The U.S. District Court of the Southern District of New York dismissed a lawsuit brought by noteholders under a New York law indenture against the co-issuer of the notes and collateral manager for breach of contract because the noteholders failed to comply with the “limitation of suits” provision in the indenture.

The court stated that the allegation of the noteholders that they did not receive proper distribution amounts on the notes constituted an “event of default” under the indenture, and as such “falls squarely within the limitation on suits clause.” However, since the noteholders did not comply with all the contractual prerequisites for bringing a lawsuit set forth in the “limitation of suits” provision of the indenture, the court did not allow them to proceed with breach of contract claims against the co-issuer and collateral manager. However, the court did not dismiss the breach of contract claims against the indenture trustee based on the same “no-action” clause, since compliance with such clause “would require [noteholders] to demand that the [indenture trustee] initiate proceedings against itself to rectify the alleged error.”

A copy of the case can be accessed here.