Toward Maximum Facilitation of Intent to Create Enforceable Article Nine Security Interest

Article Nine of the Uniform Commercial Code generally facilitates individual autonomy in the creation of consensual security interests by imposing limited form and content requirements on security agreements. Private autonomy is subordinated, however, where the Article\u27s draftsmen believed that certain other policies required a degree of regulation. Through the process of interpreting and applying a number of Code provisions which set forth the requirements for creating security interests, a court can effectuate what it considers to be the appropriate balance between facilitating the parties\u27 intent to create a security interest and insuring that regulatory policies, such as protecting creditors and debtors from fraud and mistake, are enforced. A court may also effectuate its view of the appropriate balance through the manner in which it treats evidence which is offered by a litigant to demonstrate the parties\u27 intent to create a security interest and to interpret the provisions of an alleged security agreement. In the first section of this article it will be demonstrated that some courts have overregulated nonpossessory security agreements both through their interpretation of Article Nine and through their treatment of evidence of intent. The second part of this article will demonstrate that such overregulation is required neither to insure compliance with the language of Article Nine nor to achieve the general purposes of the Article Nine statute of frauds. This demonstration will reveal that both the provisions of Article Nine regulating the creation of nonpossessory security interests as well as the rules governing the interpretation of contracts should be construed and applied in such a manner as to permit maximum facilitation of private autonomy in the creation of security interests

Is the Monopoly Theory of Trademarks Robust or a Bust?

The monopoly theory of trademarks would antitrustize trademark law by incorporating antitrust legal precedent, economics, policies, reasoning, and terminology. The theory is comprised of six interrelated postulates contained in trademark law and scholarship. The postulates are (1) trademarks are monopolies; (2) trademark monopolies are like illegal antitrust monopolies because both harm competition; (3) trademark law is like antitrust law because both value competition; (4) trademark law is like antitrust law because both apply economic methodology to product markets; (5) an antitrust lens can help one understand trademarks and trademark law; and (6) an antitrust lens can help one decide whether a trademark is functional, generic, or infringed. The sixth postulate antitrustizes important recurring trademark issues. It is advanced by numerous legal scholars, and has gained traction in the courts. This Article examines each of the postulates to determine whether the monopoly theory of trademarks is robust, consistent with what we know about trademarks and their effects in product markets, and capable of enhancing our understanding of what currently is uncertain or unknown; or whether it is a bust, failing to meet these criteria. Parts II through VI of the Article evaluate the postulates. Part VII concludes that the monopoly theory is a bust

Kentucky Law Survey: Commercial Law

This article provides a survey of Kentucky legal developments in the area of commercial law. The focus of this survey is whether a creditor’s statutory prejudgment remedies, which involve an application of state authority, are constitutional under the due process clause of the fourteenth amendment

Commercial Paper in Economic Theory and Legal History

Commercial-paper played a significant role in antebellum America by partially filling the void resulting from the shortage of gold and silver coinage and the absence of a reliable paper currency. Although most legal historians would agree with this premise, a controversy has arisen in recent years concerning negotiability, that collection of legal rules which greatly enhanced the usefulness of bills of exchange and promissory notes in commerce and finance. Many scholars believe that negotiability, along with other pre-Civil War legal doctrines, was intended to facilitate the development of a national market system and economic growth. This view typically holds that courts acted with the general approval of society and either ignores any major wealth redistributive consequences of these developments or assumes that such consequences were unanticipated. A very different view of the rise of commercial paper negotiability during 1780-1860 has been advanced by Morton Horwitz. In The Transformation of American Law he argues that American judges developed negotiability primarily to protect mercantile and entrepreneurial minorities that stood to gain from an expanding market economy. This was accomplished at the expense of persons possessing a pre- or anti-commercial consciousness. The sweeping transformation described by Horwitz, which was also reflected in property, contract, and other areas of law, was one in which enterprise was subsidized and protected while farmers, workers, consumers, and less powerful groups were increasingly disadvantaged. This controversy among legal historians bears an illuminating relationship to the work of other analysts who have sought to employ economic tools to advance the understanding of legal doctrine. Numerous studies of common law rules, including many relating to the branches of law discussed by Horwitz, suggest that judge-made law can be understood as if it were the product of judges who sought to maximize social wealth by utilizing a criterion of economic efficiency. This conclusion is obviously at variance with the Horwitzian view of antebellum legal history. It must also be unsatisfactory to historians whose training does not permit them to be satisfied with as if explanations, but which requires them to ask why common law rules approximate an efficient allocation of resources. Analysts have begun to explore two lines of explanation for the emergence of efficient case law. “Visible hand” theories postulate the existence of judges who sought to announce efficient doctrine. “Invisible hand” theories, on the other hand, do not depend on judicial motivations. They hold, for example, that the costs imposed by an inefficient rule create an incentive for litigants to expend resources in order to obtain the rule\u27s modification or reversal. Efficient legal doctrine might therefore have evolved even if judges were indifferent to or biased against efficiency as a decisional criterion. Parts I and II of this article seek to advance the inquiry into the significance of commercial paper in legal history by presenting a positive economic analysis of some of the decision rules that were important to commercial paper negotiability. It is hoped that this theory might be of use to historical studies of the allocative, distributive, or other characteristics of the judicially created negotiability doctrine applied prior to the Civil War. The article\u27s conclusion offers some suggestions concerning how this inquiry might be further advanced. It is also hoped that this analysis will have relevance to modern commercial paper law, much of which closely resembles the rules applied by nineteenth century judges

Corporations and Corporate Agents: Liability on Commercial Paper Contracts and Attainment of Holder Status

This article focuses on two classes of commercial paper issues. Section I considers the Uniform Commercial Code rules relevant to determining whether a corporation or its agents are bound by contracts made upon a negotiable instrument. Application of these rules continues to be an important and recurrent source of legal disputes. Section II considers the rights of corporations or their agents to obtain holder status prerequisite to enforcing commercial paper contracts. Problems relating to the attainment of this status can result from corporate engagement in joint-enterprise with artificial or natural persons and from the linkage of corporations through common ownership or in parent-subsidiary relationships. Enforcement problems also may arise as a consequence of corporate name changes or mergers

Introduction: From Sheet Music to MP3 Files—A Brief Perspective on Napster

The Napster case is the current cause celebre of the digital age. The story has color. It involves music-sharing technology invented by an eighteen-year-old college dropout whose high school classmates nicknamed him The Napster on account of his perpetually kinky hair. The story has drama. Depending on your perspective, it pits rapacious big music companies against poor and hardworking students who just want to enjoy some tunes; or it pits creative and industrious music companies seeking a fair return on their invested effort, time, and money against greedy and irreverent music thieves. And the case has importance. Music maybe intellectual property\u27s canary in the digital coal mine because the copyright infringement issues now confronting the music industry have important implications for other producers of digital information products including books and movies. This article does not discuss the Napster case in depth. Instead, the author briefly places Napster within the broad sweep of copyright law as it has applied to music over the last 170 years. Copyright always has been technology\u27s child. The Napster case, while the latest big thing of the digital age, is just one of many judicial and legislative adaptations of music-related copyright law to technological innovation

The Malformed Mouse Meets the LIBR: Secured and Restitutionary Claims to Commingled Funds

The malformed mouse is section 9-306(4)(d) of the Uniform Commercial Code. It provides a formula that determines the extent to which an insolvent debtor\u27s commingled bank account contains funds subject to a security interest. A special entitlement is necessary because it is impossible to physically distinguish this collateral after commingling. The label malformed mouse is appropriate if one agrees with critics who have questioned the mouse\u27s statutory architecture and underlying rationale. The image of an elusive creature is also apt. The mouse continues to elude understanding, although it has been part of the Code for many years and the subject of uniform clarifying amendments. The brattle or clatter caused by section 9-306(4)(d) is disproportionate to the mouse\u27s stature. In the breast of the malformed mouse is its drafters\u27 concern that secured creditors recover at least some commingled funds in bankruptcy. The creature\u27s ability to withstand the avoiding powers of bankruptcy trustees is a leitmotiv in this commentary. The malformed mouse\u27s entitlement assumes that most of the funds in a bankrupt debtor\u27s bank account are proceeds from the liquidation of original collateral. The lowest intermediate balance rule (LIBR) and related restitutionary doctrine provide a second means for determining a secured creditor\u27s entitlement to commingled funds. The LIBR assumes that collateral deposited in a commingled account is immiscible with and floats upon the other funds in the account. Oil floating upon water is an appropriate analogy. Although there is authority to the contrary, the generally accepted view is that Article Nine provides an asymmetric constellation of entitlements to commingled funds. Extra-Code tracing principles, including the LIBR, may be employed to reach funds of the debtor when the debtor is not in insolvency proceedings. In these proceedings extra-Code tracing is preempted by section 9-306(4)(d). There is uncertainty concerning the entitlement to commingled funds transferred by the debtor to a third party prior to bankruptcy. This article analyzes the recovery of funds subject to a security interest in or out of bankruptcy. Part II considers the mechanics of section 9-306(4)(d) and restitutionary tracing rules, including the LIBR. Part III examines the roles envisioned for these entitlements by the Code drafters. It also considers remedial and priority issues in secured claims to commingled cash proceeds and offers a general perspective on the relationship between restitutionary theory and Article Nine. Part IV explores the wisdom of the drafters\u27 entitlement scheme. It initially considers the reasons for providing any entitlement to commingled cash proceeds. It then isolates sources of credit cost that may be reduced by an entitlement, and incorporates them into an analysis of whether the malformed mouse or restitutionary tracing theory more closely approaches optimality. The article\u27s conclusion weighs the merits of altering the Code\u27s current asymmetric constellation of entitlements