## Facts

- E-II Holdings, Inc. issued bonds under a trust indenture governed by New York law that contained a broadly worded no-action clause.
- A corporate restructuring involved MPC, McCrory Corp., and E-II, including McCrory issuing new shares that resulted in E-II owning about 90% of McCrory’s equity.
- Noteholder plaintiffs alleged the restructuring and related transfers wrongfully shifted value and harmed bondholders by impairing repayment prospects.
- The noteholders asserted claims framed as fraudulent conveyance, common-law fraud, and breach of the implied covenant of good faith and fair dealing.
- The indenture’s no-action clause required specified collective-holder and demand-on-trustee prerequisites before bondholders could sue, including requesting the trustee to act and allowing time for trustee inaction.
- The noteholders sued directly without satisfying the clause’s procedural prerequisites.
- Separate McCrory/MPC stockholder plaintiffs challenged aspects of the restructuring as fraudulent conveyances and value-shifting transactions.

## Issues

1. Whether the indenture’s broad no-action clause barred noteholder claims for fraudulent conveyance, fraud, and implied covenant theories when the noteholders did not satisfy the clause’s demand and collective-action prerequisites.
2. Whether and to what extent the stockholder fraudulent conveyance and related claims were properly asserted (including standing/derivative limitations).

## Decision

- The Court of Chancery applied New York law to interpret the indenture and enforced the no-action clause according to its plain, expansive language.
- The court held the noteholders’ claims were barred because they were “with respect to” the indenture and the securities in substance, sought class-wide creditor relief, and arose from the issuer–noteholder relationship governed by the indenture.
- The noteholders’ failure to satisfy the no-action clause’s prerequisites required dismissal of their complaint.
- The court addressed the stockholder claims separately; some aspects were limited or addressed on standing/derivative grounds, and the opinion’s principal doctrinal holding concerned the noteholder/no-action-clause ruling.

## Legal Principles

- Under New York law, a broadly drafted no-action clause covering actions “upon or under or with respect to” the indenture or the securities is generally enforced as written in arm’s-length bond transactions.
- Claims styled as fraudulent conveyance, fraud, or implied covenant may fall within a no-action clause when the alleged injury and requested remedy derive from the bondholder relationship and would benefit holders pro rata.
- Courts evaluate the substance of the claim and the nature of the relief sought, not the plaintiff’s chosen label, when determining whether a no-action clause applies.
- No-action clauses serve to channel enforcement through the indenture trustee and require collective bondholder support to avoid fragmented, duplicative, or inconsistent litigation strategies.
- Absent a recognized basis to avoid enforcement, bondholders must satisfy the clause’s procedural prerequisites before pursuing litigation.

## Conclusion

The court enforced a broad indenture no-action clause to dismiss noteholder fraudulent conveyance, fraud, and implied covenant claims brought without complying with trustee-demand and collective-action prerequisites, treating the claims as class-wide enforcement efforts arising from the indenture relationship.


Feldbaum v. McCrory Corp., 1992 Del. Ch. LEXIS 113 (Del. Ch. 1992)