Rudbart v. North Jersey District Water Supply Commission

The North Jersey District Water Supply Commission (the commission) (defendant) issued $75 million in notes pursuant to a bond indenture to provide interim financing for a new facility. The notes carried an annual interest rate of seven and seven-eighths percent, payable biannually. The notes’ maturity date was June 15, 1987, but the commission was entitled to redeem them at an earlier date by providing 30 days’ notice in a newspaper of general circulation in Newark, New Jersey, and New York City. The early-redemption provision was included in the commission’s authorizing resolutions, the official offering statement, and each individual note. The commission decided to redeem the notes as of June 23, 1986. Notice was provided in three major newspapers on May 23 and June 9, 1986. The commission ceased sending interest payments after June 23. Approximately $10 million in notes remained unredeemed as of the end of 1986, with many noteholders only learning of the redemption because they did not receive their regularly scheduled interest payments. Theodore Rudbart and others filed suit in state court against the commission and the indenture trustee, Fidelity Bank, NA (the bank) (defendant), challenging the adequacy of the notice on behalf of the noteholders who learned of the redemption later in the year (the noteholders) (plaintiffs). The noteholders sought payment of interest for the period after June 15. The law division found in favor of the commission and the bank. The noteholders appealed. The appellate division reversed. The commission and the bank appealed. The New Jersey Supreme Court granted certiorari.