In the complex landscape of commercial litigation, particularly under Article 9 of the Uniform Commercial Code (UCC), the concept of “commercial reasonableness” acts as the ultimate litmus test for the validity of a foreclosure sale. Because the UCC deliberately avoids rigid, bright-line rules for how a sale must be conducted, the determination of whether a sale was reasonable is inherently factual and tied to the specific marketplace. This flexibility places an immense burden on legal teams to select an expert witness who does not just understand the law, but who deeply understands the industry in question. Selecting an expert with specialized industry knowledge is not a luxury; it is a foundational requirement for successfully navigating a UCC dispute.
The Standard of Commercial Custom and Practice
Courts routinely evaluate UCC foreclosure sales by referencing the commercial custom and practice within the relevant marketplace. This means that a sale for industrial printing presses is measured against how printing presses are typically sold, not how restaurant equipment or real estate is liquidated. An expert with deep industry knowledge serves as the primary vehicle through which these specific norms are introduced into the record. They provide the “factual scaffolding” that allows a judge or jury to understand what a professional in that specific market customarily does when enforcing security interests. Without this industry-specific context, courts are often left with hindsight arguments or simplistic price comparisons that fail to reflect market reality.
Bridging the Knowledge Gap for the Court
Judges and juries are not presumed to be experts in niche markets like heavy construction equipment, transportation fleets, or intellectual property. An expert with specialized industry knowledge bridges this gap by grounding the legal analysis in how real markets function. They can articulate technical benchmarks that a generalist might overlook, such as:
- Typical Marketing Timelines: Explaining why certain collateral requires a longer exposure period than others to reach the right buyers.
- Accepted Advertising Channels: Identifying the specific trade publications or digital platforms where buyers for that asset class customarily look for opportunities.
- Common Auction Formats: Detailing whether a public auction, private sale, or hybrid process is the industry standard for the specific collateral type.
- Inspection Norms: Explaining the level of access buyers expect for specialized machinery or inventory.
Addressing Price-Based Challenges with Reality
One of the most frequent challenges in a UCC foreclosure is a debtor’s claim that the collateral was sold for too low a price. Experts with deep industry experience are uniquely equipped to address these claims because they can explain the practical difference between “theoretical retail value” and “realizable foreclosure value”. They can articulate how market depth or the lack thereof limits bidder participation for highly specialized assets and how time constraints imposed by a default naturally impact pricing. By framing the testimony in industry-based terms, they help the court evaluate the process and exposure of the sale, rather than just the final dollar amount.
Pro-Tip: When selecting an expert, look for “Asset-Class Specificity.” An expert who has personally conducted sales in the same asset class as your collateral will carry significantly more weight with a judge than a generalist liquidator.
Developing Expertise Through “Doing,” Not Theorizing
True industry expertise in UCC matters is developed through years of active participation in the marketplace. The most effective expert witnesses are professional auctioneers who routinely translate a secured party’s rights into actual market transactions. These individuals occupy a unique role in the foreclosure ecosystem, as they are responsible for designing auctions, advising on sale methods, and establishing bidding procedures consistent with industry norms. This “hands-on” experience provides them with practical knowledge of how foreclosure conditions affect buyer behavior a level of insight that cannot be gained from books or legal theory alone. Professionals like the team at AuctionAdvisors bring this direct transactional history to every case.
The Role of Professional Designations and Leadership
An expert’s standing in their industry is often reflected in their professional affiliations and leadership roles. Membership in organizations like the Turnaround Management Association (TMA) or the American Bankruptcy Institute (ABI) demonstrates that the expert is a recognized authority in the insolvency and restructuring field. For example, Oren Klein of AuctionAdvisors serves as the Chairman of the TMA New Jersey Chapter, a role that signifies high-level peer recognition. These credentials provide the court with additional assurance that the expert’s testimony is based on broadly accepted commercial standards rather than personal opinion.
Independence and Credibility in Testimony
Selecting an expert with a broad industry background also ensures a higher degree of perceived objectivity. Auctioneers who regularly serve as experts often demonstrate their independence by working with multiple secured creditors, fiduciaries, and across different asset types. This diversity of experience allows them to ground their testimony in documented commercial behavior rather than acting as a partisan advocate for one side. Courts consistently favor experts who demonstrate this level of discipline and stay within the factual boundaries of industry custom. To discuss how this objective expertise can support your litigation, you may connect with our advisors.
Pro-Tip: Retain an expert who can provide a “Pre-Sale Reasonableness Review.” By involving an industry expert before the auction even begins, you can ensure the sale process is designed to meet the exact customs that will later be defended in court.
Conclusion
The selection of a UCC foreclosure expert witness is a strategic decision that requires a deep appreciation for the role of industry knowledge. In a legal framework that relies on commercial custom as its benchmark, an expert who understands the nuances of the specific marketplace is indispensable. By bridging the gap between law and reality, articulating market-specific benchmarks, and providing objective testimony based on transactional experience, the right expert ensures that a foreclosure sale is evaluated fairly. Whether you are a creditor seeking to execute a compliant sale or a legal team defending one, industry-specific expertise is the key to proving commercial reasonableness. For assistance with your next matter, contact our advisory office.
Frequently Asked Questions (FAQ)
- Why is industry knowledge so important in UCC foreclosure cases? Because courts evaluate these sales based on the “commercial custom and practice” of the specific marketplace, which varies wildly between industries.
- What happens if I don’t use an expert with industry-specific knowledge? Without industry context, courts are often left with hindsight arguments and simplistic price comparisons that don’t reflect market reality.
- How do experts define “commercial reasonableness”? They don’t provide a legal definition; instead, they explain what professionals in that industry customarily do when selling similar collateral.
- Can a general appraiser be a UCC industry expert? While appraisers know value, they often lack the “hands-on” experience of conducting sales and establishing the process that courts actually evaluate.
- How do experts handle specialized assets like manufacturing machinery? They use their experience to identify the correct advertising channels and marketing timelines that buyers for those specific assets expect.
- Does a low price automatically mean a sale was unreasonable? No. Article 9 focuses on the process; an expert can explain how industry conditions might result in a low price even if the process was perfect.
- What qualifications should I look for in an industry expert? Look for active UCC auctioneers with transactional experience in your specific asset class and a history of expert testimony.
- How does an expert prove a marketing period was reasonable? By comparing it to industry-standard timelines and documenting that the outreach reached the appropriate buyer universe.
- When should I involve an industry expert? Ideally before the sale starts. They can help structure the auction to ensure it meets the commercial custom of that industry.
- Who are the experts at AuctionAdvisors? Our team includes Joshua Olshin, a former corporate attorney, and Oren Klein, the Chairman of the TMA New Jersey Chapter.
