New York Court of Appeals Reinstates Claims of Noteholders and Establishes Obligations of Indenture Trustees

New York Court of Appeals Reinstates Claims of Noteholders and Establishes Obligations of Indenture Trustees

On June 25, 2008,  the New York Court of Appeals reinstated the negligence claim of noteholders seeking tens of millions of dollars from an indenture trustee resulting from its failure to deliver a document to a collateral trustee.  The Court’s decision was the first appellate decision that expressly held that prior to an event of default, an indenture trustee owes noteholders an extra-contractual obligation to perform basic, non-discretionary, ministerial functions, and that the failure to perform those obligations will subject the trustee to liability in tort.  Kasowitz New York partners Jim Stricker and Ron Rossi and Special Counsel Tali Epstein represent the plaintiffs in this action.