Court Rejects Ratification And Estoppel Defenses Based On No-Waiver Provision In Agreement

Posted: March 18, 2026 / Written by: Jeffrey M. Eilender, Thomas A. Kissane, Samuel L. Butt, Joshua Wurtzel, Channing J. Turner / Category Breach of Contract

Court Rejects Ratification And Estoppel Defenses Based On No-Waiver Provision In Agreement

On January 13, 2026, Justice Andrea Masley denied summary judgment to defendants asserting ratification and estoppel defenses against claims for breach of contract in connection with collateralized debt obligations (CDOs) based on a broad no-waiver provision in an agreement. In CWCapital Cobalt VR Ltd. v. CWCapital Investments LLC, et al., Index No. 653277/2018, the issuer plaintiff asserted claims for breach of contract, among others, against the manager and servicer of the CDOs. In response, the defendants sought to dismiss the case based on the fact that they had managed the CDOs the same way for a decade before the action without complaint from the plaintiff and that an officer of the plaintiff had certified annually that no defaults were found. The Court rejected these facts as a basis for ratification and estoppel. It explained:

Cobalt’s claims are not barred by ratification and estoppel. The [agreement] provides that “[n]o failure or delay on the part of any party hereto to exercise any right or remedy under this Agreement shall operate as a waiver thereof, and no waiver shall be effective unless it is in writing and signed by the party granting such waiver.” (NYSCEF 946, CMA § 18 [j].) Contrary to CW’s contentions, the annual Officer’s Certificate does not operate as a written waiver or approval of CWCI’s conduct. The Officer’s Certificate states that, “[p]ursuant to Section 7.12 of the Indenture,” Cobalt’s officer “does certify that: (i) [h]aving made reasonable inquiries of the Collateral Manager, and to the best of the knowledge, information and belief of the Issuer there did not exist. . . any Default; and (ii) [t]he Issuer has complied with all of its obligation.” (NYSCEF 618, 2016 Officer’s Certificate; NYSCEF 617, 2013 Officer’s Certificate; NYSCEF 619, 2010 Officer’s Certificate). The Indenture defines “Default” as “[a]n event or circumstance that is . . . an Event of Default.” (NYSCEF 827, Indenture at 10.) “Event of Default” is defined as events “specified in Section 5.01.” (Id. at 13.) Section 5.01 describes various Events of Default, all having to do with the Issuer’s obligations under the Indenture. (Id. § 5.01.) Meanwhile, section 7.12 of the Indenture, requiring the annual Officer’s Certificate, is concerned with “the fulfillment of a material obligation of the Co-Issuers under this Indenture.” (Id. § 7.12). Thus, the annual Officer’s Certificate has nothing to do with CWCI’s fulfilment of its obligations under the [agreement] and does not operate as a written waiver of Cobalt’s claims. Accordingly, “[t]here is no merit to defendants’ waiver and estoppel arguments in view of the ‘no waiver’ provision in the [] agreement and their failure to show detrimental reliance on anything plaintiff said or did.”

The attorneys at Schlam Stone & Dolan have extensive experience with wavier, estoppel, and ratification defenses in commercial disputes. Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning such issues.