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Mistakenly Authorized UCC Termination Statement Costs Secured Party $1.5 Billion

On January 21, 2015, the U.S. Court of Appeals for the Second Circuit issued a decision that might make secured parties rethink how they authorize third parties to file termination statements.  The secured party authorized debtor’s legal counsel to file termination statements related to a particular loan.  Debtor’s counsel accidentally terminated the financing statement that perfected a security interest arising from an unrelated $1.5 billion loan.  The court ruled that although the secured party had never intended to terminate the financing statement, it had authorized its agent to file the record.  Consequently, the secured party was left unperfected.  The case is In re: Motors Liquidation Company, 2015 U.S. App. LEXIS 859 (2nd Cir. Jan. 21, 2015).