Feldbaum v. McCrory Corp.
Delaware Court of Chancery
1992 Del. Ch. LEXIS 113 (1992)
- Written by Heather Whittemore, JD
Facts
E-II Holdings, Inc. (E-II) (defendant) issued bonds. The bond indenture contained a no-action clause providing that a bondholder could not bring a lawsuit under the indenture unless bondholders owning a majority of the bonds’ value asked the indenture trustee to file a lawsuit and the trustee failed to adequately respond to the request. A group of E-II bondholders (the plaintiff bondholders) (plaintiffs) filed a lawsuit in Delaware state court against E-II, alleging fraudulent conveyance, breaches of implied duties of good faith and fair dealing, and fraud. These claims arose under implicit obligations of the indenture. In bringing the lawsuit, the plaintiff bondholders did not follow the procedural requirements imposed by the no-action clause. E-II moved to dismiss the claims. The plaintiff bondholders argued that the no-action clause did not apply to their claims, asserting that the clause applied only to claims of explicit breaches of the indenture.
Rule of Law
Issue
Holding and Reasoning (Allen, J.)
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