Second Circuit Overturns Southern District In Marblegate

On Jan. 17, the U.S. Court of Appeals for the Second Circuit vacated the decision of the District Court for the Southern District of New York in Marblegate Asset Management, LLC v. Education Management Finance Corp., finding that Section 316(b) of the Trust Indenture Act (TIA) "prohibits only non-consensual amendments to an indenture's core payment terms." Section 316(b) of the TIA provides, in relevant part, that "the right of any holder...to receive payment of the principal of and interest ... shall not be impaired or affected without the consent of such holder." This decision, combined with the recent ruling of the Southern District in granting a motion to dismiss in Waxman v. Cliffs Natural Resources Inc. under a similar analysis, likely ends the uncertainly as to whether Section 316(b) of the TIA recognizes claims of "substantive" impairment of payment in addition to express amendments to indenture payment provisions that has arisen by a number of TIA decisions