Opinion ID: 387913
Heading Depth: 2
Heading Rank: 2

Heading: The Breach of Fiduciary Duty Claims

Text: 133 In part IV-C-1 of its opinion, 614 F.2d at 430-31, the panel held that Rockwell owed the holders of Debentures a fiduciary duty of good faith and fair dealing because it controlled both parties to the 1973 merger. But the panel also held that if, on remand, the jury were to find that Rockwell had fully complied with its obligations under the Indenture, its fiduciary obligations also would have been discharged as a matter of law. 134 We may assume, without deciding, that the panel was correct in its conclusion that Rockwell was charged with a fiduciary duty to the holders of Debentures. But since we have determined in part II of this opinion that Rockwell fully complied with its obligations under the Indenture, there is no need for a jury to hear this claim, even if the panel's analysis is correct: under that analysis, as applied in the light of our holding with respect to the Indenture, Rockwell can have no liability for breach of fiduciary duty. Accordingly, we affirm the judgment of the district court with respect to the breach of fiduciary duty claim against Rockwell. 135 In part IV-C-2 of its opinion, 614 F.2d at 431-32, the panel held that the Trust Indenture Act did not create any fiduciary obligations in addition to those imposed on the Trust Company under state law. For the reasons stated by the panel, we agree, and so hold. Accord, Browning Debenture Holders' Committee v. DASA Corp., 560 F.2d 1078, 1083 (2d Cir. 1977) (finding such a claim frivolous). There remains the question of the Trust Company's liability for breach of fiduciary duty under applicable state law. 136 The panel relied on Dabney v. Chase National Bank, 196 F.2d 668 (2d Cir. 1952), and United States Trust Co. v. First National City Bank, 57 A.D.2d 285, 394 N.Y.S.2d 653 (1st Dep't 1977), aff'd mem., 45 N.Y.2d 869, 382 N.E.2d 1355, 410 N.Y.S.2d 580 (1978), for its conclusion that even in the absence of a default, an indenture trustee is cloaked under New York law with a fiduciary duty to the holders of debentures that may extend beyond its strict obligations under the indenture. Both Dabney and City Bank involved conflicts of interest in which the trustee put itself in a position of advantage over the beneficiaries of the trust. Arguably, the Trust Company faced a similar conflict of interest in the case at bar when Rockwell threatened to bring a lawsuit, to withdraw other business it had with the Trust Company, and to force the Trust Company's resignation as Trustee if it refused to execute the supplemental indenture necessary for the merger. 137 Be that as it may, however, there is no actionable wrong in this case. We assume, without deciding, that the panel was correct in concluding that under New York law, the Trust Company's obligations exceeded the narrow definitions of its duties in the indenture and encompassed fiduciary duties as well. 614 F.2d at 432. And had we agreed with the panel that the Indenture was ambiguous, there would be a real question whether the holders of Debentures had received in the supplemental indenture all that was contractually due them under the Indenture. Were that question answered in the negative, there would have been the further question whether the Trust Company had adequately discharged its duties to the holders of Debentures with the absolute singleness of purpose required by New York law. Dabney, 196 F.2d at 671. The evidence in the record regarding the advice given the Trust Company by its counsel prior to the execution of the supplemental indenture undoubtedly would have been relevant to the Trust Company's defensive claim that it had acted in good faith and on advice of counsel. 138 But the question of whether the holders of Debentures received in the supplemental indenture all that was contractually due to them is conclusively answered by our holding in part II of this opinion, supra. Regardless of the Trust Company's motives, or its prior opinion as to the meaning of the Indenture, there is no question but that the Trust Company's ultimate action executing the supplemental indenture fully protected what we have determined to be the legitimate rights of the holders of Debentures under the Indenture. Broad has cited no New York authority for the proposition that an indenture trustee has a duty, fiduciary or otherwise, to seek for the holders of debentures any benefits that are greater than those contractually due them; indeed, there is support in the New York cases for the opposite conclusion. See Hazzard v. Chase National Bank, 159 Misc. 57, 287 N.Y.S. 541 (Sup.Ct.1936), aff'd mem., 257 A.D. 950, 14 N.Y.S.2d 147 (1st Dep't 1939), aff'd mem., 282 N.Y. 652, 26 N.E.2d 801, cert. denied, 311 U.S. 708, 61 S.Ct. 319, 85 L.Ed. 460 (1940). We hold that the Trust Company had no duty, as a matter of law, to do anything other than that which it in fact did. Thus, there is no question for a jury as to whether there has been a breach of fiduciary duty. Accordingly, we affirm the judgment of the district court with respect to both the state and federal breach of fiduciary duty claims against the Trust Company. 27