Consequences of Delayed SEC Filings

This post is from Robert J. Giuffra, Jr. of Sullivan & Cromwell LLP.

Three federal district courts have now ruled that a company’s delay in filing its Form 10-Q or 10-K with the SEC does not violate either (1) a widely used indenture provision that requires issuers to deliver copies of such reports to an indenture trustee within a specified time after their filing with the SEC or (2) the federal Trust Indenture Act. See UnitedHealth Group, Inc. v. Cede & Co., No. 06-cv-4307 (D. Minn. Mar. 10, 2008); Affiliated Computer Services, Inc. v. Wilmington Trust Co., No. 06-cv-1770, 2008 WL 373162 (N.D. Tex. Feb. 12, 2008); Cyberonics, Inc. v. Wells Fargo Bank N.A., No. H-07-121, 2007 WL 1729977 (S.D. Tex. June 13, 2007).

Applying New York contract law, these courts rejected the reasoning of a New York trial court decision finding that an issuer with similar language in its indenture was obligated to file such reports with the trustee within the time limit for their filing with the SEC. The Cyberonics decision is currently on appeal to the Fifth Circuit, and dispositive motions are pending in at least two similar cases in federal courts.

These decisions demonstrate the need to consider carefully the language of new indentures relating to the delivery of SEC reports to the indenture trustee.

A summary of the decisions is available here.

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