Law Commons^™

Creating Cryptolaw For The Uniform Commercial Code, Carla L. Reyes

Faculty Journal Articles and Book Chapters

A contract generally only binds its parties. Security agreements, which create a security interest in specific personal property, stand out as a glaring exception to this rule. Under certain conditions, security interests not only bind the creditor and debtor, but also third-party creditors seeking to lend against the same collateral. To receive this extraordinary benefit, creditors must put the world on notice, usually by filing a financing statement with the state in which the debtor is located. Unfortunately, the Uniform Commercial Code (U.C.C.) Article 9 filing system fails to provide actual notice to interested parties and introduces risk of heavy …

Disrupting Secured Transactions, Christopher G. Bradley

Law Faculty Scholarly Articles

Article 9 of the Uniform Commercial Code (UCC) governs secured transactions in personal property in all fifty states and has been lauded as “the most successful commercial statute ever.” But while Article 9 has facilitated commerce and economic growth, it remains complicated and inefficient in numerous respects. Its weaknesses are well known but have been considered necessary evils, accepted because no better approaches were available. But just as the UCC was motivated initially by the idea of streamlining the law to accommodate modern commerce, now that goal should motivate revision of the UCC itself.

This Article proposes to remove and …

Three Against Two: On The Difference Between Property And Contract And The Example Of Deposit Accounts In Bankruptcy, Jeanne L. Schroeder, David G. Carlson

Articles

In Citizen's Bank v. Strumpf (1995), Justice Scalia announced that deposit accounts are not "property". Five years later, the Uniform Commercial Code was amended to make deposit accounts collateral for the depositary bank maintaining the account, thereby crowding the field previously occupied by the common law right of setoff. Security interests attach to personal "property." Security interests attach to deposit accounts. Deposit accounts, by syllogistic logic, are property. Does this mean that the UCC has overruled the Supreme Court? We argue not. A deposit account is a mere contract in the two-person universe that contract law presupposes. A deposit account …

Commodifying Consumer Data In The Era Of The Internet Of Things, Stacy-Ann Elvy

Articles & Chapters

Internet of Things (“IOT”) products generate a wealth of data about consumers that was never before widely and easily accessible to companies. Examples include biometric and health-related data, such as fingerprint patterns, heart rates and calories burned. This Article explores the connection between the types of data generated by the IOT and the financial frameworks of Article 9 of the Uniform Commercial Code and the Bankruptcy Code. It critiques these regimes, which enable the commodification of consumer data, as well as laws aimed at protecting consumer data, such as the Bankruptcy Abuse Prevention and Consumer Protection Act, various state biometric …

Lessons From Case Study Of Secured Transactions With Bitcoin, Xuan-Thao Nguyen

Articles

There has been some discussion about the flaws in using secured transactions law, Article 9 of the Uniform Commercial Code (U.C.C.), to govern commercial transactions involving Bitcoins as collateral. Flaws necessitate the urgency of immediately fixing of the existing law. In the case of Bitcoins there is still much to learn about the marketplace for secured transactions with Bitcoins as collateral. The rapid change in technology, the speed of new ideas proposed, the constant announcements of adoption and adaptation of smart contracts in transactions, the volatility in cryptocurrency value, the endless reports of scams, and the rise of dark pools …

Conceptualizing Cryptolaw, Carla L. Reyes

Faculty Journal Articles and Book Chapters

Sweden transfers its real property recording system to the blockchain, a software protocol that enables public, cryptographically secure transaction verification without reliance upon a trusted third party. Dubai plans to issue blockchain-based government documents. The United States Department of Health and Human Services investigates blockchain-based systems for managing health data. Illinois explores blockchain-based applications for use in the Illinois government. News of governments and public-private partnerships developing blockchain-based legal applications increasingly splash across the headlines; however the law-makers using blockchain and other Distributed Ledger Technology (DLT) systems to implement legal processes do not systematically consider the broader implications of their …

Are Government Creditors Exempt From U.C.C. Article 9 Filing And Perfection Requirements?, Thomas Sica

Bankruptcy Research Library

(Excerpt)

Article 9 of the Uniform Commercial Code (the “UCC”) requires a creditor to perfect its security interests against its collateral in order to recover the creditor’s priority in such collateral. Former versions of the UCC that predate 2001 provided that the Article 9’s perfection requirements did not apply “[t]o a transfer by a government or a governmental unit of the state.” This exception was eliminated from the UCC in 2001. Thirty-two states, however, still have versions of the UCC that contain some version of this exception. Within the states that still enforce this exception for governmental units, there are …

U.C.C. Article 9, Filing-Based Authority, And Fundamental Property Principles: A Reply To Professor Plank, Steven L. Harris, Charles W. Mooney Jr.

All Faculty Scholarship

Uniform Commercial Code Article 9 generally follows the common-law principle that one cannot give rights in property that one does not have (nemo dat quod non habet). In many circumstances, however, Article 9’s priority rules, including its rule awarding priority to the first security interest that is perfected or as to which a financing statement has been filed, trump nemo dat and enable a debtor to grant a senior security interest in property that the debtor previously had encumbered. In this article, Professors Steven Harris and Charles Mooney argue that, properly understood, the first-to-file-or-perfect rule confers upon a debtor the …

Mezzanine Debt And Preferred Equity In Real Estate, Andrew R. Berman

Articles & Chapters

No abstract provided.

A Fundamental Flaw With Uncitral's Approach To Cross-Border Secured Transactions: The Failure To Address Creditor Due Diligence Issues, John J. Chung

Law Faculty Scholarship

No abstract provided.

Repossession Does Not Alter Debtor’S Rights In Collateral, Ian Park

Bankruptcy Research Library

(Excerpt)

Does section 541(a)(1) of title 11 of the U.S. Code, which defines a debtor’s bankruptcy “estate,” include collateral which has been lawfully repossessed by secured creditors pursuant to Article 9 of the Uniform Commercial Code (“UCC”) prior to the debtor’s filing for bankruptcy? The courts have split in answering this pro-debtor issue by defining “estate” differently. Recently, in Tidewater Fin. Co. v. Curry (In re Curry), 509 F.3d 735, 735 (6th Cir. 2007), the Sixth Circuit Court of Appeals split with the Fourth and Eleventh Circuits and held that a secured creditor’s repossession of collateral under the state’s …

F08rs Sgb No. 19 (Bylaws), Martin

Student Senate Enrolled Legislation

No abstract provided.

Risks And Realities Of Mezzanine Loans, Andrew R. Berman

Articles & Chapters

The last decade has witnessed an astounding increase in new real estate financing techniques, including mezzanine loans. These new financings are not directly secured by real estate and do not even directly involve land. In the real estate industry, mezzanine financing typically refers to a loan secured principally by the borrower's equity in other entities. Both economically and legally, the value of the mezzanine borrower's collateral derives solely from its indirect ownership of the underlying property.

This article provides a detailed description of the legal structure of mezzanine loans. In addition, this article evaluates the hazards, legal risks and uncertainties …

The Spearing Tool Filing System Disaster, Lynn M. Lopucki

UF Law Faculty Publications

Debtor name errors have been a substantial and persistent problem for filers and searchers in the Uniform Commercial Code Article 9 filing system. Filers make errors in spelling, punctuation, and spacing, use trade names, and include extraneous words. The law prior to 2001 excused such errors if they were minor and not seriously misleading. That put the burden on searchers to conduct reasonable diligent searches to find erroneous filings. The effect was to render all searches problematic and costly. The drafters of revised Article 9 conceived a brilliant solution to the problem with respect to corporate debtors (registered entities). First, …

Collateralizing Intellectual Property, Xuan-Thao Nguyen

Articles

This Article identifies and critiques the collateralization of intellectual property, revealing the complexity of intersecting secured transaction law, namely Article 9 of the Uniform Commercial Code, and doctrinal intellectual property laws such as patent law, copyright law, and trademark law. The inquiry challenges the silence surrounding the pervasive use of intellectual property as collateral in secured financing and suggests changes to the existing framework on secured financing law.

The Article proceeds as follows: Part II discusses the normative intellectual property rights for patents, copyrights, and trademarks and how such rights are utilized as corporate assets. Part III describes different forms …

Chuck And Steve's Peccadillo (Symposium: Threats To Secured Lending And Asset Securitization), James J. White

Articles

Are investors in securitized receivables to be treated as the owners of an asset whose sale has taken it beyond the reach of the trustee in bankruptcy of their sellers? O are they to be treated as holders of a security interest in the transferred asset who have left behind an interest in the sellers' hands that would cause the asset to be subject to claims and interference by the sellers' grasping trustee? By adopting contrasting-arguably conflicting-statements in two subsections of a single section, the drafters of 1999 Article 9 have thrust this issue in the faces of courts and …

Are Security Deposits "Security Interests"? The Proper Scope Of Article 9 And Statutory Interpretation In Consumer Class Actions, R. Wilson Freyermuth

Faculty Publications

Assume that Jane Doe leases an automobile from a General Motors dealer, pursuant to a lease contract under which Jane makes a cash security deposit. Under the lease, the lessor agrees to “refund” the deposit at the conclusion of the lease term in the event that Jane fully performs her obligations under the lease. Is this transaction governed by Article 9--i.e., has the lessor taken a “security interest” in Jane's cash deposit to secure Jane's obligations under the lease agreement?

A Glance At The New Article 9 Secured Transaction, Nathalie Martin, Frederick M. Hart

Faculty Scholarship

Those of us who teach a course on Article 9 of the Uniform Commercial Code (Secured Transactions) dreaded the approach of July I, 2001. On that day, a revised version of Article 9 became effective in New Mexico and most other states. The old notes had to be discarded. New materials had to be prepared, or at least the old ones had to be revised. Perhaps there would be some excitement in learning what the drafters had done, but more obvious was the effort needed to learn something new. Maybe it was time to retire. We have now taught the …

Revised Article 9, The Proposed Bankruptcy Code Amendments And Securitizing Debtors And Their Creditors, Lois R. Lupica

Faculty Publications

The new provisions in Revised Article 9 both reflects the drafters’ decision to enhance secured creditors’ rights, but also includes myriad provisions designed to facilitate securitization transactions. Because bankruptcy law looks to state law (specifically Article 9) to determine the rights of creditors and transferees with respect to personal property, changes to Article 9 are in effect, changes to bankruptcy law. The question raised by the changes to Article 9 is whether these changes are consistent with our historical understanding of bankruptcy policy.

Commercial Law Collides With Cyberspace: The Trouble With Perfection – Insecurity Interests In The New Corporate Asset, Xuan-Thao Nguyen

Articles

The recent downturn in the economy, particularly in the e-commerce sector, reveals many e-companies heading toward bankruptcy with cyberassets, such as domain names, as their most valuable corporate assets. Lending institutions and other creditors that have extended loans to such e-companies obviously want to get their hands on these bankrupt estates. Which creditor will have priority in the new cybercollateral of domain names? The answer to creditor priority questions may depend on whether domain names are intangible property for purposes of secured transactions. If so, should security interests in domain names be perfected under the Uniform Commercial Code or under …

21st Annual Conference On Legal Issues For Financial Institutions, Office Of Continuing Legal Education At The University Of Kentucky College Of Law

Continuing Legal Education Materials

Materials from the 21st Annual Conference on Legal Issues For Financial Institutions held by UK/CLE in April of 2001.

Revised Article 9, Securitization Transactions And The Bankruptcy Dynamic, Lois R. Lupica

Faculty Publications

Article 9 of the Uniform Commercial Code ("U.C.C.")1 is the law governing the creation, perfection, and enforcement of security interests in personal property. Originally enacted in 1960,2 Article 9 was substantially revised in 1972 in response to changes in commercial financing markets and practices. Since this last revision, there have been further changes, including technological advances, affecting commercial practice and custom. These changes have led the Permanent Editorial Board for the U.C.C. ("PEB") to recommend to the American Law Institute ("ALI") and the National Conference of Commissioners on Uniform State Laws ("NCCUSL") that Article 9, once again, be significantly revised. …

Comments At The 1997 Aals Annual Meeting: Consumer Protection And The Uniform Commercial Code, James J. White

Other Publications

As Jean [Braucher]' said, I have served on several committees in connection with the revisions of Articles 2, 2A, and 5. I am now on a committee of uncertain obligation that is going to review the NCCUSL draft of Article 2 for the American Law Institute. I was the reporter-an awful task, if anybody ever asks you to do that, you should think about it once or twice-for Article 5. I think service as the reporter for Article 2 might kill Dick Speidel by the time he is done.

Harmonizing The Policy Of The Bankruptcy Code And Article 9, Edwin E. Smith, Elizabeth Warren, James J. White

Other Publications

In a true sense bankruptcy law--at least as represented by the 1978 Code--is in conflict, not in harmony, with Article 9. To a considerable degree (perhaps more than they realize) debtors and unsecured creditors got things they wanted from Congress by the adoption of the Bankruptcy Reform Act of 1978. It is doubtful that that Act could have been passed in any Congress before or since. In many ways, the rights of the debtor and of the unsecured creditors have been cut back since the adoption of the Bankruptcy Reform Act.

They Came From "Beyond The Pale": Security Interests In Tort Claims, Harold R. Weinberg

Law Faculty Scholarly Articles

"[B]eyond the pale" is how the drafters of Article Nine of the Uniform Commercial Code regarded tort claims. They considered tort claims to be noncommercial assets inappropriate for inclusion as collateral within the scope of a commercial financing statute. Tort claims may not be out-of-bounds much longer. The Article Nine Study Committee of the Permanent Editorial Board for the Uniform Commercial Code recommends expansion of the Article's scope to encompass security interests in claims arising out of tort. This recommendation is significant. Tort causes of action comprise an ever-expanding universe of civil wrongs for which courts afford redress. The owners …

The Implicit "Takings" Jurisprudence Of Article 9 Of The Uniform Commercial Code, David Frisch

Law Faculty Publications

Part I of this Article begins by reasserting that central to the idea of property rights is the legal entitlement to remedies that permits a person to exercise dominion over the specific asset or to exclude the exercise of dominion by others. Next, part I examines the essence of a security interest and demonstrates that it is a protected property interest. Part II sets forth a model of priorities that suggests that although property interests should ordinarily be protected by a property rule, there is something special about a security interest, implying the need for greater contingency and justifying a …

Reforming Article 9 Priorities In Light Of Old Ignorance And New Filing Rules (Symposium: 'Managing The Paper Trail': Evaluating And Reforming The Article 9 Filing System), James J. White

Articles

The other papers in this Symposium demonstrate that we have the technical capacity to build a filing system that will exceed the expectations of Grant Gilmore in every dimension.1 With more thought about what is put into the system and more clever software to get it out, the most sophisticated system possible under current technology will store and produce enough information about a debtor to give the ACLU a fright. All of the issues on improving the filing system are important, but I do not concern myself with any of them directly. I am here discuss a different question. In …

Certainty, Efficiency, And Realism: Rights In Collateral Under Article 9 Of The Uniform Commercial Code, Margit Livingston

College of Law Faculty

Article 9 of the Uniform Commercial Code requires that the debtor have "rights in the collateral" for the attachment of a security interest. The drafters, however, left the determination of the phrase's meaning to the courts. This article argues that the requirement of "rights in the collateral" is unnecessary as it relates to tangible goods and should be deleted from Article 9. As an alternative to the uncertainty engendered by the phrase, the article proposes substituting a set of notice and priority rules that more clearly define the rights and obligations of the parties undertaking an Article 9 transaction involving …

Work And Play In Revising Article 9 (Symposium On The Revision Of Article 9 Of The Uniform Commercial Code), James J. White

Articles

For Professors Harris and Mooney the time has come to distinguish between work and play. Debating whether security is efficient is play. Revising Article 9 is work. Even Professor Schwartz does not argue for the abolition of Article 9; he merely reiterates the "puzzle" of secured credit and argues in his playful fashion that security might not be efficient.' Were it not for the fact that this debate might give us some insights about certain priority rules (such as those having to do with purchase money), it would be pure intellectual masturbation, a game with no purpose other than to …

Legislative Process And Commercial Law: Lessons From The Copyright Act Of 1976 And The Uniform Commercial Code, Harold R. Weinberg, William J. Woodward Jr.

Law Faculty Scholarly Articles

Overlap and conflict are inevitable in any legal system in which a federal government and state governments both have authority to enact laws. In our federal system, the Constitution's Supremacy Clause identifies federal law as preeminent in case of conflict. When conflict develops and litigation is required to determine whether state or federal law controls the issue at hand, our system analyzes the problem using the term preemption as a basis for analysis.

This Article explores the federal legislative process that precedes judicial preemption decisions. By studying the legislative process for its sensitivity to preemption issues, possible ways to modify …