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Creating Legislative Intent Years After Passage of Revised Article 9

posted by David Lander

The legislative drafting errors in BAPCPA have certainly launched a fascinating  set of statutory construction challenges for the courts.  For example: What level of ambiguity is necessary before the court resorts to legislative intent? If the statute itself is clear how ridiculous must the result be before the court may “ignore” the clear but clearly incorrect meaning? 

The Article 9 revision process of  a decade ago  was the polar opposite of the BAPCPA experience in terms of drafting.  The combined American Law Institute (“ALI”) - National Conference of Commissioners on Uniform State Laws (now known as the Uniform Law Commission[“ULC”]) labored for years to make sure of their drafting and vetted their proposed language extensively. Still, no one is perfect and things change so in 2007 the Permanent Editorial Board of the Uniform Commercial Code authorized a committee to consider the need for possible statutory modifications or comment amendments to the Official Text of Article 9 of the Uniform Commercial Code.    When the ULC and the ALI considered the report of that group the ALI and the ULC  jointly  authorized a drafting committee, the Joint Review Committee for Article 9 of the UCC and the Drafting Committee has met several times. 

Reports of the deliberations of the Drafting Committee indicate that the Drafting Committee  intends to recommend that most of the concerns be dealt with by changes in the official comments rather than by changes in the statute.  This is not surprising since, as a result of gargantuan efforts the last time  the statute itself was passed in record time by all fifty state legislatures; any amendments to the statute must go through that process; at best there is a danger of non uniformity for a temporary or permanent period and there is always a chance that introducing such amendments will encourage  consideration and even passage of other non uniform amendments.  So,  in order to nail down more fully the interpretation of choice,  the Drafting Committee proposes to revise the official comments to make it more clear what they meant when they wrote the relevant statutory language. 

Changing the comment in the face of uncertainty of application of the statutory language is
definitely  easier and less risky than changing the statute to make their intended  meaning more clear.  The concern this raises  for me is the same concern I have  with PEB commentaries. [Some years ago the PEB decided that when a court decision came down that was important and “wrong” or when commentators identified a problem with the language of the UCC,  the PEB should promulgate and make available an official “position paper” or answer in the form of a commentary.  A commentary must go through a procedure similar to a Federal or State rulemaking. ]

I think it is important that lawmakers provide a trail of legislative intent AT THE TIME THEY PASS LEGISLATION.  Retroactive changes to comments and promulgation of “official” commentaries years after passage of the statute  are, however, a dangerous extension of the power of the private legislature with respect to  technical subjects.  Certainly the PEB and the Drafting Committee members  have thought very carefully about these concerns and are very very smart and able and dedicated.  The question for me is, in a democracy what may and must the PEB do if they need a second bite at the apple.  Of course, if they get it right the first time and are lucky and all of the courts apply the law the way the drafters had hoped and intended, then we have the best of all worlds. (For these purposes we are ignoring the policy decisions inherent in this law making. (See “The Political Economy of Private Legislatures by Scott and Schwartz” 43 U Pa. L .R. 595 (1995)

If the courts apply the law contrary to the way  the drafters hoped,  you would expect there to be law review criticism and perhaps efforts to change the statutory language to make it crystal clear to the courts what the drafters meant the first time,  so that the courts might apply the law  “correctly” (or the way the drafters intended,)  the next time.   Retroactively changing the comments (which seems to be about 90% of what the New Article 9 Drafting Committee intends) or promulgating official Commentaries seems contrary to the democratic system and an inappropriate expansion of the power of the private legislature. Retroactive comments are, in effect, rewriting history and telling the courts this time the drafters  REALLY mean it and the courts  BETTER listen more carefully  to what they meant.   It is a violation of the implicit   rules of the partnership between the “experts”  in the private legislature and the democratically elected members of the public legislatures. 

The creation and maintenance of Article 9 and the rest of the UCC is a hybrid system.  We do not want these subjects regulated by Congress and we know the fifty state legislatures do not have the resources or capacity to deal with so many technical subjects so we marry the  experts
(the ALI, the ULI and the PEB) ) to the legislators in a fascinating way that worked very well for Article 9, but not so well for some other parts of the UCC. (See  “The  Rise and Fall of Article 2”  by Scott  62 La. L Rev. 1009 (2002). 

The lingering question for me is what to do when commentators identify concerns in the enacted statutes or judges apply those statutes in ways the PEB thinks are incorrect interpretations of the statutory language.  The authors  of the original Article 9 drafted in broad general language which gave the courts considerable leeway and provided fundamental principles upon which the court could apply the law to new and unanticipated developments.  The authors of the 2001 revisions rejected that method and chose to draft both the statute and the extensive comments in a much tighter and more detailed manner.  It was inevitable that they  would miss some issues, wander off the reservation on others and that the courts would interpret the statute in ways the PEB found incorrect.  The challenge is to remedy these “mistakes” in a manner that  preserves this very  successful partnership between the experts and the state legislatures.  Hopefully, meaningful  attention will be directed at this issue before the Drafting Committee submits its final report and before the ALI and the ULC accept that report.  The appropriate  balancing of the role of the private legislature and the role of the public legislatures may hang in the balance. 



David, I think the process is even more pernicious than you might think, because of the way courts tend to treat PEB statements. The assumption by most courts (especially generalist courts) is that PEB Commentaries have a force similar to legislative history, even though, as you correctly explain, these commentaries are actually ex post interpretative exercises. In other words, the writers of the PEB Commentaries are functioning either in a quasi-judicial capacity (yet another "court" offering its opinion on the proper interpretation of a statute) or -- and this is the bad part -- as lawyers advocating a position. If the PEB Commentaries were treated by the courts as the equivalent of amicus curiae, I would not be concerned. But they are not. They are instead treated as "legislative history" with all the extra deference that is accorded such materials by the courts.

I have seen this happening first hand on two recent occasions. One involved a district court's treatment of both the official comments and the PEB Commentary regarding purchase money security interest, in the context of the 910 car issue in section 1325. The other involved briefing regarding the intersection of UCC art. 9 and state certificate of title laws. In the latter instance, I read a recent piece by Barkley Clark, citing to the PEB Commentary as though it were the same as legislative history, urging courts in the process to take the same view.

Thanks for raising the point.

Are we talking about a bug or a feature?

I agree that the UCC poses some problems for some folks' democratic theory, especially folks of the three-branch variety. But there are some people--call them "civil society" types if you like them, or "corporatists" if you don't--who have their own political theory that is nicely consistent with the PEB-driven UCC process. They might even think that their theory is democratic: a very capacious and capricious word.

But while the three-branchers are fighting the civil societarians, the poor commercial lawyers are left in the lurch. The UCC process is broken, legislatively at least. It was a miracle that 9 was timely drafted and enacted: R2 and UCITA are more typical of the process nowadays.

This is a serious problem. UCC Articles have a half-life of 20-25 years at most: often less. O2 looks quaint by now: well past its sell-by date. The UCC 8 amendments of 1977 looked rotten only a decade later, and I believe that 2A needed a freshup shortly after it was drafted. 3&4 are museum pieces--and arguably have been so for decades.

Could some democratic theorist please tell me how to reconcile their notion of democratic legitimacy with the kind of legitimacy that attaches to a modern evolving commercial statute? If you can't do it, I'm enough of a Burkean to prefer something that works in the world of affairs to something that comports with somebody's favorite political theory.

Joe S.,

Let me start my reply by stating again that i think very highly of the members of the Drafting Committee and the PEB, personally, professionally and ethically. That said, if we are going to delegate this process to unelected "experts" i wonder whether we should qualify them by the standards of Plato's philosopher kings/queens or Dostoyevski's/Raskolnikov's Superman/Superwoman. And, should we require that they have never and will never represent folks who will benefit from their decisions. Democracy is a difficult way to govern ourselves, but.... The partnership between the ALI/ULC article 9 folks and the legislatures has worked so well, i hate to see the balance skewed by commentaries and "retroactive" comment changes.

Who appointed Harvard University to anything? Or Consumer's Union? Or the Roman Catholic church? Or the AFL-CIO? Or the Republican and Democratic parties? The state is not the only source of governance or social order. Courts should be respectful in their dealings with legitimate civil society: pretty much the same kind of respect given the PEB. I recommend that you re-read Bob Cover's Nomos and Narrative. I think it is in Volume 97 of the Harvard Law Review. Civil society is part of our modern notion of democracy, although I admit that it frightened some folk in the 1780's, motivating their fear of established churches and business organizations.

The key is legitimacy. The PEB is legitimate for two reasons. First, people like you (or me) "think very highly of the members of the Drafting Committee and the PEB, personally, professionally and ethically". And people around you think very highly of you: concentric circles of legitimation. (Since I'm pseudonymous, I won't speak for myself.) Second, commercial law--at least the nonconsumer parts--creates an amazing amount of consensus among its adepts. Compare us with almost any other group of lawyers. We might disagree on--say--whether security interests are a good idea, but the disagreement on the mechanics of a good law of security interests is pretty marginal.

Joe S,

You can argue that Commentaries are like pronouncements by Harvard et al (although they seek to have the official imprimatur of the PEB in order to be "official), but it is more of a stretch to assert that retroactive changes in the "official" comments do not cross the line, or at least move closer to the line. Legislators and judges are subject to rules to which unofficial folks are not subject, and this is particularly important since most of the folks inside the system represent secured creditors; surprisingly, unlike the situation with Article 2, other parties such as unsecured creditors have ceded the territory. Over the weekend i will make time to read the material you suggest in order to become more well informed.


I think we are beginning to converge.

I certainly agree with your comment on secured versus unsecured creditors. (I am also worried about consumer debtors who, although represented, have not gotten a fair shake out of the system.) The PEB is most legitimate when it is most technical. Although it usually acts as a body of technicians, some of its technical decisions have strong non-technical effects.

There are also limits to my thesis, even if you buy it. A democratic state should bow only so low to civil society. Family law is an excellent example; the authority of parents over their children is acknowledged as a baseline, but circumscribed by law. The PEB is generally cautious along these lines, as it should be.

I rejoin this conversation only to make this small point. Were the drafters of the PEB Official Comments to file an amicus brief in a given case, a court would readily recognize the special expertise of the brief writers, and may even be inclined to give their brief a special deference as a result. Consider, for example, the briefing offered to the district court in the chapter 15 case, Bear Stearns. The authors were intimately involved in the drafting of chapter 15, and the court knew it. Their arguments were thus given special weight.

But it was also an amicus brief, and their identities were clearly disclosed. Had the court chosen to give their brief no weight, it would have been on safe ground. Were a court to fail to give "official comments" special deference, however, that might make for a point of error on appeal.

The PEB Commentaries function like the amicus brief in Bear Stearns -- no doubt authored by knowledgeable folks whose input is appreciated by the courts. But by bearing the imprimatur "official," they take on an added precedential value that I find inappropriate. Their authorship is undisclosed, their motivations might be mixed, but all that is disguised under the guise of being "official." I think that is bad for the system. That's why I agree with David's point.

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