U.S. Bank National Association v. Windstream Services, LLC
1:17-cv-07857
S.D.N.Y.Nov 1, 2017Background
- Windstream Services, LLC received a Notice of Default on September 21, 2017 under an indenture for $700 million of unsecured notes, starting a 60-day cure period.
- Windstream moved for expedited adjudication before the cure period expired; U.S. Bank and Aurelius (Counter-Defendants) insisted they needed discovery before adjudication.
- The Court adopted an expedited schedule with 16 days of discovery and, citing Second Circuit precedent, tolled (stayed) the cure period for the duration of discovery so the cure period would not be shortened by the lenders’ discovery demand.
- Counter-Defendants appealed the October 25, 2017 order tolling the cure period; the district court issued this opinion explaining and defending that order.
- The Court relied chiefly on Metropolitan Life Insurance Co. v. RJR Nabisco, which permits a district court to limit/expedite discovery and to toll a contractual cure period to protect both parties’ rights.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the court may toll the indenture's cure period to allow lender discovery | Windstream: court may toll cure period to permit adjudication and preserve full contractual cure right | U.S. Bank/Aurelius: cure period cannot be extended; Windstream admitted it cannot cure; lenders' discovery should not delay cure | Court: Tolling for the duration of limited, expedited discovery is authorized under MetLife to protect both parties’ rights |
| Whether lender-requested discovery that exceeds cure period can justify tolling | Windstream: discovery warranted; court should limit and expedite it and toll cure accordingly | Lenders: their demand should not unilaterally vary contract; tolling would reward delay | Court: Court must assess need, limit/expedite discovery, and may toll only for the time reasonably needed for discovery |
| Whether tolling here unfairly restores time Windstream lost pre-suit | Windstream: tolling simply prevents lenders from shortening the cure period via discovery demands | Lenders: Windstream’s own delays show it could have obtained adjudication without tolling | Court: Tolling does not restore pre-suit delay; it preserves Windstream’s contractual right to the full cure window against lenders’ discovery-driven shortening |
| Whether alternative remedies (conditioning post-period acceleration on adjudication) suffice | Windstream: needs full cure period to seek adjudication; conditional acceleration would not honor bargain | Lenders: proposed clarification would protect their interests without tolling | Court: Conditional acceleration would not give Windstream its bargained-for cure period; tolling is appropriate |
Key Cases Cited
- Metropolitan Life Ins. Co. v. RJR Nabisco, 906 F.2d 884 (2d Cir. 1990) (district court may limit/expedite discovery and toll cure period so lenders can obtain admissible evidence while borrower retains full cure time)
- United States v. Ransom, 866 F.2d 574 (2d Cir. 1989) (notice of appeal confers jurisdiction on court of appeals and divests district court of control over appealed aspects)
- United States v. Nichols, 56 F.3d 403 (2d Cir. 1995) (district court may clarify an order in aid of an appeal)