McGrath North announced a favorable decision on behalf of its client, the Federal Deposit Insurance Corporation, in an important case in the Nebraska Supreme Court. The decision, issued Friday, October 29, 2010, provides a ruling on, among other things, the significant question of when a party must take action to protect its interest in collateral. According to the Nebraska Supreme Court, the answer appears to be quickly.
The case, which arose as a result of the bankruptcy and liquidation of a number of companies, involved a borrower and its surety company’s failure to file documents to perfect a security interest on behalf of its lender. The crucial question before the Court was what constituted a reasonable time to perfect the bank’s security interest? McGrath North was successful in persuading the Nebraska Supreme Court that the surety company did not act within a reasonable time, and the Court reversed the district court’s decision.
“We are very pleased by the ruling,” said Jim Powers, co-chair of the firm’s Trial Practice Group and Shareholder at McGrath North and one of the attorneys representing the FDIC, “the decision confirms that lenders must act very quickly to protect their interests.”
The decision serves as the Nebraska Supreme Court’s first reported decision on the issue, and this ruling provides useful guidance for all secured parties, especially lenders. A complete copy of the Opinion is available online at the Nebraska Judicial Branch website.