Late last year we discussed a recent New York Court of Appeals decision weighing the effect of certain indenture provisions on a purported strict foreclosure of collateral under the Uniform Commercial Code. See Goodstein, CNH Diversified (Marblegate 2.0) and Strict Foreclosure, 264 N.Y.L.J. 107 (Dec. 3, 2020)). In the CNH Diversified case, minority noteholders party to an indenture challenged a strict foreclosure, claiming that their consent was required under the terms of such indenture. That challenge was upheld by the Court of Appeals. More recently, the New York State Supreme Court Appellate Division, First Department, issued a ruling in yet another case challenging a UCC strict foreclosure. In this instance, the challenge to the foreclosure action was not sustained. In both cases, the parties had complied with the procedural requirements for strict foreclosure actions under Article 9 of the UCC.
As a quick reminder, strict foreclosure is a remedy under UCC Article 9 that allows a secured party to accept collateral either in full or partial satisfaction of a debtor’s obligation, free of competing claims and without an auction or judicial proceeding. This remedy, however, is subject to the specific requirements of §§9-620 and 9-622—among them being a consenting debtor and creditor.