MEMORANDUM OPINION
Computershare Trust Company N.A. and Computershare Trust Company of Canada are the indenture trustee (together, the “Second Lien Trustee”) for the 11% Senior Secured Second Lien Notes due 2021 and 11.75% Senior Secured Second Lien Notes due 2022.
On April 29, 2014,
BACKGROUND
The Debtors filed for bankruptcy on the Petition Date, citing both liquidity concerns and a need to restructure their ongoing operations. EFIH is a subsidiary holding company of the lead debtor, Energy Future Holdings Corp. EFIH’s primary asset is its equity interests in Oncor Electric Delivery Holdings Company, LLC,
Before filing, EFIH had already sought and begun negotiations with a DIP lender and sought approval for DIP financing in its first day filings and motions.
THE FIRST LIEN MAKE-WHOLE PROCEEDINGS
Meanwhile, the First Lien Trustee’s adversary action against EFIH proceeded at full steam. EFIH and the First Lien Trustee filed cross-motions for summary judgment on February 13, 2015. After a hearing on March 16, 2015 — and review of the First Lien Indenture and governing law — the Court issued its findings of fact and conclusions of law on March 26, 2015 and denied the First Lien Trustee’s motion for summary judgment while granting, in part, EFIH’s cross-motion for summary judgment.
In so doing, the Court found that (i) EFIH’s bankruptcy filing was. not an intentional default under the First Lien Indenture, (ii) EFIH’s bankruptcy filing caused an automatic acceleration of its Obligations under the First Lien Indenture and (iii) under the plain language of the First Lien Indenture, EFIH’s repayment of the First Lien Notes did not meet the conditions necessary for an Applicable Premium to become due.
Except as noted below, the relevant provisions of the Second Lien Indenture and the First Lien Indenture are substantially identical. Under New York law, if a document or writing is complete, the Court need not look “outside the four corners” of the document in determining the parties’ intent.
A. Standard for Summary Judgment
Federal Rule of Civil Procedure 56 is made applicable to these adversary proceedings by Federal Rule of Bankruptcy Procedure 7056 and directs that summary judgment should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits “show that there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law.”
Neither party before the Court has raised a genuine dispute of a material fact or expressed a need for more discovery. The questions before the Court are purely legal in nature. Summary judgment is therefore appropriate at this stage.
B. Contract Interpretation Under New York Law
Under New York law, which governs the Second Lien Indenture,
Having reached the conclusion that the Second Lien Indenture is unambiguous, the Court relies on long-recognized canons of interpretation to determine its meaning. First, “[t]he best evidence of what parties to a written agreement intend is what they say in their writing.”
The Second Lien Trustee argues that the inclusion of the phrase “premium, if any,” in § 6.02 of the Second Lien Indenture can only be interpreted as requiring the payment of a make-whole premium upon acceleration. Because this phrase was not in § 6.02 of the First Lien Indenture, the Second Lien Trustee argues, the Court’s interpretation of the First Lien Indenture is not applicable here.
In response, EFIH argues that the “premium, if any” language cannot reasonably be read as requiring a make-whole upon acceleration. EFIH further asserts that even if this were a reasonable interpretation, New York law and precedent both require a provision providing for a make-whole payment be in express, specific language and that the phrase “premium, if any” cannot be considered express and specific enough to meet this burden.
D. Make-Whole and Prepayment Premiums
As a general rule regarding make-whole or prepayment premiums, “a lender is not entitled to prepayment consideration after a default unless the parties’ agreement expressly requires it. This is because prepayment provisions generally address the consideration to be paid when the borrower voluntarily prepays the debt, but after a default the borrower’s repayment is neither voluntary nor in the nature of a prepayment.”
[c]ourts review prepayment consideration terms that are triggered by default and acceleration under the standards applicable to liquidated damages. That is, courts consider whether the amount due is an unenforceable penalty.28
E. The Applicable Premium is Not Due Under the Terms of the Second Lien Indenture.
Pursuant to the terms of the Second Lien Indenture, the Court must determine whether an Applicable Premium is due. As the Second Lien Notes were automatically accelerated as a result of the Debtors’ bankruptcy filings, the Partial Payment of the Second Lien Notes was not an optional redemption nor will any future payment be an optional redemption. As this Court stated in relation to the First Lien Notes, which is also applicable herein:
When the EFIH Debtors filed for bankruptcy, the Notes automatically accelerated and became due and payable immediately. Under New York law, a borrower’s repayment after acceleration is not considered voluntary. This is because acceleration moves the maturity date from the original maturity date to the acceleration date and that date becomes the new maturity date. Prepayment can only occur prior to the maturity date, and acceleration, by definition, advances the maturity date of the debt so that payment thereafter is not prepayment but instead is payment made after maturity. Once the maturity date is accelerated to the present, it is no longer possible to prepay the debt before maturity. Acceleration therefore does not trigger the Trustee’s right to prepayment consideration under the Optional Redemption provision. Thus, the Trustee’s claim that the EFIH Debtors’ repayment was an optional redemption must fail.30
There is nothing in the Second Lien Indenture that would lead the Court to a different conclusion. The Partial Paydown was not “optional” as the Second Lien Notes were accelerated under the terms of section 6.02 of the Second Lien Indenture. According to the terms of the Second Lien Indenture, the Applicable Premium is not due. Thus, even if the Court found that the language “if any” (as discussed infra) refers back to sections 3.07(a) and 3.07(d) of the Second Lien Indenture, there would be no premium due pursuant to the terms of the Second Lien Indenture.
As stated above, the Applicable Premium has not been triggered under the terms of the Second Lien Indenture. However, the Second Lien Trustee asserts that language in the acceleration provision provides for payment of a make-whole premium (in addition to principal, interest, etc.) upon automatic acceleration. The Second Lien Trustee asserts that the acceleration clause language in the Second Lien Indenture differs from the First Lien Indenture — and these additional 9 words create the obligation to pay the make-whole upon acceleration. As compared to the acceleration clause in the First Lien Indenture, the Second Lien Indenture states, in part (differing language is bold-ed):
[I]n the case of an Event of Default arising under clause (6) or (7) of Section 6.01(a) hereof, all principal of and premium, if any, interest (including Additional Interest, if any) and any other monetary obligations on the outstanding Notes shall be due and payable immediately without further action or notice.32
Thus, the Court must determine whether these additional 9 words create the obligation to pay a make-whole premium after acceleration.
The Bankruptcy Court for the Southern District of New York examined virtually identical language in .Momentive.
[I]t is “well-settled law,” that, unless the parties have clearly and specifically provided for payment of a make-whole (in this case the Applicable Premium), notwithstanding the acceleration or advancement of the original maturity date of the notes, a make-whole will not be owed. Such language is lacking in the relevant sections of the first and 1.5 lien indentures and notes; therefore, they do not create a claim for Applicable Premium following the automatic acceleration of the debt pursuant to Section 6.02 of the indentures.35
Thus, the Momentive court held that the “premium, if any” to be paid upon prepayment was not specific enough to meet the specificity requirement of New York law in order for the make-whole or prepayment claim to be payable post-acceleration.
The Momentive court stated that there are only two ways to receive a make-whole upon acceleration under New York law: (i) explicit recognition that the make-whole would be payable notwithstanding the acceleration, or (ii) a provision that requires
The District Court for the Southern District of New York affirmed the bankruptcy court’s holding in Momentive holding that the language “premium, if any” was not sufficient to create an “unambiguous right to a make-whole payment.”
The Second Lien Trustee attempts to distinguish Momentive because Judge Drain likened “if any” to other belt-and-suspenders catch-all provisions in other New York cases, where the role of “catchall” in the Second Lien Indenture is played by the “and any other monetary obligations” provision - thus, according to the Second Lien Trustee, the phrase “premium, if any” in this case refers to the applicability of the call premium for payments made after the maturity date. This distinction fails for several reasons: (i) the Second Lien Indenture is not specific or explicit about the payment of any premium upon automatic acceleration; and (ii) “if any” means that the premium may not be due at all.
The Second Lien Trustee also advances the argument that “premium, if any” must be “specific” because the Second Lien Indenture would not contain two “catch all” provisions. However, legal documents such as the Second Lien Indenture often contain redundant language and “mere redundancy of words is not so unusual as to justify the court in giving an interpretation to the contract which its words do not import.”
In another example similar to Momen-tive, in In re Solutia Inc., the bankruptcy court found the language of “premiuip, if any” insufficient and lacking in “explicitness that would be expected in a typical post-acceleration yield-maintenance clause.”
These cases should be compared to Northwestern Mutual and United Merchants, wherein the courts held that the contractual language was explicit. In Northwestern Mutual Life Ins. Co. v. Uniondale Realty Associates, the court reviewed the following language in the loan agreement (referred to below as the “Note”):
“Borrower shall have the right, upon thirty (30) days advance written notice, beginning December 15, 2003 of paying this note in full with a prepayment fee. This fee represents consideration to Lender for loss of yield and reinvestment costs. The fee shall be the greater of Yield Maintenance or 2% of the outstanding principal balance of this note*732 on the date of prepayment. In the event of a prepayment of this note following (i) the occurrence of an Event of Default ... followed by the acceleration of the whole indebtedness evidenced by this note ... such prepayment will constitute an evasion of the prepayment terms ... and be deemed to be a voluntary prepayment ... and such payment will, therefore,... include the prepayment fee required under the prepayment in full privilege recited above »43
The Northwestern Mutual court held: “When a clear and unambiguous clause which calls for payment of the prepayment premium or a sum equal thereto, at any time after default and acceleration is included in the loan agreement, such clause is analyzed as liquidated damages and is generally enforceable.”
the subject clause eliminates the need to prove that prepayment after acceleration is an intentional avoidance of the premium, as prepayment after acceleration is “deemed” voluntary and an avoidance. The clause does not, however, contain language indicating prepayment application in foreclosure, redemption or any other payment. If the woi*d “prepayment” in the subject clause was intended to include “redemption” in the context of foreclosure, it would be expressly included, as was done in the aforementioned examples.46
Thus, the court ultimately found that the prepayment premium was only relevant after an attempt at prepayment after a default and acceleration but prior to commencement of a foreclosure action; thus in Northwestern Mutual, as it was a foreclosure action, the prepayment premium was not recoverable
Similarly, in In re United Merchants and Manufacturers, Inc., the default provision in the note at issue stated:
then, at the option of the holder of any Note, exercised by written notice to (UM & M), the principal of such Note shall forthwith become due and payable, together with the interest accrued thereon, and, to the extent permitted by law, an amount equal to the pre-payment charge that would be payable if (UM & M) were pre-paying such Note at the time pursuant to P 8.2 hereof48
The Second Circuit held that this liquidated damages provision in the agreement was valid under New York law as it was a loan agreement between sophisticated parties for a large sum of money and the amount stipulated was “not plainly disproportionate to the possible loss.”
The Second Lien Indenture does not provide specifically for a payment of a premium upon acceleration, nor does it refer back to specific sections of the Second Lien Indenture. As such, and for the reasons set forth in Momentive, the Court finds that the Second Lien Indenture’s acceleration clause is unambiguous, insufficient and lacking in explicitness regarding whether a make-whole premium is due upon an event of default. Thus, after acceleration, the Second Lien Trustee does not have a valid claim for the Applicable Premium.
G. Conclusion
For the reasons set forth above the Court will grant summary judgment for EFIH on Counts I-IV and IX-X of the Amended Complaint. Counts V-VII of the Amended 'Complaint are identical in form and substance to claims brought by the First Lien Trustee on which the Court found summary judgment for EFIH.
An order will be issued.
Notes
. This Memorandum Opinion constitutes the Court’s findings of fact and conclusions of law pursuant to Fed. R. Bank. P. 7052. The Court has subject matter jurisdiction over this contested matter pursuant to 28 U.S.C. § 157 and 1334. This is a core proceeding pursuant to 11 U.S.C. 157(b)(2). Venue is proper pursuant to 28 U.S.C. § 1408 and 1409. This Court has the judicial power to enter a final order.
. Respectively, the "2021 Notes” and "2022 Notes.” Together, the "Second Lien Notes.”
. Together and with all supplements, amendments, and exhibits, the “Second Lien Indenture.”
. The "Petition Date.”
. Collectively, the "Debtors.”
. The "Partial Paydown.”
. Together, with its direct and indirect subsidiaries, “Oncor.”
. The "DIP Motion.”
. Delaware Trust Co. v. Energy Future Intermediate Holding Co. LLC (In re Energy Future Holdings Corp.),
. Id. at 202.
. Id. at 183-84.
. Id.
. Delaware Trust Co. v. Energy Future Intermediate Holding Co. LLC (In re Energy Future Holdings Corp.),
. W.W.W. Assoc., Inc. v. Giancontieri,
. EFH I at 186-87.
. Fed. R. Civ. P. 56(a); see also In re Delta Mills, Inc.,
. Delta Mills,
. Niagara Frontier Transit Metro Sys., Inc. v. Cnty. of Erie,
. Second Lien Indenture at § 13.08 "Governing Law,” attached as Exhibit A to the Amended Complaint.
. W.W.W. Assoc.,
. Sayers v. Rochester Tel. Corp. Supp. Mgmt. Pension Plan,
. Schron v. Troutman Sanders LLP,
. Muzak Corp. v. Hotel Taft Corp.,
. See Beal Sav. Bank v. Sommer,
.In re S. Side House, LLC,
. S. Side House,
. Id. at 270.
. Id. (holding mortgage lender's claim for a post-default, post-acceleration prepayment premium, pursuant to “escape” clause in mortgage documents that prohibited debtor from evading prepayment fee by tendering full amount of debt post-foreclosure, had to be disallowed; because the debtor, in proposing to pay mortgage debt over time in plan of reorganization, was not tendering full amount of debt, and was not attempting to prepay this accelerated debt.).
. United Merchants and Mfrs., Inc. v. Equitable Life Assurance Society of the U.S. (In re United Merchants & Mfrs., Inc.),
. EFH I at 195 (citations and quotations marks omitted).
. See In re MPM Silicones, LLC, No. 14-22503-RDD,
The Second Lien Trustee's assertion is incorrect. As EFIH’s counsel summarized, it appears the Second Lien Trustee is asking the • Court to embrace a new principle of law: that "unless acceleration clearly extinguishes the prepayment provision, that provision continues in full force post-acceleration.” As the Court found in the previous preceding, however, the plain language of § 3.07 is that only prepayment creates an obligation in EFIH to pay an "Applicable Premium.” Because § 6.02 accelerated the Second Lien Notes
. Second Lien Indenture § 6.02 (emphasis added).
.
. Id. at *13.
. Id. at *14 (citations omitted).
. Id. at *15.
. Id.
. Id.
. U.S Bank N.A. v. Wilmington Savings Fund Society (In re MPM Silicones, LLC),
. Casler v. Connecticut Mut. Life Ins. Co., 22 N.Y. 427, 432 (1860).
. In re Solutia Inc.,
. U.S. Bank Trust N.A. v. American Airlines, Inc. (In re AMR Corp.),
. Nw. Mut. Life Ins. Co. v. Uniondale Realty Associates,
. Id. at 836 (citations omitted).
. Id. at 839.
. Id. (emphasis added).
. Id. at 839-40.
. United Merchants and Mfrs,
. Id. at 143 (internal quotation marked omitted).
. EFHI at 196-200.
. Id.