2013 Commercial Law Developments -- X. Other Laws Affecting Commercial Transactions
X. Other Laws Affecting Commercial Transactions

March 24, 2014

A. Consumer Law

  • Dan's City Used Cars, Inc. v. Pelkey, 133 S.Ct. 1769 (2013) -- The Court concluded that the Federal Aviation Administration Authorization Act does not preempt the provisions of the New Hampshire Consumer Protection Act relating to towage and storage liens. The case may have implications in other scenarios where federal and state laws appear to overlap in the areas of consumer protection and liens.

B. Professional Liability

  • Garten v. Shearman & Sterling LLP, 958 N.Y.S.2d 107 (N.Y. App. Div. 2013) -- A secured party had no cause of action against its attorneys for malpractice in failing to provide him with a first-priority security interest because he knew the identity of the senior creditor and fully understood that his position would be junior when his loan was made. The fact that the debtor misled the secured party about the amount owing to the senior lienors and the debtor's own financial health were irrelevant because the secured party did not retain the attorneys to review the debtor's financial records.
  • DG Cogen Partners, LLC v. Lane Powell PC, 917 F. Supp. 2d 1123 (D. Or. 2013) -- Debtor had no cause of action against its attorneys for malpractice in connection with the execution of an unreasonably unfavorable settlement of tort and contract claims because the debtor's secured party had acquired all of the debtor's general intangibles at a foreclosure sale and thus the debtor was not a proper plaintiff.
  • Bolan Textile (HK), Ltd. v. DeHaan, 2013 WL 1131066 (S.D. Ohio 2013) -- Law firm's motion for summary judgment on client's malpractice claim for negligently failing timely to perfect client's junior security interest was denied because factual questions remained about whether the client suffered damages.
  • Hattem v. Smith, 2013 WL 6096535 (N.Y. App. Div. 2013) -- Seller's legal malpractice judgment against its attorney for failing to a perfect security interest in the assets of the business sold to a buyer, which failure led to a loss of priority, reversed because an instruction on the seller's comparative negligence was warranted. There was evidence that the seller, who was experienced in commercial transactions, introduced the lender that acquired a prior security interest to the buyer for the purpose of financing the purchase and never informed the attorney of the lender's involvement in the transaction.
  • FDIC v. Lowis & Gellen, LLP, 2013 WL 788188 (N.D. Ill. 2013) -- Law firm being sued for negligence for failing initially to perfect client's security interest in chattel paper stated cause of action for contribution against client's subsequent counsel for its "overly zealous litigation tactics" that forced the debtor to file for bankruptcy protection within ninety days of when the security interest was eventually perfected, which resulted in the security interest being avoided in bankruptcy.
  • Gutarts v. Fox, 961 N.Y.S.2d 101 (N.Y. App. Div. 2013) -- Law firm being sued for malpractice related to its failure timely to perfect client's security interest had no claim or breach of contract, breach of warranty, or indemnification against company hired by law firm to file the appropriate paper work. There was no breach of contract because the company had been hired to file a UCC correction statement and a termination statement, which it did, and any negligence involved would not be actionable. There was no breach of warranty because no warranty was made. There was no right to indemnification because the invoice agreement contained a liquidated damages provision limiting liability to the cost of the services provided.
  • Fagen, Inc. v. Exergy Development Group of Idaho, LLC, 2013 WL 5781473 (D. Minn. 2013) -- Law firm was not entitled to dismissal of third-party complaint brought against it by builder that had purchased 99% of the developer, subject to a repurchase obligation, and which allegedly relied on the law firm's true sale opinion.
  • Thermo Credit, LLC v. Cordia Corp., 2013 WL 425930 (E.D. La. 2013) -- An accounts financier stated cause of action against debtor's attorney for negligently misrepresenting that the debtor had the power and authority to perform under the agreement -- which included providing a security interest in receivables -- when in fact the receivables were owned by subsidiaries that were not party to the security agreement. It did not matter that the receivables had not yet been identified at the time of the attorney's representation.

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