Semi-Tech Litigation, LLC v. Bankers Trust Co., 02 Civ.0711(LAK).
| Decision Date | 21 January 2005 |
| Docket Number | No. 02 Civ.0711(LAK).,02 Civ.0711(LAK). |
| Citation | 353 F.Supp.2d 460 |
| Parties | SEMI-TECH LITIGATION, LLC, Plaintiff, v. BANKERS TRUST COMPANY, Defendant. |
| Court | U.S. District Court — Southern District of New York |
Robert I. Bodian, Kevin Ainsworth, Mintz Levin Cohen Ferris Glovsky and Popeo, P.C., New York, NY, for Plaintiff.
Edward Flanders, F. Joseph Owens, Jr., Pillsbury Winthrop LLP, New York, NY, for Defendant.
This case is an object lesson in how seemingly minor oversights can become the subject of major litigation.
Defendant Bankers Trust Company ("BT") was the trustee under an indenture for a 1993 note offering by Semi-Tech Corporation ("Semi-Tech" or the "Company") that raised $300 million to fund the Company's purchase of 51 percent of the shares of The Singer Company N.V. ("Singer"). Semi-Tech subsequently entered bankruptcy. The plaintiff holds the assigned claims of certain holders of the notes issued in the 1993 offering. It alleges that the defendant breached statutory, contractual, and fiduciary duties by failing to examine certain documents and give certain notices and that the defendant is therefore liable for the losses allegedly suffered by the noteholders after Semi-Tech entered into transactions that are said to have diminished the value of the notes. The matter now is before the Court on the defendant's motion for summary judgment dismissing the complaint.
In August 1993, Semi-Tech,1 a Canadian holding company controlled by James Ting, raised $300 million by issuing Senior Secured Discount Notes (the "Notes") in a public offering registered in the United States. The Notes were scheduled to mature in 2003 and had a stated amount at maturity of $654,193,000. The offering was used to help Semi-Tech purchase, from a related holding company named Semi-Tech (Global) Company Limited ("Global"), 51 percent of the shares of Singer, a Netherlands Antilles corporation that, together with its affiliates, manufactured and marketed sewing machines and other consumer products. Under a related Pledge Agreement, some of the Singer shares were pledged as security for the Notes.2
The Notes were issued under an indenture agreement between Semi-Tech and BT as indenture trustee. A number of provisions of the indenture are at issue here.
The indenture provides that if an Event of Default occurs and is continuing and certain notices have been given, the Default Amount of the Notes — defined, as relevant here, as the issue price plus accrued interest — would immediately become due and payable.3 "Event of Default" is defined in Section 501 of the indenture as any of a number of events, including:
(A) a default in the payment of principal or interest;4
(B) filing of bankruptcy or other similar proceeding;5
(C) "the failure by the Company to comply for 30 days after notice with any of its obligations under" a set of indenture covenants that, among other things, limited the amount of additional debt that the Company, Singer, and Singer's subsidiaries could incur, limited payments the Company could make, and limited the extent to which the Company and its subsidiaries could enter into transactions with affiliated entities;6 and
(D) "default in the performance, or breach, of any covenant or warranty of the Company in this Indenture" not otherwise dealt with in the section defining Event of Default, "and continuance of such default or breach for 60 days after" the Trustee gives a "Notice of Default" to the Company or a certain percentage of noteholders give a "Notice of Default" to the Trustee and the Company.7
The term "default," as distinct from "Event of Default," is not defined in the definitions section of the indenture.8
Article Six of the indenture is entitled "The Trustee." Section 601 provides that "[t]he duties and responsibilities of the Trustee shall be as provided in the Trust Indenture Act."9 Section 602 states:
11
Section 603 is titled "Certain Rights of Trustee." It provides, as relevant here:
The indenture required the Company periodically to deliver to BT several types of certificates stating that the Company was in compliance with its obligations under the indenture, known as "no-default" certificates.13 Section 1017(a) required annual no-default certificates from officers of Semi-Tech:
"The Company will deliver to the Trustee, within 140 days after the end of each fiscal year of the Company ... an Officers' Certificate,14 stating whether or not to the best knowledge of the signers thereof the Company is in default in the performance and observance of any of the terms, provisions and conditions of" [a number of specified covenants, including the ones dealing with prohibited transactions], "and if the Company shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge."15
Section 1017(b) is nearly identical, except that it required quarterly certificates.
The Company was obligated to provide as well annual certificates from its auditors. Section 1017(d) provides:
"The Company shall deliver to the Trustee within 140 days after the end of each fiscal year a written statement by the Company's independent public accountants stating (A) that their audit examination has included a review of the terms of this Indenture and the [Notes] as they relate to accounting matters, and (B) whether, in connection with their audit examination, any event which, with notice or the lapse of time or both, would constitute an Event of Default has come to their attention and, if such a default has come to their attention, specifying the nature and period of the existence thereof."16
Finally, Section 102 of the indenture sets forth requirements that applied to a range of certificates and opinions (the "Section 102 Language") and is at the heart of the allegations against BT:
As will be discussed in more detail below, the plaintiff alleges that BT violated the Trust Indenture Act of 1939 (the "TIA"),18 Section 31519 of which prescribes duties for indenture trustees. The portion of the statute relevant here is as follows:
(1) the indenture trustee shall not be liable except for the performance of such duties as are specifically set out in such indenture; and
(2) the indenture trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, in the absence of bad faith on the part of such trustee, upon certificates or opinions conforming to the requirements of the indenture;
but the indenture trustee shall examine the evidence furnished to it pursuant to section 314 [i.e. 15 U.S.C. § 77nnn] to determine whether or not such evidence conforms to the requirements of the indenture.
To continue reading
Request your trial
-
Rsl Communications Plc v. Bildirici
..."usual ... causation rule" requires proof of two sub-elements: "but for" and proximate causation. See Semi-Tech Litig., LLC v. Bankers Trust Co., 353 F.Supp.2d 460, 482 (S.D.N.Y.2005), aff'd, In re Bankers Trust Co., 450 F.3d 121 (2d Cir.2006); cf. Nat'l Mkt. Share, Inc. v. Sterling Nat'l B......
-
Royal Park Invs. SA/NV v. HSBC Bank USA, Nat'l Ass'n
...Cir.2014) (quoting 15 U.S.C. § 77ddd(a)(2) ).61 See 15 U.S.C. § 77ooo.62 Id. § 77ooo (a).63 Id. Accord Semi–Tech Litig., LLC v. Bankers Trust Co., 353 F.Supp.2d 460, 474 (S.D.N.Y.2005) (plain language of statute and legislative history imply this is a separate duty).64 15 U.S.C. § 77ooo (b)......
-
Ret. Bd. of the Policemen's Annuity & Benefit Fund of Chi. v. Bank of N.Y. Mellon
...In 1990, Congress amended the TIA to make such limiting language mandatory in all indentures. See Semi–Tech Litig., LLC v. Bankers Trust Co., 353 F.Supp.2d 460, 474 n. 69 (S.D.N.Y.2005), aff'd sub nom., In re Bankers Trust Co., 450 F.3d 121 (2d Cir.2006) (per curiam). Thus, “prior to defaul......
-
Fox v. Koplik (In re Perry H. Koplik & Sons, Inc.)
...that the performance of the defendant's duties would have avoided loss, and what loss it would have avoided.” 299 As Judge Kaplan noted in Semi–Tech, this requirement is often satisfied. But that will depend, as it did in Semi–Tech and as it does here, on the particular failure of duty invo......