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Delaware Supreme Court Addresses Fee-Shifting Provision In Notes

Washington v. Preferred Communication Systems Inc., No. 436, 2016 (Feb. 27, 2017)

This decision addresses a fee-shifting provision in certain notes that would be triggered if any indebtedness evidenced by the notes was collected by legal action.  In exchange for modifying the notes, the noteholders had negotiated for certain warrants.  But the company failed to grant those warrants until it was forced to through a lawsuit.  The warrants in effect created a debt under the notes, which the noteholders collected through a court proceeding.  Thus, the fee-shifting provision was triggered.