The Saks, Bergdorf Goodman, Neiman Marcus Bankruptcy Filing and the Case of the Missing or Incomplete Consignment Agreement
Many clients have contacted my law firm explaining that they are in the jewelry business and shipped jewelry, diamonds, or other high-value items to Saks on a “consignment” basis.
When I ask for the Consignment Agreement, what I usually receive—if anything at all—is a receipt or invoice stamped “Consignment” in the upper right-hand corner.
I then ask for a copy of the UCC-1 financing statement and the PMSI notice sent to other inventory secured creditors, and I am often met with a glazed look and the response: “That’s not how it’s done on 47th Street.”
Unfortunately, in a Chapter 11 case, custom and practice do not trump the Uniform Commercial Code.
Under UCC Article 9, perfected consignments are treated as secured transactions.
If the consignment is not properly perfected, the goods are deemed property of the bankruptcy estate and are subject to the claims of the debtor’s other creditors including secured inventory lenders, DIP lenders and the Bankruptcy Trustee.
The consignor, instead of being a secured creditor, is treated as a general unsecured creditor.
Article 9 does provide the consignor with a PMSI in consigned inventory—but only if it is properly perfected.
This generally requires filing a UCC-1 financing statement and sending timely PMSI notices, before delivery of the goods, with renewals every five years.
In Chapter 11, secured creditors are typically paid far more than unsecured creditors, making these steps critical.
Creditors involved with the Saks, Bergdorf Goodman, Neiman Marcus bankruptcy filing with questions about the treatment of their claims or consignment agreements should contact
Jim Shenwick, Esq.
Please click the link to schedule a telephone call with me.
https://calendly.com/james-shenwick/15mPlease click the link to schedule a telephone call with me.
https://calendly.com/james-shenwick/15min
Shenwick & Associates
116 Plymouth Drive
Scarsdale, NY 10583
Work: 917-363-3391
Bankruptcy & Creditor Rights
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