## Facts

- A French steel manufacturer sold specialty steel plate (Creusabro 8000) to an Illinois steel service center for resale.
- The sales contract included a retention-of-title clause stating the seller would remain owner of the steel until full payment.
- The buyer received multiple shipments in the United States between December 2000 and April 2001, totaling about $1.19 million.
- The buyer allegedly used or resold some steel, made only a partial payment on one shipment, and remained in arrears on most of the invoices.
- The buyer’s lender held a blanket security interest in the buyer’s inventory, including the steel, and properly perfected that interest under Article 9 filing rules.
- The seller did not perfect any security interest in the United States and relied on the retention-of-title clause.
- The seller sued in federal court and moved for (1) replevin under Illinois law to recover unpaid shipments and (2) alternatively, avoidance of the contract under the CISG to reclaim the goods.
- The lender intervened to protect its collateral interest.

## Issues

1. Whether the CISG governs or displaces domestic law on property rights and priority disputes involving a buyer’s secured lender.
2. Whether a retention-of-title clause, after delivery, gives the seller ownership/title or instead creates only a security interest under applicable domestic law.
3. Whether the lender’s perfected inventory security interest has priority over the seller’s unperfected interest in the steel.
4. Whether the seller could obtain replevin or use CISG avoidance to recover the steel notwithstanding the lender’s perfected interest.

## Decision

- The court denied the seller’s motion for replevin.
- The court denied the seller’s request to avoid the contract under the CISG as a means to reclaim the steel.
- The court held the CISG applied to the seller-buyer contract but did not govern the effect of the contract on property in the goods or priority as to third parties.
- Applying Illinois/UCC rules, the court treated the retention-of-title clause as a security interest that required perfection; because the seller did not perfect, it was subordinate to the lender’s perfected security interest.
- Because the seller lacked a superior right to immediate possession, replevin was unavailable; CISG avoidance could not defeat the lender’s domestic-law priority.

## Legal Principles

- The CISG governs formation of the international sales contract and the rights and duties between seller and buyer, but it does not govern the contract’s effect on property in the goods or third-party priority disputes.
- Under UCC § 2-401, a post-delivery reservation of title by the seller is limited to a reservation of a security interest.
- Priority in the same collateral is governed by UCC Article 9; a perfected security interest generally prevails over an unperfected security interest.
- Replevin under Illinois law requires the plaintiff to show an immediate, superior right to possession; a junior or subordinate interest is insufficient.

## Conclusion

The court held that although the CISG governed the international sales contract, Illinois UCC law controlled property and priority, rendering the seller’s retention-of-title clause an unperfected security interest that could not defeat the lender’s perfected inventory lien; accordingly, the seller was not entitled to replevin or contract avoidance to reclaim the steel.


Usinor Industeel v. Leeco Steel Prods., Inc., 209 F. Supp. 2d 880 (N.D. Ill. 2002)