Bank of New York Mellon v. Commerzbank Capital Funding Trust II
2013 Del. LEXIS 145
| Del. | 2013Background
- In 2006, Commerzbank formed two Delaware affiliates (Company and Trust II) and issued Trust Preferred Securities to raise Tier I regulatory capital.
- The Bank, Company, and Trust II are governed by Delaware agreements (LLC Agreement and Trust II Agreement) and a separate German-law Support Undertaking; the Trustee represents investors as beneficiary.
- In 2009, Commerzbank merged Dresdner Bank and assumed its obligations, including DresCap Trust Certificates payments, which became consolidated Tier I capital.
- Post-merger, the Bank paid DresCap Certificates in 2009 and 2010 and paid its own Trust Preferred Securities in 2009; no further Trust Preferred payments occurred thereafter.
- The LLC Agreement contains a Pusher Provision tying payments on Parity Securities to contemporaneous or following payments on Class B Preferred Securities; the Class B and Trust Preferred payments depend on the Bank’s profitability and capital structure.
- The Support Undertaking obligates the Bank to ensure priority parity with Parity Securities and to modify the Undertaking if priorities change.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether DresCap Certificates are Parity Securities under the LLC Agreement | Trustee contends DresCap are Parity Securities (Term 2 with Internal Modifier). | Bank argues Trailing Modifier broadens to deny Parity status since DresCap lacks subject-to-guarantee language. | DresCap Certificates are Parity Securities. |
| Whether the Pusher Provision pushed payments on the Trust Preferred Securities | Payments on DresCap 2009–2010 pushed April 12, 2010 Trust Preferred payments and may push 2011. | Fiscal Year means calendar year; no push occurred for 2010. | Fiscal Year means April 12 to April 11; DresCap payments pushed 2010 and 2011. |
| Whether the Bank violated the Support Undertaking by restructuring DresCap IV | Amendment reclassifying DresCap IV required amendment to Support Undertaking to maintain parity. | No need to amend Section 2; restructuring did not trigger Section 6. | Bank violated the Support Undertaking; must elevate Trust Preferred Securities to pari passu with DresCap IV. |
Key Cases Cited
- Kaiser Aluminum Corp. v. Matheson, 681 A.2d 392 (Del. 1996) (contra proferentem and contract-interpretation principles)
- Rhone-Poulenc Basic Chems. Co. v. Am. Motorists Ins. Co., 616 A.2d 1192 (Del. 1992) (treating ambiguities and contract reading as a whole)
- PHL Variable Ins. Co. v. Price Dawe, 28 A.3d 1059 (Del. 2011) (unambiguous contract language controls)
- Gatz Props., LLC v. Auriga Capital Corp., 59 A.3d 1206 (Del. 2012) (assessing contract interpretation and related principles)