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Florida Supreme Court Decides There is Zero Tolerance for UCC Debtor Name Errors

The standard search logic (“SSL”) used by a filing office can preserve the effectiveness of a financing statement that contains an error in the debtor name. Any error in a debtor name, no matter how small, can render a financing statement seriously misleading under UCC § 9-506(b). The only exception is found in § 9-506(c), which provides that if a search of the correct debtor name, using the jurisdiction’s SSL, if any, would disclose the record then the insufficient debtor name does not render the record seriously misleading.

It is widely assumed that all state-level UCC filing offices have some type of SSL. The Florida Supreme Court, however, just said otherwise. The case is 1944 Beach Blvd., LLC v. Live Oak Banking Co., 2022 Fla. LEXIS 1298 (Fla. Aug. 25, 2022). In response to certified questions from the Eleventh Circuit Court of Appeals, the court determined that the search logic used by the Florida Secured Transactions Registry is not SSL as contemplated by the state’s version of UCC § 9-506(c).[1] As a result, any error in a debtor name renders the financing statement seriously misleading.

In this case, Live Oak Banking Company (“Live Oak”) made a $3 million secured loan to 1944 Beach Boulevard, LLC (the “Debtor”), a Florida limited liability company.  To perfect its security interest, Live Oak filed two UCC1 financing statements with the Florida Secured Transactions Registry (the “Filing Office”). The Live Oak financing statements both abbreviated the name of the Debtor as 1944 Beach Blvd., LLC instead of the correct name listed on the public organic record–1944 Beach Boulevard, LLC (emphasis added).

The Filing Office offers searches to the public online. Unlike the search logic used in most other states, the Filing Office search logic returns the whole database. The Filing Office search system works by taking the researcher to a screen that displays twenty results in alphabetical order starting at the point in the database where the name searched would appear in the index. The researcher can navigate forward or backward from initial page of search results through the whole database.

In 2019, the Debtor filed for Chapter 11 bankruptcy. Shortly thereafter, the Debtor’s manager conducted a UCC search of the Filing Office records on the Debtor’s correct name. Live Oak’s financing statements did not appear on the initial page of twenty results search.  The two financing statements did, however, appear on the immediately preceding page. 

After discovery of the financing statement name error, the Debtor filed a complaint in the bankruptcy court. The Debtor claimed that the name error rendered the financing statements seriously misleading and, therefore, ineffective to perfect the security interest.  Live Oak asserted that the abbreviation in the name was a minor error that did not render the financing statement seriously misleading. In addition, Live Oak argued that its financing statements did appear on the search.  It only required the researcher to scroll up one page from the initial results page to find them. Therefore, the name error did not render the financing statement seriously misleading under § 9-506(c). Both the Debtor and Live Oak then moved for summary judgment on the matter.

The bankruptcy court granted summary judgment in favor of Live Oak. The court reasoned that Live Oak’s financing statements were saved by § 9-506(c) because the Filing Office’s SSL disclosed the UCC records on the page immediately preceding the page with the initial results and the researcher could easily find them. The Debtor appealed the bankruptcy court’s decision to the district court, which affirmed. The Debtor then appealed to the United States Court of Appeals for the Eleventh Circuit.

Two prior cases from different Florida bankruptcy courts reached conflicting conclusions about whether a researcher had a duty to look beyond the initial results page for § 9-506(c) to apply. In Summit Staffing of Polk County Inc., the court concluded that the search was not limited to the initial page of results so the researcher had to exercise reasonable diligence, while the court in In re: John’s Bean Farm of Homestead, Inc. concluded that the search consisted of only the initial page of results (citations omitted). Presumably, John’s Bean Farm means that the protection of § 9-506(c) would only apply if the record appeared on the initial page.

Due to the different conclusions in Summit Staffing and John’s Bean Farm, the Eleventh Circuit determined that there were two conflicting interpretations of how to apply § 9-506(c).  To avoid any doubt as to how the issues should be resolved under Florida law, the Eleventh Circuit certified three questions to the Florida Supreme Court:

  1. Is the “search of the records of the filing office under the debtor’s correct name, using the filing office’s standard search logic,” as provided for by UCC § 9-506(c), limited to or otherwise satisfied by the initial page of twenty names displayed to the user of the Registry’s search function?
  2. If not, does that search consist of all names in the filing office’s database, which the user can browse to using the command tabs displayed on the initial page?
  3. If the search consists of all names in the filing office’s database, are there any limitations on a user’s obligation to review the names and, if so, what factors should courts consider when determining whether a user has satisfied those obligations? 

On August 25, 2022, the Florida Supreme Court responded by addressing a threshold question that was not expressly included in the Eleventh Circuit’s questions–”Is the filing office’s use of a ‘standard search logic’ necessary to trigger the safe harbor protection of § 9-516(c)?” The Florida court determined the answer was “yes.”  Further, the court also determined that the Filing Office did not use SSL. Therefore, § 9-506(c) cannot apply.  Without SSL, it is not possible to conduct a § 9-506(c) search. For that reason, the Florida Supreme Court did not find it necessary to directly answer the three questions certified from the Eleventh Circuit.

What does this decision mean for UCC filers in Florida? The answer is that there is now no doubt that any error in a debtor name will likely render the financing statement seriously misleading under Florida law. There is no margin for error. According to the court, filers are left with the “zero-tolerance” rule of § 9-506(b), which provides: “a financing statement that fails to sufficiently provide the name of the debtor in accordance with § 9-503(a) is seriously misleading.” Even the tiniest deviation in punctuation, spacing, or noise words will arguably render a financing statement filed in Florida seriously misleading, leaving the secured party with an unperfected security interest. 

Those who file UCC records in Florida must be more diligent than ever to make sure that the debtor name provided on the financing statement strictly complies with the requirements set forth in UCC Article 9. To paraphrase the Florida Supreme Court, unless and until the Filing Office employs a standard search logic, under the zero-tolerance rule of § 9-506(b), any financing statement filed in Florida that fails to correctly name the debtor as required by § 9-503(a) is “seriously misleading” and therefore ineffective.

Paul Hodnefield is associate general counsel for CSC® and is a frequent speaker and writer on UCC due diligence issues. Please feel free to contact him with questions or comments at or 800-927-9801, ext. 61730.

[1] Florida adopted the official text of Article 9 for all the statutory provisions relevant in this case so all citations are to the uniform act.