This column discusses decisions on contract law issues from the Court of Appeals in June. In Quadrant Structured Products Company v. Vertin,1 the court addressed the scope of a no-action clause in an indenture. In IDT Corp. v. Tyco Group,2 the court considered whether a complaint stated a claim for breach of an obligation to negotiate in good faith. This column also offers an additional thought about Biotronik v. Conor Medsystems Ireland,3 where the Court of Appeals ruled the lost profits sought by a distributor to redress an alleged breach of a distribution agreement were general, as opposed to consequential, damages.
‘Quadrant Structured’
In Quadrant Structured Products, the Court of Appeals answered questions certified to it by the Delaware Supreme Court. The case involved an indenture for debt securities. Indentures typically contain a no-action clause that provides an individual debt holder cannot bring an action or proceeding unless certain conditions are satisfied. Before an individual holder could assert a claim concerning the indenture, the individual had to give the trustee written notice of a “default” under the indenture that was “continuing.” After giving that notice, the individual could assert the claim only if (I) the majority in interest of the individual holders requested the trustee to bring a claim concerning the default, offering the trustee a reasonable indemnity with respect to the requested action, and (ii) the trustee did not take the action.4
