Wilmington Savings Fund Society, FSB v. Caesars Entertainment
CA10004-VCG
Del. Ch.Mar 18, 2015Background
- In 2008 Apollo and TPG led a $30 billion LBO of Caesars; the operating subsidiary CEOC incurred most of the debt and remained heavily indebted (≈$19.3 billion of CEOC’s portion).
- CEOC issued multiple second‑priority secured note series in 2008–2010 under indentures (2008, 2009, 2010) secured by liens under a Second Lien Collateral Agreement; US Bank (and successor WSFS) served as trustee for the 2009 notes.
- An Intercreditor Agreement among creditors (not including CEC/CEOC as parties) defines priority among lenders and contains a forum selection clause limiting actions by Second Priority Secured Parties to New York courts; the 2009 Indenture incorporates the Intercreditor Agreement by reference.
- Plaintiff WSFS (successor trustee) alleges that Apollo/TPG and affiliates stripped CEOC of valuable assets (transfers to affiliated entities) to put assets beyond CEOC creditors’ reach and sued derivatively and directly for breach of contract, fiduciary duty, fraudulent transfer, aiding and abetting, and waste.
- Defendants moved to dismiss or stay in Delaware, arguing (1) the Intercreditor Agreement’s exclusive New York forum clause applies (incorporated into the 2009 Indenture), and (2) forum non conveniens favors New York; a near‑contemporaneous New York action exists.
- Chancellor Glasscock denied the motions, holding the Intercreditor Agreement’s New York forum clause does not clearly and unambiguously cover WSFS’s claims and that forum non conveniens did not establish overwhelming hardship to displace Delaware.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether an exclusive New York forum selection clause bars suit in Delaware | WSFS: 2009 Indenture governs trustee’s rights; no forum clause in it, so Delaware suit is permissible | Defendants: 2009 Indenture incorporates Intercreditor Agreement (which has an exclusive New York clause), so WSFS must sue in New York | Denied — court: incorporation does not clearly and unambiguously import the Intercreditor Agreement’s exclusive forum for these claims (clause limited to disputes “relating to” intercreditor priorities) |
| Whether CEOC/CEC (or WSFS) are bound to enforce Intercreditor forum clause | WSFS: CEOC is an intended beneficiary only as to limited sections; trustee not clearly bound | Defendants: incorporation + related provisions mean trustee’s enforcement rights are subject to Intercreditor Agreement and its forum clause | Denied — Intercreditor expressly limits third‑party enforcement and does not give CEOC/WSFS clear power to invoke the forum clause |
| Whether forum non conveniens requires transfer to New York | WSFS: Delaware is proper and convenient; plaintiff’s forum choice entitled to deference | Defendants: most witnesses/parties in New York; parallel New York action favors dismissal/stay | Denied — defendants failed to show “overwhelming hardship”; Cryo‑Maid factors do not favor dismissal; Delaware can apply New York law where needed |
| Whether parallel New York action compels dismissal under first‑filed rule | WSFS: Delaware action first‑filed; contemporaneous filing doctrine applies | Defendants: New York action arises from same facts and later included WSFS; proceedings should be consolidated in New York | Denied — court treated filings as contemporaneous and applied forum non conveniens framework; parallel proceedings not dispositive against Delaware forum |
Key Cases Cited
- McWane Cast Iron Pipe Corp. v. McDowell‑Wellman Eng’g Co., 263 A.2d 281 (Del. 1970) (articulates first‑filed rule and forum‑selection context)
- General Foods Corp. v. Cryo‑Maid, 198 A.2d 681 (Del. 1964) (sets forum non conveniens factors used in Delaware)
- Martinez v. E.I. DuPont de Nemours & Co., 86 A.3d 1102 (Del. 2014) (clarifies ‘‘overwhelming hardship’’ standard and modern forum non conveniens analysis)
- Berger v. Intelident Solutions, Inc., 906 A.2d 134 (Del. 2006) (forum selection/venue dismissal precedent)
- Ison v. E.I. DuPont de Nemours & Co., 729 A.2d 832 (Del. 1999) (deference to plaintiff’s forum choice; rare to dismiss on forum non conveniens)
- Taylor v. LSI Logic Corp., 689 A.2d 1196 (Del. 1997) (Delaware courts consistently uphold plaintiff’s forum choice)