920 F.3d 932
5th Cir.2019Background
- BFN Operations LLC, a wholesale grower, filed bankruptcy in Texas; it bought plants from nurseries Fishback and Surface and owed them over $1.3M in aggregate.
- Fishback shipped products to Michigan, Tennessee, and Oregon and filed UCC financing statements in those states that misnamed the debtor as "BFN Operations, LLC abn Zelenka Farms." Fishback also filed an Oregon notice of lien late.
- Surface shipped only to Michigan and filed a Michigan UCC financing statement that misnamed the debtor similarly.
- PNC held prepetition security interests in most of BFN’s assets and provided debtor-in-possession (DIP) financing, with a DIP lien superior to all valid, properly perfected, enforceable prepetition liens.
- The district court applied the law of the states where the products were located, found Michigan and Tennessee filings defective for incorrect debtor name, and found Fishback’s Oregon agricultural lien expired for failure to timely file the statutorily required extension notice; UCC filings could not substitute.
- The district court granted summary judgment to PNC; the Nurseries appealed only the Oregon-extension ruling (they did not contest MI/TN perfection failures on appeal).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Choice-of-law for lien priority | Nurseries: Oregon law should govern (contract choice-of-law or Restatement analysis). | PNC: Law of the state where each farm product was located governs perfection/priority. | Court: Apply law of state where products located; either Texas/UCC or federal conflicts analysis yields same result. |
| Applicability of contract choice-of-law clauses to third-party lien dispute | Fishback: Contract clauses selecting Oregon law should govern all disputes. | PNC: Contract clause governs only contractual disputes between parties, not third-party lien priority. | Court: Rejects application; choice-of-law clauses in Fishback–BFN invoices do not bind third-party creditors. |
| Perfection of liens in Michigan and Tennessee | Nurseries: Financing statements suffice. | PNC: Financing statements misnamed debtor, so unperfected under MI/TN law and search logic. | Court: Financing statements defective; perfection failed under Michigan and Tennessee law (issues not contested on appeal). |
| Oregon agricultural-lien extension: UCC filing as substitute or substantial compliance | Fishback: June UCC financing statement should count as Oregon "notice of lien" or at least substantially comply with extension requirements. | PNC: Oregon statute requires a distinct notice of lien (with affidavit and specific contents) filed within 45 days; UCC statement is different and inadequate. | Court: Held Fishback’s UCC filing did not satisfy Oregon extension statute and did not substantially comply; Fishback’s Oregon lien expired. |
Key Cases Cited
- In re Mirant Corp., 675 F.3d 530 (5th Cir. 2012) (discusses federal choice-of-law approach in bankruptcy)
- Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487 (U.S. 1941) (federal diversity courts apply forum state choice-of-law rules)
- Woods-Tucker Leasing Corp. v. Hutcheson-Ingram Dev. Co., 642 F.2d 744 (5th Cir. 1981) (federal choice-of-law and UCC principles in secured transactions)
- Sommers Drug Stores Co. Emp. Profit Sharing Tr. v. Corrigan, 883 F.2d 345 (5th Cir. 1989) (Texas adopts Restatement §6 "most significant relationship" test for choice of law)
- Rogers v. Roberts, 717 P.2d 620 (Or. 1986) (defines substantial compliance standard under Oregon law)