Consignment Question

Recently, we published our Client Advisory, including an article on Consignments.  One of our colleagues asked:

Fine article. Question, if you don’t mind: Does the authenticated notification required to be sent by a consignor pursuant to UCC Sec. 9-324(b)(2) need to be sent to other consignors of goods provided to a common consignee for the filing consignor to retain a first priority security interests in its own consigned goods? I would not see why that would be necessary but understand that is common (and burdensom) practice in the jewelry industry. Many thanks.

Without researching it, I think that, as 9103(d) makes a consignment a PMSI and as 9324(b)(2) sets out the steps to deal with a conflicting security interest in those types of collateral, one would have to follow 324 for the protections. To do otherwise, would allow “secret” PMSI’s against conflicting liens, something the Code gets away from. Haven’t seen a case and haven’t researched that point.

Anyone have different answer?




Written by Bernstein- Burkley, P.C. on July 30, 2008

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