Applying contract interpretation principles under New York law, the Chancery Court ruled that terms of an agreement were violated when restricted funds intended as security for a note were used for other purposes. This case has attracted widespread attention in the business press and is currently in the midst of an expedited appeal to the Delaware Supreme Court. Calpine Corp. v. Bank of New York, download file.
UPDATE: In an expedited appeal, decided within little more than a week or so after the Chancery Court decision was final, the Delaware Supreme Court largely affirmed the opinion of the Chancery Court in finding that use of the cash assets was a breach of the parties’ agreement. Here is the decision announced late last Friday: download file.