## Facts

- Athilon Capital Corp. issued notes governed by a New York–law indenture containing a “no-action” clause restricting noteholder suits to enforce “remedies under the Indenture” unless specified preconditions were met.
- After the 2008 financial crisis, Athilon became balance-sheet insolvent and remained financially distressed.
- An investment sponsor acquired Athilon’s equity, held significant amounts of its notes, and controlled Athilon’s board.
- Quadrant Structured Products Company, Ltd., a noteholder, sued in the Delaware Court of Chancery both individually and derivatively on Athilon’s behalf, asserting fiduciary-duty, common-law, and statutory claims tied to alleged insider misconduct in a distressed company.
- Defendants moved to dismiss on the ground that the indenture’s no-action clause barred the suit.
- The Delaware Court of Chancery certified questions to the New York Court of Appeals regarding whether the no-action clause barred claims not seeking to enforce the indenture itself.

## Issues

1. Whether a trust indenture no-action clause that restricts enforcement of “remedies under the Indenture,” but does not refer to “the Securities,” bars a securityholder’s independent common-law or statutory claims.
2. If not, whether such independent claims may proceed notwithstanding noncompliance with the no-action clause’s procedural preconditions.

## Decision

- The court held that the no-action clause, as drafted, did not bar a securityholder’s independent common-law or statutory claims.
- The court answered the second certified question in the affirmative, permitting Quadrant’s independent claims (including derivative claims asserted under Delaware law) to proceed despite the no-action clause.

## Legal Principles

- No-action clauses are enforced according to their plain language and are construed narrowly; courts will not extend them beyond what the parties clearly wrote.
- A clause limiting suits to those enforcing rights or remedies “under the Indenture” restricts indenture-based contractual enforcement actions, not claims grounded in duties imposed by common law or statute.
- Where an indenture uses distinct terms for “the Indenture” and “the Securities,” omission of “the Securities” from a no-action clause is treated as meaningful and limits the clause’s reach.
- Parties may draft broader no-action restrictions, but absent clear language, a no-action clause will not be read to eliminate independent investor claims.

## Conclusion

The court interpreted the indenture’s no-action clause to bar only actions to enforce contractual rights arising under the indenture itself, not independent common-law or statutory claims; therefore, Quadrant’s non-indenture claims were not dismissed for failure to satisfy the clause’s procedural requirements.


Quadrant Structured Prods. Co. v. Vertin, 23 N.Y.3d 549 (N.Y. 2014)