Overview
Judge Engelmayer yesterday ruled, following a bench trial, that Chesapeake Energy could redeem over $1 billion in notes. The central question was whether Chesapeake was required to complete the redemption in a specified contractual window — effectively requiring the process to begin beforehand — or whether notice in the timeframe would suffice. (For our prior post on the case, click here.) As Judge Engelmayer observed, “[l]ots of money turns on this dispute. Because the 2019 Notes bear an attractive interest rate of 6.775%, redeeming them at par plus interest is, in today’s low-interest-rate environment, far more advantageous to Chesapeake than its other contractual options.” Judge Engelmayer ruled in Chesapeake’s favor, even though the contract language was not perfectly clear: “The Court is . . . presented with a choice between two constructions offered of [the contract provision in dispute]. One (Chesapeake’s) is imperfect but reasonable. The other (BNY Mellon’s) is incoherent and unreasonable. There are no other reasonable constructions . . . .” Judge Engelmayer was also convinced by the extrinsic evidence:
This assembled testimony convincingly establishes that Chesapeake, BAML, and their respective counsel communicated to each other, and mutually understood, that the second sentence that they inserted during the weekend of February 11–12 was a notice provision, with the deadline for Chesapeake to give notice of redemption being March 15, 2013. The Court has carefully considered whether there is a basis for discrediting any, let alone all, of these witnesses. There is none. Each projected as credible. Each supplied testimony, in writing and in person, that was nuanced and thoughtful. Each candidly acknowledged the limits to his recollections. To be sure, none of Messrs. Burns, Dell’Osso, Telle, and Maultsby recalled the events of that weekend in precisely the same way, and BNY Mellon seeks to discredit their testimony on the grounds that the witnesses’ recollections were vague and dissonant as to particulars. But the witnesses’ deviations were as to collateral points, unlikely to be remembered more than a year after the fact—for example, which persons participated in which phone call during a corporate deal that unfolded quickly over a weekend. Such dissonances are natural and to be expected. If anything, they are hallmarks of credibility, in that they tend to refute that the witnesses coordinated their stories. It is, further, unsurprising that these witnesses would recall the substance of their negotiated agreement more acutely than logistical niceties. The Court accepts the thrust of each witness’s testimony as truthful and accurate
