In its current form, the Uniform Commercial Code (“UCC”) does little to accommodate emerging technologies such as cryptocurrencies and non-fungible tokens.  In efforts to modernize and adapt the Uniform Commercial Code to newer technologies, the Uniform Law Commission (the “ULC”) and the American Law Institute have jointly sponsored the drafting of proposed extensive amendments to

Last October we highlighted an important ruling issued in September 2019 by the Seventh Circuit in the bankruptcy proceeding of In re I80 Equipment, LLC.  The Circuit Court in that case reversed a decision from the lower bankruptcy court and held that, under Article 9 of the UCC, a financing statement sufficiently indicates collateral even though it contains no actual collateral description but rather incorporates a collateral description by reference to an unattached security agreement. In re I80 Equip., LLC, 938 F.3d 866, 871-72 (7th Cir. 2019).  We noted that this decision put the Seventh Circuit directly at odds with the First Circuit, which ruled to the contrary in January 2019 in the bankruptcy proceeding for Puerto Rico (In re Financial Oversight & Management Board).
Continue Reading Bankruptcy trustee appeals Seventh Circuit’s ruling on sufficiency of UCC collateral description to US Supreme Court

In a surprising development, on September 11, 2019 the Seventh Circuit Court of Appeals issued a ruling on appeal reversing a lower bankruptcy court decision and found that a UCC financing statement that contained no collateral information whatsoever, but simply cross-referenced a security agreement, sufficiently “indicated” the collateral for purposes of UCC Article 9. In so doing, it put itself directly at odds with a January 2019 decision by the U.S. Court of Appeals for the First Circuit (In re Financial Oversight & Management Board)” in connection with the insolvency proceeding for Puerto Rico.
Continue Reading Seventh Circuit issues surprising ruling on sufficiency of UCC collateral description

Buying and selling receivables, the obligor of which is the United States government, requires consideration of the Federal Assignment of Claims Act (“FACA”).  As is the case with non-government account debtors, the federal government, in its capacity as an obligor, has the ability (with certain limited exceptions) to set off contractual payments owed by it to a seller of the right to receive such payments, against amounts payable to it by such seller for both (x) damages and related payments caused by such seller’s failure to perform under the applicable contract and (y) any other amounts owing to the government by such seller (including federal tax liability).  In the case of non-government obligors, under the terms of the Uniform Commercial Code, a purchaser of the right to receive a contractual payment owing by such obligor may, generally, limit or cut-off the applicable set off rights of the related obligor, by providing a somewhat simple notice to such obligor that the seller has assigned its right to receive such payments.  In order for a purchaser to limit the set off rights of the federal government, however, the purchaser must comply with the more complicated requirements of FACA.
Continue Reading Sale or assignment of US government receivables – FACA considerations

Well … a lot. But one that comes across our desks far too often is: “I didn’t realize you need to file a UCC financing statement to perfect an outright sale of accounts receivable.” So as to not bury the lede: you should always file a UCC financing statement to perfect the sale of accounts. Now there is an narrow exception and maybe in a particular transaction there may be an eyes-wide-open reason that someone would choose not to file, but Article 9 of the UCC is clear. So clear in fact that official comment 4 to UCC 9-309 simply says: “Any person who regularly takes assignments of any debtor’s accounts or payment intangibles should file.” I generally recommend staying on-sides with a statue’s drafters.
Continue Reading So, first up, what is easy that you can really mess up?