But the Second Circuit didn’t flounder. Standing firm, they leaned on a four-factor test from the U.S. Supreme Court’s 1990 playbook, Reves v. Ernst & Young, which dissected the nature of financial instruments.
At the verdict’s climax, the court acknowledged Kirschner’s perspective: noteholders, lured by the siren song of potential profits, might have seen themselves as investors. However, their status was clearly etched in ink: as lenders.
With U.S. Circuit Judges José Cabranes, Joseph Bianco, and Myrna Pérez steering the ship, the Second Circuit’s decision rippled through the legal and financial realms, setting a precedent for future battles in the ever-evolving world of finance.
