Section 316(b) of the TIA reads, in relevant part:

15 U.S.C. § 77ppp(b) (emphasis added).

EDMC attempted to argue that a deeper examination of the legislative history and debates surrounding the text would support a narrow reading, but the Court found the legislative history further supported Marblegate's position and chose not to change its view from Marblegate I.

The Court noted that the impetus for the TIA was a 1936 SEC report, primarily authored by future SEC Chairman and Associate Justice of the United States Supreme Court William O. Douglas. While the Court agreed with EDMC that, in part, the TIA was designed to address "no-action clauses" (provisions restricting a bondholder from bringing suit for payment in response to a trustee's inaction), the report went on to discuss the problematic scenario of minority bondholders being confronted with voluntary restructuring where the majority's incentives would be to offer little to their dissenting counterparts.

The TIA would go through iterations in 1937 and 1938 before the final text was approved in 1939, but the Court found the relevant history did not support EDMC's position. In fact, the 1937 and 1938 versions of the text were found to be narrower than the contemporary version as they focused on the right to bring an action, rather than the broader right to receive payment under an indenture security. Furthermore, these early versions merely placed such protections in the discretion of the SEC. Testimony by then-Chairman Douglas also, it was found, seemed to be particularly relevant to the instant case as he noted the section would essentially operate as a check on majority bondholders from forcing restructuring plans on the minority (See , at *6).

The Court then noted that by 1939, the relevant text had undergone some signification changes. First, the provision had become mandatory rather than relying on the SEC to initiate the action, and second, the provision included a separate right "to receive payment" under an indenture security in addition to the right to "bring an action."

Lastly, the Court rejected EDMC's argument that a 1958 internal SEC manual supports a narrow reading of Section 316(b). The Court noted the distinction between a narrow right to sue and a broader right to receive payment (as in the instant case), and the scenario contemplated in the manual between the right to sue for payment on bonds and the right to pursue other remedies laid out in an indenture.

As the Court noted in Marblegate 1, "Little question [exists] that the Intercompany Sale is precisely the type of debt reorganization that the trust Indenture Act is designed to preclude" (, at *19). The restructuring, which was supported by a majority of the bondholders, did not specifically alter any term in the indenture affecting Plaintiff's right to receive payment. However, the circumstances were such that "[i]n effect, Marblegate bought a $14 million bond that the majority now attempts to turn into $5 million of stock, with consent procured only by threat of total deprivation, without resort to the reorganization machinery provided by law" (, at *10-11).

The Court therefore held that the intercompany sale carried out by EDMC in which no assets were left behind for Marblegate to recover against, violated Marblegate's rights under TIA Section 316(b). The Court therefore declined to grant EDMC a release from its parental guarantee and its obligation to make any payments of principal or interest on the notes due Marblegate.