Commercial Law Podcasts Now Available Through CALI

Need to brush up on Secured Transactions and Payment Systems basics? Great news.  CALI (Computer Assisted Legal Instruction) is now offering podcasts on a variety of UCC topics.  The podcasts are available on the CALI website, through the Podcast app on most phones (using the Lawdibles channel) and even through Itunes (again Lawdibles). UCC topics include:

• Payment Systems Introduction Podcast
• Payment Systems: Being a Holder in Due Course: Personal Defenses Podcast
• Payment Systems: Being a Holder in Due Course: Real Defenses Podcast
• Payment Systems: Credit Cards Podcast
• Payment Systems: Debit Cards Podcast
• Payment Systems: Effect of the Instrument on the Underlying Obligation Podcast
• Payment Systems: Employer Responsibility Podcast
• Payment Systems: Fiduciary Duty and Liability of Representatives Podcast
• Payment Systems: Fraudulent Signatures, Alterations and Negligence Podcast
• Payment Systems: Holders Podcast
• Payment Systems: Imposters and Fictitious Payees Podcast
• Payment Systems: Indorsement Liability and Transfer and Presentment Warranties Podcast
• Payment Systems: Indorsements Podcast
• Payment Systems: Instruments Signed for Accommodation Podcast
• Payment Systems: Liability of the Parties on a Negotiable Instrument Podcast
• Payment Systems: Negotiable Instruments Vocabulary Podcast
• Payment Systems: Who Can Bring a Claim on a Negotiable Instrument Podcast
• Payment Systems: Who Can Enforce a Negotiable Instrument Podcast
• Payment Systems: Who is a Holder in Due Course Podcast
• Secured Transactions: Priority: Buyers v. Secured Parties Podcast
• Secured Transactions: After-Acquired Property and Future Advances Podcast
• Secured Transactions: Bankruptcy and the Automatic Stay Podcast
• Secured Transactions: Basics Podcast
• Secured Transactions: Debtors’ Names Podcast
• Secured Transactions: Fixtures Podcast
• Secured Transactions: Lapse, Continuation, and Termination of Security Interests Podcast
• Secured Transactions: Perfection of Security Interests Podcast
• Secured Transactions: Possession, Control, and Automatic Perfection Podcast
• Secured Transactions: Priority: Purchase Money Security Interests (PMSI) Podcast
• Secured Transactions: Priority: Sellers v. Secured Parties Podcast
• Secured Transactions: Proceeds and Related Concepts Podcast
• Secured Transactions: Repossession of Collateral Podcast
• Secured Transactions: Scope of Article 9 Podcast
• Secured Transactions: True and Disguised Leases Podcast

Enjoy!

JSM

What is in a Name? Revised Article 9's Treatment of Individual Debtor Names

While Article 9 of the UCC is one of the most recently amended articles of the UCC having just undergone revision in 2001 (the “2001 Revision”), the complexity of the code and changing practices in commerce have necessitated further revision. The ALI and ULC have now approved amendments which the states will now adopt toward an effectiveness date of July 1, 2013 (the Revision). All is well on the adoption front, but what does this really mean on key issues? As I am teaching a Commercial Law Survey Spring 2012, I've started to think about what hurdles the the Revision will set up for our students and practicing attorneys.

One of the issues that led to the Revision was disagreement about how a creditor should best specify the name of the debtor on the financing statement, with states such as Texas passing non-uniform amendments to address the problems. See, e.g., TEX.. BUS. & COM. CODE ANN. § 9.503 (2011); TENN. CODE ANN. § 47-9-503 (2011). Section 9-503 generally provides that a financing statement is not seriously misleading if it lists the name of the debtor indicated on the public record or the debtor’s jurisdiction for organizations or simply the name of the individual debtor. The model form provided in section 9-521 added merely that this be the “exact full legal name.” While this might initially appear sufficient guidance, it became apparent that issues remained, such as the inclusion of trade names and how to identify an individual’s name where the individual is commonly known as more than one name. Creditors who incorrectly identified the debtor soon found that their financing statement was ineffective because it was seriously misleading. Quite simply, these name errors can be fatal to the creditor’s attempted filing of a security interest. See, e.g., Peoples Bank v. Bryan Bros. Cattle Co., 504 F.3d 549 (5th Cir. 2007)(Cornerstone Bank obtained a security interest in the cattle, but failed to file a financing statement in the legal name of the debtor, “Brooks L. Dickerson,” having instead named “Louie Dickerson” as the debtor on the financing statement.)

To alleviate this problem with respect to individuals, the rules of the Revision allow for two alternatives. Revision § 9-503(a)(4)-(5) (2011). Alternative “A” sets up a hierarchy for individual names which requires a creditor to use the name on the most recent driver’s license, if the debtor has one. In the event the debtor has no driver’s license, then the creditor can use the individual name or surname and first personal name. Alternative “B” allows the creditor more flexibility in listing the individual debtor’s name, allowing the creditor to identify the debtor on the financing statement by the individual name, the surname and personal name, or the name on the debtor’s most recent driver’s license. Under this alternative, no one name designation takes precedence. Comment 2(b) explains that when driver’s license is required, but contains an error, the creditor must still use the name on the license in full when it is required, despite the error. The challenge that creditors which operate in more than one state will now face with individuals is getting the rules correct such that if the state uses Alternative A, the creditor must use the driver’s license if the individual has one and should not rely on the other manners in which names might be equally acceptable in Alternative B states.

Irrespective of Alternatives A or B for individuals, the use of the most recent driver’s license in the state where the financing statement was filed does not eliminate the potential pitfalls for creditors. First, has the debtor indeed provided the most recent driver’s license, rather than a replaced or expired one? Will creditors be able to search the driver’s license records to make sure the name is the most recent? Second, the name on the driver’s license may not in fact even be the debtor’s correct name, such as errors on the driver’s records or in the case of persons who change their name for marriage or other reasons. This may lead to confusion when later creditors search records. Third, driver’s license names are changed from time to time by the individual. Tying debt records to driving status may not be the most hassle free solution for creditors. Will creditors have to inquire into the marital status of women frequently to guard against name changes that either have or have not been made in driving records? For individuals that don’t have driving records, the Revision has not really changed the rules to address nicknames and similar issues.

When it comes to individuals, it seems that Alternative A and B would pose a potential pitfall for creditors operating in more than one state, unless the creditor simply makes it a practice to use a driver’s license in all instances. The challenges of ensuring that the creditor has the debtor’s correct drivers licenses may pose problems to ensuring a valid filing. Even under Alternative B, determining the debtor’s name and surname can pose difficulties, particularly with surnames comprised of multiple names. Creditors should not attempt to automatically rely on the name on a birth certificate, as the debtor may have changed names and foreign birth certificates sometimes contain different ordering of names. Moreover, filings for unincorporated business entities that are debtors will have the same issues as those for individuals. The pitfalls for individuals is heightened here as creditors will have to get the name correct (often the driver’s license of multiple individuals). Choosing the correct name for a financing statement is not a mechanical task. See, Revision 9-503 cmt. d.

Whether the Revision will ultimately alleviate a substantial amount of litigation in this area over time is uncertain, but the new rules will help resolve some outstanding issues regarding debtor names. Despite any criticisms of the Revision regarding debtor names, the rules at least give some further guidance that should eliminate some of the litigation in this area.

-JSM

Call for Papers: February 2010 Contracts Conference at UNLV

UNLV's William S. Boyd School of Law will host a two-day conference, February 26 & 27, 2010, designed to afford scholars and teachers at all experience levels (including those preparing to enter the academy and those whose primary teaching appointment is not in a law school) an opportunity to present/demonstrate and discuss (formally and informally) recently-published and accepted-but-not-yet-published scholarship, works-in-progress, as-yet-fully-formed ideas for scholarship, and pedagogical innovations, and to network with colleagues -- and potential collaborators or mentors -- from around the country and the rest of the (predominantly) common-law world.

Invitation: We invite paper, presentation, and panel proposals exploring any aspect of contract law, theory, and policy writ large (including, but not limited to, bankruptcy/insolvency, commercial law, consumer law, dispute resolution regimes, family law, insurance law, legal systems, and restitution, in addition to more traditional contract topics) from a behavioral, comparative, critical, doctrinal, economic, empirical, equitable, historical, institutional, interdisciplinary, jurisprudential, pedagogical, philosophical, policy-driven, or political perspective. We also solicit volunteers to serve as moderators or discussants for panels that are not "packaged deals."

The CFPs issued earlier this year for the AALS Section on Contracts' January annual meeting program on New Approaches to Teaching Contracts: A "Teach-In" and the AALS Section on Commercial and Related Consumer Law's January annual meeting program on The Principles of the Law of Software Contracts: A Phoenix Rising from the Ashes of Article 2B and UCITA? each yielded more excellent proposals than either section could accommodate in New Orleans. Both topics remain quite relevant, and I hope to assemble one or more panels on each that will continue the conversations begun in New Orleans. I am also working on the opening plenary, my UNLV colleague Jeff Stempel is organizing a panel on insurance contracts, and Wayne Barnes (Texas Wesleyan) is organizing a panel on comparative contract law and theory. Those efforts, if all bear fruit, still leave room for many more presenters, moderators, and discussants.

We will try to accommodate as many presenters, moderators, and discussants as possible. We particularly encourage junior scholars and those who work in non-U.S. legal systems to propose papers or panels and to volunteer to serve as a discussant or moderator. We also welcome anyone who wishes to attend the conference without presenting or serving as a discussant or moderator. The educational and networking benefits alone are worth the price of admission.

Publication: There is no publication requirement for conference participants, although experience suggests that individual papers and panels often find good homes. The Nevada Law Journal encourages participants to submit individual and panel papers and hopes to publish several works from the conference in upcoming issues.

Likely Attendees: In addition to me, Jeff Stempel, and Wayne Barnes (mentioned above), as of November 18, the following have committed to attend, or expressed a strong desire to attend: Eniola Akindemowo (Thomas Jefferson), Roy Anderson (SMU), Wayne Barnes, Dan Barnhizer (Michigan State), Charles Calleros (Arizona State), Hazel Glenn Beh (Hawaii), Barbara Bucholtz (Tulsa), Gerald Caplan (McGeorge), Miriam Cherry (McGeorge), Carol Chomsky (Minnesota), Karen Cross (John Marshall), Sidney DeLong (Seattle), Larry DiMatteo (Florida, Warrington College of Business), Jay Feinman (Rutgers-Camden), Marjorie Florestal (McGeorge), David A. Friedman (Willamette), Larry Garvin (Ohio State), Danielle Kie Hart (Southwestern), Nicholas Johnson (Fordham), Yong-Sung Jonathan Kang (U. of Washington), Tadas Klimas (Lithuania), Chuck Knapp (UC-Hastings), George Kuney (Tennessee), Peter Linzer (Houston), Charles Martin (Florida Coastal), Jennifer Martin (Oregon), Meredith Miller (Touro), Marcy Peek (Whittier), Joe Perillo (Fordham), Deborah Post (Touro), Michael Pratt (Queen's University/Ontario), Cheryl Preston (BYU), Scott Pryor (Regent), Val Ricks (South Texas), Caprice Roberts (West Virginia), Irma Russell (Tulsa), Adam Scales (Washington & Lee), Andrew Schwartz (Colorado), Sean Scott (Loyola-L.A.), Jeff Stempel, Otto Stockmeyer (Cooley), Howard Walthall (Cumberland), Jarrod Wong (Pacific), and Debbie Zalesne (CUNY). All this without a proper CFP until now. I expect attendance will be at least double this number.

Submitting a Proposal: If you would like to propose a presentation or panel, please e-mail a title, brief description, and any supporting materials by January 4, 2010 to keith.rowley@unlv.edu or snail-mail it to me at 4505 S. Maryland Pkwy., Box 451003, Las Vegas, NV 89154-1003. If you would like to discuss or moderate, please let me know your interests and availability by January 4. We will evaluate proposals as they come in and will consider on a space-available basis any we receive after January 4.

Preliminary Schedule: The conference program will begin both Friday and Saturday morning no later than 9:00 a.m. (grazing and conversational opportunities will start earlier) and will run until 5:00 or 5:30 p.m. each day.

Accommodations: The Hyatt Place next to campus (4520 Paradise Road, Las Vegas, NV 89169) is holding a block of rooms at the rate of $118.00 per night (plus tax). The official deadline for hotel registration at the conference rate is January 25, 2010. However, I encourage you to book sooner, as we blocked a limited number of rooms (due to the The Hyatt Place requiring the law school to guarantee at least 80% occupancy and pay the difference if actual registration was less than we anticipate) and will be more likely to get the Hyatt Place to make the conference rate available to additional attendees if early registration is robust.

To book a conference-rate room at The Hyatt Place, go to http://www.lasvegas.place.hyatt.com/; choose a check-in date no earlier than February 25, 2010 and a check-out date no later than February 28, 2010; enter group code G-BOYD for Boyd School of Law Contracts Conference in the box labeled Group/Corporate #; hit the check availability button; if a room is available, verify that your group name is specified next to rate details and if everything matches, then hit book. If you have trouble booking online, or if you prefer to reserve a room over the phone, please call the hotel at (702) 369-3366.

Transportation: For attendees who stay at the conference hotel, The Hyatt Place provides airport shuttle service and we'll provide transportation between the Hyatt Place and the law school for those not wanting to walk the mile or so. Attendees who prefer to stay on The Strip or elsewhere are responsible for their own transportation.

Sustenance: Your registration fee will cover the costs of lunches both days and a reception and dinner Friday evening, as well as coffee, fruit, and baked goods each morning and cold beverage service and morsels each afternoon. The Hyatt Place also offers a complimentary continental breakfast, which might be particularly attractive to those whose body clocks are on Eastern or Central Time.

Registration: We're still finalizing the conference registration fee and process. The registration fee will be no more than $250. This is higher than past spring contracts conferences. Fortunately, the lower conference hotel rate than at prior conferences, free airport transportation for those staying at the conference hotel, and the relative ease and low cost of flying into and out of Las Vegas's McCarran Airport (which is less than two miles from the hotel) compared to the last three venues, will offset the higher registration fee.

The Wacky World of Investment Holding/Transfer

Photo by FaceMePLS

I've been struggling with the "new" rules for perfecting security interests in investment property for several years now, and the latest edition of my secured trans text deepened my confusion. Luckily, I found a couple of great articles that confirmed, I believe, that I had properly understood the inordinately complex world of establishing "control" over certificated, uncertificated, and most importatly, indirectly held securities (securities entitlements in securities accounts). Readers of this blog in particular might appreciate David Donald's advocacy piece here (and his descriptive piece here, in German), as well as the excellent introductory notes to the 1994 revisions of Article 8 of the U.C.C., all of which are invaluable navigational aids. If you are having trouble with endorsements, re-registration, and control agreements, check out these fine resources.

Oops!

Law.com reports that Bank of America and Citibank stand to lose in excess of $51 million because Bank of America, acting on its own behalf and as Citibank's agent, terminated both banks' financing statements against the former law firm of Heller Ehrman in August 2007, some 14 months before Heller Ehrman filed bankruptcy. As we all know, UCC § 9-317(a)(2) and 11 U.S.C. § 544(a)(1), collectively, generally give a bankruptcy trustee (or a debtor-in-possession) priority over any security interests that were unperfected when the debtor filed bankruptcy. That's bad enough news for Bank of America's and Citibank's apparently unperfected-at-filing security interests. (Bank of America and Citibank have argued that an October 2008 "correction" revived their perfection well before Heller Ehrman filed bankruptcy and had the effect of making the banks perfected when Heller Ehrman paid them. Heller Ehrman counters that the "correction" did not cure the banks' lapse in perfection.)

But, wait, it appears to get worse. Less than 90 days before Heller Ehrman filed bankruptcy, and well after Bank of America terminated its and Citibank's filings, Heller Ehrman paid the banks $51 million of the firm's outstanding debt. Under 11 U.S.C. § 547(b), the payment looks like an avoidable preference, which the banks may have to refund to the bankruptcy estate.

With Pillsbury Winthrop Shaw Pittman on one side and Greenberg Traurig on the other, this dispute figures to be hotly contested and should be interesting to follow.

(Hat tip to Scott Burnham.)

The Joy of Comparative Commercial Law

Photo by thebusybrain
Thanks so much to the Commercial Law blog folks for inviting me to be their guest for a while! I am thrilled to have a chance to discuss topics outside my primary area of scholarship, though I am delighted to have been granted license to talk about bankruptcy and comparative insolvency law, as well. In my first post, then, I thought I'd mention something at the intersection of commercial law stricto sensu, bankruptcy, and my love for all things comparative law.

In the course of researching for the book I'm co-authoring on international bankruptcy, I got to explore the different approaches to the treatment of secured creditors in bankruptcy around the world. I have to admit that I was surprised to find that in many countries, when the rubber really meets the road (i.e., in the borrower's bankruptcy), secured creditors are not the king of the hill, as in U.S. law. Quite a few bankruptcy laws subordinate secured claims to (1) administrative claims arising in the reorganization/liquidation process (e.g., fees for trustees, lawyers, appraisers, auctioneers, etc.), (2) taxes and other public debts, (3) employee wage and benefit claims, and even certain kinds of other unsecured claims (in the Czech Republic before January of this year, secured creditors enjoyed priority in insolvency cases in only 70% of the value of their collateral, with the remaining 30% reserved for unsecured creditors!). One of my favorite curious subordination laws is section 134(4) of the new Russian Bankruptcy Law, which subordinates secured claims to two kinds of unsecured claims if they arose before conclusion of the security agreement: (1) compensatory tort claims for personal injury and associated "moral harm" (emotional damages) and (2) claims for compensation for the use of intellectual property. One wonders whether the unique IP exception was designed to buttress Russia's bid to join WIPO or some other international IP or trade pact.

Along similar lines, I sheepishly admit that after teaching Secured Transactions for years, I was unaware of the substantial differences between "fixed" and "floating" charges (consensual liens) in English law. As a gross over-generalization, a "floating" charge is a blanket lien, generally on all of an enterprise's property, which "crystallizes" into a "fixed" charge and divests the debtor of unfettered control over the property upon default--for a more detailed exploration of the not-altogether-clear distinction between fixed and floating charges, see here. Floating charges are often subordinated to a variety of different unsecured claims in places like England, Australia, Bermuda, and the Cayman Islands, and in England, floating charges created after 15 September 2003 are subordinated to general unsecured claims as to a percentage of the collateral proceeds, capped at £600,000 [this clause has been edited--see comments]. Indeed, in Sweden, the equivalent of floating charges (företagshypotek on immovables and företagsinteckning on movables) created after 1 January 2004 are limited to 55% of the value of the debtor-company’s unencumbered assets (with the remaining value reserved for unsecured claims).

These kinds of significant limitations on secured creditors' rights are anathema in the United States, and given my U.S. training, I had been a strident "secured creditors über alles"-type guy. Having been exposed to these very different approaches from countries that I regard as populated by reasonable-minded, intelligent, generally commerce-friendly people, however, really opened my mind and made me think twice. For more of this kind of mind-opening study, take a look at the proceedings from a recent World Bank conference on secured transactions and insolvency law reform here.

We have a lot to learn from our friends around the world, and it's so darned FUN to travel (at least mentally) to exotic places with unfamiliar commercial and insolvency law systems. I hope to share some of my joy in the travel-and-learning process during my visit. Thanks again for having me!

Testing Secured Transactions Part II

My exams are all taken and graded now, so I wanted to report back my observations from my earlier post on Testing Secured Transactions. I ended up using a three hour examination with 30 true/false questions and five short answer essays. I actually offered up six short answer essays with the students getting to pick five to answer. The true false questions included all the basics of creating and perfecting security interests and priority. Topics on the short answer essays included: double debtors; new debtors; powers of the bankruptcy trustee; PMSI’s and general collateral descriptions in preexisting financing statements; and priority, proceeds, accounts and chattel paper. I must have had old-time television on my mind, as many of the hypos involved Gilligan's Island, Green Acres and Spiderman. Oh, and a little bit of politics thrown in too. After all, it was the "season" in Pennsylvania as I was drafting this exam.

The exam certainly was hard and rigorous from a time perspective. That said, I am a big believer in law school examinations serving the dual purpose of testing and teaching. I would certainly use this format of examination again. The true false gave me coverage of differing fact patterns, as did the short answer. The students had many situations to contend with, but also had to draft some short essays (typically about a page each) and cite to the appropriate code provisions. As for student performance, with a few exceptions, the students tended to do about the same on each part of the examination. The students who did well on the true/false mostly did about the same on the short answer essay.

Overall, I was also pleased with the quality of the answers given by the students. The rules of double debtors and new debtors probably gave the students the most trouble, but this did not surprise me. I find that the rules of 9-325 and 9-326 are hard for students to grasp (even with the examples in the code). But I did give the students a hint in the review session that these rules might appear on the examination. The next time I teach Secured Transactions, I will be mindful of my approach on these issues to see if there are better ways to make this easier for the students. With this exception, though, I am confident that the students do understand the basics of Article 9.

Most of my students this year will be taking the bar examination in Pennsylvania where Article 9 is no longer on the bar exam. But as these issues come up routinely in practice, the examinations give me confidence that they will be able to solve these issues when they arise. I would use this format of examination again, though it was a close call to pair multiple-choice with a long format traditional essay. I hope that you all had a good semester and have your grading done (or at least almost).

Testing Secured Transactions

When I went to Vanderbilt law school some years ago, I had Professor Margaret Howard for Secured Transactions. Professor Howard gave us a multiple choice final examination that I recall had elements of short answer format as well. When I’ve taught Secured Transactions in the past, I’ve nearly always given the traditional long format essay exam. But, I’ve not taught Secured Transactions in a few years, so I am revisiting this as I am thinking about this Spring’s rapidly approaching exam. I am leaning toward using a short answer examination for Secured Transactions.

Of course, what do lawyers really need to know about U.C.C. Article 9? Not that they haven’t been taught a great deal in class, but testing forces professors and students alike to give thought to focusing on key issues. It would seem at the least that students must understand the basics of classifying collateral, creating a security interest, perfecting the security interest and sorting out priorities. But then, there are plenty of other good things to learn as well. Should students really know how the “rebuttable presumption” test works for non-complying sales? What should they know about the treatment of inventory that is leased to a lessee where the lessor’s lender has a security interest in the collateral?

Lynn Daggett’s recent article All of the Above: Computerized Exam Scoring of Mulitple Choice Items Helps To: (A) Show How Exam Items Worked Technically, (B) Maximize Exam Fairness, (C) Justly Assign Letter Grades, and (D) Provide Feedback on Student Learning in the recent volume of the Journal of Legal Education makes the pitch for multiple choice generally, but not in the context of commercial law. The most persuasive argument is the ability to have data showing areas where students either mastered the material (or didn’t). Kenney Hegland’s 2006 article On Essay Exams also in the Journal of Legal Education takes the opposite stance. Hegland makes a pretty good case that exams not only evaluate, but also teach. This, of course, is better done with essay format.

The merits of both Daggett’s and Hegland’s arguments are easy to see, but are there reasons to prefer one over the other for commercial law? With the breadth of code provisions, it is tempting to use multiple choice questions in commercial law. In fact, I have used a partial multiple choice format when teaching Sales. But even in this class, I share Hegland’s desire to teach and a general commitment to having students carefully work analysis. The breadth of issues with Secured Transactions would make it easy to weave a single long fact pattern of a transaction in its entirety from the creation of the security interest to default and repossession by a lender. There would certainly be plenty for all students to write about in such a case. But, I find myself drawn to a format that might use the same transaction in a format that breaks it down to shorter 20-30 minute segments. This approach, I believe, would require students that might otherwise skip over difficult code issues to have to take them up because they are set out as separate grading items. There is also a greater potential for using variations on the fact patterns with this format, which is especially helpful for drawing out code nuances. Like Daggett, I like knowing which areas of Article 9 the students had more difficulty with on the examination. But, I am not quite willing to commit to giving the students a pass on explaining their analysis.

For any of you also mulling this over, several other articles that you might want to look at (though not specifically about commercial law) are:

Steven Friedland, A Critical Inquiry into the Traditional Uses of Law School Evaluation, 23 Pace L. Rev. 147, 174-79 (2002);

Linda R. Crane, Grading Law School Examinations: Making a Case for Objective Exams to Cure What Ails “Objectified” Exams, 34 New. Eng. L. Rev. 785 (2000);

Marcella David, A Funny Thing Happened on the Way to the Multiple-Choice Exam: Or, The Schoolroom Lessons from Bush v. Gore, 51 J. Legal Educ. 1 (2001);

Steve Sheppard, An Informal History of How Law Schools Evaluate Students, With a Predictable Emphasis on Law School Final Exams, 65 UMKC L.Rev. 657, 665-88 (1997).

What's In a Name?

On March 13, 2008, the Nebraska Legislature passed LB 851 and it is now awaiting the Governor’s signature. If signed, the new law will take effect three months after the legislature adjourns (the legislature is currently slated to adjourn on April 17, 2008) and will have a significant impact for those who conduct UCC searches on individual debtor names in the state.

The bill amends § 9-506(c) so that a financing statement is sufficient for an individual name if a search on just the correct last name of the individual would disclose the record. The effect of this legislation will be to make the first and middle names of individuals irrelevant to the efficacy of a financing statement. That in turn will increase the due diligence burden for searchers. In short, searchers will have to review every financing statement that provides the same last name as the individual name searched. This could be a large task.

For example, a UCC search of the individual last name “Johnson” on the Nebraska Secretary of State’s web site produces 2671 unique active records. For a searcher interested in the property of any one of them, each of those filings would have to be reviewed. This would seem to significantly add to the cost associated with using the filing system, something that would seem undesirable in this time of tight credit.

The problems associated with filing and searching against individual debtors has frequently been the subject of long trains of postings on the UCC listserv. Texas has already enacted a non-uniform rule to deal with the preceived problem and now Nebraska is poised to adopt a different approach. The ALI and NCCUSL are in the process of establishing an Article 9 Review Committee to discuss issues that have arisen and formulate proposals (but not to do actual drafting). I hope the remaining 48 states refrain from adopting any more non-uniform approaches -- especially not Nebraska's approach -- to this issue until that Committee has the opportunity to address the matter.