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Secured Transactions In Bionic or Genetic Organ Replacement

October 13, 2011 Leave a comment

Because I’m in law school, I’m exposed to lots of general legal theories and policies. Because I’m interested in technology, I enjoy thinking about the implications of those legal theories in relation to transhumanist technology. I hope, one day, to merge the two interests and help shape the law as it relates to transhumanist technology. I gave a talk at my law school recently about the future of healthcare technology and began to scratch the surface of merging the law and technology, and today I want to flesh out one of the topics I brought up: Contract law as it relates to human augmentation. In the US, contract law is governed by (among other laws) the Uniform Commercial Code (UCC). The UCC is a model code, which means that the drafters craft what they view as an ideal piece of legislation, and that legislation is then offered to the states for adoption (or not.) The UCC, for instance, has been adopted by every state in some form, although every state has also modified the UCC in accordance with the policy preferences of each individual state.

Article 9 of the UCC governs secured transactions for goods. Because mechanical or biological organs are tangible, moveable, and identifiable at the time of sale, they qualify as goods under the UCC. The basis of secured transactions rests in the policy that a creditor who extends money or goods on credit ought to be protected from a debtor that defaults on their payments by judicially enforced remedies. This is a common enough; anyone who has bought a car with a loan certainly signed a security agreement as part of accepting the loan that said something to the effect that the creditor has the right to repossess the car if the buyer defaults on their loan. The process of gaining a security interest in goods is relatively simple. First, the creditor must extend some value to the debtor; in the previous example the car dealer trades a vehicle for the debtor’s promise to pay in (generally) monthly installments over a period of time. The debtor must authenticate (generally: sign) this security agreement. The creditor must accurately describe the collateral secured (say, by listing the make, model, and VIN number of the car.) Most creditors of high-ticket items also file a financing statement with the appropriate state office, putting other creditors on notice that the original creditor has an existing interest in the property; essentially, the financing statement lets all other creditors know that the first creditor has dibs on the car if the buyer defaults on payments and/or declares bankruptcy.

Once secured, a creditor has the right to repossess the property if the buyer goes into default, subject to some restrictions. For instance, most states provide that a creditor cannot ‘breach the peace’ when repossessing the vehicle. If that isn’t possible, then the creditor has to go to court, get a judgment against the debtor, then get the sheriff to escort the creditor to the debtor’s property for repossession. Generally, repossessed vehicles are sold at auction. If the auction nets an amount sufficient to cover the debt, the debtor takes what is owed and transfers any excess to the buyer. If the auction nets an amount insufficient to cover the debt then the creditor can repossess any additional property used as collateral in the security agreement, or else file an unsecured lien on the debtor’s other property. All of this is fairly standard when we’re talking about repossessing a car, but how would the law handle repossession of a prosthetic limb, or even more difficult, a vital replacement organ?

The movie Repo Men offered the Hollywood take on this very situation. In the movie, contract law was rigidly enforced and there was no ‘breach of the peace’ limitation. Thus, a person who bought a (very expensive) prosthetic arm signed something like a security agreement, the prosthetic company filed a financing statement, and the buyer was obligated to make payments until the limb was paid off. If the buyer defaulted, the Repo Men were sent to collect the limb; often by tasing or otherwise incapacitating the debtor and forcibly removing the limb, leaving the debtor to fend for themselves when they woke up. In the movie, even artificial hearts were repossessed which, of course, meant the debtor never woke up. But a contract was a contract, so that was the debtor’s problem.

There are good reasons for allowing a creditor to take a security interest in an artificial limb or organ. The first relates to the general policy behind contracts mentioned above: People ought to honor their obligations, and if good will isn’t enough to compel a debtor to make timely payments then the creditor ought to have remedies to recover the property or otherwise recoup their losses. Prosthetic limbs and organs are likely to be very expensive; perhaps as much as a nice car for something like a prosthetic arm all the way up to the cost of a house (or more) for prosthetic hearts, lungs, or eyes. If a creditor has no remedies for a defaulting debtor, then no creditor in their right mind would sell a limb or organ before it was fully paid off; either in cash up front or through a layaway program where the purchaser makes all payments –before- receiving the limb or organ. If the buyer needs a prosthetic arm, this might make sense, although the buyer won’t be able to use the arm until they come up with the money or make all the layaway payments. If the buyer needs an artificial heart, this could be more problematic; most buyers probably won’t be able to come up with the money in time to save their lives. In short, without a judicially enforceable ability to recover their losses creditors will be hesitant to sell limbs or organs on credit and buyers will be inconvenienced while coming up with the money for the limb or organ or be outright unable to purchase a needed limb or organ. Prosthetics would be reserved for the wealthy (or patient) and less well-off people will not be able to take advantage of prosthetic technology.

On the other hand, we certainly don’t want creditors knocking people out and repossessing their hearts in the middle of the street. Or even in the privacy of their own homes; people ought to honor their contracts, but not if failure to do so will ultimately kill the debtor. That bumps up against another contract principle that forbids unconscionable contracts. A court would almost certainly hold that a contract, the default of which would lead to the debtors death, is unconscionable, no matter how good for public policy it is that creditors extend credit to buyers. Even if a creditor could somehow repossess a limb or organ without breaching the peace (or had a sheriff with them to enforce a judgment) we probably don’t want to force a buyer to submit to whatever doctor (or not) the creditor employs to retrieve the organs. In the US, patients generally have the right to select their doctor and aren’t forced into operations they don’t want. Although this second provision might pass the unconscionability muster if the creditor is extremely clear with the debtor about what they are signing and offers the debtor as much time as necessary to seek advice about the contract, this sort of provision goes right up to the line of what a court might allow.

How might these two persuasive policies be reconciled? The most straightforward approach would be to select one or the other policy preference and craft the laws in such a way to enforce it; either we allow secured creditors to repossess organs, even if it kills the debtor, and we modify the unconscionability doctrine, or else we forbid repossession and deal with the social fallout of rich people getting organs while poor and middle class people die for lack of an ability to pay. Neither sounds particularly appealing, although I submit that the second option is preferable to the first for a couple of reasons. Over time, technology tends to ‘trickle down’ (a phrase I use hesitantly because Regan’s economic theory was such a colossal failure). Think about cell phones; even the free-with-contract phones today are several times better than the most expensive phone available 15 years ago. Rich people might have access to the –best- prosthetics (and certainly to the newest prosthetics that are just becoming available) while poorer people have to wait, but if there is a market for refurbished prosthetics as the rich upgrade their augmentations, it seems conceivable that less wealthy individuals could eventually get a bargain prosthetic (or a prosthetic a few versions out of date) within their budget. Whether prosthetics will ever be dirt cheap is up in the air, though they ought to become affordable to the vast majority of people eventually. I imagine a large part of prostheses becoming affordable quickly rests on the palatability of implanting refurbished organs into new patients; most people wouldn’t buy a ‘refurbished’ pair of underwear, so is there any reason to think people would accept ‘lightly-used-single-owner’ eyes? Of course, if the alternative is a lifetime of blindness … Plus, people already accept donated organs that seem significantly more used by another person than a sterile, refurbished prosthetic would be.

However, policy reconciliation could be more subtle. For instance, the laws could be crafted to require debtors to secure their organs with different collateral; a debtor who defaults might have their house or car repossessed to satisfy the debt, but not the organ that is keeping them alive. This would require minimal revision in the current laws, as we already deem it acceptable to foreclose on a debtor’s house or vehicle for non-payment of a debt. Although it is difficult (for me) to be OK making a debtor homeless or taking their car (which might, after all, be the only thing allowing a debtor to get to work, which would allow them to pay off the debt eventually) it is a more acceptable option than killing a debtor who cannot pay or denying portions of society life-saving technology for want of credit. Most debtors probably wouldn’t have enough personal property to require that other collateral aside from a house or car be used given the probable expense of prosthetic limbs and organs. Part of that additional collateral could be voluntary garnishment of wages, although how attractive that is to a potential creditor would depend on how much money the debtor makes, and is always subject to the risk that the debtor will lose their job after implantation.

I’m sure there are more than these few options for securing organs, though I can’t think of any at the moment. Additional thoughts are appreciated!

*As a legal matter, I have to say that none of this should be construed as legal advice or anything other than the musings of a technophile who happens to be in law school. If you have non-theoretical questions about the UCC or secured transactions, consult a licensed attorney. As a credit-where-it’s-due matter, thanks to my law school buddy Jeremy Duke and my Contracts & Secured Transactions professor Keith Rowley for letting me bounce ideas off them. Any misstatements of the law that remain are entirely my own.

Categories: ethics, legal issues