|
|
Article: Tales of WHOA! On the docket: secured party not liable for failure to sell pledged stock before it declined in value.
- Article from:
- The RMA Journal
- Article date:
- September 1, 2005
- Author:
CopyrightCOPYRIGHT 2005 The Risk Management Association. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
|
Layne v. Bank One, Kentucky, N.A., 395 F.3d 271 (6th Cir. 2005) revisits an issue that has been before a number of different courts: whether a secured party's duty to use reasonable care in the custody and preservation of collateral includes a duty to sell stock before it declines in value.
The plaintiffs were Charles E. Johnson Jr. and Geoff Layne, each of whom owned shares of PurchasePro.com, Inc., a company that made a successful public offering of stock. As a result, Johnson and Layne had considerable net worth even though the sale of their stock was restricted. To increase their liquidity, they entered into separate loan agreements with Bank One secured by ...