Presenting a live 90-minute webinar with interactive Q&A Drafting Legal Opinions for Article 9 Security Interests: Navigating the Complexities and Avoiding Liability Understanding Scope and Limitations, Interests of Opinion Giver and Recipient, Applicability of Other States' Law WEDNESDAY, NOVEMBER 30, 2016 1pm Eastern 12pm Central 11am Mountain 10am Pacific Today s faculty features: Alan W. Beloff, Senior Counsel, Morgan, Lewis & Bockius, Boston Steven O. Weise, Partner, Proskauer Rose, Los Angeles The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10.
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Opinion letters in UCC Article 9 transactions Alan Beloff alan.beloff@morganlewis.com Steve Weise sweise@proskauer.com
Overview Lay of the land Sources of guidance on opinion letters Entity and contract opinions o Form part of the basis for UCC opinions UCC opinions o Attachment o Perfection o Priority (occasionally) 6
Role of customary practice Basis for: o Diligence o Meaning of words ALI Restatement of Law Governing Lawyers National Customary Practice Statement Statement of Opinion Practices Inappropriate requests 7
Sources of opinion letter law and customary practice ABA reports TriBar reports Many ABA, TriBar, state, and other reports available online (for free!): o http://apps.americanbar.org/busla w/tribar/ 8
Opinion basics Addressee Documents covered Materials reviewed Definitions o Collateral types o Who is secured party? 9
Covered law Opinion giver does not have to be licensed in each covered state o Question is competence Entity opinions o State of formation (usually) Power and authority o State of formation UCC attachment o Law governing security agreement UCC perfection o Location of debtor 10
Entity opinions Sources of guidance: o State bar corporate, LP, and LLC reports o TriBar II o TriBar LLC and partnership reports 11
Entity opinions Existence Good standing o Does not apply as a concept in all states or for all types of entities o Does not cover all states Just covers states where get certificate from the state for that entity Authorization No breach of listed contracts No litigation confirmation o Limited to knowledge 12
Contract opinions Sources: o State Bar Remedies Reports o ABA Guidelines o ABA Principles o TriBar II o TriBar Remedies Report 13
Contract opinions Remedies opinion - scope o Enforceability o Includes usury o Does not include UCC opinions, such as attachment of security interest (they are given separately) 14
Contracts opinions Exceptions to remedies opinion o Bankruptcy and equitable principles Does not exclude effect of absence of perfection if a perfection opinion is given o Other common exceptions 15
Contracts opinions Specific exceptions that often come up in lending transactions, including: o Prepayment premiums o Yield maintenance o Late charges o Contract provisions (especially remedies) rendered ineffective by UCC in certain cases 16
UCC opinions Sources o State Bar UCC reports o TriBar Article 9 Report o TriBar report on secondary sales of securities (UCC Article 8 issues) In part applicable to a security interest in investment property 17
Attachment Based on contract law opinions o Authority o Existence and enforceability of security agreement as a contract Are collateral and transaction subject to UCC? o UCC scope statement 18
Attachment Authentication of security agreement Grant language Description of collateral Assume rights in collateral (implicit) o Transferability of collateral o Delaware LLCs and LPs issues o IP issues Assume value has been given? 19
Perfection by filing Opinion on choice of law? o Usually not given o Diligence on type of entity o Assume location of chief executive office for organization debtors that are not registered organizations o OK to opine on non-licensed jurisdiction if have competence on particular issue Refer to law firm policies and state bar rules o Due diligence: determining state of formation, etc. 20
Perfection by filing Debtor name o Due diligence: organizational documents o Assume for individual Look at drivers license o Trusts Collateral indication Proper filing and tender of fee o Delaware recent changes in procedures and electronic filing 21
Perfection by filing fixtures Location of fixtures Check the right boxes on the fixture filing Special rules for transmitting utilities Assume (expressly or implicitly) property description and the like 22
Perfection by filing non-us debtors Cannot be a registered organization Look to place of chief executive office Assume status of filing system at that location 23
Perfection by possession Status of agent or bailee as such? o Determining actual physical possession by secured party, agent, or bailee o Due diligence: acknowledgement from bailee o Does debtor control the agent or bailee? 24
Perfection by control deposit and securities accounts Affirmative agreement of depositary bank/securities intermediary to follow instructions/entitlement orders of secured party without further consent of debtor Effect of debtor s right to give entitlement orders or instructions Due diligence: review of control agreement Non-uniform provisions in NY and Delaware 25
Perfection by control electronic chattel paper Is collateral electronic chattel paper? Choice of law Assumptions about electronic system Non-uniform provision in NY 26
Perfection by control transferable records Is collateral a transferable record? Choice of law Assumptions about electronic system 27
Priority - filing Filing priority? o Rare (rated loans only) When given, based on review of UCC report o Due diligence: accuracy of search report? 28
Priority: investment property/ instruments Control priority Possession priority Protected purchaser priority Holder-in-due-course priority o Note non-uniform Article 3 in NY Due diligence: o Assumptions re notice o Assumptions re possession, endorsement and the like 29
UCC remedies Waivers of debtor rights o See UCC 9-602, 9-603, 9-624 Notice provisions Foreclosure procedures Not manifestly unreasonable provisions Effect on guarantors 30