Uniform Commercial Code

OK, so you’re a sophisticated lending attorney in Metropolis who is comfortable with everything from aircraft financing to syndicated loans secured by casinos in Macau. Yet you feel a twinge of uncertainty when a business loan is to be secured by wine inventory made from grapes grown in both California and Washington. You know intuitively that anytime farmers, ranchers or food processors are in the mix, either as a borrower or a supplier to the borrower, the underwriting and documentation challenges are not uniform on a state-by-state basis, and are compounded by an overlay of federal laws designed to protect growers of perishable crops and providers of livestock. To get a reality check, you sometimes will secretly call your law school classmate who oddly returned to Smallville and now represents its one bank.
Continue Reading Farm Lending Pitfalls For Urban Lawyers

On January 17, 2014, California Governor Jerry Brown declared a “State of Emergency” in California due to the severity of drought conditions across the State.  Since then, the California drought continues to be severe and unprecedented in recent years, and is taking a pervasive toll on California residents, businesses, farm land, foliage and wildlife.  Despite recent rainfall, local water districts and the State have called for voluntary, and in some locales, mandatory reduction in consumption of water.  After considering the severe human toll, anyone doing business with an entity located in California (or other western states experiencing similar drought conditions) that requires water for any business purpose, particularly farmers in Northern and Central California where there are fewer alternative sources of water, must be concerned about inventory and the impact of the drought on its supply chain.  Can my California contract counterparty fulfill its obligations to produce sufficient quantities of produce, dairy products, steel, flowers, honey, etc., to meet my contract needs?  Waiting for a delivery that never arrives, is delayed or arrives in lower quantity or, worse yet, quality, is not a viable option.  The key is to be prepared to find an alternative supplier so that production goals can be timely met.  Successful navigation of these issues requires careful contract drafting and contemplation in advance of new agreements, and critical analysis of existing contracts.  This article highlights the pertinent legal mechanisms at work and options for your business.
Continue Reading Dry Times: How to Deal with the Impact of California’s Drought on Critical Commercial Agreements

Secured lenders often resort to non-judicial foreclosure sales of personal property upon a borrower’s default. Article 9, Part 6 of the Uniform Commercial Code requires that every aspect of such a sale must be commercially reasonable. However, the courts have historically provided little guidance as to what exactly constitutes a commercially reasonable sale. Fortunately, the Delaware Chancery Court recently issued a decision, entitled Edgewater Growth Capital Partners, L.P. v. H.I.G. Capital, Inc., C.A. No. 3601-CS (Del.Ch. Apr. 18, 2013), in which the court analyzed the meaning of this “commercial reasonableness” requirement and provided helpful guidance to borrowers and secured creditors alike.
Continue Reading Delaware Court Provides Critical Guidance as to the Commercial Reasonableness of a UCC Article 9 Foreclosure Sale