On December 8, 2021, the Supreme Court, Kings County in Lincoln St. Mezz II v. One Lincoln Mezz 2 LLC, No. 530492/2021 denied a borrower’s request for a preliminary injunction against a mezzanine lender’s collateral sale, finding that the borrower failed to show that the sale was not performed in a commercially reasonable manner under the UCC. For more guidance on this decision, contact Lester Bleckner & Shaw. More information on the decision is below:
Plaintiff argued that a preliminary injunction was proper because, (i) it was likely to succeed on its claim that the defendant’s disposition of the collateral was not done “in a commercially reasonable manner” as required by Section 9-627(b) of the UCC, because the timeline of the sale was rushed and convoluted by the holiday season and would chill potential bidding; and (ii) it would suffer irreparable harm because the only available remedy is monetary damages or an injunction, but it stood to lose property that could not be replaced with money damages. Rejecting each argument, the court held that, the sale was commercially reasonable because the notice was issued November 11, 2021, which it determined was well before the holiday season. The court noted that the property in question, the State Street Financial Center, would involve sophisticated bidders who are less likely to be confused by the scheduling. In addition, the court held that plaintiff did not maintain a sufficient ownership interest in the property to prove irreparable harm since plaintiff does not own the property – plaintiff owns 100% of the shares in the corporation that indirectly owns the property.
