Prior to the onset of the COVID-19 pandemic, New York State courts regularly denied preliminary injunction motions seeking to enjoin lenders from pursuing foreclosure of the membership interests in property owning entities under the Uniform Commercial Code (UCC). Courts typically denied such motions on the ground that borrowers were unable to establish a reasonable likelihood of success on the merits of their claims, and that monetary damages were an adequate remedy for addressing any alleged lender misconduct.

However, New York State courts have issued multiple decisions granting preliminary injunctions enjoining UCC foreclosures during the pandemic, including in D2 Mark LLC v. Orei VI Investments LLC (Index No. 652259/2020) (Mark Hotel), Shelbourne BRF LLC v. SR 677 BWAY LLC, Index No. 652971/2020 (N.Y. Cnty. Sup. Ct.) (Shelbourne), GVS Portfolio 1B, LLC v. Teachers Insurance Annuity Association of America, Index No. 654095/2020 (N.Y. Cnty. Sup. Ct.). These decisions reflect a marked change in how courts addressed attempts to enjoin UCC foreclosures in connection with the COVID-19 pandemic.

The UCC provides that every aspect of a disposition of collateral, including, the method, manner, time, place and other terms of the sale, must be commercially reasonable. N.Y. U.C.C. §9-625. A borrower looking to enjoin a secured party from conducting a perceived "commercially unreasonable" UCC foreclosure sale must satisfy the well-established rule in New York governing the issuance of a preliminary injunction, which requires: (i) a likelihood of success on the merits (in this scenario, a likelihood that the proposed disposition will violate the UCC); (ii) irreparable injury in the absence of an injunction; and (iii) a balance of equities that favors an injunction. See Nobu Next Door, LLC v. Fine Arts Hous., Inc., 4 N.Y.3d 839, 840 (2005).