Third Circuit Departs from Momentive and Enforces Make-Whole Provisions in EFH

On November 17, 2016, the Third Circuit Court of Appeals held in Delaware Trust Co. v. Energy Future Intermediate Holding Co. LLC (In re Energy Future Holdings Corp.) (EFH), 842 F.3d 247 (3d Cir. 2016), that the debtors, Energy Future Intermediate Holding Company LLC and EFIH Finance Inc. (collectively, EFIH), were obligated to pay make-whole premiums despite the acceleration of the underlying debts caused by the debtors’ filing for Chapter 11 bankruptcy. The Third Circuit’s decision is contrary to recent decisions by the bankruptcy and the district courts for the Southern District of New York, which held that make-whole premiums were not due after acceleration unless explicitly provided for in the loan agreement. In re MPM Silicones, LLC (Momentive), No. 14-22503-RDD, 2014 WL 4436335 (Bankr. S.D.N.Y. Sept. 9, 2014), aff’d, 531 B.R. 321 (S.D.N.Y. 2015). The Second Circuit Court of Appeals presently has the same legal issue under advisement, and it remains to be seen whether the Third Circuit’s decision in EFH will affect the Second Circuit’s decision.