Let me begin my first letter as chair of the Commercial Finance Committee by thanking the current and past leadership of the Committee for their many contributions. In particular thanks to Chris Rockers, our immediate past chair, for his leadership of the Committee and his leadership of a new taskforce working to enhance the Section's offerings for commercial and corporate lawyers. I'd also like to recognize Don Rapson, one of the first members of the ComFin Committee and an outstanding commercial lawyer and educator. A remembrance of Don prepared by fellow members of the ComFin and UCC Committees reflects how much Don and his contributions will be missed.

During and since the 2007 Annual Meeting in August, the ComFin Committee has had a full schedule of programs and projects. I'd like to highlight our current projects and encourage you to participate in them.


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Although there are no longer any drafting committees working on revisions to the Uniform Commercial Code, the UCC Committee remains active in a variety of ways. In addition to planning CLE programming for the Spring Meeting of the Business Law Section, Committee members are involved in a variety of activities designed to provide timely and useful information to the practicing bar and ensure that commercial transactions can proceed smoothly. What follows is a brief description of some of the most recently inaugurated projects. This description also serves as a call for assistance; anyone interested in becoming involved should contact the person identified.


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The Blue Hills decision covered a broad array of borrower/guarantor defenses to loan and guaranty enforcement. Not only did the court reject many of them, but it showed a willingness to permit acceleration without notice, and to use violations of the separateness covenants as a basis to support the acceleration. Equally important, the court found the guarantors liable for the full amount of the loan, not just for damages "caused" by the breach of the covenant. Blue Hills may be the first in many cases in which borrowers seek to defeat loan covenants by arguing "bad faith" and defects in the notice and cure. Because Blue Hills requires a borrower to comply strictly with the terms of the mortgage, it represents an important case for the lending community.


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As an attorney who advises law firms and lawyers on ethics, I frequently hear complaints from transactional lawyers that the ethics rules appear to have been written by litigators and are ill-suited to the realities of transactional practice. For many, the ethics rules concerning conflicts of interest seem particularly geared towards litigation. But with some basic background and a few practice tips, transactional attorneys can avoid the pitfalls of the conflicts rules.


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In its legislative session ended June 30, 2007, the Delaware General Assembly enacted amendments to the Delaware Limited Liability Company Act, 6 Del. C. § 18-101 et seq. (the "DLLC Act"), the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. § 17-101 et seq. (the "DLP Act"), and Articles 8 and 9 of the Uniform Commercial Code as in effect in the State of Delaware, 6 Del. C. § 1-101 et seq. (respectively, "Delaware Article 8" and "Delaware Article 9"). The amendments to the DLLC Act and the DLP Act took effect on August 1, 2007; the amendments to Delaware Article 8 and Delaware Article 9 took effect upon enactment into law on July 5, 2007.


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The growing wine industry and the legal and regulatory issues that confront it was the topic when the Agricultural and Agri-Business Financing Subcommittee met in October in conjunction with the American Agricultural Law Association in San Diego, CA. Jay M. Behmke, a partner at the Carle, Mackie, Power & Ross law firm, and Lindsay Wurlitzer, Senior Vice President of American AgCredit, were the featured speakers. Their presentations included the historical growth and projected future growth of the industry, issues in wine labeling, and state-law constraints relating to distribution of wine products.

The next meeting of the subcommittee is in Dallas, at the Spring section meeting. The topics for that meeting will be announced later, but ideas from ABA members are always welcome.

We hope you can join us in Dallas for the next ABA Spring Meeting (April 10-12). Our topic will most likely focus on issues faced by hedge funds and private equity firms lending to new and distressed credits, and will look at regulatory, tax, contractual, market changes and other considerations.

Our last spring meeting topic was "Hedge Funds in Chapter 11 Cases", which was presented by a panel lead by the new Vice-Chair of our Committee, Shannon Lowry Nagle. Shannon is a partner in the New York office of O’Melveny and Myers and specializes in financial restructuring and bankruptcy.

We also met at the National Conference of Bankruptcy Judges in November, where we discussed claims trading in bankruptcy, including issues negotiated between a buyer and a seller, and the new Enron decision in which the appellate court did not allow equitable subordination of a lender's claim to extend to third parties who bought the lender's claims. Shannon also lead that discussion, which was followed by an update from Tampa, Florida bankruptcy lawyer, Bill Zewadski, on how debtors residing in Florida can utilize the Florida homestead exemption, which is unlimited in amount, following the Bankruptcy Reform Act’s amendments to Section 522(b)(3) of the Bankruptcy Code (which impact the amount a debtor can claim as a homestead exemption).

As the newly appointed chair of this Subcommittee, it is my pleasure to take this opportunity to advise of the Subcommittee’s Mission Statement. It is: "The mission of the Cross-Border and Trade Financing Subcommittee is to have a forum for the promotion of understanding existing legislation, legislative developments and legal practices regarding secured and unsecured lending and trade finance in relevant foreign jurisdictions and to facilitate an awareness among counsel on how such laws and legal practises impact the participation of domestic lenders in such jurisdictions."

As you may know, the Cross-Border and Trade Financing Subcommittee is a sister subcommittee to the UCC International Commercial Law Subcommittee and it will be the approach taken by this Subcommittee that where possible and appropriate our meetings will be "joint efforts" with the UCC International Commercial Law Subcommittee.

At the upcoming Spring meeting, there will be a CLE program on UNCITRAL and other international projects in the commercial law and insolvency area. The Cross Border and Trade Financing Subcommittee will be a co-sponsor of this CLE program along with the Business Bankruptcy Committee and the UCC International Commercial Law Subcommittee.

The Subcommittee is also looking at the possibility of having a meeting in Europe during the late Spring which, if scheduled, will take place in lieu of the Spring meeting in Dallas in April 2008. If this scheduling change occurs, the appropriate communication will be made to all members of the Subcommittee well in advance of the new scheduled meeting date.

For the Spring meeting in Dallas, the CLE program co sponsored by this Subcommittee is scheduled for Friday, April 11, 2008 from 8:00 a.m. to 10:00 a.m. A thirty minute meeting of the Subcommittee will follow immediately after the CLE program.

At the Annual Meeting in San Francisco, the Intellectual Property Subcommittee hosted a presentation by three speakers - James Gatto, a partner at Pillsbury Winthrop, Shaw Pittman; Sean Kane, a partner at Drakeford & Kane LLC; and Don McGowan, in-house counsel at Microsoft in charge of Games Studio division. James and Sean discussed legal issues relating to Second Life and other virtual worlds. Don discussed the development and financing of computer games. Links to the materials from the program are available at the Subcommittee's ABA webpage.

The Subcommittee plans to hold a meeting at the ABA Business Law Section Spring Meeting in Dallas and requests that suggested topics for that meeting, as well as any other items of interest or proposed projects relating to IP financing, be sent to the Chair, Matt Kavanaugh, at mkavanaugh@buchalter.com and to the Vice-Chair, John Murdock, at jmurdock@boultcummings.com.

The Lender Liability Subcommittee is in the process of planning a program for the Spring Meeting on recent cases involving claims against lenders. Additional details on the program will be available in the next issue. If you are aware of recent cases or would like to participate in the program, please contact us. We hope to see you at the Spring Meeting.

"'Applicable Other Law' -- ERISA, Sarbanes-Oxley and the Patriot Act in Loan Documentation" was our topic when the Loan Documentation Subcommittee met in August at the ABA Annual Meeting. Jeremy Friedberg was joined by expert panelists Kurt Lawson and David Mittleman to explore the impact of "other" laws (ERISA, Sarbanes-Oxley and the Patriot Act) on commercial loan documentation and the basic issues about which loan documentation counsel needs to be aware.

Bobbi Acord, Parker, Hudson, Rainer & Dobbs LLP, and Scott Lessne, CapitalSource Finance LLC, are the new co-vice chairs of the Loan Documentation Subcommittee. Please welcome them at our next meeting in Dallas, Spring 2008. The topics for that meeting will be announced soon; please submit any ideas for programs you would like to see.

The Loan Workout Subcommittee has new and energetic leadership. Steven B. Soll, a Member at the Firm of Otterbourg, Steindler, Houston & Rosen, P.C. and Cathy L. Reece, a Member at the Firm of Fennemore Craig, P.C. have been appointed Chair and Vice-Chair of the Subcommittee. Steve, Cathy and John R. Clemency, a Partner at Greenberg Traurig, LLC presented a panel at the Fall Commercial Finance Meeting in Phoenix entitled: On the Downturn: Trends and Issues in Loan-to-Own, Workouts and Foreclosures on Equity Interests. Each panelist prepared written material and a PowerPoint presentation on their respective topic. If you would like to obtain a copy of the written materials or PowerPoint presentation, please contact Steve Soll. The Subcommittee intends to present a panel presentation at our April, 2008 subcommittee meeting in Dallas. As we prepare for this meeting, we welcome suggestions for program topics, as well as volunteers for the panel.

The Real Estate Financing Subcommittee started this year with a bang, making a presentation at the fall Commercial Finance meeting entitled "Avoiding Jail, Disbarment and Other Bad Consequences: What You Need to Know About Real Estate Collateral." Although having dirt lawyers at the CFA seems a bit out of the ordinary, since many financings include some aspect of real estate, we really did fit in quite well. Our subcommittee vice-chair Ed Lester moderated a distinguished panel including Ray Carpenter from Holland & Knight (a state and federal tax law guru), John Hoag from Stewart Title (an undisputed genius on title insurance), Kevin Napper from Carlton Fields (a truly wise man on issues of white collar criminal law) and Norm Powell from Young Conaway Stargatt & Taylor (frequent newsletter contributor and all-knowing on matters of unauthorized practice of law and ethics violations). Our only regret was that the short time allocated to the program was insufficient to do the topic justice. Accordingly, we plan to invite back our panel members to our April, 2008 subcommittee meeting in Dallas, to continue and expand on this critical topic. Hope you can join us!

Subcommittee on Securitization and Derivatives Teresa Wilton Harmon, Chair, Anthony R.G. Nolan, Vice-Chair The Securitization and Derivatives Subcommittee met at the ABA Annual Meeting in San Francisco. The Subcommittee discussed a broad range of topics, including developments in the subprime mortgage market, the status of indenture trustee and servicer reporting under Reg. AB, developments in Canadian securitization, and newly updated rating agency derivatives criteria. Eric Marcus of Kaye Scholer continues his work on revising the ABA's Deposit Account Control Agreement to fit securitization transactions. Many thanks to Eric and his working group.

We look forward to meeting again in 2008 and are particularly excited that the 2008 Annual Meeting will be in New York City. Please forward topic or speaker suggestions to subcommittee cochairs Teresa Harmon (tharmon@sidley.com) or Anthony Nolan (anthony.nolan@klgates.com). The subcommittee is also looking for volunteers to help plan future events, work on the subcommittee website and assume future leadership roles. Please be sure to let us know if you are interested in becoming more involved.

The following recent cases may be of interest to securitization practitioners:

Financial Insurers:
Fin. Sec. Assurances Inc. v. Stephens, Inc., 2007 Lexis App. 22214 (11th Cir. 2007). The Eleventh Circuit recently concluded that FSA, as financial insurer of municipal bonds, could not bring 10b-5 securities claims against the underwriters on the bonds. FSA made four arguments in favor of its standing to bring 10b-5 claims, each of which was rejected by the court.

Bankruptcy Remote SPV's:
In In re Doctor's Hosp. of Hyde Park, Inc., 360 B.R. 787 and 2007 Bankr. LEXIS 2424 (Bkrtcy. N.D. Ill. 2007), the Bankruptcy Court in two separate decisions upheld the separateness of a financing SPE from its parent. The separateness was challenged under an Illinois alter ego theory, not on substantive consolidation grounds. The Court also rejected the argument that course of performance had amended the loan contract so that the parent of the financing sub had legally become the borrower.

In re Ark-La-Tex Timber Co., 482 F.3d 319 (5th Cir. 2007). A recent decision of the United States Court of Appeals for the Fifth Circuit also refused to collapse entities on alter ego grounds and stated that a non-debtor could not be substantively consolidated with a debtor.

The Syndications and Lender Relations Subcommittee of the Commercial Finance Committee held a joint meeting with the Syndicated Bank Financing Subcommittee of the Developments in Business Financing Committee on Monday, August 13, 2007 in connection with the ABA annual meeting in San Francisco. The meeting featured some terrific speakers! Bridgett Marsh (Associate General Counsel of the LSTA and new vice-chair of the Syndicated Bank Financing Subcommittee) led a very robust discussion of the current distressed state of the syndications market. Rick Brown of Kennedy Covington and Christian Brose of Helms Mullis (each a Vice-Chair of the Model Intercreditor Agreement Task Force for Second Lien Financings) led a panel discussion involving the current state of the second-lien financing market, including a report on current trends in intercreditor arrangements between first-lien and second-lien creditors and a status report on the work of the Model Intercreditor Agreement Task Force. The Syndications and Lender Relations Subcommittee of the Commercial Finance Committee and the Syndicated Bank Financing Subcommittee of the Developments in Business Financing Committee once again will meet jointly at the ABA Spring Meeting in Dallas to present a CLE panel presentation on the current state of the syndicated loan market. The panel will be moderated by Eliot Ganz of the LSTA and will feature other leading syndications industry legal representatives.

We need your tales of WEIRD COLLATERAL. Next summer, the Section's magazine, Business Law Today, is planning on producing a mini-theme issue called Weird Collateral. We are seeking articles from UCC and ComFin committee members on unusual collateral and how it gets secured, foreclosed, etc. (and problems with same, like champerty). If you handle unusual collateral (slot machines? live animals? i.p.? perishables? lawsuits? body parts? fishing quota rights? etc...) we would like to hear from you. Please contact me at khopkins@rp-lawgroup.com if you are interested in writing on this issue (or any other issue which you think would interest our section members). To make it into the Weird Collateral issue we need your drafts by end of February. Author guidelines can be found on-line at: http://www.abanet.org/buslaw/blt/guidelines.html

The Model Intercreditor Agreement Task Force met on November 8th in Scottsdale, Arizona for an all day working session to discuss and revise the Model Intercreditor Agreement. The meeting was held at Buchalter Nemer’s offices courtesy of Matt Kavanaugh in conjunction with the joint meeting of the ABA Commercial Finance Committee and the annual Commercial Finance Association meeting. The agenda included a discussion of "market" provisions in intercreditor agreements with the goal of identifying provisions in the draft model agreement that can be considered "market" in a constantly changing financial environment and provisions where no market standard has yet developed. That discussion was led by Rick Brown of the Kennedy Covington law firm. Alyson Allen of Ropes & Gray led a discussion of the bankruptcy provisions in the draft agreement and of the broader impact of the bankruptcy laws on the enforceability of other provisions in the draft agreement. Bob Cunningham of the Gibson, Dunn law firm led a discussion on balancing the interests of first and second lien lenders.

New members are welcome. In particular, the Task Force would like to encourage in-house counsel at financial institutions to join the Task Force. We want to be sure that a broad perspective on first and second lien issues is reflected in the work of the Task Force. The Task Force website can be accessed at http://www. abanet.org/dch/committee.cfm?com=CL190029.

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(1) At the annual ABA meeting on August 13, 2007 G. Anthony Lopez, Senior Managing Director, FTI Consulting, Inc., gave a presentation on the Principles of Lease Accounting: US GAAP and International Financial Reporting Standards (IFRS). His talk provided an historical perspective on lease accounting, illustrated the basic lease accounting (risks and rewards) model, and described recent SEC, IFRS, and FASB leasing and related initiatives. Mr. Lopez can be reached at tony.lopez@fticonsulting .com.

(2) The subcommittee continues to monitor the proposed Article 2/Article 2A amendments. Earlier this year, the Texas legislature considered introducing revised Articles 2 and 2A (2003). Several industry groups objected to the proposed language and the revisions were not introduced. A similar effort was made in Oklahoma during 2007 and may be proposed again in 2008. In New Mexico a bill was introduced that would have amended Article 2A significantly, by subjecting commercial leases to the same provisions applicable to consumer transactions (2A-106 &108). After intense lobbying by various groups Article 2A was left substantially intact in New Mexico.

(3) Members of the subcommittee authored the annual UCC survey on equipment leasing for The Business Lawyer (August 2007), which should be published shortly.

(4) The co-chairs welcome ideas and suggestions from the general membership for the ABA Section of Business Law Spring Meeting in April 2008. Please contact either Barry Graynor at graynorba@ cooley.com or Teresa Davidson at Teresa.Davidson@ vfsco.com.

The General Provisions Subcommittee sponsored a program at the Annual Meeting entitled, Deals, Dents & Deficiencies in Car Purchases and Financing -- What Lawyers Representing Consumers Need to Know about the UCC. The program, which was moderated by Co-Chair Gail Hillebrand and presented by Professor Michael M. Greenfield, the Walter D. Coles Professor of Law at Washington University in St. Louis, was based on a single car sale raising issues of defects, financing, and repossession. The program highlighted and described the relevant Article 2 and Article 9 issues as a typical transaction might unfold. This program was presented in a "law school" fashion and was geared toward attorneys who are not UCC experts and who may find themselves needing to know how these portions of the Code work in representing consumers.

As part of a special program, the ABA will be making this program available on-line and is also in the process of preparing a limited number of audio recordings of the program, together with the course materials, to be distributed via compact disc to legal-services attorneys. If you are interested in either, please contact Kristen Adams, Chair of the General Provisions Subcommittee, at adams@law.stetson.edu.

The Letter of Credit Subcommittee had a productive meeting in San Francisco. Topics included the use of letters of credit as substitutes for supersedeas bonds, the latest developments concerning UCP 600, the reestablishment of a Task Force on Governmentally Mandated Forms of Letters of Credit and new case law developments. Our future plans include continued work on the project concerning letters of credit as substitutes for supersedeas bonds and the Task Force on Governmentally Mandated Forms of Letters of Credit. The Subcommittee is also considering the drafting of a model Reimbursement Agreement.

In April of 2007, NACHA, the Electronic Payments Association reported that approximately 16 billion automated clearing house (ACH) payments, valued at 30.3 trillion dollars, were made in 2006, a 14.5% increase over 2005. Approximately half of these payments were consumer bills including pre-authorized debits, internet and telephone payments, and checks converted into ACH payments. Attendees at the August 12th meeting of the Subcommittee on Payments heard an engaging panel presentation on Electronic Payments Systems --The Death Knell for UCC Article 4 or a Clarion Call for Modernization? by UCC and Banking Law experts Stephanie Heller, Counsel and Vice President of the Federal Reserve Bank of New York; Fred Miller, Professor Emeritus and Of Counsel Phillips, McFall, McCaffrey, McVay and Murrah, P.C.; Linda Rusch, Frederick N. & Barbara T. Curley Professor of Commercial Law at Gonzaga University School of Law; and Carlyle Ring, Jr., Of Counsel Ober, Kaler, Grimes & Shriver. The panel described the electronic payments innovations constraining the continued relevancy of UCC Article 4; identified inconsistencies in prevailing payment law on issues such as unauthorized transfers, error resolution, and finality; debated alternatives available for resolving the current complexity of domestic payment law; and revisited the coordinated state and federal process that produced Article 4A. Future meetings of the Subcommittee on Payments will continue the dialogue on the prevailing legal regimes, the burgeoning electronic payment innovations, and the need, if any, to foster the continued viability of the state payment laws.

We are actively gathering, editing and compiling documents and articles for the 2nd Edition of Forms Under Article 9. The goal is to publish in 2008.

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The Secured Lending subcommittee of the ComFin Committee and the Secured Transactions subcommittee of the UCC Committee held a joint meeting at the 2007 annual meeting. The program entitled New Players/New Games/New Foreclosure Strategies: Handicapping Second Lien vs. Senior Lien Foreclosure Disputes featured Larry Engel, a workout and insolvency partner at Morrison & Foerster LLP, Gary Chamblee, a finance attorney at Womble Carlyle Sandridge & Rice, PLLC and Chair of the ABA Model Intercreditor Agreement Task Force, and Mike Gillfillan, a partner at Meriturn Partners which specializes in buyouts and restructurings. The seasoned practitioners discussed issues they foresee arising as the second lien craze moves its way through an economic life cycle. The program materials can be found on the Secured Lending subcommittee's website.

As we prepare for the spring meeting in Dallas, we welcome suggestions for program topics.

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The Task Force on Filing Office Operations and Search Logic is formed from two committees of the Business Law Section of the ABA - the Uniform Commercial Code Committee and the Committee on Commercial Finance. The Task Force was formed to address issues relating to filing and searching under Article 9 of the Uniform Commercial Code. The Taskforce will cooperate closely with IACA to (1) collect and disseminate information on how filing systems operate, with particular attention to differences among individual filing offices; (2) work with IACA and individual filing offices to develop, modify, and implement rules that will help filing offices perform their duties and serve their constituencies; (3) communicate IACA's advice on how best to use the services of filing offices; and (4) make recommendations on whether and how the UCC should be amended to make filing and searching easier, uniform, and more certain to yield the best results.

At the Fall Meeting of the Commercial Finance Committee, held in Phoenix on Wednesday November 7, 2007, the day preceding the Commercial Finance Association Conference, the Task Force presented a panel on Search and Filing Issues. The panelists included the two co-chairs of the Task Force, Jim Prendergast of the UCC Division of First American and Paul Hodnefield of Corporate Service Company, and Kelly Kopyt, the UCC Administrator of the Commonwealth of Massachusetts. Ahead, the Task Force will join a roundtable discussion of filing office issues at the May meeting of IACA, will hold meetings of the Task Force with related presentations at the Spring and Annual meetings of the Section, will commence discussions with the IRS on lien filing and related issues, and will attempt to be involved in the deliberations over S. 1124 on improving public notice and access to tax lien information.

The Task Force is off to a good start.

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• Committee on Commercial Finance
      (as of 11/2007)
  
  
• Committee on Uniform Commercial Code
      (as of 11/2007)
  
  

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