Modeling the Uniform Law "Process": A Comment on Scott s Rise and Fall of Article 2

• Author: Charles W. Mooney, Jr
• Position: Professor of Law, University of Pennsylvania Law School

Professor of Law, University of Pennsylvania Law School. I wish to thank Raha Ramezani, J.D. 2002, University of Pennsylvania Law School, for valuable research assistance. Errors that remain are mine.

I Introduction

I was honored by the invitation to offer oral and written comments on Robert Scott's essay¹ at the recent symposium on the unification of commercial law sponsored by the Louisiana Law Review and the Louisiana State University's Paul M. Hebert Law Center.² This was an especially rewarding opportunity. Not only was the symposium an excellent academic conference but also several of the most respected commercial law scholars presented papers and offered comments at the symposium. Moreover, the symposium was an appropriate and well deserved tribute to my friend and fellow reform-minded academic, Chancellor Emeritus William D. Hawkland.

In his characteristically careful and thoughtful essay, Professor Scott examines the process that so far has failed to produce a revision of Uniform Commercial Code ("U.C.C.")³ Article 2 (Sales). He considers the process from two perspectives. First, he explains that the prevailing deadlock was predictable as indicated by the prediction in his earlier article (writing with Alan Schwartz) dealing with private legislatures such as the National Conference of Commissioners on Uniform State Laws ("NCCUSL") and The American Law Institute ("ALI") (the co-sponsors of the U.C.C.).⁴ Second, he examines the original drafting process for Article 2 in the shadow of the normative foundations of contract law and the role and influence of Karl Llewellyn in the process.⁵ Along the way, Scott (also characteristically) has much to say about the substance and theory of contract law and Article 2, in particular the proper domain for gap- filling rules applicable to incomplete contracts.⁶ He concludes that "the flaws in the Article 2 project were present from its inception," reasoning that "it is unlikely that any set of 'uniform' rules that are promulgated for adoption in every state can both efficiently complete the gaps in commercial contracts as well as optimally police consumer transactions."⁷ He suggests that the ordinary political and legislative processes may be more successful than the prevailing private legislative process that has addressed Article 2.⁸ But in the end, Scott holds little optimism, observing that the premises and methodology underlying Article 2 are "no longer widely shared."⁹Indeed, Scott is of the view that "Article 2 has become largely irrelevant."¹⁰

The comments in this brief essay are considerably more modest in scope than Scott's project. In large part I am sympathetic to Scott's conclusions about Article 2. But I shall focus here primarily on the Schwartz-Scott political economy model of private legislatures. And on that topic, I wish to join with others in expressing skepticism.

Part II of this essay offers a brief overview of the Schwartz-Scott model, including its principal predictions and the authors' efforts to test its predictions. Part III then summarizes earlier critiques of the model and offers some additional observations. Part IV outlines competing explanations for observable results in the uniform law process and questions the predictive value of the model. Part V concludes the essay.

II Overview Of The Schwartz-Scott Model: Predictions And Tests

Schwartz and Scott stated the purpose of their political economy article as follows: "[O]ur purpose in this Article is to advance a . . . modest claim: whatever the relative merits of private and public legislative bodies, the complacency that has heretofore marked the academic attitude toward the private law-making groups is not warranted."¹¹ However, one might question the existence of the academic complacency of which they complain. As they acknowledge, other academic critics preceded them.¹² But Schwartz and Scott were the first to develop a "primarily positive" formal model.¹³ Much of the intellectual insight that underlies the model must be credited primarily to Professor Scott's original work.¹⁴

Using "structure-induced equilibrium" theory and applying it to groups such as NCCUSL and the ALI, Schwartz and Scott concluded that:

the institution (a) has a strong status quo bias that induces it to reject significant reform; (b) frequently produces highly abstract rules that delegate substantial discretion to courts; and (c) produces clear, bright-line rules that confine judicial discretion commonly when and because dominant interest groups influence the process. The bright-line rules ordinarily advance the interest group's agenda.¹⁵

They also contend that, contrary to popular belief, politics do influence the ALI and NCCUSL.¹⁶

Schwartz and Scott claim that when powerful interest groups compete in the uniform law process they will block their opponents but will fail to achieve their own goals as well; a private legislature will reject reforms and favor the status quo.¹⁷ Also central to their analysis is the Schwartz and Scott claim that the decisions of private legislatures to use Model 1 rules (bright line rules) or Model 2 standards (abstract rules) are not necessarily grounded on which approach would best implement the policy in question.¹⁸ Instead, in their model as applied to NCCUSL and the ALI, the "output is much more a function of the structural features of these organizations than it is a conscious policy choice."¹⁹ Schwartz and Scott suggest that the Model 1 rules result from a dominant interest group acting to solidify its success in the process because these rules limit discretion in their application.²⁰ It is this dynamic which they see giving rise to Model 1 rules, not the "intrinsic virtues [of the rules] for social control."²¹ On the other hand, Model 2 rules result when reformers are unable to achieve adoption of Model 1 rules, and instead settle for Model 2 rules.²²

Schwartz and Scott offer preliminary tests of their model by examining and comparing some outcomes of actual, historical uniform law projects in light of predictions generated by the model. For example, the academic, reformer-influenced, original Article 2 process, largely bypassed by dominant interest groups, resulted in abstract and general Model 2 rules as the model would predict.²³They contrast the recent Article 2 revision process and results with both the original Article 2 project as well as recent revisions of Articles 3, 4, and 9.²⁴ The latter projects resulted in bright line and detailed Model 1 rules, which Schwartz and Scott explain resulted from the dominant influence of banks and secured financers.²⁵ With this background, in The Rise and Fall of Article 2 Scott explains that the current efforts to revise Article 2 involve strong disagreements among involved and influential competing interest groups, such as consumer advocates, sellers of goods, and those who deal in information and intellectual property.²⁶ The breakdown of the project and the failure to promulgate revisions, Scott argues, fits the Schwartz-Scott model's prediction that in the face of competing interest groups a private legislature will opt for the status quo.²⁷ Then Scott sets out to solve another puzzle:

What explains why the initial drafting process of Article 2 appears to track the first prediction (a reformer-dominated process that produced many vague and open-ended rules), while the Article 2 revision process is consistent with the second prediction (a process dominated by competing interest groups that retains the status quo)?²⁸

Scott's intriguing question will be examined in Part IV.

III Critiques Of The Schwartz-Scott Model

This essay need not provide a detailed and comprehensive critique of the Schwartz-Scott model. Professors Peter Alces and David Frisch have done so and I am largely in sympathy with their points.²⁹Alces and Frisch focus primarily on Professor Scott's political economy analysis of the Article 9 review and revision process, but because Scott's analysis is at the core of the Schwartz-Scott model, their critique is equally as trenchant when applied to pertinent aspects of the model.

Alces and Frisch argue that Scott's claim that private legislatures are inferior to public legislatures is not convincing. For example, they question Scott's approval of "logrolling" as well as his claim that it does not take place in the private legislative context.³⁰ They also take issue with Scott's assertion that drafting committee members are selected solely for their expertise as opposed to considerations of balance and geographic diversity.³¹ Alces and Frisch recognize the information asymmetry that exists between various interest groups, but disagree with Scott's suggestion that public legislatures would have any advantages in that respect.³² Similarly, they question Scott's claims based on perceived information asymmetries between drafting committees and study groups, on the one hand, and the members of private legislatures at large, on the other.³³ In rebuttal to Scott's arguments, Alces and Frisch point out that members in general are not necessarily at the mercy of committee "experts," and that, contrary to Scott's claim that members have no incentive to become educated, the membership takes part in much debate and considers position papers that are distributed.³⁴ Alces and Frisch also respond to Scott's claim that committee experts have stronger preferences for revision than the median member of a private legislature.³⁵ They note the absence of evidence for Scott's claim that committee members represent interest groups favoring revision and explain that one plausible reason committee members may favor revision is simply the desire to improve the legal system.³⁶ They also point...