Wilmington Savings Society, FSB v. Cash America International, Inc.

Cash America International, Inc. (Cash America) (defendant) was a publicly traded corporation in the business of nonrecourse lending. Cash America’s e-commerce business, which generated 39 percent of its revenue, was conducted through its subsidiary Enova International (Enova). In May 2013, Cash America issued $300 million of notes due in 2018. Section 5.01 of the indenture prohibited Cash America from disposing of any property unless its book value did not exceed 10 percent of Cash America’s total assets. Such a transaction constituted an event of default. Under § 6.02, upon default, the trustee for the noteholders, Wilmington Savings Society, FSB (Wilmington) (plaintiff), was permitted to accelerate the notes and declare all principal and interest immediately due and payable. Under § 6.03, Wilmington also had the right to pursue any remedy to enforce the performance of any provision of the notes or indenture. The indenture also had a provision, § 3.01, that gave Cash America the option to redeem the notes prior to their due date, but only upon paying a make-whole premium. In April 2014, Cash America announced its intent to spin off Enova by distributing 80 percent of Enova common stock to Cash America’s shareholders and making Enova a separate publicly traded company. Subsequently, noteholder River Birch Capital L.L.C. (River Birch) sent correspondence to Cash America stating that the spin-off would constitute an event of default and further advised that Cash America should redeem the notes and pay the make-whole premium. Cash America responded that the spin-off would not breach the indenture and that even if the spin-off was a breach, the only remedy available was acceleration of the notes. Subsequently, Cash America effectuated the spin-off. Wilmington brought suit against Cash America in federal court, claiming that the spin-off breached the indenture and that Cash America was obligated to pay the make-whole premium. Wilmington relied on the Second Circuit’s decision in Sharon Steel Corp. v. Chase Manhattan Bank, N.A., which held that a permissive acceleration clause that is not exclusive of other remedies posed no bar to specific performance of redemption provisions in an indenture under circumstances in which the debtor voluntarily caused the note to become due and payable. In response, Cash America argued that acceleration was an exclusive remedy and that Sharon Steel was distinguishable because the debtor in that case was subject to Maine law. The parties cross-moved for summary judgment.