State Action and Waiver Implications of Self-Help Repossession

In Adams v. Egley, a California federal district court held the repossession sections of the Uniform Commercial Code to be unconstitutional as a denial of due process. The Adams court relied on Sniadach v. Family Finance Co., in which the Supreme Court invalidated the Wisconsin prejudgment wage garnishment law as violative of due process because property was garnished under the statute without hearing or notice to the wage-earning debtor. When Adams was decided, the scope of Sniadach was the subject of extensive judicial dispute. Since then, the Supreme Court's decision in Fuentes v. Shevin has clarified the meaning of Sniadach by answering some of the questions spawned by that case. Fuentes saw Sniadach as not limited to deprivation of necessities, but as a statement of due process principles applicable to all deprivations of property. Even if the Supreme Court adopts the Adams view that nonjudicial repossession is unconstitutional or if such repossession is statutorily proscribed, the issue of contractual waiver of due process or statutory rights remains. Fuentes discussed contractual waiver without arriving at a solution for the bulk of foreseeable cases. The resolution of this problem, too, may have a profound impact on the debtor-creditor relationship, for the probable alternatives are that either a waiver inserted in the standard form contract will suffice or that waiver will be impossible in the majority of transactions. The constitutional issues of state action and contractual waiver in nonjudicial repossession will provide the focus for this discussion.