Chesapeake Energy Corp. v. Bank of New York Mellon Trust Co., N.A.
2014 U.S. App. LEXIS 22308
2d Cir.2014Background
- Chesapeake issued $1.3 billion of senior notes due March 15, 2019 governed by Base Indenture and a February 2012 Supplemental Indenture.
- Section 1.7(b) of the Supplemental Indenture allows Special Price redemption during the Special Early Redemption Period (Nov 15, 2012 to Mar 15, 2013) with 30–60 days’ notice, plus a remaining $250 million outstanding constraint after any partial redemption.
- Notice for Special Price redemption must be given during the Special Early Redemption Period pursuant to Base Indenture §3.04.
- Chesapeake announced on Feb 20, 2013 its intent to redeem at the Special Price, but later faced protest that the notice window had closed; Chesapeake issued a March 15, 2013 notice for redemption on May 15, 2013.
- BNY Mellon refused to participate, suggesting redemption would occur at the Make-Whole Price; Chesapeake sued for declaratory relief asserting timeliness.
- The district court held that §1.7(b) unambiguously allowed redemption at the Special Price if notice was given within the period, and that redemption could occur 30–60 days after, rendering Chesapeake’s March 15 notice timely.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does §1.7(b) unambiguously fix the deadline for Special Price redemption? | Chesapeake | BNY Mellon | Yes; the court held §1.7(b) unambiguously limits notice to Feb 13, 2013 and timeliness favors BNY Mellon. |
| Is §1.7(b) ambiguous, requiring extrinsic evidence to interpret? | Chesapeake | BNY Mellon | No; court finds no ambiguity; intrinsic language controls the meaning. |
| If ambiguity exists, should extrinsic evidence be reevaluated to resolve the ambiguity? | Chesapeake | BNY Mellon | Yes; but the current panel held no ambiguity and remanded for related issues rather than extrinsic review. |
Key Cases Cited
- Law Debenture Trust Co. of N.Y. v. Maverick Tube Corp., 595 F.3d 458 (2d Cir. 2010) (ambiguity standards and contract interpretation)
- Olin Corp. v. Am. Home Assur. Co., 704 F.3d 89 (2d Cir. 2012) (defining unambiguous contract terms)
- Compagnie Financiere de CIC et de L’Union Europeenne v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 232 F.3d 153 (2d Cir. 2000) (interpretation of integrated agreements)
- Howard v. Howard, 292 A.D.2d 345 (2d Dep’t 2002) (contract interpretation within NY courts)
- Seiden Assocs. v. ANC Holdings, Inc., 959 F.2d 425 (2d Cir. 1992) (ambiguity and integrated contracts)
- Kass v. Kass, 91 N.Y.2d 554 (N.Y. 1998) (form over substance in contract interpretation)