On January 3, 2026, Justice Patel of the New York County Commercial Division issued a decision in Axos Fin., Inc. v. Reception Purchaser, LLC, 2026 NY Slip Op. 50019(U), holding that a no action clause did not bar claims when a demand on the clause’s notice party would be futile, explaining:
Defendants argue, as a threshold matter, Plaintiffs lack standing to assert their claims pursuant to CPLR § 3211(a)(3) because the no-action clause in Section 9.3(c) of the Agreement vests Antares Capital, as the Administrative Agent, with the exclusive authority to enforce all rights and remedies under the Agreement. The relevant language of Section 9.3(c) states:
Notwithstanding anything to the contrary contained herein or in any other Loan Document, the authority to enforce rights and remedies hereunder and under the other Loan Documents against the Credit Parties or any of them shall be vested exclusively in, and all actions and proceedings at law in connection with such enforcement shall be instituted and maintained exclusively by, Agent in accordance with the Loan Documents for the benefit of all the Secured Parties
Defendant Lenders rely upon the notwithstanding anything to the contrary language to establish that it was clear and unambiguous to all parties that the No Action Provision applies to every covered claim, without exception. It is undisputed that Plaintiffs did not make any demand upon Antares Capital to enforce their rights or seek any remedies that are the subject of this action. Therefore, Defendants contend that without the consent of Antares Capital, Plaintiffs lack standing to sue. The Court does not credit Defendants’ argument.
Dismissal pursuant to CPLR § 3211(a)(3) is warranted where plaintiffs lack standing to sue due to their failure to comply with provisions of governing contracts, including no-action clauses. New York courts read a no-action clause to give effect to the precise words and language used, for the clause must be ‘strictly construed. It is well settled law that no-action clauses are strictly enforced where applicable. An agreement to be bound by such a collective design applies where litigation decisions are to be made by a designated Administrative Agent that must act at the direction of contractually defined Required Lenders, even where there is a risk of potentially unequal treatment. Where a no-action clause is present in a credit agreement that cedes authority to the administrative agent, litigation decisions must be made by a designated Administrative Agent. Lenders’ agreement to similar provisions in lending documents indicates that the syndicate participants agree to be bound by a collective design that precludes litigation claims initiated by a single plaintiff.
However, compliance with the no-action clause is excused when demand futility requires that a party commence an action against itself. A no-action clause requiring parties to bring their claims to the trustee will not bar litigation against the trustee itself because it would be absurd to require the debenture holders to ask the Trustee to sue itself. Plaintiffs establish that demand upon Antares Capital to enforce their rights under the Agreement would have been futile because Antares is a named defendant and because Antares is alleged to have participated in the Scheme along with STG and the Defendant Lenders—including the Antares Lenders. Any claims that Antares would bring against the defendant lenders and STG would necessarily implicate its own liability not just as an agent but as a participating defendant lender.
The Court finds Commerzbank to be instructive. In Commerzbank, the Second Circuit extended the holding of Cruden to other parties with close relationships with the breaching entities and who are directly implicated in the wrongdoing. Commerzbank instructs courts determining whether a no-action clause requires pre-suit demands to consider whether such requirements would entail potential conflicts of interest on the demanded party, and if so, whether the nature and extent of the conflicts would indicate that these parties would be sufficiently unlikely to bring claims if asked to do so, such that the demand would be futile. Notably, on remand, the trial court determined that pre-suit demand on Citibank was futile because Citigroup—an affiliate of Citibank—was the breaching trust administrator and custodian, and its affiliate was a breaching sponsor. Accordingly, these affiliates were directly implicated in the wrongdoing alleged.
Defendant Lenders’ argument that demand futility would apply only to Antares Capital, and not to Defendant Lenders or STG, is therefore without merit as Antares Capital is alleged to have participated in the Scheme. Taking the factual allegations as true, Antares Capital was far from a neutral Administrative Agent with the capacity to assess the merits of Plaintiffs’ claims and decide whether to sue on behalf of the lending group.
Because Plaintiffs sufficiently allege that Antares Capital—to whom the parties had delegated litigation decisions—is implicated in the Scheme and conflicted, Defendants’ arguments that the collective design of the Agreement also fail. Defendants rely upon J. Crew where, as here, a no-action clause in a syndicated lending credit agreement barred the plaintiff lenders from initiating claims without the consent of the administrative agent. The failure of the plaintiffs in J. Crew to make a demand upon the administrative agent prior to filing an action resulted in a dismissal of all claims where making such a demand was a predicate for establishing standing. Defendants also cite to Antara for the proposition that Plaintiffs lack standing to initiate this litigation. Antara Cap. Master Fund LP v. Bombardier, Inc., No. 650477/2022, 2023 WL 2566166 (NY Sup. Ct. NY Cnty, March 17, 2023). Both cases are inapposite, as neither case addressed allegations as to the agent’s alleged bad faith, gross negligence, or willful misconduct. Specifically, in Antara, the court determined that the amended complaint did not allege particularized facts to suggest demand futility, including that the Trustee could face exposure for its own breach. Absent a non-exculpated act, a plaintiff has no basis to contend that the agent could not have impartially considered a demand for permission to sue. Plaintiffs have sufficiently alleged a non-exculpated act.
(Internal quotations and citations omitted).