 
representations and warranties in the PSAs.  Both decisions held that the no-action 
clauses in the PSAs barred the claims.  Neither decision addressed an attempt by 
certificate holders to invoke rights that did not depend on the PSAs.  Both cases are 
comparable to an attempt by noteholders to assert a claim for breach of the indenture, 
which is a claim to which a no-action clause necessarily applies.  See Foster, supra note 
1, at n.3 (“Where the individual bondholder, in order to make out a cause of action, must 
rely upon some violation by the debtor of the terms of the trust indenture or like 
instrument securing the bond, then, rather plainly, the bondholder cannot maintain his 
action unless he has met such restrictive conditions as are imposed by the trust indenture 
in respect of actions by individual bondholders.”).  Subpart 3.0 of the Athilon Clause 
explicitly bars such a claim.  Neither Walnut Place nor Greenwich Financial sheds light 
on the extent to which a New York court would apply the Athilon Clause to bar a claim 
that did not invoke a provision of the Indenture. 
C. 
Other Instructive Delaware Precedents 
In Feldbaum and Lange, this Court interpreted expansive no-action clauses that 
were governed New York law.  In other decisions, the Delaware Supreme Court and this 
Court have commented on narrower clauses and suggested that bondholders could bring 
claims that fell outside of the language of the clause.  Unfortunately, these decisions have 
28 
 
not made clear whether the indentures in question were governed by New York law.  I 
discuss them for three reasons.  First, they represent the only extant indications of the 
Delaware Supreme Court‟s views; second, given the prevalence of New York law in this 
area, some of the indentures may have been governed by New York law despite the 
absence of any reference in the opinion; and third, this Court has observed that there are 
no pertinent distinctions between New York law and Delaware law in this area.  See Tang 
Capital P’rs, LP v. Norton, 2012 WL 3072347, at *4 & n.15 (Del. Ch. July 27, 2012) 
(interpreting no-action clause in indenture with New York choice of law provision; 
noting that “[n]either party has cited and I am not aware of any case law indicating that 
the principles of contract interpretation under New York law, so far as relevant to this 
case, differ materially from those under Delaware law”); Elliott Assocs., L.P. v. Bio–
Response, Inc., 1989 WL 55070, at *3 n.1 (Del. Ch. May 23, 1989) (interpreting no-
action clause in indenture with New York choice of law provision; remarking that “there 
has been no showing that the law of New York differs from that of Delaware with respect 
to any of the matters at issue here” and concluding that “it appears to be of no 
consequence which authorities are relied upon”). 
This line of Delaware decisions begins with Harff v. Kerkorian, 324 A.2d 215 
(Del. Ch. 1974) (“Harff I”), aff’d in part, rev’d in part, 347 A.2d 133 (Del. 1975) (“Harff 
II”).  There, holders of debentures claimed that they had been harmed by the declaration 
of an allegedly improper dividend, and they sued both derivatively and directly for breach 
of fiduciary duty.  Chancellor Quillen dismissed their derivative claims for lack of 
standing.  Id. at 220.  The defendants argued that to the extent the same claims could be 
29 
 
framed as direct causes of action, they were barred by a no-action clause in the related 
indenture, which provided that “[n]o holder of any Debenture shall have any right by 
virtue of or by availing of any provision of this Indenture to institute any suit, action or 
proceeding in equity or at law upon or under or with respect this Indenture . . . .”  Id. at 
221 n.5.  Although the opinion did not quote the entire clause, the foregoing portion 
resembles the Athilon Clause. 
In ruling on the debentureholders‟ class claims, Chancellor Quillen noted that 
“[t]he authorities cited by plaintiffs for the proposition that creditors can maintain an 
action against management for violation of rights which exist independently of the 
Indenture Agreement all involved either fraud or insolvency.”  Id. at 221.  The 
Chancellor observed that the plaintiffs had not alleged that the corporation was insolvent, 
asserted any violation of a Delaware statute, or pled that the dividend amounted to fraud.  
Id.  He concluded that “no fiduciary duties existed as between the parties and that the 
rights of the convertible debenture holders . . . are confined to the terms of the Indenture 
Agreement.”  Id. at 222.  In light of this holding, the Chancellor held that “[t]he effect of 
the „no-action clause‟ . . . need not be determined.”  Id. 
On appeal, the Delaware Supreme Court affirmed the dismissal of the derivative 
claim, but reversed the dismissal of the direct claims.  Harff II, 347 A.2d at 134.  The 
Delaware Supreme Court held that the plaintiffs had pled adequately that the dividend 
amounted to fraud.  Id.  The Delaware Supreme Court accepted the plaintiffs‟ contention 
that “this „tort claim is wholly unrelated to and unaffected by any contract rights that the 
plaintiffs may have under the Indenture Agreement.‟”  Id.  The high court held that that 
30 
 
“judgment in favor of the defendants in the class action is reversed and the cause 
remanded for trial of the issue of fraud.”  Id.  As in Cruden II, the appellate decision did 
not comment on the no-action clause analysis. 
Harff II implies that the Delaware Supreme Court believed a no-action clause with 
the same scope as the Athilon Clause would not bar the noteholders‟ individual claims for 
damages under a theory of fraud.  In Continental Illinois, Justice Jacobs, then a Vice 
Chancellor, read Harff II in this fashion:  “By recognizing that the debenture holders 
were entitled to proceed on a claim of fraud independent of the terms and limitations of 
the Indenture, the Supreme Court in Harff implicitly ruled that the no-action clause of the 
indenture would not bar an action for fraud.”  Cont’l Ill. Nat’l Bank & Trust Co. of Chi. v. 
Hunt Int’l Res. Corp., 1987 WL 55826, at *5 (Del. Ch. Feb. 27, 1987); see also Simons v. 
Cogan, 549 A.2d 300, 303 (Del. 1988) (“this Court permitted the class action in Harff to 
proceed because plaintiffs had brought themselves within the fraud exception”).   
In Mann v. Oppenheimer, Justice Walsh, then Vice Chancellor, reached the same 
conclusion about Harff.  See Mann v. Oppenheimer & Co., 1985 WL 11555 (Del. Ch. 
Apr. 4, 1985), rev’d on other grounds, 517 A.2d 1056 (Del. 1986).  The plaintiffs in 
Mann owned subordinated debentures and challenged an exchange offer on grounds of 
fraud.  The defendants relied on a no-action clause which stated, “no holder of any 
Debenture may institute any action to enforce any remedy under the Indenture unless the 
Trustee declines or fails to exercise its powers or to institute such action . . . .”  Id. at *3.  
The plaintiffs argued that the no-action clause only restricted “suits brought „under or 
upon‟ the indenture.”  Id.  Citing Harff I, Justice Walsh stated:  “There is merit in 
31 
 
plaintiffs‟ position.  Even though this dispute may implicate the terms of the Indenture, 
the allegations of fraud and Federal security law violations are sufficient to support an 
independent action.  Thus, the plaintiffs need not have given notice to the Trustee prior to 
bringing suit.”  Id. (citation omitted).  Justice Walsh nevertheless granted summary 
judgment in favor of the defendants.  Id.  On appeal, the Delaware Supreme Court 
reversed and remanded so that the noteholder plaintiffs could take discovery on the 
common law fraud claims before the court addressed the defendants‟ motion for 
summary judgment.  See Mann v. Oppenheimer & Co., 517 A.2d 1056, 1060-61 (Del. 
1986).  Although the Delaware Supreme Court did not explicitly address the no-action 
clause, its ruling was consistent with Justice Walsh‟s interpretation and inconsistent with 
the contrary position that the no-action clause barred the claims as a matter of law.  See 
Cont’l Ill., 1987 WL 55826, at *5 (interpreting Mann in this fashion). 
Justice Berger, then Vice Chancellor, employed a similar analysis in Mabon, 
Nugent & Co. v. Texas American Energy Corp., 1988 WL 5492 (Del. Ch. Jan. 27, 1988).  
The holders of debentures sued the issuer and its parent for breach of the indenture and 
for fraud, contending that the defendants misrepresented that the parent would assume the 
indenture.  The defendants relied on a no-action clause.  Although the language of the 
clause was not quoted in the opinion, Justice Berger described it as requiring that notice 
be given to the trustee and other procedural requirements met “before instituting any 
action for the enforcement of any remedy under the indenture.”  Id. at *2.  Justice Berger 
held that the no-action clause only applied to the breach of contract claim:  “Plaintiffs‟ 
32 
 
remaining claims are not contractual and, therefore, the restrictions in the Indenture do 
not apply.”  Id. at *3 (citing Cont’l Illinois, 1987 WL 55826). 
It bears noting that in Lange, Chancellor Strine declined to read the Harff cases as 
expressing any view on the scope of a no-action clause.  2002 WL 2005728, at *7 n.21.  
On the merits, Chancellor Strine had held that the broad no-action clause at issue in 
Lange barred the noteholders claims for breach of fiduciary duty.  Id. at *7.   In a 
footnote, he observed that some earlier cases suggested that claims for breach of fiduciary 
duty could fall outside a no-action clause, citing Continental Illinois, and he traced 
“[m]ost of this confusion” to Harff II.  He then asked,  
[D]id the Harff case hold that a no-action clause could not bar 
a bondholder suit alleging fraud or that the issuer was 
insolvent?  The answer to that question is no.  In Harff, the 
Court of Chancery expressly avoided any ruling on the scope 
of applicability of the no-action clause, and the Supreme 
Court never addressed it any discernible, articulated way. 
2002 WL 2005728, at *7 n.21.  Notably, the Lange footnote framed the operative 
question as whether a no-action clause could bar a breach of fiduciary duty claim, not 
whether the specific language of the no-action clause at issue in Harff barred the claim.  
As in the current case, the parties may not have focused at the trial court level on the 
specific wording of the two clauses, and the Lange decision did not parse the narrower 
no-action clause in Harff or contrast it with the broader no-action clause in Lange.   
Taken together, the Harff cases and subsequent decisions indicate that the Athilon 
Clause applies only to claims under the Indenture and does not extend to claims that rely 
on other sources of law.  The limited reading that these cases give to narrow no-action 
33 
 
clauses parallels the approach taken by the authorities that explicitly apply New York 
law. 
D. 
Authoritative Commentary 
Although New York law directs that indenture provisions be interpreted using 
standard principles of contract interpretation, “[c]ourts strive to give indenture provisions 
a consistent and uniform meaning because uniformity in interpretation is important to the 
efficiency of capital markets.” Concord Real Estate CDO 2006–1, Ltd. v. Bank of Am. 
N.A., 996 A.2d 324, 331 (Del. Ch. 2010) (internal quotation marks omitted), aff’d, 15 
A.3d 216 (Del. 2011) (TABLE).  Experienced drafters deploy settled language: 
The preparation of an instrument of security intended to 
provide with artistic completeness for the ramifications of the 
modern corporate entity imposes upon its author the 
obligation to use wording that is well defined among those 
engaged in the interpretation of such indentures.  To depart 
from well understood verbiage is to invite criticism and 
possibly to plunge the investor into the field of the unknown. 
Bond Issues at 4. 
“Courts enhance stability and uniformity of interpretation by looking to the multi-
decade efforts of leading practitioners to develop model indenture provisions.” Concord 
Real Estate, 996 A.2d at 331.  These efforts began with the Commentaries in 1971 and 
continued with subsequent updates.  See, e.g., Revised Model Simplified Indenture, 55 
Bus. Law. 1115 (2000); Model Simplified Indenture, 38 Bus. Law. 741 (1983); Mortgage 
Bond Indenture Form, 36 Bus. Law. 1917 (1981). 
The Commentaries “provide powerful evidence of the established commercial 
expectations of practitioners and market participants.” Concord Real Estate, 996 A.2d at 
34 
 
331.  “Where a standard term is the product of an explicit standard-setting process such 
as the model bond indenture or the model simplified indenture, commentaries of the 
standard-setting organization should be accorded authoritative weight.”  Marcel Kahan & 
Michael Klausner, Standardization and Innovation in Corporate Contracting (or “The 
Economics of Boilerplate”), 83 Va. L. Rev. 713, 765 (1997) (footnote omitted).  The 
Delaware Supreme Court and other courts “have looked to the [Commentaries] as „an aid 
to drafting and construction‟ of common indenture language.”  Bank of N.Y. Mellon Trust 
Co., N.A. v. Liberty Media Corp., 29 A.3d 225, 241 (Del. 2011); see Kaiser Aluminum 
Corp. v. Matheson, 681 A.2d 392, 396-97 (Del. 1996) (relying on Commentaries and 
subsequent versions of the model indenture). 
The Commentaries contain a model no-action clause that resembles the Athilon 
Clause: 
No holder of any Debenture or coupon shall have any right to 
institute any proceeding, judicial or otherwise, with respect to 
this Indenture, or for the appointment of a receiver or trustee, 
or for any other remedy hereunder, unless [the holder 
complies with the conditions in the clause]. 
Commentaries, supra note 3, § 5-7 at 232.  Unlike the Athilon Clause, the Commentaries‟ 
model clause does not contain language similar to subpart 1.0 that explicitly addresses the 
source of the rights that a holder may invoke.  It does, however, contain language similar 
to subparts 3.0 and 4.0 addressing the types of proceedings governed by the clause, viz., 
those “with respect to this Indenture” or which seek “the appointment of a receiver or 
trustee, or for any other remedy hereunder.”  Notably, the model clause does not refer to 
proceedings “with respect to the Debentures,” and the Commentaries stress this point:  
35 
 
“Note that this limitation is only on suits under the indenture.”  Id. at 233.  Reinforcing 
this observation, the Commentaries describe as a “curious case” a decision which held 
that a “holder of coupons for overdue interest on mortgage bonds issued under an 
indenture containing a provision similar to the [model no-action clause] could not 
maintain a suit on such coupons.”  Id. at 233 n.22 (referencing Bartol v. Gottlieb-
Bauernschmidt-Straus Brewing Co., 98 A. 286 (Md. 1916)).  The implication is that the 
plain language of the model no-action clause only applies to suits under the indenture or 
that seek specified remedies, but not to other suits, such as actions or proceedings that do 
not rely on the indenture and seek other remedies.  
More recent authority confirms this interpretation.  In 2000, the Ad Hoc 
Committee for Revision of the 1983 Modified Simplified Indenture, working under the 
aegis of the Committee on Developments in Business Financing of the American Bar 
Association‟s Section of Business Law and assisted by members of the Committee on 
Trust Indentures and Indenture Trustees and the Business Bankruptcy Committee‟s 
Subcommittee on Trust Indentures, produced a Revised Model Simplified Indenture.  See 
Revised Model Simplified Indenture, 55 Bus. Law. 1115 (2000); see also Bank of N.Y., 29 
A.3d at 242 (relying on the Revised Model Simplified Indenture and commentary).  Its 
model no-action clause resembles the Feldbaum/Lange clause:  “A Securityholder may 
pursue a remedy with respect to this Indenture or the Securities only if [the holder 
complies with the terms of the clause].”  Revised Model Simplified Indenture, 55 Bus. 
Law. 1115, 1137-38 (2000).   
36 
 
Like the Feldbaum/Lange clause, the model clause applies to any efforts by a 
Securityholder to “pursue a remedy with respect to this Indenture or the Securities.”  Yet 
notwithstanding the broad language, the commentary to the provision states:   
The clause applies, however, only to suits brought to enforce 
contract rights under the Indenture or the Securities, not to 
suits asserting rights arising under other laws. 
Note that the introductory language requiring compliance 
prior to pursuing a remedy “with respect to this Indenture or 
the Securities” indicates merely that claims to enforce the 
contractual terms of the Securities (which may include rights 
incorporated from the Indenture) are likewise subject to the 
no-action clause (subject to the exclusion noted in the 
preceding paragraph).  
Id. at 1191-92 (emphasis in original) (citations omitted).  Thus, according to authoritative 
commentators, even a clause like the Feldbaum/Lange clause should not extend beyond 
contract rights.  For purposes of the issue presented by the Remand Order, this 
commentary confirms that the Athilon Clause should receive a narrow reading. 
E. 
The Statutory Receivership Cases 
There is one line of cases that cuts against the preceding authorities and favors 
equating the Athilon Clause with the Feldbaum/Lange clause.  When considering 
bondholders‟ petitions for a statutory receivership, judicial decisions have given a broad 
construction to no-action clauses paralleling the Athilon Clause.  The defendants rely on 
Tang, which they say holds that the Athilon Clause must apply to any attempt by a 
noteholder to bring an action on a debt instrument.  I read Tang and its predecessor cases 
as limited to statutory receiverships and not as speaking to other contexts, such as the 
claims in this case. 
37 
 
In Tang, noteholders petitioned for a statutory receivership under Section 291 of 
the Delaware General Corporation Law based on their status as creditors.  See 8 Del. C. § 
291 (“Whenever a corporation shall be insolvent, the Court of Chancery, on the 
application of any creditor or stockholder thereof, may, at any time, appoint 1 or more 
persons to be receivers of and for the corporation . . . .”).  Like the Athilon Clause, the 
no-action clause in Tang provided that 
no Holder of any Note shall have any right by virtue or by 
availing of any provision of this Indenture to institute any 
suit, action or proceeding in equity or at law upon or under or 
with respect to this Indenture, or for the appointment of a 
receiver, trustee, liquidator, custodian or other similar official, 
or for any other remedy hereunder [without meeting specified 
conditions] . . . . 
Tang, 2012 WL 3072347, at *3 (emphasis omitted).  The noteholders argued that the no-
action clause did not apply because they were not invoking a “right by virtue or by 
availing of any provision of this Indenture.”  The defendants responded that the no-action 
clause applied because the phrase “„by virtue of or by availing of any provision [of this 
Indenture]‟ should be construed to bar actions that arise out of any rights or status 
conferred on the Note holders by the Indenture.”  Id. at *5.  Vice Chancellor Glasscock 
commented that he “read the [no-action clause] as the Defendants do” and stated that he 
agreed that the phrase “„by virtue of the Indenture‟ indicates coverage of such causes of 
action available to a plaintiff by virtue of its status as a Note holder.”  Id.   
In support of their right to pursue a statutory receivership notwithstanding the no-
action clause, the plaintiffs relied on Noble v. European Mortgage & Investment Corp., 
165 A. 157 (Del. 1933).  Vice Chancellor Glasscock declined to follow Noble and relied 
38 
 
instead on Elliott Associates, in which Justice Berger, then Vice Chancellor, 
distinguished the earlier Noble decision.  To understand this line of authority, it is helpful 
to start with Noble and work forward.   
Noble was one of two opinions addressing whether a no-action clause applied to a 
claim for a statutory receiver that Chancellor Josiah O. Wolcott issued within a five 
month period.  In Noble, Chancellor Wolcott considered whether a bondholder could 
obtain a statutory receivership in light of a no-action clause that applied to “any action or 
proceeding at law or in equity upon or in respect of this indenture, or for the execution of 
any trust or power hereof, or for any other remedy under or upon this indenture.”  165 A. 
at 158 (internal quotation marks omitted).  The issuer had defaulted on its interest 
payments, and the holders of the coupons sued for the overdue payments and for the 
appointment of a statutory receiver.  Chancellor Wolcott noted that the petition for a 
statutory receiver did not seek a remedy “under or upon this indenture” and that no-action 
clauses were “strictly construed.”  Id. at 159.  The coupon holders were therefore “as 
much entitled to file a receivership bill under the statute as is any other creditor.”  Id.  
Shortly thereafter, in Tietjen v. United Post Office Corp., 167 A. 846 (Del. Ch. 
1933), Chancellor Wolcott considered a similar petition for a statutory receivership.  The 
Tietjen no-action clause applied to “any suit, action or proceeding at law or in equity for 
the foreclosure of this indenture, or for the appointment of a receiver, or for any other 
remedy hereunder . . . .”  Id. at 847.  The petitioner relied on Noble, but Chancellor 
Wolcott observed that “[w]hat clearly distinguishes the pending case from the Noble Case 
is this—that here the indenture in Section 1 of Article Seven expressly denies to any 
39 
 
bondholder the right to sue for the appointment of a receiver unless the required request 
has been made of the trustees . . . .”  Id.  In response to the petitioner‟s argument that the 
no-action clause applied only to “the appointment of a receiver . . . hereunder,” viz. under 
the terms of the indenture, Chancellor Wolcott explained that the no-action clause 
extended to any remedy that the trustee could obtain under the indenture, and that the 
language of the indenture demonstrated that the trustee could seek a statutory receiver: 
It is suggested by the complainant that the only sort of 
receiver which the prohibition referred to can be taken to 
contemplate is a receiver of the property under the indenture, 
and that inasmuch as the pending bill seeks a general receiver 
for the corporation and not of the property alone, the 
prohibition is not applicable.  The answer to that suggestion I 
think is plain, for it is to be observed that the request and 
refusal are conditions precedent not only to the bondholders‟ 
right to sue for a receiver but as well to the bondholders‟ right 
to enforce any power or remedy given to the trustees.  Now 
among those powers which are given to the trustees is the one 
found in Section 5 of the same Article Seven, which is that in 
case any one of the defaults occurs under Section 2 (which 
defaults accelerate the maturity of the bonds) the trustees are 
“entitled as of right, without notice, to the appointment of a 
receiver . . . of each and every [of] the rights and properties of 
the corporation, with power to operate and continue the 
business of the corporation, and with all other rights and 
powers of receivers in equity.”  This language clearly shows 
that the sort of receiver which the bondholders are forbidden 
to seek without satisfying the conditions precedent, is not of 
the limited type which operates only in a custodial capacity 
over the mortgaged property. 
Id. at 847-48.  Because the type of statutory receiver that the bondholders sought was one 
that the trustee could obtain under the indenture, Chancellor Wolcott dismissed the 
petition.  Id. at 848.   
40 
 
Tietjen reached the same result as two contemporaneous New York decisions.  See 
Greene v. N.Y. United Hotels, 260 N.Y.S. 405 (App. Div. 1932), aff’d, 183 N.E. 798 
(N.Y. 1933); Ernst v. Film Prod. Co., 264 N.Y.S. 227 (Sup. Ct. 1933).  In Greene, the 
no-action clause provided that 
[i]n order to promote and protect the equal and ratable rights 
of every holder of the Debentures and to avoid multiplicity of 
suits, all the Debentures shall be subject to the condition that 
no holder of any Debenture or coupon appertaining thereto 
shall have any right to institute any action, at law or in equity, 
under or growing out of any provision of this Indenture, or for 
the enforcement thereof, [without meeting its conditions]. 
260 N.Y.S. at 406.  A single bondholder sought the appointment of a receiver because of 
the corporation‟s failure to pay interest coupons when due.  The appellate court affirmed 
the dismissal of the petition on two grounds.  First, the complaint did not plead 
compliance with the no-action clause, and the court stated without analysis that “[t]he 
plaintiff as a bondholder holds his securities subject to the condition of this underlying 
trust agreement and can maintain an action only upon the conditions specified in the trust 
agreement.”  Id. at 407.  The court did not discuss whether the plaintiff had instituted an 
action “under or growing out of any provision of this indenture, or for the enforcement 
thereof.”  Second, the complaint requested a receiver but did not describe what the 
receiver would do.  Id.  The court held that the appointment of a receiver “is provisional” 
and “never . . . the ultimate object of the action,” hence the complaint was 
“fundamentally defective.”  Id.  I suspect that under current pleading standards, it would 
be reasonable to infer that the petitioner wanted the receiver to cause the company to pay 
the interest on the past-due coupons.  See Cent. Mortg. Co. v. Morgan Stanley Mortg. 
41 
 
Capital Hldgs. LLC, 27 A.3d 531, 536 (Del. 2011) (adopting “reasonable conceivability” 
as pleading standard in Delaware state court). 
Ernst involved the same indenture litigated in Relmar Holding Co. v. Paramount 
Public Corp., 263 N.Y.S. 776 (Sup. Ct. 1932), aff’d, 261 N.Y.S. 959 (App. Div. 1933).  
The no-action clause provided: 
In order to promote and protect the equal ratable right of 
every holder of the bonds and to avoid multiplicity of suits, 
all the bonds shall be subject to the condition that all rights of 
action thereon, or in respect thereof, or on or in respect of the 
coupons thereto appertaining, are vested exclusively in the 
trustee under this indenture, and that no holder of any bond or 
coupon appertaining thereto shall have any right to institute 
any action, at law or in equity, upon the bonds or any of the 
appurtenant coupons, or growing out of any provision thereof, 
or of this indenture, or for the enforcement of this indenture 
[without complying with its conditions]. 
Relmar, 263 N.Y.S. at 777-78 (Sup. Ct. 1932).  In Relmar, plaintiff bondholders 
contended that the issuance of a new series of bonds by one of Paramount‟s wholly 
owned subsidiaries violated the terms of the indenture, and the court had little difficulty 
holding that the no-action clause applied.  Id.   
In Ernst, the plaintiffs sought the appointment of a receiver on the grounds that the 
same issuance constituted a fraudulent conveyance.  264 N.Y.S. at 228.  This time, the 
plaintiffs contended that they were not suing under the indenture but rather as creditors 
under the New York Debtor and Creditor Law.  Id.  The court held that the no-action 
clause applied to this claim as well: 
What [the plaintiffs] seek is a receiver in a representative 
action to set aside a transfer as fraudulent.  The nature of their 
action shows that they are presuming to speak for all the 
42 
 
bondholders and not for themselves alone.  They are 
attempting to protect their rights under the indenture, but to 
be permitted to do so they must not contravene its terms.  . . . 
As soon as the plaintiffs presumed to speak for all other 
bondholders, they necessarily brought in the collateral 
indenture, their right to do which is challenged as a question 
of fact. 
Id. at 229.  The court seemingly could have reached the same result simply by citing the 
plain language of the no-action clause, which encompassed not only rights of action 
under the indenture but also rights under the bonds. 
The outcomes in Tietjen, Greene, and Ernst reflected the rule at the time in most 
jurisdictions.  See Smith, supra note 1 (collecting cases).  By contrast, contemporaneous 
decisions from the New Jersey Court of Chancery held that no-action clauses must be 
interpreted strictly such that when a clause referred to a right of action by virtue of the 
indenture or a remedy under its terms, it did not bar a suit for a statutory receiver.  See 
Jennings v. Studebaker Corp., 165 A. 631 (N.J. Ch. 1933); Tachna v. Pressed Steel Car 
Co., 163 A. 806 (N.J. Ch. 1933), rev’d on other grounds, 164 A. 413 (N.J. 1933); 
Reinhardt v. InterState Tele. Co., 63 A. 1097 (N.J. Ch. 1906).  This did not mean that a 
New Jersey court would grant the petition for a statutory receiver, only that the no-action 
clause did not bar consideration of the petition on the merits.  See Jennings, 165 A. at 
633-34 (denying petition). 
Against this backdrop, Justice Berger decided Elliott Associates.  The plaintiffs 
held debentures and sought the appointment of a receiver for the issuer, Bio-Response, 
Inc under Section 291.  They also claimed that Bio-Response had committed fraud and 
violated the implied covenant of good faith and fair dealing.  Elliott Assocs., 1989 WL 
43 
 
55070 at *1, *4.  Citing Harff I and II, Justice Berger noted that “debenture holders may 
be able to seek relief outside of the indenture where there are „special circumstances 
which affect the rights of the debenture holders as creditors of the corporation, e.g., fraud, 
insolvency, or a violation of a statute . . . .‟”  Id. at *4.  But Justice Berger held that (i) the 
complaint did not sufficiently allege fraud and (ii) the implied covenant of good faith and 
fair dealing did not give the plaintiffs any rights other than those found in the indenture.  
Id.   
This left the claim for a receiver, which Justice Berger held was barred by the no-
action clause.  Like the Athilon Clause and the provision in Tang, the no-action clause at 
issue in Elliott Associates stated: 
No Holder of any Security shall have any right by virtue of or 
by availing of any provision of this Indenture to institute any 
action or proceeding at law or in equity or in bankruptcy or 
otherwise upon or under or with respect to this Indenture, or 
for the appointment of a receiver or trustee, or for any other 
remedy hereunder unless such Holder previously [complies 
with specified conditions]. 
Id. at *6.  Justice Berger held that “[u]nlike the relevant clause in Noble, there is nothing 
in this Indenture reserving to plaintiffs the right to commence an action, „so long as the 
procedure they adopt is not under the [I]ndenture‟” and that “as in Tietjen, Debenture 
holders are expressly denied the right to bring an action for the appointment of a receiver 
without first following the specified procedure . . . .”  Id. at *7.   
In Tang, Vice Chancellor Glasscock followed Elliott Associates on grounds of 
stare decisis.  He noted that “[t]he language of the indenture‟s no-action clause in Elliott 
44 
 
was nearly identical to that [in Tang].”  2012 WL 3072347, at *6.  He therefore relied on 
Elliott Associates as “directly on point” and “not credibly refuted.”  Id. 
In my view, the defendants are correct to point out the tension between the rulings 
in the Delaware statutory receivership cases and the plain language of the no-action 
clauses at issue.  After excising the inapplicable language, the relevant portions of the 
Tang and Elliott Associates clauses stated:  “No Holder of any Security shall have any 
right by virtue of or by availing of any provision of this Indenture to institute any action 
or proceeding . . . for the appointment of a receiver or trustee, or for any other remedy 
hereunder.”  The predicate requirement for triggering the clause was that the holder 
invoke a right “by virtue of or by availing of any provision of this Indenture.”  The 
plaintiffs, however, were not asserting any right “by virtue of or by availing of any 
provision of this Indenture,” but rather under Section 291.  Consistent with the New 
Jersey authorities, it would seem that the no-action clause would not apply to a petition 
for receivership that did not rely on the indenture.  Tietjen, however, held that the 
reference to a receivership was sufficient to reach the opposite conclusion, creating a 
conceptual disconnect. 
Elliott Associates relied on Tietjen, focused on the reference to “the appointment 
of a receiver” in the no-action clause, and did not dilate on the apparent limitation of the 
clause to claims “by virtue of or by availing of any provision of this Indenture.”  1989 
WL 55070, at *6.  Tang reasoned through the conceptual disconnect and bridged the 
divide by holding that a suit “by virtue of or by availing of any provision of this 
Indenture” was the equivalent of a suit under the notes.  To reach this result, the Tang 
45 
 
court adopted the defendants‟ position that if the two prepositional phrases “by virtue of” 
and “by availing of” did not mean different things, then one would be rendered 
surplusage, an outcome contrary to standard principles of contract interpretation.  2012 
WL 3072347, at *5.  Tang gave meaning to both by interpreting the phrase “by availing 
of any provision of this Indenture” to refer to claims under the indenture itself while 
interpreting “by virtue of . . . this Indenture” to encompass claims under the notes.  Id.   
As demonstrated by this authorities discussed in this opinion, some no-action 
clauses refer to claims under “the Indenture” while others refer to claims under “the 
Indenture or the Notes.”  The Tang approach eliminates any distinction between the two 
usages by transforming a no-action clause like the Athilon Clause into the functional 
equivalent of the following provision, in which the italicized language reflects alterations: 
No Holder of any Note shall have any right by virtue of or by 
availing of any provision of this Indenture or the Notes to 
institute any suit, action or proceeding in equity or at law 
upon or under or with respect to this Indenture or the Notes, 
or for the appointment of a receiver, trustee, liquidator, 
custodian or other similar official, or for any other remedy 
hereunder or under the Notes.   
If applied to a no-action clause that already included the italicized references, the 
reasoning in Tang would render them meaningless because the phrase “by virtue of . . . 
the Indenture” takes care of note-based claims.  The no-surplusage rule thus contradicts 
itself:  by not treating the phrase “by virtue of . . . the Indenture” as surplusage, the phrase 
“or the Notes” becomes surplusage.    
Under Cruden II, Victor v. Riklis, and pre-TIA decisions, including the phrase “or 
the Notes” changes the scope of the no-action clause.  These authorities indicate that if 
46 
 
one of the two phrases is redundant, it is “by virtue of.”  It consequently seems preferable 
to regard the compound prepositional phrase “by virtue of or by availing of” as an 
example of the law‟s hoary tradition of deploying joint terms, such as “indemnify and 
hold harmless,” where technically one term would suffice.  See, e.g., Majkowski v. Am. 
Imaging Mgmt. Servs., LLC, 913 A.2d 572, 588 (Del. Ch. 2006) (declining to give 
separate meaning to the phrase “hold harmless”; noting that “[t]he terms „indemnify‟ and 
„hold harmless‟ have a long history of joint use throughout the lexicon of Anglo-
American legal practice”).  See generally Bryan A. Garner, The Redbook:  A Manual on 
Legal Style § 11.2 at 192 (2d ed. 2006) (“The doublet and triplet phrasing common in 
Middle English still survives in legal writing, especially contracts, wills, and trusts.  
That‟s probably the worst possible soil for it to grow in because those who interpret legal 
writing are impelled to strain for distinctions so that no word is rendered surplusage.  Yet 
that is exactly all but one word . . . is [in these phrases].”).  Under this reading, the 
Athilon Clause would not encompass a petition for a statutory receivership, which is not 
to say that a no-action clause could not be drafted to reach such a petition.  The 
Feldbaum/Lange clause would bar a statutory receivership action, because through such 
an action a “Securityholder” would be pursuing a “remedy with respect to this Indenture 
or the Securities.”   
The Complaint does not seek a statutory receivership, so for purposes of the issue 
raised by the Remand Order, this Court is not required to follow the decisions in Tietjen, 
Elliott Associates, and Tang on grounds of stare decisis.  Rather, the tension between 
47 
 
these opinions and other decisions suggests that the receivership cases should not be 
relied upon to expand the scope of the Athilon Clause to include claims under the Notes. 
F. 
Applying The Athilon Clause To Quadrant’s Claims 
The foregoing review of cases and authorities indicates that each noteholder claim 
must be measured against the particular language of the no-action clause in question.  In 
this case, the Athilon Clause applies to Counts VII and VIII in their entirety and to Count 
X to the extent it alleges a conspiracy to engage in the wrongs alleged in Counts VII and 
VIII.  Otherwise, the Athilon Clause does not apply to the Complaint. 
1. 
Count I:  Breach Of Fiduciary Duty 
In Count I of the Complaint, Quadrant asserts a derivative claim on behalf of 
Athilon against the individual defendants for breach of fiduciary duty.  In Feldbaum and 
Lange, this Court held that the no-action clause at issue in those cases barred similar 
claims for breach of fiduciary duty.  See Feldbaum, 1992 WL 119095, at *6-8; Lange, 
2002 WL 2005728, at *7.  Based on the arguments previously made at the trial level, 
Lange and Feldbaum were “directly on point.”  Dismissal Order ¶ 1. 
The Athilon Clause, however, only extends to actions or proceedings where a 
noteholder claims a right “by virtue or by availing of any provision of this Indenture.”  In 
Count I, Quadrant relies on its status as a creditor under the Notes, its allegation that 
Athilon is insolvent, and the doctrine of creditor standing articulated by the Delaware 
Supreme Court in North American Catholic Education Programming Foundation, Inc. v. 
Gheewalla, 930 A.2d 92, 101-02 (Del. 2007).  Quadrant does not rely on any provision of 
the Indenture.  It therefore appears, based on the argument Quadrant made on appeal and 
48 
 
the authorities considered on remand, that Lange and Feldbaum are not controlling and 
that the plain language of the Athilon Clause does not extend to a Gheewalla claim. 
Levy v. Paramount Publix Corp., 266 N.Y.S. 271 (Sup. Ct. 1933), aff’d, 269 
N.Y.S.2d 997 (App. Div. 1934), a case cited in Lange, does not compel a different result.  
The Levy decision construed the same no-action clause addressed in Relmar and Ernst, 
quoted above.  The no-action clause expressly encompassed rights of action on the bonds, 
“or in respect thereof,” and barred any holder of the bonds from instituting any action 
“upon the Bonds . . . or growing out of any provision thereof.”  Levy, 266 N.Y.S. at 273.  
Like the no-action clause in Lange, the no-action clause in Levy was not limited to rights 
under the indenture.  Moreover, the court in Levy does not appear to have relied on the 
no-action clause to dispose of the breach of fiduciary duty claim, which failed on other 
grounds.  Id. at 273-76.  Levy reinforces the principle that the plain language of the no-
action clause controls. 
2. 
Count II:  Aiding and Abetting A Breach Of Fiduciary Duty 
In Count II of the Complaint, Quadrant asserts a derivative claim on behalf of 
Athilon for aiding and abetting the breaches of fiduciary duty alleged in Count I.  In 
Feldbaum, this Court held that a no-action clause “applies equally to claims against non-
issuer defendants as to claims against issuers.”  1992 WL 119095, at *7.  With that 
additional analytical step, the analysis of Count I applies equally to Count II, both as to 
the initial ruling in the Dismissal Order and for purposes of the Remand Order. 
49 
 
3. 
Count III:  Permanent Injunction Based On Breach of Duty 
In Count III of the Complaint, Quadrant seeks a permanent injunction barring the 
individual defendants from causing Athilon to make interest payments on the Junior 
Notes or to pay the service and license fees identified in Count I.  For purposes of the 
Athilon Clause, the analysis is the same as Count I, both as to the initial ruling in the 
Dismissal Order and for purposes of the Remand Order. 
4. 
Counts IV And V:  Fraudulent Conveyance 
In Counts IV and V, Quadrant challenges the payment of interest on the Junior 
Notes and the service and license fees paid to EBF and ASIA as fraudulent transfers.  In 
Lange and Feldbaum, this Court held that the no-action clause at issue in those cases 
barred similar claims for fraudulent transfer.  See Feldbaum, 1992 WL 119095, at *6-8; 
Lange, 2002 WL 2005728, at *7.  Based on the arguments previously made at the trial 
level, Lange and Feldbaum seemed “directly on point.”  Dismissal Order ¶ 1. 
The Athilon Clause only extends to actions or proceedings where a noteholder 
claims a right “by virtue or by availing of any provision of this Indenture.”  In Counts IV 
and V, Quadrant relies on its status as a creditor under the Notes, its allegation that 
Athilon is insolvent, and provisions of the DFTA.  See 6 Del. C. §§ 1304(a)(1), 1305(b).  
Quadrant does not rely on any provision of the Indenture.  It therefore appears, based on 
the argument Quadrant made on appeal and the authorities considered on remand, that 
Lange and Feldbaum are not controlling. 
Lange and Feldbaum cited New York cases for the proposition that no-action 
clauses can bar fraudulent transfer claims.  Clearly this is so, but whether it is true in a 
50 
 
particular case depends on the specific language of the clause.  Feldbaum relied on the 
Ernst case, and Lange relied on both Levy and Ernst.  See Feldbaum, 1992 WL 119095, 
at *6; Lange, 2002 WL 2005728, at *7 n.19.  As discussed, the no-action clause in Levy 
and Ernst explicitly included rights of action on the bonds, “or in respect thereof,” and 
barred any holder of the bonds from instituting any action “upon the Bonds . . . or 
growing out of any provision thereof.”  Levy, 266 N.Y.S. at 273.  The Lange decision 
also relied on Victor v. Riklis and Wherehouse Entertainment.  See Lange, 2002 WL 
2005728, at *7 n.18.  As discussed, both decisions interpreted a no-action clause identical 
to the Feldbaum/Lange clause, which barred the debentureholders from seeking “any 
remedy with respect to [the] Indenture or the Securities” unless they first complied with 
its terms.  Each ruling turned on the broad scope of the no-action clause at issue.  None 
stands for the proposition that every no-action clause, however worded, necessarily bars 
fraudulent transfer claims. 
5. 
Count VI:  Permanent Injunction Based On Fraudulent Conveyance 
Count VI seeks a permanent injunction under the DFTA against continuing 
payments of interest on the Junior Notes and service and license fees to EBF and ASIA.  
For purposes of the Athilon Clause, the analysis is the same as Counts IV and V, both as 
to the initial ruling in the Dismissal Order and for purposes of the Remand Order. 
6. 
Count VII:  Implied Covenant Of Good Faith And Fair Dealing 
Count VII contends that by taking the actions detailed in Count I and elsewhere in 
the Complaint, Athilon breached the implied covenant of good faith and fair dealing that 
inheres in the Indenture.  In Feldbaum, this Court held that the no-action clause at issue 
51 
 
barred a claim for breach of the implied covenant.  See Feldbaum, 1992 WL 119095, at 
*6.  The Dismissal Order relied on Feldbaum.  Neither the argument debuted by 
Quadrant on appeal, nor the authorities considered on remand suggest a different result. 
“New York law recognizes an implied duty of good faith and fair dealing as part 
of its contract law.”  Rossdeutscher v. Viacom, Inc., 768 A.2d 8, 20 (Del. 2001).  The 
implied obligation encompasses “any promises which a reasonable person in the position 
of the promisee would be justified in understanding were included.”  Dalton v. Educ. 
Testing Serv., 663 N.E.2d 289, 291 (N.Y. 1995).  The resulting contract term is “implicit 
in the agreement as a whole.”  Rowe v. Great Atl. & Pac. Tea Co., 385 N.E.2d 566, 570 
(N.Y. 1978).  “A breach of the implied covenant is a breach of contract.”  Rossdeutcher, 
768 A.2d at 20. 
By invoking the implied covenant, Quadrant sued to enforce an implied term of 
the Indenture.  Count VII of the Complaint even references the Indenture.  The Athilon 
Clause applies to any action or proceeding “upon or under or with respect to this 
Indenture.”  Dkt. 32 Ex. A. at 51.  Quadrant‟s failure to comply with the Athilon Clause 
is fatal to its implied covenant claim.  Simons, 549 A.2d at 305.   
7. 
Count VIII:  Tortious Interference With The Implied Covenant 
Count VIII contends that EBF tortiously interfered with Athilon‟s obligations 
under the implied covenant of good faith and fair dealing that inheres in the Indenture.  
Such a claim on its face asserts a right “by virtue or by availing of any provision of [the] 
Indenture” and constitutes an action “upon or under or with respect to [the] Indenture.”  It 
is therefore covered by plain language of the Athilon Clause. 
52 
 
Two New York cases support this result.  In RJ Capital, the United States District 
Court for the Southern District of New York interpreted a no-action clause which 
provided that “[n]o Holder of any Note shall have any right to institute any Proceedings, 
judicial or otherwise, with respect to his Indenture, or for the appointment of a receiver or 
trustee, or for any other remedy hereunder [without complying with its terms].”  RJ 
Capital, 2011 WL 3251554, at *5.  Elsewhere, the indenture made the rights of 
noteholders to sue for principal and interest “subject to the provisions of [the no-action 
clause],” and the noteholders did not argue that the TIA overrode this provision.  Id. at *6 
n.6 (emphasis omitted).  The noteholders contended that the collateral manager for the 
debt securities tortiously interfered with the terms of the indenture by issuing inaccurate 
reports that the issuer then used to calculate the payments of principal and interest 
required by the indenture.  The court held that the no-action clause barred the claim for 
tortious interference, but also dismissed the claim on the merits.  Id. at *7, *14.  Similarly 
in Emmet & Co. v. Catholic Health East, 951 N.Y.S.2d 846 (Sup. Ct. 2012), the court 
held that a no-action clause applied to a claim for tortious interference with rights under 
an indenture, although the court did not quote the language of the clause.  Id. at 849-50 
(applying New York law because of lack of conflict with the law of the jurisdictions 
chosen under the indentures).  
8. 
Count IX:  Constructive Dividends In Violation Of Delaware Law 
Count IX asserts that Athilon paid constructive dividends in violation of Delaware 
law and seeks to recover those payments from the individual defendants.  Under the 
reasoning of Feldbaum and Lange, such a claim should be barred.  See Feldbaum, 1992 
53 
 
WL 119095, at *6 (“[N]o matter what legal theory a plaintiff advances, if the trustee is 
capable of satisfying its obligations, then any claim that can be enforced by the trustee on 
behalf of all bonds, other than a claim for the recovery of past due interest or [principal], 
is subject to the terms of a no-action clause of this type.”); accord Lange, 2002 WL 
2005728, at *7 (quoting Feldbaum). 
Unlike the Feldbaum/Lange clause, the Athilon Clause only extends to actions or 
proceedings where a noteholder claims a right “by virtue or by availing of any provision 
of this Indenture.”  In Count IX, Quadrant relies on its status as a creditor under the Notes 
and Sections 170, 173, and 174 of the Delaware General Corporation Law.  See 8 Del. C. 
§§ 170, 173, 174.  The Athilon Clause does not reach such a claim.  See Regan v. 
Prudence Co., 17 N.Y.S.2d 422, 425 (Sup. Ct. 1939) (holding that no-action clause did 
not apply to a suit for to recover dividends under New York‟s Stock Corporation Law). 
The defendants cite Norte & Co. v. Manor Healthcare Corp., 1985 WL 44684 
(Del. Ch. Nov. 21, 1985), as standing for the proposition that a no-action clause applies to 
a claim alleging constructive dividends, but the Norte plaintiffs contended that defendants 
paid “constructive dividend in violation of various provisions in the trust indentures.”  Id. 
at *5.  By relying on provisions of the trust indentures, the Norte plaintiffs brought the 
claim within the scope of the no-action clause in that case.  Had Quadrant made a similar 
argument here, then the Athilon Clause would apply.   
Count IX does not allege constructive dividends that violated the Indenture; rather, 
it alleges constructive dividends that violated the General Corporation Law.   It therefore 
54 
 
appears, based on the argument Quadrant made on appeal and the authorities considered 
on remand, that Lange and Feldbaum are not controlling.   
9. 
Count X:  Civil Conspiracy 
Count X asserts a claim for civil conspiracy against EBF and ASIA for actions 
taken in concert with the individual defendants.  In Feldbaum, this Court held that a no-
action clause “applies equally to claims against non-issuer defendants as against issuers.”  
1992 WL 119095, at *7.   Count X seeks to impose secondary liability on other 
defendants for conspiring in the primary wrongs detailed in other counts of the 
Complaint.  In my view, the Athilon Clause should apply to Count X to the same degree 
as it applies to the primary wrongs.  As a practical matter, this means that the Athilon 
Clause bars the plaintiffs‟ ability to recover against secondary actors for conspiring to 
commit the wrongs alleged in Counts VII and VIII.  Otherwise the Athilon Clause does 
not apply. 
III. 
CONCLUSION 
As directed by the Remand Order, this opinion has analyzed the significance under 
New York law of the differences between the no-action clauses in the Lange and 
Feldbaum indentures and the Athilon indentures.  The analysis has included a discussion 
of decisions by New York courts and other courts applying New York law.  This opinion 
has not addressed other arguments about the Athilon Clause that Quadrant raised on 
appeal but which were not the subject of the Remand Order. 
It appears that as a matter of New York law, the differences between the Athilon 
Clause and the Feldbaum/Lange clause are significant.  Based on the analysis presented, 
55 
 
the Athilon Clause does not apply to Counts I through VI and IX of the Complaint, or to 
Count X to the extent it seeks to impose liability on secondary actors for violations of the 
other counts.  The clause applies to Counts VII and VIII of the Complaint, subject to the 
outcome of Quadrant‟s other arguments on appeal.