In Wilmington Trust Co., as indenture trustee, v. Tropicana Entertainment , LLC, (Del. Ch., Feb. 29, 2008), read opinion here, the Chancery Court ruled on cross-motions for summary judgment regarding the claim that the loss of a casino license was a default or caused a default under the terms of an indenture involving about one billion dollars of debt. There were both winners and losers in the decision as some parts of each motion were granted and denied. Of particular note is the intersection of basic contract interpretation principles with the "customary language used for generations"( my words) for indenture documents. The money quote follows:
In this instance, the parties have cross-moved for partial summary judgment without identifying any material facts in dispute; accordingly, the Court, as authorized by Court of Chancery Rule 56(h), may treat the motions as “the equivalent of a stipulation for decision on the merits based on the record submitted with the motions.” The questions before the Court are appropriate for summary judgment because they depend almost exclusively upon the Indenture, the ICA Trust Agreement, New Jersey gaming law and regulation, and the acts of the Commission as evidenced by its rulings.23
For purposes of construing and applying a trust indenture, it is, in many ways, just another contract. The rules of interpretation are drawn from basic contract law. The shared intent of the parties, as evidenced by their written words, is the target,24 and, as with shorter and perhaps simpler agreements, the words and terms are generally given their plain and ordinary meaning.25 Yet, there is a difference. The same “boilerplate” language appears over and over again through the years in many similar indentures, and it is important that language routinely and broadly employed in a specific category of agreements be accorded a consistent and uniform construction.26 Efforts to give trust indenture provisions
expansive readings or some additional force by implication carry the ever present risk of not honoring the careful and sophisticated drafting which is said to go into the preparation of such agreements. It has been recognized that “the highlynegotiated provisions of notes and debentures that restrict the commercial freedom that issuers otherwise enjoy under default law are traditionally interpreted strictly, precisely because they involve specifically extracted limitations on ordinary economic liberties.”27 Even with due respect for the principle that indentures (and their “boilerplate” language in particular) should not be read as the source for some previously unrecognized “implied” rights, the drafters of such documents bear the
risk that acts or conduct not contemplated may fall squarely within the reach of the
express and unambiguous language appearing in the document. With these principles and objectives in mind, the Court turns to the specific contentions of the parties.
C. Loss of Licensure is Not an Event of Default
The Company starts with five uncontrovertible propositions: (1) the Indenture does not contain a specific licensure covenant ...
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22. See, e.g., Levy v. HLI Operating Co., 924 A.2d 210, 219 (Del. Ch. 2007).
23 .Compare Union Oil of Cal. v. Mobil Pipeline Co., 2006 WL 3770834, at *10 (Del. Ch.
Dec. 15, 2006) (“Summary judgment is the proper framework for enforcing unambiguous
contracts because there is no need to resolve material disputes of fact.”).
24. See Sharon Steel Corp. v. Chase Manhattan Bank, N.A., 691 F.2d 1039, 1049 (2d Cir. 1982).
25. See, e.g., Lopez v. Fernandito’s Antique, Ltd., 760 N.Y.S.2d 140, 141 (N.Y. App. Div. 2003).
26. See, e.g., Sharon Steel, 691 F.2d at 1048; Morgan Stanley & Co., Inc. v. Archer Daniels
Midland Co., 570 F. Supp. 1529, 1542 (S.D.N.Y. 1983).
27. Allied Capital Corp. v. GC-Sun Holdings, L.P., 910 A.2d 1020, 1033 (Del. Ch. 2006) (citing Metro. Life Ins. Co. v. RJR Nabisco, Inc., 716 F. Supp. 1504, 1515 (S.D.N.Y. 1989)).
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Let me leave you with one more nugget. Although sympathetic to the consequences that would flow from a default that might then trigger a bankruptcy, the court observed at page 24 that: "...any consequences of a potential bankruptcy, whatever they may be, are simply beyond the reach of a state court judge."
