Bank of New York Mellon Trust Co. v. Liberty Media Corp.
29 A.3d 225
Del.2011Background
- Liberty proposed the Capital Splitoff to separate Capital and Starz Group assets into SplitCo, a new public company.
- The Indenture contains a boilerplate successor obligor provision prohibiting disposition of all or substantially all assets unless a successor assumes Liberty's obligations.
- Liberty previously executed three asset-dispositions (LMI, Discovery, LEI splitoffs) since 2004, which the Trustee argues should be aggregated with the Capital Splitoff.
- Court of Chancery found the four transactions were not sufficiently connected to warrant aggregation; held Capital Splitoff alone would not transfer substantially all assets.
- The Trustee appealed, arguing the Court adopted the step-transaction doctrine and erred in not aggregating under New York law.
- Delaware Supreme Court affirmed, holding Sharon Steel precedent governs aggregation and that the Capital Splitoff, viewed with the prior transactions, does not constitute a disposition of substantially all Liberty’s assets.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether prior spin-offs should be aggregated with the Capital Splitoff. | Liberty: aggregation inappropriate; each transaction independent. | Trustee: aggregation warranted under step-transaction doctrine; all assetsTransferred may exceed threshold. | Aggregation not warranted; Capital Splitoff does not violate. |
| What law governs aggregation (New York law) and whether Sharon Steel applies. | Liberty: Sharon Steel not broadened by New York law; no plan to liquidate. | Trustee: step-transaction doctrine supports aggregation; model provisions imply broader scope. | Under New York law, Sharon Steel governs; Capital Splitoff not aggregated. |
| Whether the Indenture's boilerplate 'series of transactions' language expands protection beyond Sharon Steel. | Liberty: boilerplate language aligns with Sharon Steel; no expansion beyond piecemeal plan. | Trustee: language may broaden aggregation. | Series language interpreted to conform with Sharon Steel; no broader aggregation. |
| Whether the three-step tests of the step-transaction doctrine would change the outcome. | Not necessary to adopt; facts do not show binding commitment or interdependence. | Step-transaction could mandate aggregation. | Court did not need to adopt; outcome unchanged under current analysis. |
Key Cases Cited
- Sharon Steel Corp. v. Chase Manhattan Bank, N.A., 691 F.2d 1039 (2d Cir. 1982) (aggregation only for plan-of-liquidation or piecemeal liquidation contexts)
- Noddings Inv. Grp., Inc. v. Capstar Commc'ns, Inc., 741 A.2d 16 (Del. 1999) (three lenses of step-transaction doctrine applied to aggregate series)
- Airgas, Inc. v. Air Products and Chemicals, 8 A.3d 1182 (Del.2010) (boilerplate interpretation; uniform construction of indentures)
- San Antonio Fire & Police Pension Fund v. Amylin Pharms., Inc., 983 A.2d 304 (Del.Ch. 2009) (piercing boilerplate context in contract interpretation)