An antidote to federal mandates.

The oldest of the state governmental associations, the National Conference of Commissioners on Uniform State Laws, ends its year-long centennial celebration in August. The Uniform Law Commissioners from their beginnings, 100 years ago, assumed the primary institutional role in American law for the development of private state law, emphasis on the "state." Foremost in the original considerations was the relationship between the states and the federal government. Their initial statement of purpose and of the issues they decided to address reeks with worry over federal encroachment upon state powers.

That role continues, and it's not any easier. Recent examples of the phenomenon of federal encroachment point out the complexity of the problem and what uniformity means as a solution.

For example, the U.S. Commission on Interstate Child Support appears poised to recommend federal legislation mandating uniform standards for determining paternity. This action is occurring despite the promulgation of the Uniform Parentage Act in 1969, which addresses the legal notion of illegitimacy and provides a modern definition of paternity. Eighteen states have adopted this act since 1969--a respectable number, but hardly enough to fend off federal intervention.

Another example. Consider stock market crashes and their implications. Most of us who were not asleep through October 1987 will remember the big 500-plus point slide in the stock market. Whatever its economic impact, and that seems modest in hindsight, it did motivate the Securities and Exchange Commission to study and propose remedial legislation (since adopted). One aspect of that legislation grants the SEC the power to pre-empt transfer rules for investment securities by regulation.

Traditionally, transfer rules for investment securities (stocks and bonds, principally) have been the states' under Article 8 of the Uniform Commercial Code, and the Uniform Investment Securities Act before the Uniform Commercial Code, and the common law before that. Federal legislation, virtually conceding such fundamental law to the arcane machinations of a federal agency, is a conceptual sea change. What has been historically regarded as fundamental state law has been considerably downgraded. Perhaps denigrated and besmirched are better words. Nothing in the 1987 crash would have indicated a priori the transfer of such powers to the federal government. Nothing in that crash justifies trashing fundamental state law.

In fact, it is such a sea change that the SEC has not shown any great desire to exercise those powers. The Uniform Law Commissioners have achieved some breathing space for the states by beginning a new project to amend Article 8 of the Uniform Commercial Code. Presumably, if that project is successful and if the state response to uniformity is sufficient, the SEC will not exercise its new-found authority.

However, some five states still have not gotten around to adopting the 1977 amendments to Article 8 of the Uniform Commercial Code, a fact that was used in promoting the federal legislation. Less than complete adoption of the new Article 8 may concede the whole issue to the federal government.

A similar problem permeates fundamental banking laws, as well. Historically, the fundamental law governing checks and bank deposits has been state law, Articles 3 and 4 of the Uniform Commercial Code, and the Uniform Negotiable Instruments Act before the Uniform Commercial Code, and the common law before that. The old Negotiable Instruments Act was the first major commercial uniform act that the Uniform Law Commissioners promulgated--in 1896.

The Federal Reserve Board now probably has the regulatory power to pre-empt state law. What power it does not have, Congress would likely grant it, if asked. The Uniform Law Commissioners have embarked upon significant revisions of the banking articles in the Uniform Commercial Code. They have added one article, Article 4A, on funds transfers. Here again, the federal agency has shown forbearance, but it is an open question how long that forbearance will continue, if the states cannot achieve uniformity through their own institution for that purpose.

The Uniform Law Commissioners have taken on the responsibility for private law development at the state level as an antidote to centralization. It is a peculiar responsibility that does not always get the attention that it probably should get in the state legislatures. Yet that private law has much to do with the social and economic well-being of the country. It is important to the commonweal. It is also very complicated law, requiring appropriate institutional response to make it work exactly right. That is why the states have the Uniform Law Commissioners--the institution with the ability to do the job. The federal government is totally incapable of doing well anything in the area of private law. In fact, prior federal incursions have become legal nightmares.

These are matters too important to be relegated to the undemocratic rule-making processes of appointed federal agencies. Only true legislatures should make such law. The states, in fact, have the mechanism to take care of their own business. What they need to do is to give greater credibility to the issue of uniformity. In each of the cases cited, large social and economic forces are at work, pressing for one law. If the states are not to make themselves irrelevant as law-makers, they must demonstrate their ability to provide uniformity as their best defense against federalization.