Problem.Self help repossession
A. In the words of Dave Barry: "We didn't make this up." Slim Jim Repossessors ("Slim"), hired by a bank, has had a difficult time repossessing a 1995 Corvette from its owner who parks it only in his locked garage at home or in an enclosed and guarded security area at work. Slim and his employees finally succeeded in repossessing the Corvette in the following manner: Just before the owner arrived home from work, Slim parked a car blocking access to the owner's driveway. Slim raised the hood and peered underneath, as if he were simply a passing motorist investigating a problem with his car. When the owner of the Corvette arrived and got out of the Corvette to inquire or offer assistance, one of Slim's employees who had been hiding behind a tree furtively slipped into the Corvette and, as he drove away, smiled at the protesting owner. Has Slim breached the peace? If so, is the bank liable? How should compensatory damages be calculated? Should either party be liable for punitive damages? U.C.C. 9-625(b), U.C.C. 9-625(c) and Official Comment 3 to U.C.C. 9-625. Note that California did not adopt U.C.C. 9-625(c)(2).
B. A 1999 newspaper article (S.J. Mercury News, Section C, p. 1, 8/14/99) reports that automobile dealer Mel Farr, former NFL running back, and owner of 12 automobile dealership franchises in Michigan and Ohio, uses a "high-tech dashboard gizmo" that prevents a customer from starting a car if the customer has failed to make a required installment payment for the car. The device is manufactured by a California company, Payment Protection Systems, which reports use of the devise in about 1000 cars around the country, including 200 on cars sold by Farr. Customers who make their payment are given a six-digit code. When they punch in their code on the dashboard device they can start the car. Farr claims that this device makes it possible for him to market in urban areas where customers pose greater credit risks. So far (no pun intended) no one with the device has defaulted. Is the use of this technology consistent with U.C.C. 9-609(a)(2)? See U.C.C. 9-102(a)(33). Would it be permissible if agreed to by the debtor in the security agreement? See U.C.C. 1-102(3), U.C.C. 9-602.
C. You are in-house counsel to a company that designs, manufacturers, and licenses software to business for accounting, payroll, inventory control, and the like. Your client asks for your opinion about the wisdom and legality of remote electronic disabling of software upon the licensee's breach of the licensing agreement. Would it matter if this were to cause a serious disruption in the business operations of the defaulting party, including denial of access to, damage to, or destruction of important information stored in the electronic databases of the defaulting party? Does Article 9 apply? See U.C.C. 9-109(a) and U.C.C. 1-201(37). If Article 9 is not applicable, is any language of U.C.C. 9-609 nonetheless helpful by analogy? Consider the solutions offered in sections 815 and 816 of the 1999 draft of the Uniform Computer Information Transactions Act (currently being proposed for adoption in state legislatures throughout the country).
D. Wisconsin prohibits self help repossession of motor vehicles until after a court determination that the creditor is entitled to the collateral. Wis. Stat. Ann. 425.203-.206 (West 1988 & Supp. 1991). Whitford and Laufer concluded that this approach increased the costs and decreased the number of repossessions and resulted in larger down payments required of purchasers of used cars. Whitford and Laufer, The Impact of Denying self help Repossession of Automobiles: A Case Study of the Wisconsin Consumer Act, 1975 Wis.L.Rev. 607. Why not prohibit self help repossession of automobiles (or other collateral?) entirely, as some consumer advocates have urged? Would that significantly alter the terms or availability of credit? If so, would that cost be worth the benefit?
E. In considering the likelihood of a breach of the peace, what, if anything, distinguishes the repossession of automobiles from dispossession of tenants by a landlord? Consider the following excerpt from Berg v. Wiley, 264 N.W. 2d 145 (Sup. Ct. Minn. 1978):
We recognize that the growing modern trend departs completely from the common-law rule to hold that self help is never available to dispossess a tenant who is in possession and has not abandoned or voluntarily surrendered the premises. . . . This growing rule is founded on the recognition that the potential for violent breach of peace inheres in any situation where a landlord attempts by his own means to remove a tenant who is claiming possession adversely to the landlord.