Bankruptcy

Creating Legislative Intent Years After Passage of Revised Article 9

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. 

Full post as published by Credit Slips on April 27, 2009 (boomark / email).