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					SUPREME COURT OF THE STATE OF NEW YORK
APPELLATE DIVISION – FIRST DEPARTMENT
MURRAY CAPITAL MANAGEMENT, INC.,

                       Plaintiff-Respondent,               Index Nos. 01-105506 & 01-601827

       v.                                                  BRIEF FOR AMICI CURIAE THE
                                                           BOND MARKET ASSOCIATION
OWENS-ILLINOIS, INC.,                                      AND THE SECURITIES INDUSTRY
                                                           ASSOCIATION
               Defendant-Appellant.
MURRAY CAPITAL MANAGEMENT, INC.,

                       Plaintiff-Respondent,

       v.

DEUTSCHE BANK, AG,

                       Defendant-Appellant.

                                        INTRODUCTION

       The Bond Market Association (“TBMA”) and the Securities Industry Association

(“SIA”) (collectively, “Amici”) respectfully submit this brief as amici curiae in support of

                                                               s
Defendants-Appellants for the purpose of bringing to the Court’ attention their views regarding

the enforcement of “limitation on suits” clauses (also known as “no action” clauses) frequently

                                                                               s
contained in indentures, and the significant implications of the Supreme Court’ decision for the

operation of the U.S. bond markets.

                            STATEMENT OF INTEREST OF AMICI

       The Bond Market Association represents securities firms and banks that underwrite, trade

and sell debt securities in the U.S. and international markets. All of the primary dealers of U.S.

Treasury bonds, notes and bills, as recognized by the Federal Reserve Bank of New York, are

members of TBMA, as are other securities and commodities brokers and dealers. TBMA’s

members transact business in a wide variety of public and private debt obligations, most of



                                                 1
which are bonds, notes, or similar instruments actively traded in the U.S. and abroad, including

trillions of dollars in outstanding corporate debt obligations, much of which is issued under

indentures similar to the one at bar.

       From its inception in 1976 (and under its prior name of the Public Securities

Association), TBMA has addressed significant issues confronting the U.S. securities markets,

and has sought to foster sound credit, business and trading practices for participants in the debt

markets. Among other activities, TBMA provides a market perspective on debt securities and

regulation, and undertakes numerous industry initiatives to improve industry practices and

                               s
market efficiency. One of TBMA’ goals is to standardize market practices and commonly used

documentation, such as the indenture at issue in this action.

       The SIA, established in 1972, is the principal trade organization of the securities industry

with a membership of nearly seven hundred securities firms in the U.S. and Canada, including

investment banks, broker-dealers, and mutual fund companies. SIA members are active in all

U.S. and foreign markets and in all areas of corporate and public finance. Through its numerous

                                                               s
activities, the SIA strives to inspire and maintain the public’ trust and confidence in the

securities industry and the U.S. capital markets. The SIA and TBMA both regularly submit

briefs as amicus curiae to address matters of common law, statutes and regulations that affect the

legal rights and obligations of participants in the U.S. securities and debt markets.

       Amici have a significant interest in the legal and policy issues raised in this case

regarding the enforceability of limitation on suits clauses contained in many indentures. These

widely used clauses serve important purposes for both issuers and the long-term interests of

bondholders. The Supreme Court in this action refused to enforce the limitation on suits clause

contained in an indenture, holding that such clauses are unenforceable unless they appear on the




                                                 2
face of the bond certificate and that barring suit in these circumstances would be inequitable.

                                                                       s
The court thus permitted a single holder of 1% of a class of a company’ debentures – and less

than 0.5% of another class – to challenge a refinancing plan that the issuer contends was critical

               s
to the company’ long-term financed health and which no other bondholder, nor the indenture

trustee, has challenged.

       Such a holding is outmoded and does not reflect commercial reality: in the vast majority

of public bond offerings, such as this one, the bonds are issued in “book entry” form, rather than

with issuance of a physical note, and bondholders only see a “form of note” (if at all) in the

context of federally mandated disclosure documents that are required to contain the indenture.

Further, to call into doubt the enforceability of clearly worded indenture provisions, like the one

at issue, would have a negative impact on all participants in the U.S. bond market by disrupting

the settled expectations of issuers, underwriters, and investors as to the meaning of provisions

they have previously agreed to and calling into question the validity of numerous corporate

actions taken on the assumption that the clauses would be respected. On the other hand, if the

court upholds the settled meaning and effect of the indenture provision at issue, market

participants will remain free to choose whether or not to include or modify it in future

indentures. Accordingly, Amici are filing this brief to lend a broad market perspective to the

issues presented on appeal. The specific concerns of Amici are set forth below.

                                 PRELIMINARY STATEMENT

       Participants in the securities markets, and their attorneys, strive for legal certainty in their

transactions. If the parties are confident in understanding the terms and ramifications of a

financial instrument, such as a debenture issued by a corporation, they are more likely to engage

in a transaction involving that instrument. This benefits not only the particular parties, but the




                                                  3
financial markets as a whole, because it improves the liquidity of financial instruments, which

contributes to the efficient allocation of capital.

        Recognizing the benefits of legal certainty, participants in the corporate debt market have

long turned to commonly used agreements to document the terms of debt instruments, including

indenture provisions that are often modeled on industry-wide documents developed through the

American Bar Association and subject to default provisions governed by the federal Trust

Indenture Act of 1939, 15 U.S.C. §§ 77aaa-77bbbb (“TIA”). The corporate debt market, in

which trillions of dollars in outstanding corporate debt is traded or held by institutional and retail

investors, depends heavily on uniform and consistent enforcement of commonly used indenture

terms. Without this treatment, it would be impossible for such a diverse marketplace to maintain

liquidity and predictability. Thus, it is particularly important that, when courts are called upon to

construe corporate bond indentures, they do so consistently with the stated intention of the

parties, as expressed on the face of the indenture contracts, and with an understanding of the

implications of their decisions for the market as a whole.

        The lower court in this action disregarded this principle in two ways. First, the court

allowed equitable considerations to override the clear language of the provision (the “Limitation

on Suits clause”) in the bond indenture at issue (the “Indenture”), which provision bars Plaintiff-

Respondent Murray Capital Management, Inc. (“Murray Capital”) from bringing suit without the

consent of either the indenture trustee or the holders of a majority of the outstanding debt of the

class of debentures at issue. Second, the court broke new ground by refusing to enforce the

Limitation on Suits clause in the Indenture on the grounds that the limitation was not expressly

reprinted on the “form of note”, a theory that had never previously been applied outside the

context of suits for unpaid principal or interest. Such a rule makes no sense in the modern bond




                                                      4
market, where most bonds – including the bonds at issue – are traded and held in book entry

form. Both aspects of this decision could potentially upset the reasonable expectations of

numerous parties in the corporate debt market, and, as a result, the decision should be reversed.

                                            STATEMENT OF FACTS

       Briefly, and taking the facts in the light most favorable to the non-moving party (Murray

Capital) this case arises from allegations that Defendant-Appellant Owens-Illinois, Inc. (“Owens-

Illinois”) breached a clause contained in agreements relating to certain debentures issued by

Owens-Illinois (the “Senior Notes”) when it refinanced certain bank loans to grant bank lenders a

security interest greater than that possessed by holders of the Senior Notes.1

       The Senior Notes were issued May 15, 1997, and are governed, as is customary, by a

series of documents: (1) an indenture (the “Indenture”) [R. 86-131]; (2) officers’certificates,

which attest to the necessary corporate authorization to issue each of the notes and add certain

terms to the Indenture (the “Officers’Certificate”) [R. 132-42, 152-62]; (3) a “Form of Note”

attached to each Officers’Certificate (the “Form of Note”) [R. 143-51, 163-70]; and (4) standard

terms imposed by the TIA [See, e.g., R. 95 § 1.03; R. 146 ¶ 4; 166 ¶ 4].

       As is common among notes of this nature, the Senior Notes appear to have been issued

solely in book entry form. The “Form of Note” annexed to each Officers’Certificate – the only

“note” in the record, as Murray Capital does not allege that it ever saw or received a copy of a

note – contains the following recital:




1
       Owens-Illinois contends that the structure of the financing, involving loans to Owens-Illinois subsidiaries in exchange
       for liens on assets of the subsidiaries, did not violate the relevant contract terms. Amici do not address this issue,
       inasmuch as the enforceability of the Limitation on Suits clause is not dependent upon the merits of the underlying
       claim.




                                                             5
           UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
           REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A
           NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO
           THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER,
           EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
           REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
           NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
           OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
           SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
           REPRESENTATIVE OF DTC); ANY TRANSFER, PLEDGE, OR OTHER
           USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
           PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
           HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

           TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
           TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF
                                                        S
           DTC OR TO A SUCCESSOR THEREOF OR SUCCESSOR’ NOMINEE
           AND LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH
           THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED
           TO HEREIN.

Form of Note [R. 143]. See also [R. 163 (containing substantially identical language)].

(capitalization in original; emphasis omitted). In the standard practice of the bond market, this

means that these bonds are what is known as “book entry” bonds. As described in more detail

below (see infra Point III (A)), the practical effect of holding in book entry form is that

bondholders do not receive a separate “note” or “certificate”; rather, the interests of all

bondholders are registered with DTC. Thus, what the bondholder who buys a book entry bond in

a public offering receives are (1) a confirmation of the bond purchase from its broker-dealer and

(2) such disclosure documents as are required by the Securities and Exchange Commission

(“SEC”). A purchaser of the bonds in the secondary market, such as Murray Capital (see Cpl. ¶2

[R. 71]), receives only the confirmation, but can easily obtain other public disclosure documents,

such as the registration statement, that are on file with the SEC.

       Each Form of Note, as is customary, expressly incorporates by reference the terms of the

Indenture, which made the Indenture a part of the Form of Note as a matter of black-letter


                                                  6
contract law as discussed below. See infra Point III(B). Paragraph 4 of each Form of Note,

entitled “Indenture,” specifically states:

           The terms of the Securities include those stated in the Indenture [including
           the Officers’Certificate] and those made part of the Indenture by reference
           to the Trust Indenture Act of 1939 . . . (the “TIA”). The Securities are
           subject to all such terms, and Securityholders are referred to the Indenture
           and the TIA for a statement of those terms. Any conflict between the terms
           of this Security and the Indenture will be governed by the Indenture.

Form of Note ¶ 4 [R. 146 ¶ 4; 166 ¶ 4]. The Indenture, likewise, incorporates by reference the

terms of the TIA. See Indenture § 1.03 [R. 95 § 1.03].

       Among the terms of the Indenture that are contained in the Officers’Certificate is a

clause identified as “Limitation on Liens,” also sometimes referred to as a “negative pledge.”

See Officers Certificate § 4.09 [R. 135-36 § 4.09; R. 155-56 § 4.09]. Murray Capital alleges

that, pursuant to this provision, “Owens could grant [a] security [interest] to other lenders to

Owens – including bank lenders – only if it granted to holders of the Notes the identical level of

                                                                            s
security.” Cpl. ¶ 11 [R. 73]. Owens contested this reading of the provision’ language in its

motion to dismiss on the basis of the documentary evidence pursuant to CPLR 3211(a)(1), but,

as discussed below, the merits of the parties’respective readings of the Limitation on Liens

clause of the Indenture are irrelevant to the enforceability of the Limitation on Suits clause. See

infra Point I(B). The Form of Note makes reference to this and other clauses of the Indenture,

but the details are set forth in the Indenture and Officers’Certificate and not in the Form of Note:

                                                                           s
           The Indenture imposes certain limitations on the Company’ and its
           Subsidiaries’ability to enter transactions with Affiliates, to create or incur
           certain Liens on any of its assets or properties or any shares of Capital
           Stock or Indebtedness of any Subsidiary, to make Investments in
           Unrestricted Subsidiaries, to consolidate or merge, or transfer all or
           substantially all of its property or assets, and to pay any fees to Holders for
           or as an inducement to any consent, waiver or amendment of the Indenture.

Form of Note ¶ 4 [R. 146 ¶ 4; 166 ¶ 4].


                                                  7
       Section 6.06 of the Indenture, titled “Limitation on Suits,” provides in pertinent part:

          A Holder of securities may not pursue a remedy with respect to this
          Indenture or the Securities unless:

          (1) the Holder gives to the Trustee written notice of a continuing Event of
          Default with respect to that series;

          (2) the Holders of at least 50% in principal amount of the then outstanding
          Securities of that series make a written request to the Trustee to pursue the
          remedy;

          (3) such Holder or Holders offer to the Trustee indemnity satisfactory to
          the Trustee against any loss, liability or expense;

          (4) the Trustee does not comply with the request within 60 days after
          receipt of the request and the offer and, if requested, the provision of
          indemnity; and

          (5) during such 60-day period the Holders of a majority in principal
          amount of the then outstanding Securities of that series do not give the
          Trustee direction inconsistent with the request.

Indenture § 6.06 [R. 112 § 6.06]. The terms of the Limitation on Suits clause are likewise not

directly reprinted in the Form of Note, but the section in each Form of Note on “Defaults and

Remedies” does indicate – in language taken directly from the TIA – that “[s]ubject to certain

provisions, including those requiring security or indemnification of the Trustee, the holders of a

majority in principal amount of the Securities have the right to direct the time, method and place

of conducting any proceeding for any remedy available to the Trustee . . . .” Form of Note ¶ 11

[R. 148 ¶ 11; R. 168 ¶ 11]. See 15 U.S.C. § 77ppp(a)(1)(A).

       It is apparently undisputed that Murray Capital, a holder of 1% of one class of the Senior

Notes and less than 0.5% of another class, did not comply with this provision, nor has the trustee

or any other holder of the Senior Notes taken action. The parties’contentions before the court

below instead centered on whether there was any basis for Murray Capital to avoid the

application of the clause.



                                                 8
       Each of the documents before the Court – the Indenture, the Officers’Certificate, and the

Form of Note – was filed with the SEC in a Form 8-K dated May 16, 1997, and the Indenture

was also filed with the SEC in a Registration Statement on Form S-3 dated April 14, 1997.2 As

discussed in more detail below (see infra Point III (A)), the filing of the Registration Statement

was mandatory under federal securities law for the Senior Notes to be offered to the public.

                                         THE DECISION BELOW

       The threshold issue faced by the court below in its opinion was whether the Limitation on

Suits clause barred the action. The court declined to enforce the clause on two grounds. First,

noting its conclusion that Owens-Illinois had “unilaterally and wrongfully” breached the

“Limitation on Liens” clause, the court found that “[u]nder the circumstances, barring plaintiff

from any redress would be manifestly unjust,” and “[w]here there is a wrong there should be a

remedy.” Memorandum Decision and Order dated January 7, 2001 (“Mem.”) at 5 [R. 11

                                                          t
(quoting Harrison v. Schultz, 240 A.D. 13, 16-17 (1st Dep’ 1934)]. Second, quoting Friedman

               l,                                 t
v. Airlift Int’ Inc., 44 A.D.2d 459, 460 (1st Dep’ 1974), the court held that “‘[r]estrictions

against suit in an indenture are not effective unless the face of the bond gives adequate notice of

the restriction.’” Mem. at 5 [R. 11]. Thus, based upon its finding that “the Notes, on their face,

do not give adequate notice of the limitation on suits provision,” the court concluded that the

Limitation on Suits clause did not bar the action. Mem. at 5 [R. 11].

                                                 ARGUMENT

                                                      s
       Amici respectfully submit that the lower court’ decision conflicts with longstanding

precedents and settled commercial practice, injects an unnecessary element of uncertainty into


2
                                                     s
       These forms are publicly available on the SEC’ website at
       http://www.sec.gov/Archives/edgar/data/812074/0000912057-97-018517.txt and
       http://www.sec.gov/Archives/edgar/data/812074/0000912057-97-012911.txt, respectively.




                                                         9
the corporate debt markets, and applies a concept of “notice” that is utterly meaningless in the

context of book entry bonds issued in a public offering. This Court should reverse the Supreme

      s
Court’ decision and enforce the Limitation on Suits clause under its express terms.

       I.         THE CORPORATE DEBT MARKET RELIES ON UNIFORM
                  ENFORCEMENT OF COMMONLY USED TERMS IN BOND INDENTURES

       In approaching the terms of the Indenture and the Senior Notes, the Court should bear in

mind the nature of the instruments and the practical commercial realities of the marketplaces in

which they are purchased and sold. Both longstanding judicial precedent and commercial

practice compel three conclusions: (1) the Court should construe the terms consistent with the

intention of the parties as expressed on the face of the indenture and without reference to any

extraneous evidence of the intent of the parties before the Court; (2) the Court should construe

the terms in a way that will apply uniformly to all indentures containing the same or similar

terms, rather than by reference to the factual setting of this dispute; and (3) the Court should

seek, to the greatest extent possible, to construe the terms consistently with prior judicial

constructions.3

                  A.       The Corporate Debt Market Is A Large, Active Market That Relies On
                           Commonly Used Contract Terms To Facilitate Liquidity

       The market for corporate debt is vast, liquid, and active. As of September 30, 2001, there

was approximately $3.7 trillion in corporate debt outstanding in the hands of institutional and

retail investors. A large proportion of this debt consists of debt securities issued to the public,

and all publicly issued debt is issued under an indenture.4 The vast majority of these indentures,

3
       In the lower court, Murray Capital raised a number of other challenges to the application of the Limitation on Suits
       clause other than equitable considerations and the failure of the clause to be reprinted in the Senior Notes. While
       Amici do not address these contentions, these three principles apply equally to the proper approach to resolving such
       challenges.
4
       Debentures, such as the Senior Notes at issue, are generally unsecured debt and as such are distinct from corporate
                                                                                                      l
       “bonds,” although the terms are commonly used interchangeably. See Broad v. Rockwell Int’ Corp., 642 F.2d 929,
                                                                                                               (continued… )


                                                            10
in turn, contain standard terms modeled on industry-standard documents. Notwithstanding the

existence of standardized terms in trust indentures, market participants can and often do vary

individual terms. The existence of standard terms serves two purposes: it reduces the number of

terms that need to be negotiated in advance of a bond issuance, and it provides a settled meaning

to those that are negotiated and agreed upon in the standard form.

        The process by which corporate bond indentures are negotiated was aptly described by

the court in Metropolitan Life Insur. Co. v. RJR Nabisco, 716 F. Supp. 1504, 1509 (S.D.N.Y.

1989) (“RJR I”):

                 No one disputes that the holders of public bond issues, like
                 plaintiffs here, often enter the market after the indentures have
                 been negotiated and memorialized. Thus, those indentures are
                 often not the product of face-to-face negotiations between the
                 ultimate holders and the issuing company. What remains equally
                 true, however, is that underwriters ordinarily negotiate the terms of
                 the indentures with the issuers. Since the underwriters must then
                 sell or place the bonds, they necessarily negotiate in part with the
                 interests of the buyers in mind. Moreover, these indentures were
                 not secret agreements foisted upon unwitting participants in the
                 bond market. No successive holder is required to accept or to
                 continue to hold the bonds, governed by their accompanying
                 indentures; indeed, plaintiffs . . . could have sold their bonds right
                 up until the announcement of the [disputed transaction]. Instead,
                 sophisticated investors like plaintiffs are well aware of the
                 indenture terms and, presumably, review them carefully before
                 lending hundreds of millions of dollars to any company.

                 B.        State And Federal Courts In This State And Elsewhere Have Consistently
                           Urged A Uniform Construction Of Commonly Used Terms In Indentures

        As a general rule, “[a] standardized agreement is to be interpreted whenever reasonable

as treating alike all those similarly situated, without regard to their knowledge or understanding


(… continued)
        941 n.12 (5th Cir.) (en banc), cert. denied 454 U.S. 965 (1981) (quoting American Bar Foundation, Commentaries on
        Indentures 7 n.3 (1971)). As discussed below, the important features of these debentures for present purposes are that
        (1) they were publicly issued, (2) under an indenture, and (3) in book entry form.




                                                             11
of the standard terms of the writing.” Canel v. Fed. Home Loan Mortgage Corp., No. 85 C 1424,

1985 WL 2929, at *3 (N.D. Ill. Sept. 30, 1985) (citing Restatement (Second) of Contracts

§ 211(2) (1982)).

       It is well-settled that the rights of bondholders, with certain limited exceptions not

relevant here, are determined by contract.5 Because of New York’ prominence as a financial
                                                                s

center and the standard incorporation in most bond indentures of a clause applying the internal

laws of New York to the indenture, the courts of this State and the New York federal courts have

both had extensive experience interpreting bond indentures, and other courts interpreting

indentures have generally applied New York law to interpret indentures. There has developed

among these courts a long tradition of reading indentures to have a consistent, uniform meaning.

Because of the importance of the interpretation of New York law to the national market for

                                             s
corporate debt securities, the Supreme Court’ decision, if allowed to stand, could significantly

disrupt this market and would serve as a disincentive to selection of New York law as the

governing law for bond indentures.

       In the seminal case in the Second Circuit, Sharon Steel Corp. v. Chase Manhattan Bank,

N.A., 691 F.2d 1039 (2d Cir. 1982), cert. denied, 460 U.S. 1012 (1983), the court was asked to

resolve competing interpretations of a provision in an indenture that required immediate

redemption of debentures under certain circumstances.6 Sharon Steel argued that the district

5
       See, e.g., New York State Med. Care Facilities Fin. Agency v. Bank of Tokyo Trust Co., 163 Misc. 2d 551, 556, 621
                                                          d,                                        t),
       N.Y.S.2d 466, 470 (Sup. Ct. N.Y. Cty. 1994), aff’ 216 A.D.2d 126, 629 N.Y.S.2d 3 (1st Dep’ appeal dismissed, 87
       N.Y.2d 892, 663 N.E.2d 914, 640 N.Y.S.2d 873 (1995); AMBAC Indem. Corp. v. Bankers Trust Co., 151 Misc.2d 334,
       336, 573 N.Y.S.2d 204, 206 (Sup. Ct. N.Y. Cty. 1991); Elliott Assocs. v. J. Henry Schroder Bank & Trust Co., 838
       F.2d 66, 70-71 (2d Cir. 1988); RJR I, 716 F. Supp. at 1524-25; Simons v. Cogan, 549 A.2d 300, 303-04 (Del. 1988)
       (applying Delaware law). See also Manufacturers & Traders Trust Co. v. Erie County Indus. Dev. Agency, 280 A.D.2d
                                                   t
       909, 910, 719 N.Y.S.2d 914, 914 (4th Dep’ 2001) (applying terms of indenture regarding date interest was to accrue
                                                                                                        t
       until); Beck v. Mfrs. Hanover Trust Co., 218 A.D.2d 1, 10-13, 632 N.Y.S.2d 520, 526-28 (1st Dep’ 1995) (describing
       exceptions regarding duties of indenture trustee).
6
       The claims in Sharon Steel centered on a “successor obligor” provision, which permitted assumption of debt by a
                                                                                                                          s
       purchasing corporation if the corporate successor to the issuer purchased “all or substantially all” of the issuer’ assets.
                                                                                                                  (continued… )


                                                              12
court erred in not submitting to the jury the question of the meaning of the clause in question.

The Second Circuit disagreed, noting that successor obligor clauses are “boilerplate” provisions

found in virtually all indentures:

           There are no adjudicative facts relating to the parties to the litigation for a
           jury to find and the meaning of boilerplate provisions is, therefore, a matter
           of law rather than fact.

Id. at 1048 (emphasis added). The court emphasized the importance of uniformity of

interpretation in the capital markets:

           “A large degree of uniformity in the language of debenture indentures is
           essential to the effective functioning of the financial markets: uniformity of
           the indentures that govern competing debenture issues is what makes it
           possible meaningfully to compare one debenture issue with another,
           focusing only on the business provisions of the issue . . . and the economic
           conditions of the issuer, without being misled by peculiarities in the
           underlying instruments.” Whereas participants in the capital markets can
           adjust their affairs according to a uniform interpretation, whether it be
           correct or not as an initial proposition, the creation of enduring uncertainties
           as to the meaning of boilerplate provisions would decrease the value of all
           debenture issues and greatly impair the efficient working of capital markets.
           Such uncertainties would vastly increase the risks and, therefore, the costs
           of borrowing with no offsetting benefits either in the capital market or in the
           administration of justice. Just such uncertainties would be created if
           interpretation of boilerplate provisions were submitted to juries sitting in
           every judicial district in the nation.

Id. (emphasis added) (quoting Broad v. Rockwell Int’ Corp., 642 F.2d 929, 943 (5th Cir.) (en
                                                    l

banc), cert. denied, 454 U.S. 965 (1981)).

        The Court of Appeals, in a recent decision addressing the construction of indentures,

echoed this approach. The Eleventh Circuit, in In re Southeast Banking Corp., 156 F.3d 1114



(… continued)
        If the debt was not assigned, the issuer was required to pay off the debt immediately. The issuer (UV) liquidated its
                                                                                                                  s
        assets piecemeal, with Sharon Steel acquiring the last remaining assets and agreeing to assume all of UV’ liabilities,
        including the debentures. The indenture trustees, however, refused to sign supplemental indentures and, instead, issued
        notices of default demanding redemption.




                                                             13
(11th Cir. 1998), was presented with the question of whether senior debenture holders were

entitled to interest accruing after the filing of a bankruptcy petition by the issuer, where the

indentures under which unsecured subordinated debentures were issued made no mention of the

possibility of such interest. Noting a longstanding “Rule of Explicitness” under federal law

(prior to adoption of the Bankruptcy Code) permitting such interest to be paid only when there

was clear language to that effect in the subordinated indentures, the Eleventh Circuit, citing

Sharon Steel and Broad, indicated its hesitance “to depart from prior practice” but decided to

certify the question to the New York Court of Appeals to resolve as a matter of first impression

under New York law. Id. at 1125.

       On certification, the New York Court of Appeals decided to follow the prior rule,

stressing it was “acutely cognizant of the practical effect that our answer to the certified question

will have on a vast sea of subordination agreements not before us now in live cases or

controversies, nor even within the framework of this Eleventh Circuit litigation, involving

enormous sums of outstanding public debt” that were “drafted and entered into before the Rule

of Explicitness was called into question by the ruling of the Eleventh Circuit in the instant case.”

In re Southeast Banking Corp., 93 N.Y.2d 178, 183-84, 710 N.E.2d 1083, 1086, 688 N.Y.S.2d

484, 487 (1999). The court emphasized the need to consider the interests of parties not before

the court:

             This practical policy consequence is a matter of legitimate concern in the
             common-law developmental process, especially with respect to commercial
             matters where reliance, definiteness and predictability are such important
             goals of the law itself, designed so that parties may intelligently negotiate
             and order their rights and duties. Parties to subordination agreements
             undoubtedly relied on the Rule – their lawyers would have been quite
             remiss had they not – since recent case law, as well as a leading authority
             and many commentators have consistently recognized the continued vitality
             of the Rule.

Id., 93 N.Y.2d at 184, 710 N.E.2d at 1086, 688 N.Y.S.2d at 487 (emphasis added).


                                                  14
       Numerous other courts have followed the approach laid out in Broad and Sharon Steel,

frequently noting the danger to the marketplace of varying interpretations of standardized

indenture agreements. See, e.g., Leverso v. SouthTrust Bank of Al., N.A., 18 F.3d 1527, 1531,

1534 (11th Cir. 1994) (finding it “imperative that the terms of the indenture govern the parties’

contractual rights as determined by the judiciary”); Metropolitan Life Insur. Co. v. RJR Nabisco,

Inc., 906 F.2d 884, 891 (2d Cir. 1990) (rejecting appeal to “modern equity practice” in

construing bond; “[w]e concede without apology that we believe contract provisions specifying

60-day periods mean 60 days rather than 60 days plus an additional period calculated by the

                         s
length of the chancellor’ foot”); Chase Manhattan Bank v. Traffic Stream (BVI) Infrastructure

Ltd., 86 F. Supp. 2d 244, 256 (S.D.N.Y. 2000) (“the meaning of ‘boilerplate’provisions should

be determined by courts as a matter of law”), vacated on other grounds, 251 F.3d 334 (2d Cir.

2001) (finding absence of diversity jurisdiction), cert. granted, 122 S. Ct. 803 (2002); United

States Trust Co. of N.Y. v. Alpert, 10 F. Supp.2d 290, 305-06 (S.D.N.Y. 1998) (reliance on

equitable considerations to override indenture terms “would send shock waves to the markets”

and “would not only change the very nature of the investment but also be an unworkable

concept”); RJR I, 716 F. Supp. at 1514-16, 1520-22 (“this Court . . . cannot ignore or disavow

the marketplace in which the contract is performed. Nor can it ignore the expectations of that

market – expectations, for instance, that the terms of an indenture will be upheld, and that a court

will not, sua sponte, add new substantive terms to that indenture as it sees fit.”).7

       Here, the Supreme Court relied in part on “the equities” and its view of what “would be

manifestly unjust” in declining to enforce the express terms of the indenture. Mem. at 5 [R. 11].

7
       See also Granite Partners, L.P. v. Bear, Stearns & Co., 17 F. Supp. 2d 275, 302-03 (S.D.N.Y. 1998) (accepting view of
       TBMA, as amicus, urging court to follow standard terms of industry standard agreement for “repo” transactions; “[t]he
       determination of market participants that elect to enter into a repo transaction has been and should be respected and
                                                                                                             (continued… )



                                                           15
Equitable considerations, however, could just as easily point in the opposite direction, towards

                                                            s
permitting a refinancing undertaken to maximize the company’ long-term financial health that

apparently raised no objection among the great majority of Owens-Illinois’bondholders. In

either event, however, the courts should not impose their own judgment of the equities on terms

that the parties agreed would cover their transaction. In light of the principles set forth above,

                  s
the Supreme Court’ reliance on equitable considerations to override the clear language of an

indenture was wholly inappropriate and casts unwarranted doubt on the enforceability of

commonly used indenture terms.

        II.       LIMITATION ON SUITS CLAUSES ARE WIDELY USED, SERVE AN
                  IMPORTANT FUNCTION, AND HAVE BEEN LONG ENFORCED IN
                  CORPORATE INDENTURES

        A limitation on suits clause similar to the one at bar has been included in each generation

                               s
of the American Bar Foundation’ Model Debenture Indenture and Commentaries thereto, which

                                                                                s
were first issued in 1970 and has been followed by the American Bar Association’ Model

Simplified Indenture, which was issued in 1983 and revised and updated in 1999. See Revised

Model Simplified Indenture, 55 Bus. Lawyer 1115, 1137-38, 1191-92 (2000) (Revised Model

Simplified Indenture §6.06); Model Simplified Indenture, 38 Bus. Lawyer 741, 757, 794 (1983)

(Model Simplified Indenture §6.06); American Bar Foundation, Commentaries on Indentures

232-34 (1971) (Model Indenture §507) (collectively, the “Model Indentures”). These model

indentures were each the product of intensive labor and research by experienced counsel

throughout the United States, and represent a considered, consensus judgment that is routinely

relied upon by parties and counsel to transactions in debt securities. The Model Indentures and



(… continued)
        their settled expectations will not be overturned.”).




                                                                16
the Commentaries have been cited and followed by many courts as the authoritative source for

construction of commonly used indenture terms.

       Following the Model Indentures, limitation on suits clauses are today standard in many

indentures. In recognition of this widespread practice, the New York courts have enforced

limitation on suits clauses for more than a century, stretching back at least to the Court of

Appeals’decision in Batchelder v. Council Grove Water Co., 131 N.Y. 42, 46-47, 29 N.E. 801,

801-02 (1892). The courts of this State and the New York federal courts have had many

occasions since to enforce such clauses, which “are strictly construed.” Cruden v. Bank of New

York, 957 F.2d 961, 968 (2d Cir. 1992). See, e.g., Bank of N.Y. v. Battery Park City Author.,

                                                    t
251 A.D.2d 211, 211, 675 N.Y.S.2d 860, 860 (1st Dep’ 1998) (mem.); Feder v. Union Carbide

                                                             t
Corp., 141 A.D.2d 799, 800, 530 N.Y.S.2d 165, 166-67 (2d Dep’ 1988); Sutter v. Hudson Coal

                                                        t
Co., 259 A.D. 1053, 1053-54, 21 N.Y.S.2d 40, 41 (2d Dep’ 1940) (mem.) (“[P]laintiff did not

allege compliance with the requirements of the trust indenture in the event of a breach . . . [i]n

the absence of such allegations and proof, the trustee is the only one who may maintain an action

against the defendant in respect of such a breach.”); Greene v. New York United Hotels, Inc.,

                                                t           d,
236 A.D. 647, 648, 260 N.Y.S. 405, 407 (1st Dep’ 1932), aff’ 261 N.Y. 698, 185 N.E. 798

(1933); Levy v. Paramount Publix Corp., 149 Misc. 129, 133-34, 266 N.Y.S. 271, 276 (Sup. Ct.

                     d,                                     t),  d,
N.Y. Cty. 1933), aff’ 241 A.D. 711, 269 N.Y.S. 997 (1st Dep’ aff’ 265 N.Y. 629, 193 N.E.

418 (1934); Ernst v. Film Prod. Corp., 148 Misc. 62, 63, 264 N.Y.S. 227, 229 (Sup. Ct. N.Y.

Cty. 1933); Relmar Holding Co. v. Paramount Publix Corp., 147 Misc. 2d 824, 825, 263 N.Y.S.

776, 778 (Sup. Ct. N.Y. Cty. 1932) (rejecting argument that no-action clauses were against

                    d,                                     t
public policy), aff’ 237 A.D. 870, 261 N.Y.S. 959 (1st Dep’ 1933); Friedman v. Chesapeake &

Oh. Ry. Co., 395 F.2d 663, 664 (2d Cir. 1968), cert. denied, 393 U.S. 1016 (1969); McMahan &




                                                 17
                       t,
Co. v. Wherehouse Entm’ Inc., 859 F. Supp. 743, 747-49 (S.D.N.Y. 1994) (dismissing state law

                                                                              d
claims but not federal securities claims pursuant to “no action” clause), rev’ in part on other

grounds, 65 F.3d 1044, 1050-51 (2d Cir. 1995) (affirming refusal to dismiss federal securities

claims but not addressing state claims), cert. denied, 517 U.S. 1190 (1996); Victor v. Riklis, No.

91 Civ. 2897, 1992 WL 122911, at *6 (S.D.N.Y. May 15, 1992).8 Cf. Caplan v. Unimax

                                                                  t
Holdings Corp., 188 A.D.2d 325, 326, 591 N.Y.S.2d 28, 28 (1st Dep’ 1992) (mem.) (“[T]he

express terms of the Indenture providing a limited release against all but defendant corporation is

not violative of public policy.”)

       The highest courts of two other states have followed suit, see Simons, 549 A.2d at 305-

06; Haberman v. Wa. Pub. Power Supply Sys., 109 Wash.2d 107, 149-53, 744 P.2d 1032, 1061-

63 (Wash. 1987) (en banc), opinion amended, 189 Wash.2d 107, 750 P.2d 254 (Wash.), appeal

dismissed, 488 U.S. 805 (1988), as have other courts across the country. See, e.g., Alleco, Inc. v.

IBJ Schroder Bank & Trust Co., 745 F. Supp. 1467, 1476 (D. Minn. 1989) (enforcing “no

action” clause to dismiss counterclaims where issuer had brought action for declaratory

judgment).

       In enforcing these provisions, the courts have regularly recognized that limitation on suits

clauses serve an important and useful function: they permit the bondholders, collectively and

through the trustee, to limit recourse to litigation to those situations where they perceive a

genuine threat to the long-term interests of the bondholders. The bondholders are thus

empowered to reach a collective decision as to whether the harm of a potential breach is




8
       See also Campbell v. Hudson & Manhattan R. Co., 277 A.D. 731, 734-35, 102 N.Y.S.2d 878, 881-82 (1st Dep’        t)
       (noting general rule supporting no-action clauses in “numerous decisions upon this subject” but permitting suit where
                                                                                   d,
       trustee admitted in answer to complaint that court should permit suit), aff’ 302 N.Y. 902, 100 N.E.2d 183 (1951).




                                                            18
                                        s
outweighed by its benefit to the issuer’ financial stability or by the expense of litigation. In

Batchelder, for example, the Court of Appeals observed that a “no action” clause

          subjects the action to be taken by the bondholders to the will of a majority,
          and insures that course of action . . . which will inure to the best interest of
          the bondholders as a class. This prevents individual bondholders from
          pursuing an individual course of action, and thus harassing their common
          debtor, and jeopardizing the fund provided for their common benefit . . . It
          is not reasonable to suppose that the bondholders, as a class, intended to
          make a contract which should lead to that result.

Batchelder, 131 N.Y. at 46-47, 29 N.E. at 801-02 (emphasis added). The original Model

Indenture echoed this concern:

          The major purpose of this Section is to deter individual debenture-holders
          from bringing independent law suits for unworthy or unjustifiable reasons,
          causing expense to the Company and diminishing its assets. The theory is
          that if the suit is worthwhile, [the specified percentage] of the
          debentureholders would be willing to join in sponsoring it.

Model Indenture, at 232 (emphasis added).9 See also Feder, 141 A.D.2d at 800, 530 N.Y.S.2d at

67 (citing Model Indenture).

       Here, Murray Capital contends that Owens-Illinois granted bank lenders an interest

superior to that of the bondholders, thus placing them in a worse legal position than the one in

which they had previously been. Murray Capital claims that it has the contractual right to sue to

stop this; Owens-Illinois, in addition to disputing the merits of the contract claim, contends that

the refinancing was necessary for Owens-Illinois’ long-term financial health and, among other

things, to ensure that Owens-Illinois would be in a position to continue to make payments on the

debentures. If Murray Capital is correct, the bondholders had a potentially meritorious claim; if

Owens-Illinois is right, there may well have been a good reason not to pursue it. Resolution of

9
       While the Model Indenture and many indentures have provided for 25% approval to institute suit, a 50% threshold such
       as the one included in the Owens-Illinois indentures is not unusual or unreasonable and, as noted below, is consistent
       with the default provisions of the TIA. See infra Point III(C).




                                                           19
this dispute – whether the legal rights and equities of the parties, when taken together with

concerns over the long-term financial health of the issuer, justifies the filing of suit – is a classic

example of a decision that calls for the exercise of business judgment. This is precisely why the

Model Indentures, and the Indenture at bar, delegate such decisions to the trustee or a majority

of the holders. The parties to the Owens-Illinois Indenture agreed that this decision is better left

to their determination rather than being subject to intervention by the court on equitable grounds.

If the Court refuses to enforce the clause, however, numerous corporate actions undertaken to

benefit the corporation and with the consent of a majority of the bondholders could be called into

question, and the ability of trustees to exercise judgment in the interests of bondholders as a

group will be compromised.

        III.    REQUIRING TERMS IN BOND INDENTURES TO BE REPRINTED IN
                BOND CERTIFICATES IS INCONSISTENT WITH PRESENT
                COMMERCIAL PRACTICE AND FEDERAL LAW AND WOULD UPSET
                THE REASONABLE EXPECTATIONS OF THE CORPORATE DEBT
                MARKETS

        Given the widespread and longstanding use of limitation on suits clauses in indentures

and the extensive judicial approval such clauses have received, the court below erred in imposing

an additional requirement that the clause must have been reprinted in the Form of Note itself as

well as the Indenture. The only cases in which such restrictions have been required have been

cases where the bondholder sued for payment of principal or interest due unconditionally at

maturity, a claim quite different from the one at bar. Moreover, this rule is based upon outdated

provisions of State commercial law that have no application to publicly traded securities, and it

conflicts with the approach taken in the TIA.




                                                  20
               A.      Under Present Commercial Practice and the Federal Regulatory Scheme,
                       Holders of Corporate Bonds Issued in Book Entry Form Have No Greater
                       Access To Bond Certificates Than To The Indenture

       The court below attached dispositive significance to “adequate notice” on the “face” of

                           s
the Form of Note. In today’ debt markets, however, there is no occasion for a bondholder to

review a form of note in isolation from the indenture, and therefore no meaningful “notice” is

given by the redundant disclosure required by the Supreme Court.

       In rare instances, some corporate bonds are still issued in the traditional form of bearer

certificates, with the owner's name printed on them. There are no coupons attached for the

owner to submit for payment of interest. The issuer's agent or trustee sends the interest to the

bondholder at the proper intervals and forwards the principal at maturity. “Book entry,”

however, has long since replaced certificates as the form of issuance for the overwhelming

majority of corporate debentures. With book-entry securities, a bond issue has only one master,

or global, certificate, which is kept at a securities depository, generally DTC. The ownership of

book-entry bonds is recorded in the investor's brokerage account. All interest and principal

payments are forwarded to the brokerage account. The only time the investor sees a copy of the

form of note, if at all, is in the disclosure documents, such as the registration statement, which is

required to include the indenture. As discussed above, the record discloses that the Owens-

Illinois bonds at issue were book entry bonds.

       Because the Owens-Illinois bonds were initially sold in a public offering, they were

required to be registered under Section 7(a) of the Securities Act of 1933. See 15 U.S.C.

§ 77g(a). Section 7(a), in turn, provides that “[t]he registration statement … shall contain the

information … specified in Schedule A”; Schedule A, in turn, requires inclusion in the

registration statement of “a copy of the underlying agreements or indentures affecting any …

bonds, or debentures offered or to be offered.” 15 U.S.C. § 77aa(32) (emphasis added).


                                                 21
Pursuant to these requirements, Owens-Illinois filed with the SEC on April 14, 1997 a

Registration Statement on Form S-3 containing, among other things, the Indenture, and further

filed, on May 16, 1997 a Form 8-K containing, among other things, the Indenture, the Officers’

Certificates, and the Form of Note. Any investor who cared to do so could easily obtain a copy

of this filing from the SEC or print a copy from the SEC’ website.10
                                                         s

       Moreover, Section 305 of the TIA requires heightened disclosure consisting of “[a]n

analysis of any provisions of such indenture” regarding certain critical terms such as the

definition of an event of default or the release of property secured by an indenture for secured

notes. See 15 U.S.C. §77eee(a)(2). It further permits the SEC to insert its own explanation of

              s
the indenture’ terms if “necessary and appropriate in the public interest or for the protection of

investors … ” 15 U.S.C. §77eee(c). Congress, however, did not require any additional

disclosures for limitations on suits clauses, although (as discussed below) the TIA expressly

addresses such clauses. Moreover, the TIA expressly permits compliance with TIA disclosure

requirements “by incorporating by reference any information or documents on file with the

Commission,” including documents filed under the Securities Act. 15 U.S.C. § 77hhh(a).

       Far from being hostile to terms that appear solely in the indenture, the SEC has sought to

simplify and streamline the provisions of indentures. In 1981, for example, the SEC issued a

release under the Trust Indenture Act notifying issuers of an indenture that had come to its


10
       Because the Registration Statement and Form 8-K are documents on file with the SEC, the court may appropriately
       choose to take judicial notice of them. See Kramer v. Time Warner Inc., 937 F.2d 767, 774 (2d Cir. 1991) (district
       court could properly take judicial notice of the contents of public disclosure documents filed with the SEC); Faulkner v.
       Verizon Communications, Inc., 156 F. Supp.2d 384, 391 (S.D.N.Y. 2001) (taking judicial notice of reports filed
       pursuant to SEC regulations); Aerotel, Ltd. v. Sprint Corp., 100 F. Supp.2d 189, 192 n.3 (S.D.N.Y. 2000) (taking
       judicial notice of public disclosure documents required to be filed with the SEC). Even if the Court does not, however,
                                                   s                                   s
       Amici respectfully submit that the Court’ legal analysis of Murray Capital’ claim should take into consideration that
       indentures of this nature are generally on file with the SEC and thus easily accessible to any interested investor, and
       that proof of such a filing should be sufficient to establish that adequate notice has been given of the terms of the
       indenture at issue.




                                                            22
attention that reduced cumbersome text by incorporating the statutorily-mandated provisions by

reference. “The advantage of this indenture is that it incorporates by reference many of the

provisions of the Trust Indenture Act required to be included in qualified indentures, instead of

physically incorporating such provisions in the language of the indenture itself, in the traditional

complex manner.” Simplified Form of Trust Indenture, Trust Indenture Act Release No. 39-605,

46 Fed. Reg. 3500, Fed. Sec. L. Rep. (CCH) ¶ 42,164B, at 32,115-16, 1981 WL 108252 (January

8, 1981). The SEC noted that incorporation by reference made the indenture “simple and

straightforward” and observed that “shortcuts in indenture draftsmanship . . . contribute to

speedier processing of registration statements”. Id. See also Techniques in Drafting Trust

Indentures, Securities Act Release No. 33-6090, 44 Fed. Reg. 43,466, Fed. Sec. L. Rep. (CCH) ¶

42,164A, at 32,115, 1979 WL 169928, at *1-2 (July 11, 1979) (suggesting use of a standard form

such as a “verbatim” copy of the Model Indenture coupled with “a supplemental indenture [to be

filed] as an exhibit to the registration statement.”).

        Cases requiring notice on the face of the note are a relic of the age when paper

certificates were the dominant method of recording debenture interests, and are in any event

limited to facts very different from those present here. Today, there is no meaningful distinction

between disclosure in the “note” and in the indenture as far as notice to investors, and the federal

disclosure scheme provides adequate assurance that investors can obtain and review the

indenture if they so choose. Indeed, Murray Capital alleges in its Complaint that it relied, in

purchasing the Senior Notes, on the terms of the Indenture itself. Cpl. ¶¶ 18, 33 [R. 75, 79].

Few, if any, investors will benefit in any meaningful way from a rule, like the one fashioned by

the Supreme Court, requiring disclosure of terms in the form of note, at the cost of added




                                                  23
uncertainty and the potential expense of reviewing and amending scores of existing forms of

note, which are mostly held only by DTC.

                 B.        Limitation on Suits Clauses Are Only Disfavored In Cases Where They
                                               s
                           Restrict The Holder’ Ability To Sue For Payment When It Is
                           Unconditionally Due

       As a general rule, a contract will be deemed to include the terms of any document

incorporated by reference therein.11 The rule applies equally to bond indentures.12 Courts

considering limitations on suits clauses in indentures have generally followed this rule and

enforced the terms of the indentures regardless of whether they were expressly reprinted in the

bonds.13 The court below relied upon two cases in holding that a limitation on suits clause in an

                                                                                        l,
indenture is unenforceable if it is not contained in the notes: Friedman v. Airlift Int’ Inc., 44

                                                t
A.D.2d 459, 460, 355 N.Y.S.2d 613, 614 (1st Dep’ 1974), and the principal case it relied upon,

Cunningham v. Pressed Steel Car Co., 238 A.D. 624, 626-27, 265 N.Y.S. 256, 259-260 (1st

    t           d,
Dep’ 1933), aff’ 263 N.Y. 671, 189 N.E. 750 (1934). Mem. at 5 [R. 11] The rule announced

in these cases, however, is based upon outdated commercial law concerns that are not implicated

by an action to enforce a “Limitation on Liens” clause in an indenture in the context of

debentures sold in a registered public offering in book entry form.




11
       See, e.g., Advanced Refractory Tech., Inc. v. Power Auth. of N.Y., 81 N.Y.2d 670, 678, 623 N.E.2d 6, 9, 603 N.Y.S.2d
       285, 288 (1993) (“The provisions of a Federal Act, when incorporated by reference into a contract . . . are part of the
       agreement.”); Manufacturers & Traders Trust Co. v. Erie County Indus. Dev. Agency, 269 A.D.2d 871, 872, 703
                                    t
       N.Y.S.2d 636, 638 (4th Dep’ 2000) (mem.) (indenture and related agreements read together as part of the same
       transaction); Perl v. Smith Barney Inc., 230 A.D.2d 664, 665, 646 N.Y.S.2d 678, 679 (1st Dep't) (enforcing provision
       of booklet that was incorporated by reference in brokerage account agreement signed by plaintiff), appeal denied, 89
       N.Y.2d 803, 675 N.E.2d 1234, 653 N.Y.S.2d 281 (1996).
12
                                                                                                               d,
       See, e.g., RJR I, 716 F. Supp. at 1509; In re W.T. Grant Co., 4 B.R. 53, 73 (Bankr. S.D.N.Y. 1980), aff’ 20 B.R. 186
                             d,
       (S.D.N.Y. 1982), aff’ 699 F.2d 599 (2d Cir.), cert. denied, 464 U.S. 822 (1983).
13
       See, e.g., Greene, 236 A.D. at 648, 260 N.Y.S. at 407 (“[P]laintiff as a bondholder holds his securities subject to the
       condition of this underlying trust agreement and can maintain an action only upon the conditions specified in the trust
       agreement.”); Relmar, 147 Misc. 2d at 825, 263 N.Y.S. at 778 (same); McMahan, 859 F. Supp. at 748 (same).




                                                            24
       First, both Friedman and Cunningham involved claims for payment that was

unconditionally due and owing on the bonds. Indeed, Friedman explicitly distinguished “cases

where the bondholder sought not only payment but a collection right provided in the indenture.”

Friedman, 44 A.D.2d at 461, 355 N.Y.S.2d at 615. The opinion in Cunningham opens:

           The question here presented is whether certain bonds . . . contain on their
           face an absolute and unconditional promise to pay the bearer at maturity, or
           whether a reference provision to the terms of another unattached document
           makes them subject to a condition which might postpone payment
           indefinitely.

Cunningham, 238 A.D.2d at 624, 265 N.Y.S. at 257. Here, of course, there is no claim of non-

payment whatsoever, let alone non-payment when unconditionally due and owing. Rather,

Murray Capital seeks to enforce a covenant relating to security interests held by other parties.14

       The principal animating concern in these and similar cases was not the enforceability of

indenture terms generally but the concern that application of a limitation on suits clause to a

claim for overdue payments would impair the negotiability of the notes, which would be

impeded if there were restrictions on the absolute right to recover payment when due. See Tandy

Corp. v. United States, 626 F.2d 1186, 1192 (5th Cir. 1980) (citing Model Indenture

Commentaries, at 234-35; purpose of exception, taken from Model Indenture, to limitation on

suits clause for claims for overdue payments “was to assure the negotiability of the Debentures

by making certain that the promise to pay contained in the Debentures was unconditional”).

Friedman made clear its reliance on this reasoning:




14
       Here, of course, Murray Capital seeks enforcement of a right in the Officers’ Certificate as a rider to the Indenture,
       rather than anything in the Form of Note itself. Although the Form of Note does reference the Limitation on Liens
       clause generally, one would have to read the Officers’Certificate to know what its terms are.




                                                             25
           There are really two distinct agreements, one embraced in the debenture
           bond and the other in the indenture. The indenture provides certain rights
           of collection in the event of certain contingencies and also sets up
           procedural limitations on the enforcement of those rights. The bond itself is
           intended to be a negotiable instrument. Any limitation on the obligation to
           pay at maturity appearing on its face would render it non-negotiable.

                                                                                  s
Friedman, 44 A.D.2d at 461, 355 N.Y.S.2d at 615. This was premised upon the court’ finding

that “[t]he law is clearly and comprehensively set out in Cunningham.” Id.

                            s
       The First Department’ decision in Cunningham, in turn, relied in part on Section 90 of

the former Negotiable Instruments Law, holding that giving effect to the limitation on suits

clause would render the bonds non-negotiable under the Negotiable Instruments Law, thus

impeding their marketability. Cunningham, 238 A.D.2d at 627-28, 265 N.Y.S. at 260-61.

(“these bonds . . . are negotiable instruments and have no doubt been purchased by the general

public as such . . . [T]o uphold the construction defendant now seeks to place upon these bearer

bonds would render them nonnegotiable.”). Section 90 of the Negotiable Instruments Law has

been superseded by § 3-301 of the New York Uniform Commercial Code (UCC). See N.Y.

UCC § 3-301 (2002) (“The holder of an instrument . . . may . . . enforce payment in his own

name.”). Article 3 of the UCC covers negotiable instruments and specifically excludes

investment securities from its coverage. See N.Y. UCC § 3-103 and cmt. 1 (2002).15 Therefore,

Article 3 does not cover the debentures at issue in this action. Rather, the bonds here are covered

by Article 8 of the UCC.16 See Vigilant Ins. Co. of Am. v. Housing Auth. of El Paso, Texas, 87

N.Y.2d 36, 43, 660 N.E.2d 1121, 1125, 637 N.Y.S.2d 342, 346 (1995) (finding that bearer bonds

15
       Furthermore, to the extent that an instrument may be an “investment security” under Article 8 and “negotiable” under
       Article 3, it is covered by Article 8 rather than Article 3. See N.Y. UCC § 3-103, cmt. 2 (2002).
16
       Article 8 defines “securities” as “an obligation of an issuer. . . (i) . . . the transfer of which may be registered upon
       books maintained for that purpose by or on behalf of the issuer; (ii) which is one of a class or series. . .; and (iii) which
       (A) is . . . dealt in or traded on securities exchanges or securities markets.” N.Y. UCC § 8-102(15). The debentures at
       issue meet these requirements.




                                                               26
were “securities” within the meaning of Article 8 and thus not covered by Article 3); Goldstein

                                       t
v. Engel, 240 A.D.2d 280, 281 (1st Dep’ 1997) (holding that certificated bonds were governed

exclusively by Article 8 even though they might have qualified as commercial paper under

Article 3). There is no indication in Article 8 that a limitation on suits clause would restrict the

transferability of an investment security. Thus, the reasoning behind the decision in Friedman

                                                     s
and Cunningham is simply inapplicable under New York’ current law regarding negotiable

instruments.

       Moreover, Cunningham was decided on the basis of facts predating enactment of the

federal securities laws, including the Securities Act and the TIA, and its reasoning is difficult to

square with post-1933 disclosure practices. The court noted that “[t]he application executed by

defendant for listing them on the New York Stock Exchange refers to no provision in the

indenture, or otherwise, which would preclude any holder from enforcing collection at

maturity . . . .” Cunningham, 238 A.D.2d at 627, 265 N.Y.S. at 260 (emphasis added). Here, of

course, the Indenture was required to be, and was, fully disclosed for all investors to examine in

Owens-Illinois’required filing with the SEC.

       To the extent that Friedman and Cunningham have any continuing validity in the

environment of bonds sold in a registered public offering in book entry form, their hostility to

limitation on suits clauses must be limited to claims for the payment of overdue principal or

interest. This distinction is a well-recognized one in this context. The caselaw has drawn it

explicitly, as courts have distinguished Friedman and Cunningham where more than just

                                                                                   l
repayment was at issue. See, e.g., McMahan, 859 F. Supp. at 748 & n.7; Jackson Nat’ Life Ins.

Co. v. Ladish Co., No. 92 Civ. 9358, 1993 WL 43373, at *5-7 (S.D.N.Y. Feb. 18, 1993) (citing

Friedman to permit suit for unpaid interest without compliance with “no action” clause, but not




                                                 27
right to acceleration based on terms of indenture); Haberman, 744 P.2d at 1026 (Washington

law). Other courts have also found the distinction significant. See also Cruden, 957 F.2d at 968

                       no
(“Notwithstanding the ‘ action’clause, the debenture holders have an absolute right to institute

suit after nonpayment of principal or interest.”) (emphasis in original); In re Envirodyne Indus.,

Inc., 174 B.R. 986, 993-97 (Bankr. N.D. Ill. 1994) (finding that investors properly brought

involuntary bankruptcy proceedings against issuer, without complying with limitation on suits

clause, because issuer had not paid past due interest); Continental Bank & Trust Co. of N.Y. v.

          l
First Nat’ Petroleum Trust, 67 F. Supp. 859, 871 (D.R.I. 1946) (construing TIA); Ernst, 148

Misc. at 63, 264 N.Y.S. at 229.

       The distinction between suits to recover money owed after default on an instrument and

suits to enforce other terms of the instrument is one long recognized under New York law and

codified in the provisions of CPLR 3213 allowing for commencement of summary actions

brought on by service of a summons and motion for summary judgment in lieu of a complaint

“when an action is based upon an instrument for the payment of money only”. N.Y. C.P.L.R.

3213 (2001). Such summary actions are not permitted, and the ordinary incidents of pleading

procedure are required to be followed, when an action does not seek exclusively the recovery of

money after default. See, e.g., Weissman v. Sinorm Deli Inc., 88 N.Y.2d 437, 444-45, 669

N.E.2d 242, 245-46 646 N.Y.S.2d 308, 311-12 (1996) (suit on indemnification not suit on “an

instrument for the payment of money only” where proof required of “liabilities and obligations

. . . [that] can only be ascertained by resorting to evidence outside the instrument”).17


17
       Accord R-H-D Constr. Corp. v. Miller, 222 A.D.2d 802, 803, 634 N.Y.S.2d 846, 847 (3rd Dep't 1995) (defenses
       relating to alleged oral agreement took case out of purview of CPLR 3213); Grossman v. Laurence Handprints-N.J.,
                                                                t
       Inc., 90 A.D.2d 95, 98, 355 N.Y.S.2d 852, 854 (2d Dep’ 1982) (complaint asserting several causes of action not one
       “for the payment of money only”); Signal Plan, Inc. v. Chase Manhattan Bank, 23 A.D.2d 636, 637, 256 N.Y.S.2d 866,
                       t
       867 (1st Dep’ 1965) (CPLR 3213 not applicable to action for breach of contract).




                                                         28
         The holdings of Friedman and Cunningham apply only to similar collection actions.

They should not have been extended to this context.

                C.     Refusal To Enforce The Indenture Would Conflict With The Carefully
                       Crafted Federal Scheme Governing Bond Indentures

         Congress enacted the TIA in 1939 – immediately following many of the New York cases

upholding limitations on suits clauses – after careful study of then-current practices in drafting

bond indentures. Congress specifically noted its awareness of the distinction between the terms

that were then ordinarily contained in bond certificates and those contained in trust indentures,

and imposed specific disclosure requirements and specific restrictions on the permitted scope of

limitations on suits clauses. Congress nonetheless declined to ban such clauses or to require that

such clauses be inserted into the bond certificate. The rule of Friedman and Cunningham

extends no further than what Congress has already provided by appropriate legislation. The

              s
Supreme Court’ decision, however, would go significantly further and prohibit enforcement of

terms permitted by Congress. To avoid a conflict with federal law, therefore, this Court should

reverse and limit Friedman and Cunningham to suits to recover past due principal or interest.

         Among its findings regarding common practices in the debt markets, the 1939 Congress

noted:

                The use of the trust-indenture is a practical necessity where bonds
                are to be nationally distributed . . . The indenture, which is from 50
                to 200 pages long, vests in the indenture trustee powers with
                                                            s
                respect to the enforcement of the issuer’ obligations and the
                bondholders’rights, for it is impracticable in such cases for the
                bondholders to attempt such enforcement by individual action.
                The bond itself is only 1 page long, but it incorporates, by general
                reference to the indenture, many important and frequently
                complicated provisions which, although the bondholder rarely sees
                them, legally constitute part of his contract with the borrower.

H. Rep. No. 1016, at 24 (June 30, 1939) (emphasis added). The solutions chosen by Congress to

its concerns regarding the protection of bond investors, as discussed in more detail below, are


                                                 29
carefully balanced to reflect the importance of bond indenture terms and to mandate their

disclosure in publicly filed documents – not to force issuers to squeeze more disclosures onto

bond certificates. Indeed, that approach is one reason why the market has been able to evolve

away from the use of paper certificates.

       Several of the cases that drew a distinction between suits to collect unpaid principal and

interest and other suits to enforce terms in an indenture have relied upon the express distinction

drawn by Congress in the TIA, which declares unlawful any provision imposing restrictions on

suits to recover past due principal or interest. See 15 U.S.C. § 77ppp(b).18 In light of the TIA,

each generation of the Model Indenture has included a provision – incorporated in the indenture

at bar – to provide for individual suits for such purpose.19 As Congress recognized in passing the

TIA, “[u]ntil comparatively recently, a prohibition of this sort was perfectly standard in note and

bond indentures. In many states it is necessary in order to preserve the negotiability of the notes

or bonds . . . [t]his prohibition does not prevent the majority from binding dissenters by other

changes in the indenture or by a waiver of other defaults . . . .” H. Rep. No. 1016, at 56 (June 30,

1939) (emphasis added).



18
       Section 316(b) provides:
       Notwithstanding any other provision of the indenture to be qualified, the right of any holder of any indenture
       security to receive payment of the principal of and interest on such indenture security, on or after the
       respective due dates expressed in such indenture security, or to institute suit for the enforcement of any such
       payment on or after such respective dates, shall not be impaired or affected without the consent of such
       holder, except as to a postponement of an interest payment consented to as provided in paragraph (2) of
       subsection (a) of this section, and except that such indenture may contain provisions limiting or denying the
       right of any such holder to institute any such suit, if and to the extent that the institution or prosecution
       thereof or the entry of judgment therein would, under applicable law, result in the surrender, impairment,
       waiver, or loss of the lien of such indenture upon any property subject to such lien.
       15 U.S.C. § 77ppp(b) (emphasis added). One exception is provided: the indenture may, but is not required to, permit
       75% of holders to consent to a limited postponement of interest payments. See 15 U.S.C. § 77ppp(a)(2).
19
       See Revised Model Simplified Indenture, 55 Bus. Lawyer at 1138, 1193-94 (Revised Model Simplified Indenture
       §6.07); Model Simplified Indenture, 38 Bus. Lawyer at 757-58, 795 (Model Simplified Indenture §6.07);
       Commentaries on Model Indenture at 234-35 (Model Indenture §508). See also Indenture ¶ 6.07 [R. 112 ¶ 6.07].




                                                             30
        The TIA, however, expressly permits clauses in indentures that empower the trustee and

the majority to control the filing of other suits and, in fact, imposes them on the parties unless

they negotiate for a different result:

           The indenture to be qualified - (1) shall automatically be deemed (unless it
           is expressly provided therein that any such provision is excluded) to contain
           provisions authorizing the holders of not less than a majority in principal
           amount of the indenture securities or if expressly specified in such
           indenture, of any series of securities at the time outstanding (A) to direct the
           time, method, and place of conducting any proceeding for any remedy
           available to such trustee, or exercising any trust or power conferred upon
           such trustee, under such indenture, or (B) on behalf of the holders of all
           such indenture securities, to consent to the waiver of any past default and its
           consequences . . . .

77 U.S.C. § 77ppp(a)(1) (emphasis added). Moreover, the TIA expressly permits the inclusion

of other terms in the indenture, leaving no room for state law to impose additional restrictions on

the effectiveness of clear indenture terms besides those contained therein:

           The indenture to be qualified may contain, in addition to provisions
           specifically authorized under this subchapter to be included therein, any
           other provisions the inclusion of which is not in contravention of any
           provision of this subchapter.

77 U.S.C. § 77rrr(b) (emphasis added).

        Notably, in inserting provisions into the default indenture and permitting other provisions

in the indenture, the TIA does not also require inclusion of the provision in accompanying

certificates. The automatic inclusion of default terms was added to the TIA in 1990, in

legislation initially proposed to Congress by the SEC. This provision was intended to “remove a

significant administrative burden from the Commission, whose staff now reviews the indentures

to ensure that those terms are properly included,” and to “reduc[e] legal and printing costs

attendant to the requirement of recitation.” 101 Cong. Rec. 15,915 (Nov. 16, 1989) (statement of

Sen. Riegle). Congress believed that incorporation of terms by reference would ensure that



                                                 31
“bondholders will get the protection of the statute regardless of what is put in or left out of the

indenture.” Id. at 15,916 (statement of Sen. Dodd). Under the theory adopted by the Supreme

Court, however, indenture terms may be rendered ineffective if not reprinted in a bond

certificate.

         It is well-settled that, where the federal securities laws expressly permit a particular

practice or form of disclosure, state law requirements that would render the permission useless

are preempted.20 Here, the TIA’ carefully crafted federal scheme – particularly when taken in
                               s

                                                          s
combination with the required disclosure of the indenture’ terms under the Securities Act –

would be unsettled by allowing additional state law disclosure requirements to intrude beyond

the scope of what is already accomplished by the TIA.

         The holdings of Friedman and Cunningham went no further than TIA Section 316(b); the

              s
Supreme Court’ decision herein goes much further. To avoid conflict with federal law, this

Court should reverse and hold that the Limitation on Suits provision, as disclosed in Owens-

Illinois’SEC filing and in compliance with the TIA, is enforceable according to its express

terms.




20
         See Guice v. Charles Schwab & Co., 89 N.Y.2d 31, 46-47, 674 N.E.2d 282, 290, 651 N.Y.S.2d 352, 360 (1996), cert.
         denied, 520 U.S. 1118 (1997); Estate of Braunstein v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 238 A.D.2d 242,
                                               t)
         243-44, 657 N.Y.S. 2d 12, 13 (1st Dep’ (mem.), app. dismissed, 90 N.Y.2d 934, 686 N.E.2d 1366, 664 N.Y.S.2d 271,
         app. denied, 99 N.Y.2d 803, 691 N.E.2d 630, 668 N.Y.S.2d 558 (1997), cert. denied, 523 U.S. 1119 (1998); Levitin v.
         Paine Webber, Inc., 159 F.3d 698, 705-06 (2d Cir. 1998), cert. denied, 525 U.S. 1144 (1999).




                                                            32
                                         CONCLUSION

         For the reasons stated above, amici curiae The Bond Market Association and the

Securities Industry Association respectfully submit that the decision of the court below was in

error and that the court should enforce the Limitation on Suits clause in the Indenture pursuant to

its express terms.

Dated: New York, New York
       February 19, 2002

                                                 SIDLEY AUSTIN BROWN & WOOD LLP
                                                 875 Third Avenue
                                                 New York NY 10022
                                                 (212) 906-2576


                                             By:________________________
                                                A. Robert Pietrzak (AP 6711)
                                                Daniel A. McLaughlin (DM 2688)

                                                 John M. Ramsay (JR 7126)
                                                 Michel de Konkoly Thege (MD 5858)
                                                 The Bond Market Association
                                                 40 Broad Street
                                                 New York, NY 10004

                                                 George R. Kramer (GK 7592)
                                                 Securities Industry Association
                                                 1401 I Street N.W.
                                                 Washington, DC 20005


                                                 Attorneys for Amici Curiae The Bond Market
                                                 Association and the Securities Industry
                                                 Association




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