## Facts

- Plaintiffs were minority lenders holding about 12% of a secured term loan to a retail corporate group under a 2014 amended and restated credit agreement.
- The agreement granted lenders security interests in substantially all borrower property, including valuable intellectual property held by subsidiaries, and limited collateral transfers to defined “Restricted Subsidiaries.”
- The agreement generally allowed amendments with “Required Lenders” (majority) consent, but required unanimous lender consent for any transaction or related series transferring “all or substantially all” of the collateral.
- In 2016, the borrower implemented a restructuring that transferred key intellectual property collateral to other subsidiaries; plaintiffs alleged the recipients were not “Restricted Subsidiaries” and that the transfers, as a series, effectively moved “all or substantially all” collateral.
- In 2017, the borrower sought and obtained roughly 85% lender consent to amend the agreement to ratify the 2016 transfers and modify covenants; plaintiffs did not consent.
- Plaintiffs sued the borrower-related entities and the administrative/collateral agent, asserting contract claims and various fraud- and fiduciary-duty-type theories.
- Defendants moved to dismiss under CPLR 3211(a), relying on documentary evidence, failure to state a claim, the agreement’s no-action clause, and agent exculpation provisions.

## Issues

1. Whether the agreement’s no-action clause barred individual lenders from asserting claims without satisfying contractual preconditions to suit.
2. Whether an express exception to the no-action clause permitted individual suit for breach of contract claims alleging an unauthorized transfer of “all or substantially all” collateral without unanimous consent.
3. Whether the administrative/collateral agent could be liable given an exculpatory provision protecting actions taken at the direction of the required lenders absent bad faith.
4. Whether plaintiffs stated fraud or other tort claims distinct from contractual rights and remedies and outside the no-action bar.

## Decision

- The court enforced the no-action clause and dismissed all claims not within its express carve-out.
- The court allowed only the narrow breach of contract claim alleging a transfer of “all or substantially all” collateral without unanimous lender consent to proceed.
- The court dismissed all claims against the administrative/collateral agent with prejudice, holding the exculpatory provision barred liability for actions taken at required-lender direction absent adequately pleaded bad faith.
- The court dismissed plaintiffs’ fraud and related tort claims, concluding they were barred by the no-action clause and otherwise inadequately pleaded and not independent of the contract.
- The borrower-related defendants’ motion was granted in substantial part, leaving only the narrow “all or substantially all” collateral-transfer contract theory.

## Legal Principles

- Contractual no-action clauses in syndicated credit agreements are enforceable under New York law and bar individual lender suits except as expressly permitted by the agreement.
- A narrowly written exception to a no-action clause is applied as written; sharing factual overlap with an excepted contract theory does not bring tort claims within the exception.
- Where a credit agreement requires unanimous consent for transactions transferring “all or substantially all” collateral, a claim that such a transfer occurred may proceed if the agreement’s no-action clause expressly permits it.
- An administrative/collateral agent is protected by exculpatory provisions for actions taken at the direction of required lenders, absent well-pleaded bad faith.

## Conclusion

The court limited minority lenders to a single breach of contract theory falling within a specific no-action clause exception for alleged transfers of “all or substantially all” collateral without unanimous consent, and it dismissed tort theories and all claims against the loan agent because the agreement’s collective-action and exculpation provisions controlled absent a sufficient bad-faith pleading.


Eaton Vance Mgmt. v. Wilmington Sav. Fund Soc’y, FSB, 2018 N.Y. Misc. LEXIS 1488 (Sup. Ct. N.Y. Cnty. Mar. 22, 2018)