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Third Circuit Upholds Ban on UCC Materials; Sixth Circuit Disagrees

The Pennsylvania Department of Corrections (PDOC) may lawfully ban the receipt and possession of materials related to the Uniform Commercial Code (UCC), the Third Circuit Court of Appeals held on July 29, 2008. In a more recent ruling, however, the Sixth Circuit upheld a preliminary injunction barring the Michigan DOC from enforcing a policy that restricted prisoners’ access to UCC materials.

The UCC is one of several acts which seek to harmonize the law on sales and commercial transactions in all 50 states to better enable interstate commerce. That’s the real world short answer.

If you’re unfamiliar with the prison version of the UCC, here’s a brief introduction. Are you tired of being in prison? If you answered yes, then you might be interested in Cracking the Code, a book that tells you step-by-step how to file a lien against your judge and prosecutor. Cracking the Code explains how, after the United States went off the gold standard, the government created a split personality for each of its citizens: The real you and a fictional person called the “strawman.” Your strawman was pledged by the United States as collateral for its ever-growing trillion dollar deficit. The judge and prosecutor in your case, however, only have power over your strawman and not the real you.

By filing UCC financing statements you can acquire a security interest in your strawman.
This will enable you to demand millions of dollars from your judge and prosecutor for their use of your strawman’s name on your indictment and other legal documents. Your judge and prosecutor can avoid paying these monies by releasing you from prison. And if they refuse, no problem. You can extort your release by filing liens against them.

Does this sound crazy? That’s because it is. But believe it or not, some prisoners (and non-incarcerated citizens) actually have faith in this nonsense. “UCC’ers,” as they are sometimes called, subscribe to the so-called “Redemptionist” theory, which supports the use of commercial law to resist authority – including the correctional and judicial systems – despite the fact that the theory is absurd and doesn’t work.

Indeed, one U.S. District Court noted that a defendant facing federal charges who insisted on raising nonsensical UCC arguments was a “prisoner of his own gibberish.” See: United States v. Sandoval, 365 F.Supp.2d 319 (E.D.N.Y. 2005).

Fraudulent UCC liens, which are easy to file, difficult to remove and disastrous to a person’s credit rating, became the focus of Pennsylvania prison officials after a state prisoner filed liens against a judge, PDOC Secretary Jeffrey Beard and a prison superintendent.

In an effort to curb the filing of fraudulent liens, the PDOC designated all UCC-related materials as contraband. An investigation of prisoners believed to be engaged in filing liens was also ordered.

As a result of the new policy, PDOC staff at SCI-Graterford confiscated a variety of UCC materials from numerous prisoners. Believing this action to be unlawful, the prisoners filed suit in federal court. The district court denied relief. The plaintiffs then appealed and the Third Circuit affirmed, finding, that prisoners have no right to possess or receive materials that would help them file fraudulent UCC liens. See: Monroe v. Beard, 536 F.3d 198 (3d Cir. 2008), cert. denied.

Another federal appellate court has weighed in on the UCC issue in a recent ruling, but reached a contrary conclusion. On June 23, 2009, the Sixth Circuit affirmed a district court’s preliminary injunction that enjoined the Michigan Dept. of Corrections (MDOC) from enforcing Rule 23 of MDOC policy directive 05.03.118. Rule 23 regulates prisoners’ possession of UCC-related materials.

MDOC prisoner Walter Jones filed suit under 42 U.S.C. § 1983, claiming that Rule 23 infringed upon his First Amendment rights when his letter to the Secretary of State “seeking forms related to Michigan copyright and trademark registration laws” was confiscated by prison officials. He sought injunctive and declaratory relief, plus modest compensatory and punitive damages.

The Sixth Circuit held that the district court had abused its discretion by applying an incorrect “heightened” standard of scrutiny to Rule 23, but affirmed the issuance of the preliminary injunction on the merits under the Turner standard (Turner v. Safley, 482 U.S. 78, 107 S.Ct. 2254 (1987)).

Although the Court of Appeals noted “[T]here has been a nationwide increase in the number of filings by prison inmates of unsubstantiated liens and Uniform Commercial Code (UCC) financing statements against state or federal officials involved with their incarceration,” it found the MDOC could not enforce a blanket ban on most UCC-related materials under Rule 23.

The appellate court specifically noted that alternatives to Rule 23 existed; for example, prison officials could confiscate UCC materials under other MDOC policies, including Rules 3 and 7, which prohibit mail that is a security threat or that promotes or advocates the violation of state or federal laws.

The Sixth Circuit found that Jones was likely to succeed on the merits of his First Amendment claim, and thus affirmed the district court’s preliminary injunction enjoining the MDOC from enforcing Rule 23. Judge McKeague dissented, stating that the majority decision was “directly contrary to Turner’s clear and insistent teaching to let prison administrators make the difficult judgments concerning institutional operations.”

Readers should note that this appellate decision addressed the First Amendment aspect of Jones’ claim, and not the merits of any UCC arguments. Indeed, in affirming the lower court’s order, the Sixth Circuit held that UCC materials did not qualify as “legal mail” and thus did not have heightened constitutional protection. See: Jones v. Caruso, 569 F.3d 258 (6th Cir. 2009).

Congress recently took action to curb the filing of fraudulent liens. As part of the Court Security Improvement Act of 2007, it is now a federal crime for any person to file, attempt to file or conspire to file “any false lien or encumbrance against the real or personal property” of an officer or employee of the United States (Public Law No. 110-177). The offense is punishable by up to ten years imprisonment. Additionally, Michigan has enacted a state statute that makes it a felony to file false UCC financing statements.

UCC’ers should take note: If they persist in filing fraudulent liens as part of their mistaken belief in the UCC, they – and not their “strawman” – risk doing more time in prison.

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Related legal cases

Jones v. Caruso

Monroe v. Beard

United States v. Sandoval