## Facts

- D2 Mark LLC owned the Mark Hotel business through a structure in which D2 Mark’s membership interest in D2 Mark Sub LLC was pledged as collateral for a $35 million nonrecourse mezzanine loan held by OREI VI Investments LLC.
- D2 Mark admittedly defaulted under the mezzanine loan.
- OREI VI noticed a public UCC Article 9 foreclosure sale of the pledged membership interest, scheduled for June 24, 2020.
- The sale provided roughly 36 days’ notice, required the winning bidder to close within 24 hours, and initially sought to bar the borrower from bidding (a restriction later withdrawn).
- The COVID-19 pandemic severely disrupted hotel operations, the commercial real estate market, and credit availability; New York City’s hotel-related restrictions were to be lifted only shortly before the scheduled sale.
- Marketing reportedly generated many inquiries but only two financially qualified bidders other than the lender; pandemic conditions limited bidders’ ability to conduct timely, meaningful on-site due diligence.
- D2 Mark sought a preliminary injunction postponing the sale for 90 days to allow time to market the collateral and to increase competitive bidding.

## Issues

1. Whether the proposed UCC Article 9 disposition of the pledged membership interest was likely not “commercially reasonable” under UCC § 9-610(b) given pandemic conditions, the marketing period, and the 24-hour closing requirement.
2. Whether D2 Mark satisfied New York’s preliminary injunction requirements: likelihood of success, irreparable harm, and a balance of equities in its favor.

## Decision

- The court granted a preliminary injunction enjoining OREI VI from proceeding with the June 24, 2020 sale.
- The court ordered a 90-day postponement of the UCC foreclosure sale.
- The court found D2 Mark demonstrated a likelihood of success that the sale, as scheduled and structured during COVID-19 conditions, was not commercially reasonable.
- The court found irreparable harm because a rushed foreclosure risked a distressed transfer of control of a unique asset that could not be adequately remedied by money damages.
- The court held the balance of equities favored a temporary delay that preserved the lender’s enforcement rights while allowing additional time for market participation.

## Legal Principles

- Under UCC § 9-610(b), every aspect of a collateral disposition—including method, manner, time, place, and other terms—must be commercially reasonable.
- Commercial reasonableness is fact-specific and assessed in context; extraordinary market disruption can render otherwise customary sale timelines and terms unreasonable.
- Sale terms that materially chill bidding (including extremely expedited closing requirements in disrupted credit markets) may support a finding of commercial unreasonableness.
- Efforts to restrict a debtor’s participation in the bidding process may be inconsistent with accepted practices and may weigh against commercial reasonableness.
- A preliminary injunction requires showing (1) likelihood of success on the merits, (2) irreparable harm absent relief, and (3) equities favoring the movant; courts may tailor relief by delaying, rather than permanently barring, foreclosure.

## Conclusion

The court temporarily stopped and rescheduled a mezzanine lender’s UCC foreclosure sale, holding that pandemic-driven market and credit dislocation, combined with short notice and a 24-hour closing requirement, made the proposed disposition likely commercially unreasonable and justified injunctive relief.


D2 Mark LLC v. OREI VI Invs. LLC, 2020 WL 3432950 (N.Y. Sup. Ct. June 23, 2020)