The Honorable Jesse M. Furman of the U.S. District Court for the Southern District of New York granted summary judgment to Paul, Weiss client Wilmington Savings Fund Society, FSB, on its claim for breach of contract against defendant Cash America International, Inc. Wilmington, as trustee under an indenture for notes issued by Cash America, alleged that Cash America breached the indenture by disposing of 80 percent of the shares of a valuable wholly owned subsidiary to its shareholders through a stock dividend. Wilmington argued that, under the indenture and decisional law of the Second Circuit, the proper remedy for Cash America's breach was an award requiring Cash America to redeem the notes by paying the redemption price specified in the indenture, which included a "make-whole" premium.
On cross-motions for summary judgment, Judge Furman held that the disposition of significant property without consideration reduced Cash America's future expected income and materially changed its financial condition. Accordingly, the disposition constituted a breach of the indenture and, under the Second Circuit's decision in Sharon Steel v. Chase Manhattan Bank, N.A., 691 F.2d 1039 (2d Cir. 1982), the noteholders were entitled to payment of the redemption price, including a make-whole premium calculated in accordance with the indenture. Judge Furman rejected Cash America's "tortured reading of both the Indenture and Sharon Steel."