How a Warehouseman Can Properly Auction Liened Goods to Settle Debts

Going Once, Twice, Sold: How Warehousemen Can Properly Sell Goods on a Lien to Settle Debts

By Gregg Garfinkel, Esq.

A warehouseman has a lien on goods left in his care as security for payment for all services performed, including storage charges, processing fees, transportation, and auction fees. The lien protects the warehouseman in the event that the bailor, or person entrusting her goods to the warehouseman, defaults on her obligations to the warehouseman. Unfortunately, these trying economic times have caused a significant increase in the amount of bailor defaults, which has increased the amount of warehouse auctions.

One recurring issue of significance to the moving and storage industry is how to execute on the lien following the bailor’s default. In California, this process is governed by California Commercial Code Section 7210. The code imposes mandatory requirements concerning notice of the intent to sell the liened goods, conducting the sale, handling the proceeds from sale, and other aspects of executing on the lien. Deviation could result in the warehouseman’s civil liability to the bailor for, e.g., conversion, and possibly for punitive damages.

The process for executing on a lien under Section 7210 breaks down into three major phases:

1. Giving notice of the intent to sell the goods
2. Advertising the sale
3. Conducting the sale

Giving Proper Notice of the Intent to Sell Liened Goods: The devil is in the details

It is imperative that the notice, and execution, of an auction comply with all Commercial Code requirements, and that such compliances are documented. It is safe to say that a bailor whose goods have been sold will not be enthused about the prospect of having his goods sold to satisfy a debt. Many of these auctions give rise to litigation, where a warehouseman’s conduct will be under the microscope. Thus, any failure to comply with the requirements will subject the warehouseman, and possibly the auctioneer, to civil liability.

A warehouseman’s first obligation is to notify all persons claiming to have an interest in the liened goods of its intention to auction the goods. The notification must be sent by any “reasonable means.” It should be noted that the “reasonable means” language is a departure from the more stringent requirement of the prior version of the code section, which required that the notice be sent via registered or certified mail or delivered in person.

The notice must contain:

• An itemized statement of the claim;
• a description of the goods subject to the lien;
• a demand for payment within a specified time (which must be at least 10 days from the receipt of the notice);
• and a conspicuous statement that “unless the claim is paid within the time specified, the goods will be advertised for sale and sold by auction at a specified time and place.”

Advertising the Sale of Liened Goods

A warehouseman must also advertise the auction to the general public. The advertisement must be publicized in a newspaper of general circulation published in the judicial district where the sale is to be held after the expiration of the time period given in the notice of intent to sell goods. In addition, the advertisement must be published once a week for two consecutive weeks prior to the sale. If there is no newspaper of general circulation where the sale is to be held, then the warehousemen must post the advertisement in no less than six conspicuous places where the sale is to be held.

Once again, exacting requirements apply as to what must be contained in the advertisement. Specifically, the ad must contain:

• A description of the goods;
• the name of the person on whose account the goods are being held;
• and the time and place of the sale.

It is extremely important to note that the date of the auction must be least 15 days after the date the first advertisement is published.

Conducting a Proper Sale of Liened Goods

Once the notice and advertising requirements have been met, a warehouseman must ensure that the auction is properly executed. The sale must be held at the place nearest the location where the goods are stored/held that is suitable for such a sale. It is important to note that any person claiming a right in the liened goods has a right to halt the sale and reinstate the warehousing arrangement if, before the sale occurs, they pay the amount necessary to satisfy the lien and pay the reasonable expenses incurred by the warehouseman under these provisions (costs associated with arranging the auction).

Nothing precludes the warehouseman from buying the goods to be auctioned. Furthermore, the intent of this statute is to allow the warehouseman to satisfy the lien from the sale proceeds. However, the warehouseman is not entitled to a windfall.

Common Pitfalls When Auctioning & Selling Goods on a Lien

The requirements of Section 7210 create a number of traps for the unwary. The most common mistake in noticing a sale is the warehouseman’s failure to notify everyone having an interest in the goods of the pendency of the sale. A classic example is where a husband and wife are listed on the warehouse receipt and contract, with two different mailing addresses. During the course of the storage, the couple breaks up, and the storage account is unpaid. The warehouseman, unfortunately, provides only one of the parties with the notice of sale, erroneously assuming that notice to one is notice to both. The party not receiving notice of the sale could, in this situation, sue the warehouseman for negligence, breach of contract, and possibly conversion.

The safer course of conduct dictates that all persons and all addresses listed on the bill of lading and warehouse contract be provided with notice of the sale. The cost of an additional letter or e-mail can spare a warehouseman a much more expensive jury verdict.

Another common claim by an aggrieved bailor, or person with an interest in the goods, is “I never received the notice of sale!” A warehouseman can defeat this allegation by showing, through properly documented paperwork that notice was sent by registered mail or through an e-mail confirmation to the last known address of the bailor. Actual notice need not be established to defeat a bailor’s challenge to the propriety of an auction.

Properly preparing and maintaining the shipping, storage and billing documents, as well as any correspondence or documents submitted by the bailor, is the best protection against this complaint. The bailor’s correspondence, in particular, including personal checks with an address listed on them, provide pertinent address information. The failure to note, or take action on, a change of address notification (formal or informal) could prove costly. In addition, warehousemen are strongly suggested to obtain e-mail addresses from their clients to create another channel of communication.

To Recap…

The validity of a warehouseman’s auction often boils down to whether sufficient notice (procedural and substantive) of the sale pendency was provided. A sale that does not afford the statutorily required amount of time will render a warehouseman liable for damages. California warehousemen are strongly encouraged to ensure that their auction procedures meet the strict requirements of Section 7210. The failure to do so could subject them to liability far in excess of the storage charges owed on overdue accounts.

The Transportation, Logistics, and Warehousing Law experts at Stone | Dean have handled over 1,500 transportation-and-warehousing-related lawsuits and claims in their legal careers. If you or your company are involved in a claim, or wish to limit their exposure to lawsuits, contact the Stone | Dean office at (818)999-2232 or visit StoneDeanLaw.com for more information.

Neil Gorsuch Supreme Court Confirmation | Why Republicans used the "Nuclear Option" | What This Means for America

How Neil Gorsuch Became the Next Supreme Court Justice, Why Republicans “Went Nuclear,” and What This Means for America

By Matthew Harvey

This was originally posted to the Stone | Dean Cutting Edge Blog. Find the original here.

On Friday, April 7, 2017, Neil Gorsuch became the 113th Judge to serve on the Supreme Court of the United States. His confirmation has been mired in controversy, with the phrase “going nuclear,” being born out of Senate Republicans changing SCOTUS-confirmation rules to get him on the bench.

But while the worlds of law & politics constantly debate this incredible year for the US High-Court, regular Americans are left wondering “What’s going on and what does this mean for me?”

Well, Jon & Jane Q. Taxpayer, here’s what you’ve got to know:

1) Who is Neil Gorsuch?

Neil Gorsuch was born in Denver, Colorado in 1967. His mother, Anne Gorsuch Buford, was appointed by Ronald Reagan to be the first Female Administrator of the United States Environmental Protection Agency, giving Neil an impressive pedigree. He attended the prestigious Georgetown Preparatory School in Washington, D.C. and would go on to form part of the high-flying Harvard Class of 1991, which included none-other than President Barack Obama (though no one directly remembers them crossing paths).

Gorsuch attended Columbia university for his Under-Graduate studies, Harvard Law School for his J.D., and the University of Oxford for his doctorate in philosophy. In many ways, Gorsuch was an active student not afraid to stand up for what he felt right, but similarly able to command respect across-the-board. His time at Harvard Law School, a typically left-leaning campus, saw him characterized as a dedicated conservative; however many of his classmates describe him as “certainly not a political firebrand.”

Gorsuch’s career was forged in dedicated servitude toward the idea of textualism — where legal interpretation is derived from the original meaning of the law — and “Natural Law.” He is an ardent proponent of originality in interpreting the United States Constitution and tends to side with State-power over Federal-power. His decisions — much like his Senate confirmation hearing — have been predictably conservative, often uncontroversial, and based around laws being interpreted literally. In a speech given to Case Western Reserve University in 2005, Gorsuch opined:

[Judges should work] to apply the law as it is, focusing backward, not forward, and looking to text, structure, and history to decide what a reasonable reader at the time of the events in question would have understood the law to be—not to decide cases based on their own moral convictions or the policy consequences they believe might serve society best.

So despite his incredible education, prodigious upbringing, general lack of controversy, deep-seeded respect in the world of law, and tremendous experience serving both the Supreme Court as a clerk as well as a federal judge for the US 10th-Circuit Court of Appeals, Neil Gorsuch became one of the most controversial Supreme Court confirmations in history.

How’d this all happen?

2) Why was Gorsuch’s confirmation so controversial and what’s “Going Nuclear,”?

Ah, politics. Quite frankly, the controversy surrounding Neil Gorsuch’s confirmation is purely encased in political-party bad blood.

It all starts in February, 2016 with the death of Justice Antonin Scalia. Scalia’s death was surrounded in mystery, surprise, and questions; the biggest question became “Who replaces him?” but was quickly overshadowed by the question of “Who picks his replacement?”

Barack Obama, at the time in the last year of his final term in office, picked the Honorable Merrick Garland to fill the empty chair; however Senate republicans quickly moved to quash Obama from selecting a replacement. A lame duckpresident, they argued, shouldn’t be able to change the face of the US High-Court for decades and should instead leave the duty to his successor.

The Republican-controlled Senate, pushed-forward by Senate Majority leader Mitch McConnell in an exceptional move, decided to refuse consideration of Garland’s nomination, stating they would hold “no hearings, no votes, no action whatsoever.” Despite receiving the American Bar Associations’ highest possible rating, as well as a White House Petition signed by over 170,000 people, Garland’s nomination expired on January 3, 2017 after enduring 239 days of silence from the Senate.

But what’s this got to do with Neil Gorsuch?

President Trump announced on January 31st, 2017 that he would nominate Neil Gorsuch for the vacant Supreme Court seat. Despite being confirmed by the Senate Judiciary Committee, Senate Democrats moved to deter the nomination of Gorsuch to the Supreme Court via filibuster, making sure he could not achieve the 60 Senate votes needed for confirmation.

This is where the “Nuclear-Option,” comes to play.

Traditionally, Supreme Court nominations are confirmed by receiving three-fifths of votes from sworn Senators. This rule was put in place to encourage scrutiny and bipartisan debate around high-court nominations. However, this and all Senate rules can be changed by a simple majority-vote, according to a 1892 decision in the case of United States v. Ballin.

This is what politics has deemed “The Nuclear Option.”

On April 6th, 2017 Senate Republicans moved to change the rules for Supreme Court Nominations to allow confirmation after only a simple majority-vote, as well as enabling cloture of SCOTUS-Nomination filibusters with only 51 votes. This will forever change the face of the Senate and how Supreme Court Nominations become Justices, but allowed for the Republican-majority Senate to confirm Neil Gorsuch as Antonin Scalia’s replacement on April 7, 2017.

3) What does Neil Gorsuch’s confirmation mean for America?

Neil Gorsuch, in every way, is a very well-qualified nomination and will likely pick-up where Justice Scalia left-off in interpreting the Constitution as the framer’s intended. His confirmation, while surrounded in controversy, should not have been as hard-fought as it turned out as he is a very knowledgeable, experienced, and sound-minded candidate.

But the way his confirmation went-about will forever have an impact on American politics.

Firstly, Senate SCOTUS-confirmation rules are now forever changed. What was once meant to be one of the most difficult acid-tests in law has now been cheapened by allowing a simple-majority to confirm nominations. No longer will bipartisanship be required for a SCOTUS-confirmation — the majority-party at the time will now be able to select their Justices at will. Gorsuch, in this writer’s humble opinion, is in no way a partisan-puppet brought in to further divide the high-court; whether that will become a problem in the future, however, remains to be seen.

Party-lines seem to be more divided than ever, but the experience of this confirmation will see ill-feeling all but increase and leave many politicians seeking revenge instead of licking their wounds. The filibuster of Gorsuch’s nomination was already one example of partisan retaliation — where might it go from here?

In the meantime, I’m sure Neil Gorsuch is ready and eager to get to work. Many important decisions with potentially wide-implications are coming the Supreme Court’s way:

1) Trinity Lutheran Church v. Comer: A Church vs. State case where a Church-school has been denied access to a Missouri-state-run program due to the Missouri constitution provision denying public support for religious institutions. The Lutheran church argues the program, which gives schools recycled rubber material for children-playgrounds, will not be supporting religious activities.

2) District of Columbia v. Wesby: (1) Whether police officers who found late-night partiers inside a vacant home belonging to someone else had probable cause to arrest the partiers for trespassing and in particular whether, when the owner of a vacant home informs police that he has not authorized entry, an officer may discredit the suspects’ questionable claims of an innocent mental state; and (2) whether, even if there was no probable cause to arrest the apparent trespassers, the officers were entitled to qualified immunity because the law was not clearly established in this regard.

3) Epic Systems Corp. v. Lewis: An issue with employment agreements requiring disputes to be arbitrated individually, waiving class and collective proceedings. Are these agreements enforceable under the Federal Arbitration Act?

Under the same token:

3A) National Labor Relations Board v. Murphy Oil USA: Whether individual employee arbitration agreements, barring employees from pursuing work-related claims on a collective basis is considered unfair labor practice.

3B) Ernst & Young LLP v. Morris: Whether National Labor Relations Board collective-bargaining provisions prohibit enforcement of agreements requiring employee-conflict arbitration on an individual basis.

Gorsuch will likely get a deciding-vote in many of these cases as well as in cases to come in his career serving SCOTUS. This American just hopes that Justice Neil Gorsuch serves his role on the court honorably, with dignity, and does what he believes is right. As the youngest Supreme Court confirmation in decades, Gorsuch will be given the chance to influence American Law for many years to come.

Let’s all hope the bad blood that mired his confirmation does not affect anything Gorsuch does; to allow as much would be an affront to the American way of life.