Business Restructuring and Bankruptcy Alert- Pay attention to language in loan documents

Parties to commercial loans should take note of the Eighth Appellate District’s recent ruling. In U.S. Bank, N.A. v. Gotham King Fee Owner, L.L.C, 2013-Ohio-1983 (8th App. Dist. May 16, 2013), the Eighth Appellate District (Cuyahoga County) confirmed that courts may appoint a receiver, with expanded powers, on an expedited basis. The terms of the parties’ loan documents proved to be very important in its reasoning. As an initial matter, the decision demonstrates that appointment of a receiver can be a useful remedy for a lender that wants to sell collateral following a borrower’s default. It also serves to remind us that the specific language of loan documents is critically important. This ruling highlights the importance of contract terms and demonstrates that courts will enforce such terms, particularly with respect to commercial loans.