A recent bankruptcy ruling from the United States Court of Appeals for the Eleventh Circuit demonstrated how simply abbreviating a debtor’s name on a UCC1 financing statement can have costly implications for creditors, as a creditor who timely filed an otherwise proper UCC1 financing statement may be considered flawed. The Eleventh Circuit’s Sept. 29 decision ruled that a UCC1 filing of all assets with the Florida Secured Transaction Registry by creditor Live Oak Banking Co. (“Live Oak”), in connection with a $3 million loan dollars from Live Oak to “ 1944 Beach Boulevard LLC“(“1944 Beach”) was “materially misleading” due to the fact that the UCC1 file listed the name 1944 Beach as ” 1944 Beach Blvd. SARL“, thereby allowing 1944 Beach to invoke Article 544  of the United States Bankruptcy Code to avoid Live Oak’s warranty being defectively enforceable.
Pursuant to Section 9 of the Model Uniform Commercial Code (which has been adopted in Florida, as well as all other states) (“Section 9”), a financing statement must show the “name of debtor” who, for registered organizations, is the “name on the public organic record most recently filed with or issued or promulgated by the jurisdiction of the registered organization which purports to indicate, modify or restate the name of the registered organization. By this standard, the seemingly innocuous abbreviation from “Boulevard” to “Blvd.” in the state funding of Live Oak proved fatal because the name specified in the 1944 Beach statutes filed with the Florida Secretary of State did not include any such abbreviation.
Live Oak sought to invoke a defense under Section 9 of Florida’s Safe Harbor, which provides that minor errors or omissions in a financing statement will render that financing statement ineffective only if those errors or omissions make the funding statement “seriously misleading”. Under Florida Section 9, determining whether such an error or omission is “grossly misleading” is determined by whether or not a search of the filing office’s records under the debtor’s correct legal name, in using the filing office’s standard search logic, if available, discloses such funding status. 
Answer a certified question from the Eleventh Circuit in this casethe Florida Supreme Court found that the Florida Secured Transaction Registry, which is designed to return a list of twenty entity names, starting with the entity name that most closely matches the entered name and is a dot from which the search user can endlessly browse back and forth through the entirety of all indexed entities in the Florida search registry, in fact has “no standard search logic” as that “a search procedure that returns results, for any search string, of all funding statements in the filing office database cannot rationally be treated as “standard search logic”. The Florida Supreme Court has found that the absence of “any standard search logic” in the Florida Secured Transaction Registry renders the safe harbor described above unavailable as a defense. As a result, the Eleventh Circuit ruled that any An error in the name of a registered organization on a financing statement filed in Florida is by definition “grossly misleading”, thereby rendering such a financing statement ineffective. 
Although the Eleventh Circuit’s decision in this case is limited to Florida filings, this case reminds all creditors of the need for continued due diligence and accuracy when preparing any UCC1 financing statement in no any jurisdiction. This due diligence should include reviewing a debtor’s legal name as it appears on a recently certified copy of its underlying governing documents in its jurisdiction of organization, and ensuring that that debtor’s name on a proposed UCC1 funding statement reflects this. While this case is a stark reminder of how costly seemingly innocuous errors on a funding statement can be, these risks can be significantly reduced by ensuring that proper due diligence processes are consistently followed before any statement is filed. of financing.