In a heavily redacted summary judgment
response brief filed Tuesday, Sept. 5, plaintiffs Hudson and CarVal argue that Wilmington Trust breached its fiduciary duties as trustee for Class B certificate holders by following the instructions of Class A certificate holder Ares Management and conducting an unnecessary and commercially unreasonable sale
of Norwegian Air Shuttle aircraft collateral. “Wilmington, as Class B Trustee, had a fiduciary duty to ensure that Wilmington, as Class A Trustee and Loan Trustee, was complying with the law and Agreement,” the plaintiffs assert.
Wilmington argues in its summary judgment motion that it conducted the aircraft sale as Class A and loan trustee, and in those capacities it was bound to carry out Ares’ instructions as holder of the Class A certificates. Ares and its affiliate Vmo Aircraft Leasing, which acquired the aircraft through the sale, maintain that because Wilmington did not breach any fiduciary duties to the Class B certificate holders, they cannot be liable for aiding and abetting any breach.
The plaintiffs say Wilmington’s argument that it “did not breach its fiduciary duties as Class B Trustee
because it implemented the foreclosure solely in its capacity as Class A Trustee
” is “absurd.” According to the plaintiffs, “[T]he notion that Wilmington, as Class B Trustee, could not stop itself, as Class A Trustee or Loan Trustee, from conducting an unnecessary and commercially unreasonable foreclosure makes no sense.”
“The Class B Trustee was obligated to either resign due to a conflict or inform itself of relevant facts and act as a prudent person, to maximize the recovery and return to Class B Holders after the default,” the plaintiffs maintain. “Here, Wilmington admittedly failed to do so.”
The plaintiffs also deny that their only protections against an unreasonable sale were the minimum liquidation prices in the agreements and an option to buy out Class A certificates at par. Class B certificate holders were also “protected by the Class B Trustee’s fiduciary duties and the requirement that any foreclosure be commercially reasonable,” the plaintiffs say.
The minimum liquidation price “was not a safe harbor provision; it was simply a floor,” the plaintiffs explain. “If a reasonable foreclosure process would generate a recovery $50,000,000 higher than the Minimum Sale Price, a trustee is not excused if it deliberately or negligently sells the assets for $50,000,000 less.”
Finally, the plaintiffs reject Ares’ and Vmo’s argument they “did not aid and abet Wilmington’s breach because Vmo only directed Wilmington in its Class A Trustee hat.” According to the plaintiffs, “Ares and Vmo deliberately induced Wilmington - which they knew was simultaneously acting as Class A Trustee, Class B Trustee and Loan Trustee - to conduct the commercially unreasonable and unnecessary Sale.”