Scott Mollen, Partner at Herrick, Feinstein LLP

UCC Sale—Court Denies Motion To Enjoin UCC Sale of Member and Equity Interest In an LLC—Objections as to Timing of the Sale During a Holiday Period Rejected—Size and Complexity of the Transaction Meant Potential Purchases Would Be Sophisticated and Well Counseled—Notice of Sale Preceded the Holiday Period—Mezzanine Loan Interest Is Not Interest in Real Property for Purpose of Demonstrating That Property Is Unique and Money Damages Would Not Suffice

A plaintiff sought to enjoin a defendant from moving forward with a UCC sale of a "member and equity interest" in an LLC. The dispute involved an office complex in Boston, Massachusetts, owned by a nonparty LLC through its affiliates. There are four loans on the property. There is a mortgage loan for the amount of $535 million and three "subordinate mezzanine loans."

Although the plaintiff attempted to refinance the loans, it defaulted on the subject loan on November 10, 2021. The following day, the defendant sent a notice pursuant to UCC-Art. 9 for the "sale of collateral, namely the one hundred percent equity interest in defendant corporation pursuant to a Pledge and Security Agreement executed when the defendant purchased the loan" in June 2021. The UCC sale was scheduled for Dec. 20, 2021. A third mezzanine lender also scheduled a UCC foreclosure sale. That sale was scheduled for the next day, Dec. 21, 2021.

The plaintiff tried to establish a likelihood of success on the merits by "demonstrating that defendant failed to satisfied §9-6.27(b) of the (UCC)." That provision requires that disposition of the collateral be made in a "commercially reasonable manner." That means that the disposition is done "in conformity with reasonable commercial practices among dealers in the type of property that was the subject of the disposition."