No Safe Harbor in Florida If Financing Statement Misnames the Debtor

As we reported here, the Eleventh Circuit recently certified to the Florida Supreme Court a series of questions about the consequences under Florida law of a misnamed debtor in a UCC-1 financing statement. Florida law provides that a financing statement is “seriously misleading” if it does not include the debtor’s correct name, but provides a safe harbor where “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. The Eleventh Circuit was asked to apply these provisions in a case that began in bankruptcy court, where the debtor-in-possession attempted to avoid a blanket lien on its assets because the financing statements identified the debtor as “1944 Beach Blvd., LLC” instead of its correct name, “1944 Beach Boulevard, LLC.” If the debtor’s correct name were searched, the financing statements would not appear on the first page of 20 search results, but would appear if the searcher hit “previous” to look at the preceding 20 results. The Eleventh Circuit certified to the Florida Supreme Court three questions relevant to its application of the statutory provisions.

The Florida Supreme Court did not reach those questions, however, because it “found dispositive a threshold issue that [the Eleventh Circuit] did not expressly address.” The safe harbor only applies, the Florida court held, where the filing office actually uses “a standard search logic,”—and Florida, the court concluded, does not. Consequently, the safe harbor did not apply to the statements filed with respect to 1944 Beach Boulevard, LLC—or, presumably, to any other financing statement filed in Florida. Accordingly, when the case returned to the Eleventh Circuit, the court held that the safe harbor did not apply; that the financing statements were “seriously misleading”; and that the creditor therefore failed to perfect its security interest. 1944 Beach Boulevard, LLC v. Live Oak Banking Co. (In re NRP Lease Holdings, LLC), 2022 U.S. App. LEXIS 27330 (11th Cir. Sept. 29, 2022).

Posted by Valerie Sanders.

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