The case centers on a $5 million loan made by Silverleaf Private Credit, LLC to Turner Acceptance Corp. in 2022, which was secured by a subordination and intercreditor agreement with CIBC Bank USA. When Turner defaulted on its obligations to both lenders, CIBC directed a "managed self-liquidation" of Turner's loan portfolio. Silverleaf alleges that CIBC failed to manage the liquidation in a commercially reasonable manner, causing delinquency rates to spike and leaving Silverleaf with no prospect of recovery on its junior loan.
Judge Jeremy C. Daniel granted in part and denied in part CIBC's motion to dismiss the claims against it. The court dismissed Silverleaf's breach of contract claim, finding that CIBC's obligation to act in a commercially reasonable manner under the intercreditor agreement was triggered only by a formal "foreclosure," not by the self-managed liquidation process at issue.
The court also dismissed Silverleaf's claim for breach of the implied covenant of good faith and fair dealing, ruling that it was not tethered to any provision of the agreement because the relevant section did not apply. Additionally, the fraud claim was dismissed for failing to meet Rule 9(b)'s heightened pleading standard, as Silverleaf did not adequately identify who made the alleged half-truths or explain their materiality.
However, the court allowed Silverleaf's claim under Section 9-610 of the Illinois Uniform Commercial Code to proceed. The judge reasoned that the UCC's requirement for a commercially reasonable disposition applies to every aspect of preparing or processing collateral, not just the final sale. Because CIBC was directing the management and servicing of Turner's portfolio to eventually liquidate it, Silverleaf could plausibly allege a violation.
The court also addressed Turner Acceptance Corp.'s motion to dismiss, denying it after ruling that the intercreditor agreement's waiver provisions could not be enforced by Turner. The borrower was explicitly barred from acting as a third-party beneficiary or enforcing the agreement, meaning it could not use those waivers to block Silverleaf's claims.
Finally, Judge Daniel denied Silverleaf's motion to appoint a receiver, finding that the drastic equitable remedy was unwarranted. The court noted that Silverleaf's fraud claim had been dismissed, money damages might be adequate to cure the alleged harm, and Silverleaf likely waived its right to seek a receivership under the terms of the intercreditor agreement.