National Collegiate v.

PRECEDENTIAL

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
________________

No. 18-3327
________________

In re: NATIONAL COLLEGIATE STUDENT LOAN
TRUSTS 2003-1, 2004-1,
2004-2, 2005-1, 2005-2, 2005-3

*Waterfall Asset
Management, LLC,
One William Street Capital
Master Fund, Ltd., OWS
Credit Opportunity I, LLC,
OWS ABS Fund II, L.P. and
OWS COF 1 Master, L.P.,
Appellants

*(Pursuant to Rule 12(a) Fed. R. App. P.)

________________

No. 18-3328
________________

In re: NATIONAL COLLEGIATE STUDENT LOAN
TRUSTS 2003-1, 2004-1,
2004-2, 2005-1, 2005-2, 2005-3
 U.S. Bank National Association,
Indenture Trustee,
Appellant
________________
Appeal from the United States District Court
for the District of Delaware
(D.C. Civil Action No. 1-16-cv-00341)
District Judge: Honorable Joseph F. Bataillon
Magistrate Judge: Honorable Sherry R. Fallon
________________
Argued March 11, 2020

Before: McKEE, AMBRO, and PHIPPS, Circuit Judges

(Opinion filed: August 19, 2020)

Michael Hanin (Argued)
Uri Itkin
Kasowitz Benson Torres
1633 Broadway, 21st Floor
New York, NY 10019

Henry B. Brownstein
Kosowitz Ben Torres
1399 New York Avenue, Suite 201
Washington, DC 20005

Andrew D. Cordo
Ashby & Geddes, P.A.
500 Delaware Avenue, 8th Floor
P.O. Box 1150

2
Wilmington, DE 19899

Counsel for Appellants
Waterfall Asset Management LLC,
One William Street Capital Master Fund Ltd.,
OWS Credit Opportunity I LLC,
OWS ABS Fund II LP, OWS COF I Master LP

Jeffrey T. Castellano
John W. Shaw
Shaw Keller
1105 North Market Street
I.M. Pei Building, 12th Floor
Wilmington, DE 19801

Louis Chaiten
James R. Saywell
Jones Day
901 Lakeside Avenue
North Point
Cleveland, OH 44114

Keith Kollmeyer
Matthew Martel (Argued)
Anthony Masero
Joseph B. Sconyers
Jones Day
100 High Street
Boston, MA 02110

Counsel for Appellant
US Bank NA, as Indenture Trustee

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Daniel L. Berger
Charles T. Caliendo
James J. Sabella
Grant & Eisenhofer
485 Lexington Avenue, 29th Floor
New York, NY 10017

Kimberly Evans (Argued)
Michael T. Manuel
Grant & Eisenhofer
123 Justison Street, 7th Floor
Wilmington, DE 19801

Counsel for Appellees
________________

OPINION OF THE COURT
________________

AMBRO, Circuit Judge
Six Delaware statutory trusts (the “Trusts”) acquired
student loans, issued notes for those acquisitions, and pledged
the student loans as collateral for the notes. This process,
called a securitization, works well when the students do not
default on their loans. When they do, a servicer of the loans
attempts to collect. If that servicer comes up short, there is a
problem. That is what occurred here. To remedy the problem
and aid collection, an additional servicer was added by the
owners of the Trusts. May this be done under the documents
for the securitization and, if so, were the requirements in those
documents followed? To flesh out this dispute, what follows

4
is a Reader’s Digest version followed by a more complete
factual and procedural background.
Each Trust stems from a trust agreement (the “Trust
Agreement”) pursuant to the Delaware Statutory Trust Act.
Del. Code Ann. tit. 12, § 3801(g). The Trusts issued notes (the
“Notes”) entitling their holders (the “Noteholders”) to the
income from the student loans purchased with Note proceeds.
To secure the Notes, the Trusts pledged the student loans under
a “Granting Clause” in documents called “Indentures” entered
into with U.S. Bank National Association (“U.S. Bank”), as
Indenture Trustee.

The Indentures also contain various protections for the
benefit of the Indenture Trustee and the Noteholders, including
a requirement that the Trusts obtain consent from the Indenture
Trustee and the Noteholders to amend, supplement, or
terminate the Indentures (the “Consent Clause”).
The Trusts initially did not provide for servicing loans
delinquent in their payments. They later entered into a
“Special Servicing Agreement” to do so. U.S. Bank became
both the Indenture Trustee and the “Special Servicer” under the
Special Servicing Agreement. It is here our dispute begins.
U.S. Bank allegedly failed as the Special Servicer to
collect hundreds of millions of dollars in delinquent loans. To
mitigate losses, holders of the equity ownership interests in the
Trusts (the “Owners”) sought to hire an additional loan
servicer, and ultimately entered into an agreement for Odyssey
Education Resources, LLC (“Odyssey”) to serve in that role
(the “Odyssey Agreement”). Thereafter the Trusts submitted
invoices from Odyssey for payment from the trust estate.

The parties dispute whether the Trusts had the right to
enter the Odyssey Agreement and whether that Agreement

5
conflicts with the “Basic Documents,” meaning the Indentures,
the Trust Agreements, along with the Servicing Agreements,
and other related agreements. On cross-motions for summary
judgment, the District Court held that: (1) the Trusts did not
violate the Granting Clause by hiring Odyssey and retaining
the right to hire a new servicer; (2) the Trusts were not required
to obtain consent to hire Odyssey because the Odyssey
Agreement did not waive, amend, modify, supplement, or
terminate any of the terms of the Basic Documents; (3)
Odyssey’s invoices were accordingly payable; and (4) the
question whether the Odyssey Agreement was the result of
improper self-dealing was irrelevant. U.S. Nat’l Bank Ass’n v.
Nat’l Collegiate Student Loan Tr. 2003-1, No. 16-cv-341, 2018
WL 4462369 (D. Del. Sept. 18, 2018).
We affirm in part and reverse in part. We agree that the
Granting Clause does not bar the Trusts from appointing an
additional servicer, yet we also hold that several provisions of
the Odyssey Agreement violate the Granting Clause by
impermissibly transferring to the Owners of the Trusts rights
reserved for the Indenture Trustee. We also part with the
District Court and hold that the Odyssey Agreement
supplements and modifies several provisions of the Basic
Documents, thus requiring consents not obtained from the
Indenture Trustee. Accordingly, the Odyssey Agreement is
invalid, and we remand to the District Court to determine
whether the Odyssey invoices are nonetheless payable (which
may include a re-look at the self-dealing issue).
I. FACTUAL AND PROCEDURAL BACKGROUND
A. The Creation, Structure, and Basic
Documents of the Trusts
The Trusts (National Collegiate Student Loan Trusts
2003-1, 2004-1, 2004-2, 2005-1, 2005-2, and 2005-3) were

6
created between 2003 and 2005. Their purpose was to acquire
student loans by issuing notes and executing indentures, to
provide for administration of the Trusts and servicing of the
student loans, and to enter into other necessary agreements to
achieve the foregoing. Trust Agreement (“TA”) § 2.03(a), J.A.
267–68.
The Trust Agreements appointed an owner trustee (the
“Owner Trustee”) to act for and manage the affairs of each
Trust. The Owner Trustee in turn appointed an administrator
(the “Administrator”) to aid it in discharging its duties and to
take certain actions under an administration agreement (the
“Administration Agreement”). GSS Data Services Inc.
(“GSS”) initially served as Administrator. J.A. 148–49.
To fund the acquisition of the student loans, the Trusts
issued Notes to the Noteholders. The Notes are backed by the
loans and are paid through principal and interest payments
received from the student loan borrowers.
Appellants are the Noteholders,1 and U.S. Bank, which
serves as the current Indenture Trustee for the Trusts (together
“Appellants”). The Indentures are governed by New York law.
See Indenture § 11.13, J.A. 384.
The Administration Agreements were entered into on
various dates by and among each of the Trusts, Wilmington
Trust Company (“Wilmington Trust”) as Owner Trustee, U.S.
Bank as Indenture Trustee, The National Collegiate Funding

1
The interested Noteholders (participating in this suit)
are Waterfall Asset Management, LLC, One William Street
Capital Master Fund, Ltd., OWS Credit Opportunity I, LLC,
OWS ABS Fund II, L.P., and OWS COF I Master, L.P. The
Noteholders and U.S. Bank initially brought separate appeals
that are herein consolidated.

7
LLC as the Depositor, and First Marblehead Data Services,
Inc. (“First Marblehead Data”) as Administrator under each
Administration Agreement.
Under the Indentures, the Trusts granted all of the right,
title, and interest in and to, among other things, the student
loans held by the Trusts, the related agreements, funds and
accounts, and all related present and future claims related
thereto (collectively, the “Indenture Trust Estate”) to the
Indenture Trustee for the benefit of the Noteholders.
The Granting Clause, under which the Trusts grant their
interest in the student loans to the Indenture Trustee, provides
in relevant part:
The Issuer [i.e., the Trust] hereby Grants2 to the
Indenture Trustee at the Closing Date with

2
The Indenture defines “Grant” in a litany of legal
jargon meant to be very broad:

“Grant” means mortgage, pledge, bargain, sell,
warrant, alienate, remise, release, convey,
assign, transfer, create, and grant a lien upon and
a security interest in and right of setoff against,
deposit, set over and confirm pursuant to the
Indenture. A Grant of the Collateral or of any
other agreement or instrument shall include all
rights, powers and options (but none of the
obligations) of the Granting party thereunder,
including the immediate and continuing right to
claim for, collect, receive and give receipt for
principal and interest payments in respect of the
Collateral and all other moneys payable
thereunder, to give and receive notices and other

8
 respect to the Initial Financed Student Loans,
and as of each Subsequent Transfer Date with
respect to Subsequent Loans acquired as of such
date, as trustee for the benefit of the holders of
the Notes, all the Issuer’s right, title and interest
in and to the following:
(a) the Student Loans, and all obligations of the
Obligors thereunder including all moneys paid
thereunder on or after the Cutoff Date . . . ;
(b) all Servicing Agreements and all Student
Loan Purchase Agreements, including the right
of the Issuer to cause the Sellers to repurchase[,]
or the Servicer to purchase, Student Loans from
the Issuer under circumstances described therein;
....
Indenture at 1–2, J.A. 317–18. It is “absolute.” Indenture
§ 3.07(f), J.A. 336.
To protect the Noteholders’ interests, the Indentures
include “Issuer Separateness Covenants” that impose on the
Trusts obligations to “maintain an arm’s length relationship
with . . . any of the [Trusts’] Affiliates.” Indenture § 3.23(l),

communications, to make waivers or other
agreements, to exercise all rights and options, to
bring Proceedings in the name of the Granting
party or otherwise and generally to do and
receive anything that the Granting party is or
may be entitled to do or receive thereunder or
with respect thereto.

Indenture, App. A-16, J.A. 406.

9
J.A. 346. So long as the Notes are outstanding, the Trusts must
“avoid the appearance [] of conducting business on behalf of
any Owner or any Affiliate of an Owner.” TA § 2.03(b)(iv),
J.A. 268. In addition, the Indentures require the consent of
Noteholders and the Indenture Trustee in order to “waive,
amend, modify, supplement or terminate” any of the Basic
Documents. Indenture §§ 3.07(c), (f), J.A. 336–37.
B. Special Loan Servicing Agreements

At the Trusts’ inception, the Pennsylvania Higher
Education Assistance Agency (“PA Education Agency”) acted
as the sole Servicer for each Trust pursuant to a servicing
agreement (the “PA Education Agency Servicing
Agreement”). Under it, the PA Education Agency serviced
performing, or up-to-date, student loans and could purchase
those loans out of the Trusts but only for “an amount equal to
the principal balance and accrued and unpaid interest.” J.A.
605, 740.
The Basic Documents at the outset did not provide for
servicing loans delinquent in their payments because The
Educational Resources Institute Inc. (the “Resource Institute”)
guaranteed full repayment on those loans. After that entity’s
bankruptcy in 2008, however, the Trusts established a regime
for servicing delinquent student loans. Specifically, in 2009
the Trusts entered into a “Special Servicing Agreement” for the
purpose of servicing two categories of non-performing student
loans, “Defaulted Loans” and “Delinquent Loans.” J.A. 428.

The Special Servicing Agreement was entered into by
and among First Marblehead Education Resources, Inc. (“First
Marblehead Education”) and each of the Trusts, which named
First Marblehead Education as Special Servicer for delinquent
and defaulted loans (hereinafter referred to as “Defaulted
Loans”). The Special Servicing Agreement provided that U.S.

10
Bank was the “Back-up Special Servicer,” and that if First
Marblehead Education were to resign as Special Servicer, U.S.
Bank would replace it. J.A. 428.
The Special Servicing Agreement further provided that
Defaulted Loans are serviced exclusively by the Special
Servicer. Amendments to the Special Servicing Agreement
had to be agreed to by parties other than the Trust, including
the Special Servicer, and U.S. Bank (as Indenture Trustee) and
the Administrator. Special Servicing Agreement (“SSA”)
§ 16, J.A. 442. For the Trusts to replace the Special Servicer,
they were required to provide prior written notice to the rating
agencies Moody’s Corp., S&P Global Ratings, and Fitch
Ratings Inc., (collectively, the “Rating Agencies”), and receive
written confirmation that the proposed successor would not
result in a reduction or withdrawal of the Notes’ then-current
ratings (the “Special Servicing Agreement Rating Agency
Condition”). SSA § 6(E), J.A. 433; see also Indenture,
Definitions, J.A. 414 (instructing that “each Rating Agency
shall have been given 10 days’ prior notice thereof . . . [,] and
that none of the Rating Agencies shall have notified the
Administrator or the Indenture Trustee[] in writing that such
action will in and of itself result in a reduction or withdrawal
of the then current rating of the Notes . . . .” (the “Indenture
Rating Agency Condition”)).
In 2012, First Marblehead Data was sold, and shortly
thereafter First Marblehead Education resigned as Special
Servicer. U.S. Bank then became Special Servicer.
C. The Trusts Hire Odyssey
The Trusts allege that since U.S. Bank took over as
Special Servicer over $1 billion of loans have become
uncollectable due to the expiration of the relevant statute of
limitations and over $4 billion of loans have defaulted. The

11
Trusts are paying servicing fees in excess of any revenues they
can collect on the Defaulted Loans.
In addition, lawsuits filed by U.S. Bank on behalf of the
Trusts against borrowers for collection on Defaulted Loans
were dismissed due to faulty documentation and procedures,
and subsequently the Trusts were sued in both class action suits
and by individuals for illegal collection practices.
To mitigate losses, the Owners sought to hire an
additional loan servicer. In 2014 they entered an agreement for
Odyssey to act as a Servicer for each Trust’s Loans. Odyssey
Agreement (“OA”), J.A. 490–500.

At inception the Owners of the Trusts were the National
Collegiate Funding LLC, a depositor and sponsor of the
securitizations, and the Resource Institute. In 2014, at the time
of the Odyssey transaction, the beneficial owners of the Trusts
were an affiliate of Citibank named SL Resid Holdings, LLC
(“Citibank”) and an affiliate of VCG Securities, LLC (“VCG”)
named NC Owners, LLC. VCG was the authorized
representative of the Owners in connection with the Odyssey
transaction. At the time of the Odyssey Agreement, Odyssey
had two members, VCG and Boston Portfolio Advisors, Inc.
The latter resigned in 2017, leaving VCG as the sole member
of Odyssey.3

3
Appellants point out that VCG is now the majority
equity owner of the Trusts and the only owner of Odyssey.
This arguably leaves one entity doing the pooling and the
servicing of the student loans.
The Trusts counter that U.S. Bank is the party with a
“substantial conflict[] of interest” here “given its dual roles as
Indenture Trustee and Special Servicer . . . .” Appellees’ Br.

12
 When the Owners decided to hire an additional loan
servicer, they sent letters to the Rating Agencies informing
them about the Odyssey Agreement. None of the agencies
expressed that hiring Odyssey would cause a downgrade.
After more than 10 days had passed from the time the Rating
Agencies were notified of the Trusts’ intention to hire
Odyssey, the Owners directed Wilmington Trust to execute the
Odyssey Agreement and notify GSS (as Administrator) and
U.S. Bank (as Indenture Trustee) of that action.
The Trusts thereafter asked U.S. Bank to acknowledge
Odyssey’s hiring. Under Section 11.01 of the Indentures, if the
Issuer (i.e., a trust) requests that the Indenture Trustee (U.S.
Bank) take any action, the Issuer must provide “the Indenture
Trustee (i) an Officers’ Certificate of the Issuer stating that all
conditions precedent . . . relating to the proposed action have
been complied with and (ii) an Opinion of Counsel stating” as
much. J.A. 380. On January 14, 2016, per the requirements of
Section 11.01, Wilmington Trust sent an Officers’ Certificate
of Issuer and an opinion letter to U.S. Bank. It, however,
refused to acknowledge Odyssey’s retention.

D. The Odyssey Agreement
Under the Odyssey Agreement, Odyssey is to service
“Defaulted Loans” and “Loans Eligible For Sale.” OA at 1,
§ 2(B), J.A. 491. Odyssey has the authority to purchase certain
defaulted Loans from the Trusts.

2. They posit that, “[a]s Special Servicer, U.S. Bank receives
a fee based on the total outstanding Loan balances . . . [.] To
the extent hiring Odyssey will result in Loans being sold, this
will reduce the fees to which U.S. Bank would otherwise be
entitled.” Id.

13
 The Noteholders and U.S. Bank, as Indenture Trustee,
allege that VCG has sought to transfer servicing of newly
Defaulted Loans from the Special Servicer (U.S. Bank) to
Odyssey.
One of the main disputes before us is whether the
Odyssey Agreement unilaterally, and thus impermissibly,
amended the Basic Documents. The parties disagree as to what
extent the Odyssey Agreement and the Special Servicing
Agreement are incompatible.
For example, Appellants (U.S. Bank and the
Noteholders) argue that the Special Servicing Agreement does
not permit sales of loans. The Odyssey Agreement authorizes
Odyssey to purchase Defaulted Loans at a “purchase price”
that is 10% less than fair market value of the Defaulted Loan
(put differently, to retain a 10% commission for arranging for
the sale of the Loan). OA § 2(C), J.A. 492–93. Appellees (the
Trusts) point to several sections of the Indentures to argue the
Basic Documents, including the Special Servicing Agreement,
do allow the sale of loans. Section 3.14 permits the Indenture
Trustee to dispose of Loans to three parties: a guarantor, a
seller, and a servicer. Indenture § 3.14, J.A. 340. Loans sold
to the Servicer must be at a “price [] equal to or in excess of
the amount required by the applicable . . . Servicing Agreement
. . . .” Indenture § 3.14(b), J.A. 340. The Special Servicing and
Odyssey Agreements also arguably vary in several other
respects:

 The Special Servicing Agreement allows the
Indenture Trustee to remove the Special Servicer
for cause without the consent of the Trusts. SSA
§ 6(D), J.A. 432–33. The Odyssey Agreement
allows for the removal of Odyssey for cause only
“with the prior written consent of the Trust.” OA
§ 6(C), J.A. 494 (emphasis added).

14
  Amendments to the Special Servicing
Agreement require the consent of the
Administrator. SSA § 16, J.A. 442. The
Odyssey Agreement requires the Trusts to
consent to any amendments to the Odyssey
Agreement. OA § 15, J.A. 497.
 The Special Servicing Agreement provides that
the Indenture Trustee and other transaction
parties shall be indemnified by the Special
Servicer for liability arising from “willful
misconduct, negligence or bad faith,” SSA, § 10,
J.A 441, whereas the Odyssey Agreement
provides indemnification for only “willful
misconduct, gross negligence or bad faith,” OA
§ 9, J.A. 496 (emphasis added).
 The Basic Documents did not permit dealings
with affiliates. TA § 2.03(b)(iv), J.A. 268. The
Odyssey Agreement permits Odyssey to “enter
into transactions or otherwise deal with any of its
affiliates.” OA § 5(B), J.A. 494.
E. The Unpaid Invoices
In December 2015, the Trusts submitted more than
$1.24 million in invoices from Odyssey for payment from the
Indenture Trust Estate. Odyssey performed services such as
conducting audits and other work to evaluate which Defaulted
Loans could be sold. GSS, as Administrator, refused to process
the invoices and requested additional information. It sent the
invoices to U.S. Bank as Indenture Trustee, complaining that
no documentation was provided for the alleged expenses.

15
 F. Procedural History
In February 2016, U.S. Bank sought instruction from a
Minnesota state court on (1) whether Odyssey was properly
appointed as a servicer, (2) whether the Odyssey Agreement is
invalid because it would amend or modify the Basic
Documents, and (3) whether the invoices submitted by
Odyssey for services should be paid.
The Trusts removed the case to the United States
District Court for the District of Minnesota. Thereafter, the
parties stipulated to transferring the case to the United States
District Court for the District of Delaware. After discovery,
the parties filed cross-motions for summary judgment.
The Magistrate Judge issued a Report and
Recommendation (“R&R”), recommending that the District
Court grant the Trusts’ motion for summary judgment, deny
U.S. Bank’s motion, and order that the Odyssey invoices be
paid. The Magistrate Judge found that: (1) under Section 2.03
of the Indentures, the Trusts have the power “to enter into such
agreements that are necessary, suitable or convenient” to
administer the Trusts and service the loans, and that no other
relevant agreement establishes “an exclusive arrangement
pursuant to which the Trusts forfeited their right . . . to enter
into other servicing agreements,” J.A. 38; (2) the Odyssey
Agreement does not waive, amend, or terminate the terms of
the Basic Documents because, inter alia, Section 3.14 of the
Indentures specifically allows for the sale of loans to a servicer
and there is no conflict between the Odyssey Agreement and
the Special Servicing Agreement; and (3) the Trusts satisfied
the applicable Indenture Rating Agency Condition. The
Magistrate found that VCG and Odyssey’s alleged self-dealing
were not dispositive of the issues.

16
 U.S. Bank and the Noteholders filed objections to the
R&R. The Trusts contend that most of their objections raised
new arguments not presented before the Magistrate Judge,
including that the Granting Clause precluded the Trusts from
hiring Odyssey.
The District Court essentially adopted the R&R in its
entirety and held that arguments not presented to the
Magistrate Judge were waived. U.S. Nat’l Bank Ass’n, 2018
WL 4462369.
II. JURISDICTION AND STANDARD OF REVIEW
The District Court had subject matter jurisdiction under
28 U.S.C. §§ 1332, 1348, 1441(b), and 1446. We have
appellate jurisdiction pursuant to 28 U.S.C. § 1291.
“The standard of review in an appeal from an order
resolving cross-motions for summary judgment is plenary.”
Cantor v. Perelman, 414 F.3d 430, 435 n.2 (3d Cir. 2005).
Summary judgment is appropriate where “there is no genuine
dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(a).
“Under our case law, contract interpretation is a
question of fact reviewed for clear error and contract
construction is a question of law reviewed de novo.” Wayne
Land & Mineral Grp. LLC v. Del. River Basin Comm’n, 894
F.3d 509, 528 (3d Cir. 2018). Contract interpretation involves
determining the meaning of the contract language and giving
effect to the parties’ intent. See John F. Harkins Co., Inc. v.
Waldinger Corp., 796 F.2d 657, 659 (3d. Cir. 1986).
Construction of a contract goes beyond interpretation and
requires determining the legal effect and consequences of
contractual provisions. Id. (citing 3 Corbin, Corbin on
Contracts § 534 at 9 (1960)); see also Garden State Tanning

17
Inc. v. Mitchell Mfg. Grp., Inc., 273 F.3d 332, 335 (3d Cir.
2001) (“When an ambiguity exists in the agreement, the
problem is one of interpretation. If, however, the terms are
clear, construction of the contract determines its legal
operation.”).
“This case raises an issue of contract construction
because the issue[s] on appeal do[] not require interpretation of
any particular terms, but instead ask[] us to determine the legal
effect of and interplay between various provisions” of the
Basic Documents and the Odyssey Agreement. Medtronic,
Inc. v. Mirowski Family Ventures, LLC, 682 F. App’x 921, 926
(Fed. Cir. 2017); see also Ram Constr. Co. v. Am. States Ins.
Co., 749 F.2d 1049, 1052–53 (3d Cir. 1984) (stating that a case
raised issues of contract construction because the court had to
assess how actions of the parties affected the initial agreement
and whether a subsequent agreement was created). We thus
apply a de novo standard of review.

Because the District Court adopted the Magistrate
Judge’s R&R in all material respects, we review the Magistrate
Judge’s proposed disposition of the case and treat it and the
District Judge’s order interchangeably. See Shaver v. Siemens
Corp., 670 F.3d 462, 470 (3d Cir. 2012).
III. DISCUSSION
A. The Odyssey Agreement Violates the
Granting Clause.
Appellants argue that the Indentures’ Granting Clause
precluded the Trusts from appointing Odyssey as a new
Servicer because its plain language assigned to the Indenture
Trustee (U.S. Bank), for the benefit of the Noteholders, any
right the Trusts may have previously had to appoint servicers.
The Trusts counter that Appellants waived this argument

18
because they failed to raise it before the Magistrate Judge.
Alternatively, they argue that the Trusts had the authority to
appoint Odyssey under the plain language of the Basic
Documents and they complied with all the requirements of the
Basic Documents in entering the Odyssey Agreement.
We agree with the Appellants that the Odyssey
Agreement violates the Granting Clause. However, we reach
this conclusion not because the plain language of the Granting
Clause prohibits the Trusts from appointing a new servicer, but
rather because the Odyssey Agreement specifically assigned to
the Owners of the Trusts several rights reserved for the
Indenture Trustee, for the benefit of the Noteholders, in the
Basic Documents.
1. The Granting Clause Argument was
not Waived.
We first address whether Appellants waived their
argument that the Granting Clause precludes the Trusts from
entering into the Odyssey Agreement.4 Arguments not
presented to a magistrate judge and raised for the first time in
objections to the magistrate’s recommendations are deemed

4
We note that forfeiture “is the failure to make the
timely assertion of a right,” or the “inadvertent failure to raise
an argument,” while waiver, in contrast, is the “intentional
relinquishment or abandonment of a known right.” Barna v.
Bd. of Sch. Directors of Panther Valley Sch. Dist., 877 F.3d
136, 147 (3d Cir. 2017) (citations and internal quotation marks
omitted). Although “forfeiture” of arguments may be the
applicable concept to describe Appellants’ alleged failure to
raise certain arguments here, we use “waiver” because the
parties and District Court did and the Appellants’ relevant
arguments are not forfeited in any event.

19
waived. See Marshall v. Chater, 75 F.3d 1421, 1426 (10th Cir.
1996) (“Issues raised for the first time in objections to the
magistrate judge’s recommendation are deemed waived.”). A
“passing reference to an issue” does not suffice to preserve it.
See Laborers’ Int’l Union of N.A. v. Foster Wheeler Energy
Corp., 26 F.3d 375, 398 (3d Cir. 1994).
First, the Trusts misrepresent that the District Court held
that the Granting Clause argument was waived. The Court in
fact addressed this argument expressly by holding that “the
granting clause does not preclude the trusts from appointing
new servicers.” U.S. Nat’l Bank Ass’n, 2018 WL 4462369, at
*5. It recited the standard for waiver but did not hold that there
was waiver. Id. at *4.
Second, the Trustees concede that the Noteholders
argued to the Magistrate Judge “that the Odyssey Agreement
violates the grant of the Indentures,” yet posit that this was
insufficient to preserve the issue because the argument was
merely a “passing reference.” Appellees’ Br. 32. This too
misrepresents the record. The Noteholders’ submission to the
Magistrate Judge devoted an entire section to the argument that
the Odyssey Agreement “repudiates the Issuers’ grant.” J.A.
1024–25. The Judge expressly discussed the Granting Clause.
And the Noteholders joined U.S. Bank’s submissions on
summary judgment, which included arguments that the
Odyssey Agreement violated the Clause.
On this record, the Trusts cannot claim the Granting
Clause argument surprised them. Cf. Lark v. Sec’y Pa. Dep’t
of Corr., 645 F.3d 596, 607 (3d Cir. 2011) (stating that “the
crucial question regarding waiver” is whether the proceedings
“put the [d]istrict [c]ourt on notice of the legal argument”).
Moreover, even if Appellants had not clearly raised the
argument, we have discretion to consider whether the Odyssey
Agreement contravenes the Grant of the Indenture (something

20
we would do if needed), which presents a “pure question of
law” “closely related to arguments that [the parties] did raise”
and for which “[n]o additional fact-finding is necessary.”
Bagot v. Ashcroft, 398 F.3d 252, 256 (3d Cir. 2005). With no
waiver, we thus proceed with Appellants’ arguments.
2. The Plain Language of the Grant of the
Indenture Does Not Prohibit the Trusts
from Appointing a New Servicer.
The Grant of the Indenture transferred to the Indenture
Trustee (U.S. Bank), among other rights, “all the Issuer’s right,
title and interest in and to . . . the Student Loans, . . . [and] all
Servicing Agreements . . . [,] including the right of the Issuer
to cause . . . the Servicer to purchase[] Student Loans from the
Issuer.” Indenture at 1–2, J.A. 317–18. To restate, this was
absolute.
Appellants contend that the right to appoint servicers is
not shared; it was one of the rights absolutely granted to the
Indenture Trustee, and under New York law an assignment of
this breadth makes the trustee the exclusive holder of the rights
assigned. See Phoenix Light SF Ltd. v. U.S. Bank Nat’l Ass’n,
No. 14-cv-10116, 2015 WL 2359358, at *2 (S.D.N.Y. May 18,
2015) (stating that the grant of “all . . . right, title and interest”
in the certificates and related claims constituted a “full
assignment” that “divests plaintiffs of any rights they
otherwise may have had to commence litigation on their own
behalf” (citation and internal quotation marks omitted)); House
of Eur. Funding I Ltd. v. Wells Fargo Bank, N.A., No. 13-cv-
519, 2015 WL 1472301, at *7 (S.D.N.Y. Mar. 30, 2015)
(holding that granting clause effected “complete” assignment
to trustee and rejecting contention that the clause was merely
an “assignment as security” that reserved to the issuer any right
to sue) (citation and internal quotation marks omitted).

21
 The Trusts counter, and the District Court agreed,
however, that “[t]he Granting Clause does not purport to divest
the Trusts of their power and responsibility to appoint
servicers. If that was the intention of the Granting Clause, it
could have easily said so, but it did not.” Appellees’ Br. 34.
The Court relied on San Antonio Fire & Police Pension Fund
v. Amylin Pharm., Inc., 983 A.2d 304 (Del. Ch.), aff’d, 981
A.2d 1173 (Del. 2009) (applying New York law), which held
that “[i]ndentures are to be read strictly[,] and to the extent they
do not expressly restrict the rights of the issuer, the issuer is
left with the freedom to act[.]” Id. at 314. Thus the Court
concluded that “[t]here is no language presented to the court
that takes away this right to appoint servicers.” U.S. Nat’l Bank
Ass’n, 2018 WL 4462369, at *5. It further pointed out that
“[t]he granting rights clause does not use the language ‘sole’
or ‘exclusive holder’ when talking about the Indenture Trustee.
Yet, when intended, the Indenture uses such words.” Id. (citing
Indenture § 6.10(b)(i)). And indeed, “[i]t is axiomatic [under
New York law] that the powers of an indenture trustee are
limited to those specifically articulated in the indentures
themselves.” See Fleet Nat’l Bank v. Trans World Airlines,
Inc., 767 F. Supp. 510, 513 (S.D.N.Y. 1991).
The other cases Appellants cite to support that under
New York law the Grant is absolute do not address whether a
trust retains its right to appoint a servicer pursuant to an
indenture. See, e.g., Nat’l Credit Union Admin. Bd. v. U.S.
Bank Nat’l Ass’n, 898 F.3d 243, 253 (2d Cir. 2018) (stating
that the granting clause effected a “complete transfer” of the
estate of trusts to an indenture trustee); BlackRock Allocation
Target Shares: Series S. Portfolio v. Wells Fargo Bank, N.A.,
247 F. Supp. 3d 377, 412–13 (S.D.N.Y. 2017) (holding that
owners of a trust had no right to control trust assets because the
owners “contracted it away” to indenture trustee in the granting
clause). Instead, they primarily involve residential mortgage-
backed security (“RMBS”) trusts, entities entirely distinct from

22
the Trusts at issue here. See, e.g., Triaxx Prime CDO 2006-1,
Ltd. v. Bank of N.Y. Mellon, No. 16-cv-1597, 2018 WL
1417850 (S.D.N.Y. Mar. 8, 2018) (involving RMBS trusts, not
owner-directed Trusts, and addressing the plaintiff’s right to
sue, not whether it had the authority to appoint a new servicer);
Triaxx Prime CDO 2006-1, Ltd. v. Ocwen Loan Servicing,
LLC, 762 F.App’x 601, 605 (11th Cir. 2019) (same); Nat’l
Credit Union Admin. Bd., 898 F.3d at 253–54 (same);
BlackRock Allocation Target Shares, 247 F. Supp. 3d at 411-
12 (same); Phoenix Light SF Ltd. v. U.S. Bank Nat’l Ass’n, No.
14-cv-10116, 2016 WL 1169515, at *7 (S.D.N.Y. Mar. 22,
2016) (same).
More instructive here is the outcome in Hildene Cap.
Mgmt., LLC v. Bank of N.Y. Mellon, 105 A.D.3d 436 (N.Y.
App. Div. 2013). There the Court held that a granting clause
similar to the one here did not deprive the issuers of notes of
their right to enforce provisions of the indentures or other
agreements. Plaintiffs, who were senior noteholders, alleged
that Bank of New York Mellon (“BNYM”), as trustee, had
improperly sold collateral securities. Id. at 437. Preferred
Term Securities XX, Ltd. (“PreTSL XX”), as the issuer of the
notes, moved to intervene, and the Court found it had standing
to do so based on the contractual duties it assumed under the
relevant indenture. Id. Specifically, in the granting clause,
PreTSL XX granted its “right, title and interest” in the
collateral securities to BNYM “for the benefit of itself and the
Holders of the Notes” and “in trust . . . to secure compliance
with the provisions of this Indenture . . . .” Id. at 438.
However, Section 3.5 of the indenture authorized PreTSL XX
to take action “necessary or advisable to: . . . preserve and
defend title to the Collateral.” Id. The Court held that it could
not read the granting clause to divest PreTSL XX of the right
to bring claims, for the benefit of itself and the noteholders, to
recover damages for BNYM’s alleged breach. Id.

23
 The Trusts argue that, here too, they assumed certain
contractual obligations under the Basic Documents that were
not annulled by the Granting Clause. They assert they retain
the obligation to take various actions to protect their interests
and enforce the obligations of persons doing business with
them. This includes the obligation “to enter into such
agreements that are necessary” to “provide for . . . the servicing
of the Student Loans.” TA § 2.03(a)(ii) & (iii), J.A. 268. In
addition, Section 3.07(d) of the Indentures provides:
If the Issuer shall have knowledge of the
occurrence of a Servicer Default . . . . , the Issuer
shall promptly notify the Indenture Trustee and
the Rating Agencies thereof, and shall specify in
such notice the action, if any, the Issuer is taking
with respect to such default . . . . [T]he Issuer
shall take all reasonable steps available to it to
enforce its rights under the Basic Documents in
respect of such failure.
J.A. 336. And indeed the definition of “Grant” in the
Indentures states that it is a conveyance of the “rights, powers
and options . . . of the Granting party,” J.A. 406, and it states
as well that “none of the obligations” of the granting party are
transferred thereunder, id.

As in Hildene Capital Management, 105 A.D.3d 436,
reading the Granting Clause here to prevent the Trusts from
hiring a new Servicer would render meaningless Sections
2.03(a)(ii) and (iii) of the Trust Agreements, and other rights
and powers of the Trusts, including, inter alia, their right and
power to hire, designate, and appoint the Special Servicer
under each Trust’s respective Indenture, Indenture
§ 2.03(a)(ii)–(iii), to direct audits on behalf of the Trusts, id.
§ 4.03(d), and to protect the Trusts and take action if they
become aware of a servicer default, id. § 3.07(d).

24
 It is a “cardinal rule of construction that a court should
not ‘adopt an interpretation’ which will operate to leave a
‘provision of a contract . . . without force and effect.’” Corhill
Corp. v. S.D. Plants, Inc., 9 N.Y.2d 595, 599 (N.Y. 1961)
(citations omitted). And where one interpretation of a contract
provision would place it in conflict with another provision,
courts are obliged to reconcile the provisions to give both
effect. Perlbinder v. Board of Mgrs. of 411 E. 53rd St. Condo.,
65 A.D.3d 985, 987 (N.Y. App. Div. 2009). Holding that the
Granting Clause prevents the Trusts from ever appointing a
new servicer would render ineffective several provisions of the
Basic Documents. Thus we decline to adopt such an
interpretation.
Because the Granting Clause does not state that it
divests the Trusts of their power and obligation to appoint
servicers and because interpreting the Clause to do so would
render several other provisions of the Basic Documents not
effective, we hold that the Granting Clause does not
categorically prohibit the Trusts from appointing another
servicer.
This conclusion does not end our analysis, however.
That the Trusts still have authority to appoint a new servicer
does not mean that the Odyssey Agreement specifically does
not violate the Granting Clause.5

5
The Trusts also argue that Section 2 of the Special
Servicing Agreement gives them the power to appoint the
Special Servicer under each of the Trust’s respective
Indentures. They point out that U.S. Bank itself became the
Special Servicer after signing the Special Servicing Agreement
in March 2009 (years after the Indentures were executed), and
that the Trusts previously entered into servicing agreements

25
 3. The Odyssey Agreement Violates the
Granting Clause by Reserving for the
Trusts Rights Belonging to the
Indenture Trustee for the Benefit of the
Noteholders.
Appellants also countered that the Odyssey Agreement
impermissibly reserved for the Trusts several rights that the
Granting Clause conveyed to the Indenture Trustee, including,
among others, the right to replace Odyssey for cause (Section
6(C)), and the right to direct Odyssey to act free from liability
to the Indenture Trustee (Section 9). J.A. 492, 494, 496.

We agree. Under the Special Servicing Agreement, the
Indenture Trustee “shall” remove the Successor Special

with different entities, such as the Master Servicing Agreement
between the PA Education Agency and the First Marblehead
Corporation in 2006. According to the Trusts, just as they
could enter the Special Servicing Agreement and the Master
Servicing Agreement, they could enter the Odyssey
Agreement. This argument fails, however, because, with
respect to the Special Servicing Agreement, U.S. Bank is not
acting only as the Special Servicer; it also serves as the
Indenture Trustee and its complaint about the Odyssey
Agreement is that its rights as Trustee are being violated. And
that the terms of the Master Servicing Agreement and any other
servicing agreement may not have violated the Basic
Documents does not shield the Odyssey Agreement from
criticism. Appellants do not argue that those other agreements
usurped the rights of the Indenture Trustee or included the kind
of provisions the Odyssey Agreement includes. Those
agreements are substantively different from the Odyssey
Agreement and not pertinent in our case.

26
Servicer upon the occurrence of certain specified defaults.
SSA § 6.D, J.A. 432–33. Odyssey, in contrast, cannot be
removed for defaults under the Odyssey Agreement without
consent of the Trusts. OA § 6(C), J.A. 494.6 Likewise, under
the Special Servicing Agreement the Indenture Trustee had a
right to indemnity by the Special Servicer for liability traced to
“willful misconduct, negligence or bad faith,” SSA § 10, J.A.

6
The Trusts claim that Section 6(C) cannot violate the
Granting Clause because the Master Servicing Agreement gave
First Marblehead Corporation the right to terminate the Master
Servicing Agreement. However, Appellants correctly point
out that Section 6(C) is readily distinguishable from the rights
granted to First Marblehead Corporation under the Master
Servicing Agreement. It expressly contemplated that First
Marblehead Corporation’s rights under that Agreement would
be assigned to “Permitted Assignees” — i.e., the Indenture
Trustee, among others — as part of the original securitization
process. Master Servicing Agreement (“MSA”) § 1.32, J.A.
742 (defining “Permitted Assignees” to include the Indenture
Trustee); MSA §13.02(b), J.A. 771 (contemplating that rights
of First Marblehead Corporation will be “assigned to Permitted
Assignees”); MSA § 13.03, J.A. 771–72 (“all rights and
obligations of [First Marblehead Corporation] under this
Agreement with respect to [] Student Loans shall inure to . . .
the Permitted Assignees”). Whatever termination rights First
Marblehead Corporation had under the Master Servicing
Agreement were ultimately granted to the Indenture Trustee.
Moreover, the Master Servicing Agreement specifically states
that “[n]othing contained herein shall be construed to create an
exclusive arrangement . . . . The Servicer understands and
agrees that [First Marblehead Corporation] may enter into
other agreements for the servicing of Private Student Loans in
the future.” MSA § 15.03, J.A. 776.

27
441, whereas the Odyssey Agreement provides
indemnification for only “willful misconduct, gross negligence
or bad faith,” OA § 9, J.A. 496 (emphasis added).
We discuss in the next section how the Odyssey
Agreement impermissibly modified and supplemented the
Basic Documents. Some of those modifications were the same
reassignment of rights from the Indenture Trustee to the Trusts
discussed here. Whether we treat the relevant provisions of the
Odyssey Agreement as impermissible reassignments of rights
or unilateral modifications, they render the Odyssey
Agreement invalid.

B. The Odyssey Agreement Impermissibly
Modified and Supplemented the Basic
Documents Without Consent.

Although we hold that the Granting Clause does not
divest the Trusts of their authority to appoint new servicers, we
still must address Appellants’ argument that the Indentures
unambiguously require consent from the Indenture Trustee and
the Noteholders for any amendment, supplement, or
termination of the terms of the Basic Documents, and whether
the Odyssey Agreement modified and supplemented the Basic
Documents without that consent.7

7
Our reading of the Granting Clause avoids the
untenable outcome that the Trusts can never replace the
servicer no matter how ineffectual it may be in performing its
role (the accusation they direct at U.S. Bank). Holding that the
Odyssey Agreement specifically violated the Granting Clause
does not render the Trusts helpless. It allows them to appoint
a new servicer. They just cannot do so in a way that violates
the Basic Documents. For example, the Trusts conceivably

28
 The parties do not contest that the Trusts did not obtain
consent from the Indenture Trustee or the Noteholders before
entering the Odyssey Agreement. The question thus devolves
to whether that agreement impermissibly effected any
modifications or supplements to the Basic Documents.
1. We Assess the Effect of the Odyssey
Agreement on the Basic Documents to
Determine Whether it Violated the
Consent Clause of the Indentures.
Section 3.07(c) of the Indentures prohibits any
alteration to the Special Servicing Agreement or other Basic
Documents — specifically, any change that would “waive,
amend, modify, supplement or terminate” them — “without
the consent of the Indenture Trustee and the Interested
Noteholders . . . .” Indenture § 3.07(c), (f), J.A. 336. The
Special Servicing Agreement also prohibits any amendment
without the consent of “the parties [thereto]” and “the
Administrator;” any amendment must also satisfy the Rating
Agency Condition; and any successor servicer must be
approved by the Indenture Trustee and be affirmatively
approved by the Rating Agencies. SSA §§ 6(E), 16, 22(A),
J.A. 433, 442, 444.
We address first whether only formal alterations of the
Basic Documents violate Section 3.07(c). The Trusts argue in
essence, and the District Court agreed, that any agreement
short of a formal modification cannot trigger the Consent
Clause because Section 3.07(f) states that approval is required
for anything that “amend[s], modif[ies], waive[s],
supplement[s], terminate[s] or surrender[s] . . . the terms of . . .
the Basic Documents,” J.A. 336–37 (emphasis added), and the

could have entered another agreement that did not retain solely
for the Trusts the right to hire and fire the servicer.

29
Odyssey Agreement did not make any actual modifications or
additions to those terms. Applying a strict construction, the
Court held that the Odyssey Agreement does not alter the terms
of the Special Servicing Agreement or other Basic Documents.
U.S. Nat’l Bank Ass’n, 2018 WL 4462369, at *5.8

We disagree and hold that the District Court’s
conclusion contravenes well-settled New York law. Under that
law, parties to contracts cannot do anything that “‘will have the
effect of destroying or injuring the right of the other party to
receive the fruits of the contract.” Empresas Cablevision,
S.A.B. de C.V. v. JPMorgan Chase Bank, N.A., 680 F. Supp. 2d
625, 631 (S.D.N.Y.) (quoting Dalton v. Educ. Testing Serv.,
663 N.E.2d 289 (N.Y. 1995)), aff’d and remanded, 381 F.
App’x 117 (2d Cir. 2010) (per curiam). Courts look to the
effect of a contractual action. In Empresas, for example,
Cablevisión sought to enjoin its lender, JPMorgan, from selling
a 90% “participation” in the loan (an action that did not require
Cablevisión’s consent under the credit agreement), arguing
that the participation was in fact an “assignment” under the
agreement (an action that did explicitly require Cablevisión’s
consent). 680 F. Supp. 2d at 626. The Court held that
JPMorgan could not under the guise of selling a “participation”

8
Appellees assert that Appellants waived several of
their arguments as to how the Odyssey Agreement alters
provisions in the Basic Documents. However, the Magistrate
Judge specifically considered the modification argument, J.A.
47–49, even if not quite in the form presented before us. These
arguments are thus not waived. See United States v. Joseph,
730 F.3d 336, 341 (3d Cir. 2013) (holding that while parties
may not raise new arguments, they may place “greater
emphasis and more fully explain an argument on appeal”).

30
accomplish what was in substance a forbidden assignment. Id.
at 631–32.
Here too the Trusts cannot circumvent Section 3.07(c)
by entering a “new” agreement for the servicing of Defaulted
Loans that achieves the same result as an amendment without
obtaining the required consents. See Penny Lane Owners
Corp. v. Conthur Dev. Co., No. 94-cv-940, 2000 WL 178189,
at *12 (S.D.N.Y. Feb. 16, 2000) (refusing to “exalt form over
function” by treating a “lease” as an “assignment,” “even if
[the agreement] is not labeled so”); In re LightSquared Inc.,
511 B.R. 253, 333 (Bankr. S.D.N.Y. 2014) (holding that party
to credit agreement could not “end-run . . . the Eligible
Assignee provisions of the Credit Agreement” by engaging in
prohibited conduct through a shell company). Cf. President &
Fellows of Harvard Coll. v. Glancy, No. 18790, 2003 WL
21026784, at *14, 20 (Del. Ch. Mar. 21, 2003) (rejecting
shareholder agreement that effectively amended a preexisting
voting trust agreement without the required unanimous
shareholder approval). Indeed, the Trusts concede that the
purpose of the Odyssey Agreement was to remedy and replace
the existing special servicing arrangement because of U.S.
Bank’s alleged poor collection practices.
Thus we assess whether the Odyssey Agreement had the
effect of altering the Basic Documents even if there was no
formal amendment. If the Odyssey Agreement is indeed an
attempt to end-run the Consent Clause and modifies or
supplements the Basic Documents without the consent of the
Indenture Trustee and Noteholders, then it is invalid. We
review each alleged modification or supplement in turn.

2. Purchasing Loans from the Trust at
Below-Market Value
Appellants assert that the Odyssey Agreement amends

31
the Basic Documents by giving a new power to Odyssey to
purchase certain Defaulted Loans from the Trusts at below-
market value and to control the purchase price and the sale
process of loans pledged to the Indenture Trustee. The
Odyssey Agreement authorizes Odyssey to purchase Defaulted
Loans at a “purchase price” that is 10% less than fair market
value of the Defaulted Loan, in other words, to retain a 10%
commission for arranging for the sale of the Loan. OA § 2(C),
J.A. 492–93.
The Trusts counter that Odyssey may only purchase
Defaulted Loans from them in accord with mechanisms
provided in the Basic Documents. They point to several
sections of the Indentures to suggest the Basic Documents,
including the Special Servicing Agreement, do allow the sale
of loans. For example, Section 3.14 allows the Indenture
Trustee to dispose of loans to three parties: a guarantor, a seller,
and a servicer, J.A. 340, and loans sold to the Servicer must be
at a “price equal to or in excess of the amount required by the
applicable . . . Servicing Agreement,” Indenture § 3.14(b), J.A.
340.

Contrast this with the Odyssey Agreement. For
Odyssey to purchase Defaulted Loans from the Trusts, the
latter must provide an Issuer Order to the Indenture Trustee
directing the sale of the Loans to Odyssey, and that Order must
state the purchase price. OA § 2.C, J.A. 492–93; Indenture,
§ 3.14, J.A. 340. The Indenture Trustee must acknowledge and
sign the Order for the Loans to be sold to Odyssey. Id. This
same mechanism is specifically provided in the Basic
Documents. Moreover, the Trusts allege the Odyssey
Agreement does not allow Defaulted Loans to be sold at
below-market value and the Trusts cannot unilaterally set a
purchase price, as the Indenture requires that the purchase price
be equal to or in excess of the market value as determined in
the Odyssey Agreement. However, that market value is

32
determined according to the methods provided in the Odyssey
Agreement. It provides for two methods for calculating the
market value, specifically: (i) the highest bid received from at
least three qualified bidders when conducting the sale in a
manner that will yield the “highest and best net proceeds to be
paid” in exchange for the Loans; or (ii) the average value
determined from the appraisal values of two reputable
appraisers. OA § 2(C)(iii), J.A. 493.
Market value is thus ultimately determined by methods
laid out in the Odyssey Agreement. They do not appear in the
Basic Documents. Accordingly, the Odyssey Agreement
supplemented the Basic Documents at least with respect to the
methods for calculating market value of the Defaulted Loans
Odyssey may purchase. This supplement was made without
the consent of the Indenture Trustee or Noteholders, and thus
it violates the Consent Clause.
We could end our analysis here, but we briefly consider
several additional provisions of the Odyssey Agreement that
modified the terms of the Basic Documents.9

9
Appellants also argue that the PA Education Agency
Servicing Agreement and the Special Servicing Agreement
created an exclusive servicing arrangement for Defaulted
Loans, which are now handled by U.S. Bank in its role as
Successor Special Servicer, J.A. 958, and that the Odyssey
Agreement modifies and violates this exclusive servicing
arrangement by providing for Odyssey to service Defaulted
Loans. This argument fails for the reasons discussed above in
Section III.A.3.

33
 3. Indemnity Protection
The Odyssey Agreement also modifies indemnity
protections related to servicing. The Special Servicing
Agreement provides that the Indenture Trustee and other
parties shall be indemnified by the special servicer for liability
arising from “willful misconduct, negligence or bad faith,”
SSA § 10, J.A. 441, whereas the Odyssey Agreement provides
indemnification for only “willful misconduct, gross negligence
or bad faith,” O.A. § 9, J.A. 496 (emphasis added).
The District Court held that there is “no provision in the
Indentures or in the [Special Servicing Agreement] [that]
[provides] that every servicing agreement must mirror the
others, ,” U.S. Nat’l Bank Ass’n, 2018 WL 4462369, at *5, and
the Trusts add that the existence of differing terms in the
Odyssey Agreement and the Special Servicing Agreement does
not mean the former modified the latter.
However, the question is not whether all servicing
agreements must be identical. Appellants have rights outlined
in the Basic Documents as Indenture Trustee and Noteholders.
U.S. Bank as Indenture Trustee (not as servicer) has less
indemnity protection under the terms of the Odyssey
Agreement than under the terms of the Special Servicing
Agreement. This result also is a modification of the Special
Servicing Agreement that was not consented to by the
Indenture Trustee or the Noteholders. It thus violates the
Consent Clause.
4. Removal of Servicer
As discussed in Section III.A.3 above, the Odyssey
Agreement also modified the process by which a servicer could
be removed. Briefly, under the Special Servicing Agreement
the Indenture Trustee “shall” remove the Successor Special

34
Servicer when certain defaults occur. SSA, § 6.D, J.A. 432–
33. Odyssey, in contrast, cannot be removed for defaults under
the Odyssey Agreement without consent of the Trusts. OA
§ 6(C), J.A. 494. Hence Section 6(C) of the Odyssey
Agreement also modified the Special Servicing Agreement
without consent of the required parties.10

10
Appellants tell us that the Odyssey Agreement fails to
satisfy the Indenture Rating Agency Condition and the Special
Servicing Agreement Rating Agency Condition, effectively
writing both provisions out of the Basic Documents and thus
modifying them. The Trusts counter that they satisfied the
Indenture Rating Agency Condition, see Indenture,
Definitions, J.A. 414, when they provided the Rating Agencies
with notice of their “intention to hire Odyssey as a Servicer”
and sent them each a copy of the Odyssey Agreement. J.A.
844. None of the Rating Agencies sent written notice that the
Agreement would result in a reduction or withdrawal of the
rating of the Notes. As for the Special Servicing Agreement
Rating Agency Condition, see SSA § 6(E), J.A. 433, the Trusts
allege that it applies only to the “resignation or removal of the
Special Servicer,” J.A. 433, and that here the Trusts have not
removed U.S. Bank as Special Servicer nor was Odyssey hired
as a successor Special Servicer. The Trusts contend that
Odyssey was appointed as an additional servicer for Defaulted
Loans and they informed the Ratings Agencies as much. J.A.
873. But even assuming both Ratings Agency Conditions have
been met, our conclusion remains unchanged—several
provisions of the Odyssey Agreement violate the Granting
Clause and the Consent Clause.

35
 5. Amendments
Amendments to the Special Servicing Agreement must
be agreed to by parties other than the Trust, including the
Special Servicer, Indenture Trustee, and the Administrator.
SSA § 16, J.A. 442. The Odyssey Agreement has no such
provision and reserves for the Trusts the right to amend it. OA
§ 15, J.A. 497. This too is a modification inasmuch as it affects
the rights of the Indenture Trustee and Noteholders vis-a-vis
the servicer.11
C. The District Court Must Determine in the
First Instance Whether the Odyssey Invoices
Are Payable.
Because the District Court held that the Odyssey
Agreement did not violate the Granting Clause or the Consent

11
Because we hold that the Odyssey Agreement
violated the Granting Clause and the Consent Clause, we need
not decide whether the Agreement’s formation was an arm’s-
length transaction or improper self-dealing. We note, however,
that the Indentures require the Trusts to “maintain an arm’s
length relationship with . . . any of the [Trusts’] Affiliates” and
to preserve the lien of the Indentures. Indenture § 3.23(l), (o),
J.A. 346. The Trust Agreements prohibit the Trusts from
giving “the appearance [] of conducting business on behalf of
any Owner or any Affiliate of an Owner.” TA § 2.03(b)(iv),
J.A. 268. VCG nonetheless stands on both sides of the
Odyssey Agreement. Its chairman signed VCG’s letter (as an
Owner of the Trusts) directing the Trusts to appoint Odyssey
as servicer. He also signed the Odyssey Agreement on behalf
of Odyssey. J.A. 500. It is hard to see how such a transaction
could be considered as conducted at arm’s length. See LiquidX
Inc. v. Brooklawn Capital, LLC, 254 F. Supp. 3d 609, 618

36
Clause and was thus enforceable, it also ruled that Odyssey is
entitled to payment for its invoices from the pledged assets of
the Trusts. The Court had no opportunity to consider whether
the invoices would be payable if the Odyssey Agreement were
invalid and thus void. It will need to answer this question on
remand.
Appellants maintain that, because the appointment of
Odyssey was invalid, it was never an authorized servicer and
has no right to any payment. However, because the District
Court did not rule on this issue and the parties have not fully
briefed it before us, we decline to decide in the first instance
whether Odyssey’s invoices are payable.
CONCLUSION
Although the Odyssey Agreement does not violate the
Granting Clause by appointing another servicer, it does violate
it by assigning to the Owners of the Trusts several rights
reserved for the Indenture Trustee, for the benefit of the
Noteholders, in the Basic Documents. The Odyssey
Agreement required the consent of the Indenture Trustee and
Noteholders because it supplements and amends several
provisions of the Basic Documents. Accordingly, the Odyssey
Agreement is invalid and, if so, the Odyssey Invoices are likely

(S.D.N.Y. 2017) (holding that a transaction engineered “from
both sides” cannot be at “arm’s length”); Roso v. Saxon Energy
Corp., 758 F. Supp. 164, 169 (S.D.N.Y. 1991) (transaction
where a party held “integral positions on both sides of the
agreement” could not be “considered at arms-length”). It is
true that the decision to hire Odyssey was not VCG’s alone,
but jointly VCG and Citibank’s call. However, that other
parties were involved does not resolve the problem of VCG
being on both sides of the Agreement.

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not payable. We remand to the District Court to decide that
issue in the first instance with the benefit of further briefing.
Hence we affirm in part and reverse in part the rulings of the
District Court.

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