May 14, 2020

Security Interests

Security Interests

Legal Opinions in Corporate Transactions: Opinions Relating to Security Interests in Personal Property
      Scott FitzGibbon and Donald W. Glazer, 44(3): 655–92 (May 1989)
This Article recommends an approach to drafting a legal opinion on a security interest in personal property. It also suggests a standard interpretation for opinions on secured transactions and discusses the work required to support them.

Postpetition Security Interests Under the Bankruptcy Code
      David Gray Carlson, 48(2): 483–533 (Feb. 1993)
Section 364(c) and (d) of the Bankruptcy Code provides for the creation of security interests in real and personal property under federal law. This Article, discusses the quality and nature of these federal security interests, their remarkable immunity from reversal on appeal, and the ability of postpetition lenders to obtain preferences over other creditors through "cross- collateralization" clauses and the like.

Special Report by the TriBar Opinion committee: U.C.C. Security Interest Opinions
      TriBar Opinion committee, 49(1): 359–402 (Nov. 1993)
Beginning with Legal Opinions to Third Parties: An Easier Path , 34 BUS. LAW. 1891 (1979), the TriBar Opinion committee has produced a variety of commentaries on third-party opinion issues, all of which have appeared in The Business Lawyer. This Report continues in the TriBar tradition of explaining theory and providing practical advice to opinion givers and counsel for opinion recipients on the preparation, meaning, and scope of opinion letters. The focus of this Report is U.C.C. security interest opinions, a subject TriBar has not previously addressed. It is prompted by the observed tendency of practitioners in this field to render increasingly prolix and complex opinion letters. It is intended to promote a better understanding of the issues to the end that security interest opinions will be less arduous to negotiate, more economic to prepare, and easier to interpret. To provide a context in which the theory of the commentary and the practical requirements of the practice come together, the Report appends an illustrative security interest opinion.

Collateralizing Nonassignable Contracts, Licenses, and Permits: Half a Loaf Is Better than No Loaf
      Timothy J. Boyce, 52(2): 559–75 (Feb. 1997)
The issue of whether, and to what extent, to recognize a security interest in nonassignable contracts, permits, and licenses has long vexed lenders, borrowers, and the grantors of such licenses and permits. This Article analyzes case law, especially in the context of Federal Communications Commission broadcast licenses, as well as proposed revisions to the U.C.C. to suggest that an acceptable compromise position can be reached that protects both the core interests of lenders in adequately collateralizing their loans and of grantors of such licenses and permits in restricting those with whom they deal.

The Overlooked Corporate Finance Problems of a Microsoft Breakup
      Lucian Arye Bebchuk and David I. Walker, 56(2): 459 (Feb 2001)
This Article identifies problems with the ordered breakup of Microsoft that appear to have been completely overlooked by the government, the judge, and the commentators. The breakup order prohibits Bill Gates and other large Microsoft shareholders from owning shares in both of the companies that would result from the separation. Given this prohibition, this Article shows dividing the securities in the resultant companies among the shareholders is not as straightforward as the government has suggested. Any method of distributing the securities that would comply with this mandate would either (i) impose a significant financial penalty on Microsoft's large shareholders that is not contemplated by the order or (ii) create a risk of a substantial transfer of value between Microsoft's shareholders. In addition to identifying the difficulties and costs involved in the two distribution methods that would comply with the cross-shareholding prohibition, this Article examines how the breakup order could be refined to reduce these difficulties and costs. The problems identified should be addressed if a breakup is ultimately to be pursued and should be taken into account in making the basic decision of whether to break up Microsoft at all.

Framework for Control over Electronic Chattel PaperÂ-Compliance with UCC § 9–105
      Working Group on Transferability of Electronic Financial Assets, a Joint Working Group of the committee on Cyberspace Law and the committee on the Uniform Commercial Code of the ABA Section of Business Law and The Open Group Security Forum, 61(2):721—744 (February 2006)

Initial Report of the Joint Task Force on Deposit Accounts Control Agreements
      Joint Task Force on Deposit Account Control Agreements, ABA Section of Business Law, 61(2):745—796 (February 2006)

Beyond the Basics: Seventy-five Defenses Securities Litigators Need to Know
      Jonathan Eisenberg, 62(4): 1281&–1394 (August 2007)
After questioning the value of securities class actions, which are largely unknown outside the United States, the author discusses 75 defenses that courts have used to dismiss securities claims. These defenses are typically raised at the motion to dismiss stage, and are important because securities class actions that survive motions to dismiss are usually settled rather than resolved on the merits. The article provides a template for analyzing the application of each defense to securities class action complaints, and then discusses each defense and references key authorities that practitioners can turn to for further analysis.

Seeking a Meaning for "Meaningful Residual Value" and the Reality of "Economic Realities"—An Alternative Roadmap for Distinguishing True Leases from Security Interests
      Robert W. Ihne, 62(4): 1439–1466 (August 2007)
This article examines (i) the statutory criteria provided in the Uniform Commercial Code for distinguishing between true leases of goods and security interests in such goods, and (ii) various concepts developed by courts and commentators for analyzing fact patterns not covered by the statute. The article concludes that each of these concepts, while helpful to some extent, falls short in certain respects. Employing some of the more helpful theoretical underpinnings of the statute and these concepts, the article proposes an alternative framework of analysis focusing on whether or not the lessee can be expected to exhaust the economic value of the goods.

Report of the Model First Lien/Second Lien Intercreditor Agreement Task Force
      committee on Commercial Finance, ABA Section of Business Law, 65(3): 809–884 (May 2010)

Article 9 of the UCC: Reconciling Fundamental Property Principles and Plain Language
     Thomas E. Plank; 68(2): 439-506 (February 2013) 
Article 9 of the Uniform Commercial Code, which governs (i) the grant of a security interest in personal property to secure payment or performance of an obligation—a “true security interest”—and (ii) the sale of receivables, incorporates the primary property law principle of nemo dat quod non habet—one cannot transfer an interest in property that one does not have—and its corollary —a transferee can receive what the transferor has and no more. For good policy reasons, however, Article 9 also enacts the innovative exception to nemo dat, the Filing Priority Principle codified in the “first-to-file-or-perfect rule,” that permits a secured party who first files a financing statement to obtain a superior security interest over a secured party who first obtains a security interest and would otherwise prevail under nemo dat. For true security interests, the plain language of Article 9 effectuates the policies of nemo dat and the Filing Priority Principle.

U.C.C. Article 9, Filing-Based Priority, and Fundamental Property Principles: A Reply to Professor Plank
     Steven L. Harris and Charles W. Mooney, Jr., 69(1): 79-92 (November 2013)
Uniform Commercial Code Article 9 generally follows the common law principle that one cannot give rights in property that one does not have (nemo dat quod non habet). In many circumstances, however, the priority rules under Article 9, including its rule awarding priority to the first security interest that is perfected or as to which a financing statement has been filed, trump nemo dat and enable a debtor to grant a senior security interest in property that the debtor previously had encumbered. In this article, Professors Steven Harris and Charles Mooney argue that, properly understood, the first-to-file-or-perfect rule confers upon a debtor the power to create a security interest in accounts and other rights to payment that the debtor has already sold and in which it retains no interest. In doing so, the authors take issue with Professor Thomas Plank, whose argument to the contrary appeared in the February 2013 issue of The Business Lawyer.

Task Force Introductory Report and Background Considerations Model Intellectual Property Security Agreement
     Model Intellectual Property Security Agreement Task Force, Commercial Finance committee and Uniform Commercial Code committee, ABA Business Law Section, 771(3): 849-932 (Summer 2016)

Securities on Blockchain and the Uniform Commercial Code
     Reade Ryan and Mayme Donohue; 73(1): 85-108 (Winter 2017/2018)
This article initially provides a high-level description of blockchain technology intended to be accessible to those without a technical background, and illustratively describes an existing blockchain system that already evidences securities issued and being traded. The article then sets forth and analyzes how Article 8 of the Uniform Commercial Code covers blockchain securities as “uncertificated securities.” Finally, the article provides guidance to corporate lawyers faced with giving a legal opinion relating to the issuance and sale of securities on a blockchain.