04/14/2009 01:00 PM Senate LABOR & COMMERCE

             CSHB 102(JUD)-UNIFORM COMMERCIAL CODE                                                                          
                                                                                                                                
2:04:18 PM                                                                                                                    
CHAIR   PASKVAN   announced   CSHB   102(JUD)   to   be   up   for                                                              
consideration.                                                                                                                  
                                                                                                                                
ALLISON LEFINE,  staff to Representative Gruenberg,  sponsor of HB
,  said  it  amends  Alaska  statutes  to  reflect  the  recent                                                              
revisions  to Articles  1 and  7  of the  Uniform Commercial  Code                                                              
(UCC). The bill has two non-UCC provisions as well.                                                                             
                                                                                                                                
TERRY  THURBON,  Public  Member, Alaska  Uniform  Law  Commission,                                                              
said  updating the  UCC  is a  priority this  year  in large  part                                                              
because it  is cleanup legislation to  get Alaska up to  date with                                                              
electronic  documents of  title with  respect to  bills of  lading                                                              
and  warehouse  receipts  for  the   transportation  industry.  It                                                              
updates a few other general provisions as well.                                                                                 
                                                                                                                                
She said  it seems  like an overwhelmingly  large bill  at 60-plus                                                              
pages, but  the Uniform Commercial  Code parts, sections 8  and 4,                                                              
are the  only ones  she is  speaking to.  Those provisions  are by                                                              
and  large changes  in  terminology to  make  the code  consistent                                                              
with  a  handful of  substantive  changes  that  are made.  It  is                                                              
divided  up   into  two  parts,   Article  1,  which   is  general                                                              
provisions,  and covers  things like  definitions and  obligations                                                              
of  good  faith, and  then  Article  7,  which has  the  warehouse                                                              
receipts, bills of lading and documents of title provisions.                                                                    
                                                                                                                                
2:08:34 PM                                                                                                                    
MS. THURBON  said the  revisions in  general deal almost  entirely                                                              
with  bringing  us  into  the  electronic  age  for  shipping  and                                                              
transportation,  and  how  title is  transferred  amongst  parties                                                              
(Article 7).  Some of those  provisions were originally  developed                                                              
in the early  1900s and the last  update was in 1951.  In 2003 the                                                              
Uniform Law  Commission came up  with these revisions.  Thirty-two                                                              
states  have already  adopted  these  provisions  and three  other                                                              
states besides Alaska have introduced legislation this year.                                                                    
                                                                                                                                
The  general  provisions  starting   in  section  8  of  the  bill                                                              
regarding  Article 1  are  peppered throughout  Title  45 and  are                                                              
mainly  conforming  terminology  and  amendments,  but  there  are                                                              
about half  dozen substantively important  things those do  to the                                                              
UCC.                                                                                                                            
                                                                                                                                
MS. THURBON said  some of the changes clarified  scope of coverage                                                              
to make  it clear  that these  provisions are  applicable  only to                                                              
UCC-covered  transactions.  The   statute  of  frauds  requirement                                                              
which  governs  when an  agreement  has to  be  in  writing was  a                                                              
little  fuzzy and  appeared to  apply to  transactions outside  of                                                              
the  UCC; so  that was  fixed. The  rules  on choice  of law  were                                                              
clarified so that  the parties in agreement can choose  the law of                                                              
whichever   jurisdiction  they   want   to  apply   -  with   some                                                              
limitations meant to  protect consumers so that they  can have the                                                              
protection of their own state's laws.                                                                                           
                                                                                                                                
2:12:13 PM                                                                                                                    
Another  substantive  change  clarified the  definition  of  "good                                                              
faith" in  the context  of UCC to  mean honesty  and fact  and the                                                              
observance of  reasonable commercial  standards for  fair dealing.                                                              
It  clarifies  use of  evidence  of  course  of performance  of  a                                                              
contractual arrangement  in addition to  the uses of trade  and of                                                              
dealings.  The bottom  line  is that  these  changes bring  Alaska                                                              
into the  fold of the  critical mass of  nearly all of  the states                                                              
that are using the same version of the UCC in these two areas.                                                                  
                                                                                                                                
2:13:26 PM                                                                                                                    
PROFESSOR BILL  HENNINGS, Alabama  Uniform Law Commissioner,  said                                                              
he  was executive  director  of the  Uniform  Law Commission  from                                                              
2001-2007,  which is when  these two  acts were finally  produced.                                                              
He  teaches  in  the  area  of   the  UCC  and  works  with  these                                                              
provisions every day.                                                                                                           
                                                                                                                                
PROFESSOR HENNINGS said  that over the last 20 years,  the UCC has                                                              
been updated  to accommodate  electronic transactions.  Articles 1                                                              
and 7  were the last  to be revised,  and they found  industry was                                                              
already  far   ahead  of  them   in  terms  of   using  electronic                                                              
documents,  but industry  wanted legal provisions  that would  put                                                              
them  on  solid  ground  to  make  certain  their  documents  were                                                              
entirely  effective.   He  said  that  Article  7   had  not  been                                                              
thoroughly  revised, but  the electronic  documents sections  were                                                              
dealt with almost exclusively.                                                                                                  
                                                                                                                                
2:16:24 PM                                                                                                                    
Article  1  is general  provisions  applicable  to all  the  other                                                              
articles,  Professor   Hennings  explained.  After   20  years  of                                                              
revisions  there  was  sort  of a  disconnect  between  the  other                                                              
articles  mostly  in terms  of  definitions.  So the  revision  of                                                              
Article 1  is designed  to clean  everything up  and pull  the UCC                                                              
together.                                                                                                                       
                                                                                                                                
2:17:16 PM                                                                                                                    
SENATOR THOMAS said  one area talks about proceeds  from goods and                                                              
possessions  being  sold.  Does  someone determine  the  value  of                                                              
those goods so that  if $1,000 is owed and the  carrier decides to                                                              
dispose of  $10,000 worth  of furniture just  to get  their $1,000                                                              
is there some claim that causes it to be a fair disposal?                                                                       
                                                                                                                                
PROFESSOR HENNINGS  replied that no  specific procedure is  set up                                                              
requiring commercially  reasonable sales  like those in  Article 7                                                              
foreclosures,  but the  general standards  of the  UCC, which  are                                                              
good faith and  commercial reasonableness are applied.  Good faith                                                              
is honesty; and  commercial reasonableness means that  you have to                                                              
comport  with  standards  of fairness  that  are  consistent  with                                                              
other similar  entities would do  in the commercial world.  He has                                                              
no doubt  that a  court could  regulate that  kind of  conduct and                                                              
treat a sale for  a ridiculously small amount as  something in the                                                              
nature of a conversion.  However, there is no  broad structure for                                                              
that in Article 7, unless he has forgotten it.                                                                                  
                                                                                                                                
2:19:58 PM                                                                                                                    
CHAIR  PASKVAN closed  public testimony.  He  added that  bringing                                                              
                   st                                                                                                           
Alaska up to the 21 Century is a good thing.                                                                                    
                                                                                                                                
SENATOR  THOMAS moved  to report  CSHB 102(JUD),  version S,  from                                                              
committee  with  individual recommendations  and  attached  fiscal                                                              
note(s). There were no objections and it was so ordered.