## Facts

- Several unit investment trusts (UITs) held Washington Public Power Supply System (WPPSS) bonds and issued units to investors under trust indentures governing ownership and distributions.
- After WPPSS projects failed and related guarantees were held unenforceable, bondholders pursued securities litigation that resulted in a settlement exceeding $150 million for the benefit of the UITs.
- The UIT trustees received the settlement funds and filed interpleader actions to determine which unit holders were entitled to the proceeds.
- Investors fell into three relevant categories: (1) former holders who bought before June 15, 1983 and sold before that date; (2) current holders who bought after June 15, 1983; and (3) continuous holders who bought before June 15, 1983 and held through that date.
- Former holders argued they bore the economic injury from the WPPSS collapse and should receive the settlement on an injury-based or equitable theory.
- Current and continuous holders relied on the indentures’ distribution provisions requiring payments to be made pro rata to owners of record on contractually specified record dates and distribution dates.
- The district court granted summary judgment largely for current and continuous holders, concluding the indentures controlled and foreclosed former holders’ claims.
- Former holders appealed, and certain current/continuous holder representatives cross-appealed on limited issues.

## Issues

1. Whether the UIT indentures unambiguously required settlement proceeds received by the trustees to be distributed to unit holders of record on specified record dates rather than to former holders who owned units earlier.
2. Whether equitable considerations or securities-law concepts of who suffered loss could override the indentures’ distribution scheme.
3. Whether extrinsic evidence could be used to alter or interpret the indentures’ distribution provisions if the texts were unambiguous.

## Decision

- The Second Circuit affirmed the district court’s summary judgment in all material respects.
- The court held the indentures were clear and required distribution of settlement proceeds to holders of record on the indenture-defined record dates (i.e., current and continuous holders as of those dates).
- The court rejected former holders’ attempt to obtain the proceeds based on who was “really harmed” by the WPPSS events.
- The court declined to consider extrinsic evidence to modify or reinterpret the indentures’ unambiguous distribution terms.
- The court held equitable authority could not be used to rewrite the contractual allocation of rights in standardized financial instruments.

## Legal Principles

- When a trust indenture is unambiguous, courts must enforce it as written and may not use extrinsic evidence to change its meaning.
- Distribution rights in a UIT are determined by the indenture’s record-date and distribution-date provisions; settlement proceeds received by the trustee are treated as trust assets subject to those provisions.
- Equitable considerations about loss allocation among successive investors cannot override explicit contractual distribution terms, particularly in sophisticated market settings where risk and pricing reflect known information.
- Courts will not reorder contractual entitlements to achieve perceived fairness when doing so would contradict the parties’ written agreement and disrupt predictable market arrangements.

## Conclusion

The Second Circuit held that the UIT indentures’ plain terms controlled allocation of the WPPSS settlement proceeds, requiring payment to unit holders of record on the specified dates and barring former holders’ equity-based claims to the fund.


United States Tr. Co. of N.Y. v. Jenner, 168 F.3d 630 (2d Cir. 1999)