Wilmington v. Tropicana

Summary

Tropicana Entertainment, LLC and Tropicana Finance Corp. acquired the Tropicana Atlantic City Casino by issuing $960 million in bonds. Wilmington Trust Co. is the indenture trustee and delivered a notice of default on behalf of the majority of holders after the Tropicana Atlantic City Casino lost its New Jersey gaming license, claiming that the transfer of power to Justice Stein (an agent of the state) was a prohibited transfer under the agreement. Tropicana claims that it was not a prohibited transfer, since there was nothing in the agreement stating that a loss of license was an event of default, and that such an occurrence is easily foreseeable as a risk of the business. Tropicana further claims that Justice Steins role is so limited that no considerable transfer has occurred due to the loss of the license. The court holds in summary judgment that though there was nothing in the contract stating that a loss of license would lead to default, that fact does not prevent a loss of license from triggering another part of the contract. Although Justice Stein held the assets prior to the loss of license and prior to the contract, the vesting of assets in Justice Stein constituted a breach of the agreement.