A Debtor by Any Other Name? Court Certifies Question to Florida Supreme Court

Florida law provides that a UCC-1 financing statement is “seriously misleading” if it does not include the debtor’s correct name, unless “a search of the records of the filing office under the debtor’s correct name, using the filing office’s standard search logic, if any, would disclose” the financing statement notwithstanding the misnomer. But how much of a search is required? The Eleventh Circuit certified that question to Florida’s Supreme Court in 1944 Beach Boulevard, LLC v. Live Oak Banking Co. (In re NRP Lease Holdings, LLC), 2021 U.S. App. LEXIS 36637 (11th Cir. Dec. 10, 2021).

The case began in bankruptcy court, where 1944 Beach Boulevard, LLC, as debtor-in-possession, filed a complaint to avoid a purported blanket lien on its assets by Live Oak Banking Company. Live Oak had filed UCC-1 financing statements with the Florida Secured Transaction Registry, but the statements misidentified the debtor as “1944 Beach Blvd., LLC” instead of “1944 Beach Boulevard, LLC.” As a result, a search of the Registry using the name on the financing statement would bring up a page of 20 entries, but the debtor’s correct name was not among them. To find the debtor’s correct name, the searcher would have to click the “PREVIOUS” link to go to the immediately preceding 20 names on the Registry’s list. The bankruptcy court held that the misnomer on Live Oak’s financing statements was not “seriously misleading,” and that the statements were therefore effective, based on its finding that the search results from the Registry “appear[] to include more than the initial page displayed.” The district court affirmed.

On appeal, the Eleventh Circuit, in an opinion written by Judge Lagoa, noted that different bankruptcy courts have reached different conclusions about the scope of the term “search” as used in the relevant Florida statute. In light of that, and the importance of the issue to debtors and creditors, the court certified to the Florida Supreme Court the following questions:

(1) Is the “search of the records of the filing office under the debtor’s correct name, using the filling office’s standard search logic,” as provided for by Florida Statute § 679.5061(3), limited to or otherwise satisfied by the initial page of twenty names displayed to the user of the Registry’s search function?

(2) If not, does that search consist of all names in the filing office’s database, which the user can browse to using the command tabs displayed on the initial page?

(3) If the search consists of all names in the filing office’s database, are there any limitations on a user’s obligation to review the names and, if so, what factors should courts consider when determining whether a user has satisfied those obligations?

Posted by Valerie Sanders.

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