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«JOURNAL OF LAW, ECONOMICS & POLICY VOLUME 10 SPRING 2014 NUMBER 2 EDITORIAL BOARD 2013-2014 Steve Dunn Editor-in-Chief Crystal Yi Meagan Dziura Sarah ...»

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150 See, e.g., Western Union Misses Payments; Credit Rating Cut, WALL ST. J., Dec. 2 1987, at 51 (“Western Union Corp. skipped more interest payments, prompting Standard & Poor's Corp. to downgrade to ‘default’ credit ratings on various company securities.”).

72440 JOURNAL OF LAW, ECONOMICS & POLICY [VOL. 10:2

to this strategy. First, the lender may choose to continue to pursue payment from the corporation before seeking to enforce the servicemember’s guaranty.151 Second, the lender may be able to prove that the guarantor’s ability to pay the obligation was not materially impacted as required under § 527.152 Additionally, the lender may be able to prove that the servicemember employing this strategy is abusing the corporate form, and therefore the court may pierce the corporate veil.153 In any of these scenarios, a court may seek to block the corporation’s strategy as an attempt to employ the SCRA as a weapon against legitimate creditors.154 While these scenarios may suggest that a strategic default to take advantage of § 527 protection would rarely succeed, corporate management is certainly capable of exploiting and expanding any “loophole” in the law.155 Any court confronted with the question of guarantor liability under § 527 should therefore slam the door on this strategy at the outset by holding that a servicemember guarantor can be liable for interest in excess of 6%.

CONCLUSION

Courts have not directly addressed the question of whether a servicemember who has guaranteed the debt of a corporation can be held liable for interest on that debt that accrues at a rate greater than 6%. While the text of the Servicemembers Civil Relief Act allows for at least three different interpretations, analysis of the statute’s text, relevant case law, and the law of guaranty suggest that a rule that would allow a servicemember guarantor to be held liable for interest on corporate debt that accrues at a rate greater than 6% is correct. This result is also consistent with Congress’s intent, maintains servicemember-owned corporations’ access to credit, and eliminates the incentive for strategic default by these corporations.

151 See, e.g., Newton, 2012 WL 1752407, at *4 (bank foreclosing on corporate assets before enforcing the guaranty against servicemember).

152 50 U.S.C. App. § 527(c) (2006).

153 See 18 AM. JUR. 2D Corporations § 47 (2010).

154 Engstrom v. First Nat. Bank of Eagle Lake, 47 F.3d 1459, 1462 (5th Cir. 1995) (“Although the act is to be liberally construed it is not to be used as a sword against persons with legitimate claims.”).

155 See, e.g., George J. Staubus, Ethics Failures in Corporate Financial Reporting, 57 J. BUS.

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INTRODUCTION

A sixteen-hour standoff with police began after a suspect took control of six cows that wandered on to his farm and “chased police off his land with high powered rifles.”1 Without the suspect’s knowledge, police used a Predator drone to locate and apprehend him on his 3,000-acre farm.2 In addition to law enforcement, anyone may buy a handheld drone. The Parrot AR.Drone 2.0, for example, costs less than three hundred dollars and can fly up to 165 feet from its controller while recording and transmitting live high-definition video from the sky.3 Unmanned aerial vehicles (drones) have become essential to government surveillance overseas and are now being deployed domestically for law enforcement and other purposes. The ability of drones to conduct widespread domestic surveillance has raised serious privacy concerns.

Both government and private actors may use drones. Given the proliferation of this new technology, Congress has recently directed the Federal Aviation Administration (FAA) to expedite the licensing process and open the domestic airspace to drones.4 Situations like the one described above will likely become more common in the near future.5 Domestic drones * George Mason University School of Law, J.D. Candidate, May 2015; Boston University, M.S., Business Administration and Management; North Carolina State University, B.S., Business Management. This comment builds upon and includes sources and material from a seminar paper I completed in July 2012 titled “Unmanned Aerial Vehicle Surveillance in the United States: A Discussion of the Legal Framework.” I would like to thank the Editors and Staff of the Journal of Law, Economics & Policy, including my Notes Editor, Emily Barber, Professor D. Bruce Johnsen, George Mason University School of Law, and everyone who took the time to provide comments on this paper.

1 Jason Koebler, First Man Arrested with Drone Evidence Vows to Fight Case, U.S. NEWS & WORLD REPORT (Apr. 9, 2012), http://www.usnews.com/news/articles/2012/04/09/first-manarrested-with-drone-evidence-vows-to-fight-case.

2 Id.

3 APPLE STORE, http://store.apple.com/us/product/H8859ZM/A/parrot-ardrone-20 (last visited Jan. 18, 2012).

4 Harley Geiger, Congress Demands Drones Over America, CTR. FOR DEMOCRACY & TECH.

(Feb. 9, 2012), https://www.cdt.org/blogs/harley-geiger/0902congress-demands-drones-over-america;

FAA Modernization and Reform Act of 2012, Pub. L. No. 112-95, 126 Stat. 11 (2012).

5 The global drone market is predicted to total more than $94 billion over the next decade.





Worldwide UAV market is to reach more that $94 billion in ten years, HOMELAND SEC. NEWS WIRE

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have the potential to allow the government to effectively and efficiently monitor the activities of people across the nation. Part I of this Comment examines the capabilities of drones, discusses currently planned drone deployments, and examines recent developments that have brought the topic of domestic drone surveillance to the forefront of national security law discussions.

This comment concludes that current law does not adequately protect privacy interests from the widespread surveillance that could result from the unrestricted domestic use of drones. Part II discusses the sources of the right to privacy and examines the current state of the law.

Part III applies an economic perspective to determine the optimal level of domestic drone surveillance that the law should allow. This analysis is based upon a general economic model of surveillance developed by Andrew Song following the September 11, 2001 terrorist attacks.6 Economic analysis shows that the uncontrolled domestic deployment of drones would lead to an inefficient and unproductive loss of social utility. Prompt legislative action is therefore necessary to address the fundamental privacy challenges presented by the use of drones. Part IV concludes by proposing a legal framework to balance security and other interests while safeguarding the privacy rights of U.S. citizens. As discussed in this comment, such legislation should allow constructive use of the technology within a framework that protects individual privacy rights.

I. BACKGROUND: DOMESTIC DEPLOYMENT OF DRONES

Recent congressional legislation has directed the FAA to expedite its current licensing process and allow the private and commercial use of drones in U.S. airspace by October 2015.7 The FAA has streamlined the authorization process to “less than 60 days” for nonemergency drone operations.8 Among other requirements, the recent legislation directs the FAA to allow government agencies to operate small drones weighing less than 4.4 pounds.9 The use of drones can be expected to increase dramatically in the coming years.

(Apr. 12, 2012), http://www.homelandsecuritynewswire.com/dr20120412-worldwide-uav-market-toreach-more-than-94-billion-in-ten-years.

6 Andrew Song, Technology, Terrorism, and the Fishbowl Effect: An Economic Analysis of Surveillance and Searches 3–22, (Harvard Law Sch. Pub. Law & Legal Theory, Working Paper No. 73, May 2003), available at http://papers.ssrn.com/abstract=422220.

7 Geiger, supra note 4; FAA Modernization and Reform Act of 2012, Pub. L. No. 112-95, 126

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The FAA has already authorized many police departments and other agencies to use drones.10 As of November 2012, the FAA oversaw 345 active Certificates of Waiver or Authorization that allow public entities to operate drones in civil airspace.11 Customs and Border Protection uses Predator drones along the nation’s borders “to search for illegal immigrants and smugglers”12 and “[t]he FBI and Drug Enforcement Administration have used Predators for other domestic investigations.”13 Predators owned by Customs and Border Protection and based at U.S. Air Force bases have been deployed on numerous occasions to assist local law enforcement.14 One law enforcement agency has even deployed a drone capable of being armed with lethal and non-lethal weapons.15 Drones also have applications beyond government law enforcement.

Drones may be used to provide live video coverage of events without the need to use piloted helicopters and by paparazzi chasing after pictures of celebrities and other public figures.16 Individuals may use drones to spy on their neighbors, to keep an eye on their children, or to keep tabs on a potentially unfaithful spouse.17 The possibilities for corporate espionage and the theft of trade secrets are also endless.

Drones range in size from handheld units to units the size of large aircraft and have a wide variety of capabilities.18 Nearly fifty companies are reported to be developing an estimated 150 varieties of drone systems.19 Users of drones may include the military, federal and local law enforcement agencies, business entities, and private individuals. Drones have many diverse domestic uses including surveillance of dangerous disaster sites, patrolling borders, helping law enforcement locate suspects, monitoring traffic, crop dusting, aerial mapping, media coverage, and many others.20 10 Somini Sengupta, Who Is Flying Drones Over America?, N.Y. TIMES BITS BLOG (Jul 14, 2012, 7:08 AM), http://bits.blogs.nytimes.com/2012/07/14/who-is-flying-drones-over-america/.

11 Fact Sheet, supra note 8.

12 Brian Bennett, Police employ Predator drone spy planes on home front, L.A. TIMES (Dec. 10, 2011), available at http://articles.latimes.com/print/2011/dec/10/nation/la-na-drone-arrest-20111211.

13 Id.

14 Id.

15 Harley Geiger, How Congress Should Tackle the Drone Privacy Problem, CTR. FOR DEMOCRACY & TECH. (Mar. 27, 2012), https://www.cdt.org/blogs/harley-geiger/2703how-congressshould-tackle-drone-privacy-problem (last updated May 4, 2012) (citing Texas county police buys drone HOMELAND SEC. NEWS WIRE (Oct. 31, 2011), that can carry weapons, http://www.homelandsecuritynewswire.com/texas-county-police-buys-drone-can-carry-weapons).

16 Mark Corcoran, Rise of the Machines, ABC NEWS (Apr. 9, 2012), http://www.abc.net.au/foreign/content/2012/s3582815.htm.

17 Id.

18 Andy Pasztor & John Emshwiller, Drone Use Takes Off on the Home Front, WALL ST. J. (Apr.

20, 2012), http://online.wsj.com/article/SB10001424052702304331204577354331959335276.html.

19 Id.

20 Harley Geiger, The Drones Are Coming, CTR. FOR DEMOCRACY & TECH. (Dec. 21, 2011), https://www.cdt.org/blogs/harley-geiger/2112drones-are-coming.

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Drones represent an unprecedented convergence of surveillance technologies that could lead to increased security but could also jeopardize the privacy of U.S. citizens. Drones may be equipped with a variety of technologies including high-resolution cameras,21 face-recognition technology,22 video-recording capability,23 heat sensors,24 radar systems,25 night vision,26 infrared sensors,27 thermal-imaging cameras,28 Wi-Fi and communications interception devices,29 GPS,30 license-plate scanners,31 and other systems designed to aid in surveillance. Drones will soon be able to recognize faces and track the movement of subjects with only minimal visual-image data 21 Neal Gompa, New spy drone has 1.8 gigapixel camera, EXTREMETECH (Dec. 28, 2011), http://www.extremetech.com/extreme/110873-new-spy-drone-has-1-8-gigapixel-camera.

22 Geiger, supra note 4 (citing Noah Shachtman, Army Tracking Plan: Drones That Never Forget a Face, WIRED (Sep. 28, 2011), http://www.wired.com/dangerroom/2011/09/drones-never-forget-aface/ (discussing the ability of drones to utilize facial recognition technology to track subjects).

23 Joe Pollicino, Parrot unveils AR.Drone 2.0 with 720p HD camera, autonomous videorecording, we go hands-on, ENGADGET (Jan. 8, 2012), http://www.engadget.com/2012/01/08/parrotunveils-ar-drone-2-0-with-720p-hd-camera-autonomous-vide/ (discussing the video recording capability of drones).

24 Drones in U.S.: More Unmanned Aircraft Will Be Flying in Domestic Airspace by 2015, HUFFPOST LIVE (Sep. 19. 2012, 11:42 AM), http://www.huffingtonpost.com/2012/09/19/dronesunmanned-aircrafts-us-airspace_n_1896839.html (discussing the use of heat sensors on drones).

25 C.E. Schwartz et al., A Radar for Unmanned Air Vehicles, 3 LINCOLN LAB. J. 1 (1990), available at http://www.ll.mit.edu/publications/journal/pdf/vol03_no1/3.1.6.radaraUAV.pdf (discussing a radar system designed for drones).

26 Ian Drury, The 7oz helicopter that could help beat the Taliban: $35,000 device enables soldiers to look at enemy territory without risk of being killed, MAIL ONLINE (Aug. 2, 2012), http://www.dailymail.co.uk/sciencetech/article-2182916/The-7oz-helicopter-help-beat-Taliban--20-000device-enables-soldiers-look-enemy-territory-risk-killed.html (discussing the night vision capability of drones).

27 Developing Commercial UAV Applications, Imaging Sensors and Data Collection, UAV MARKETSPACE http://www.uavm.com/uavsubsystems/imagingdatasensors.html (last visited Oct. 7, 2013) (discussing infrared sensors available for drones).

28 Geiger, supra note 4 (citing Draganfly Innovations Inc., DraganFlyer X6, http://www.draganfly.com/uav-helicopter/draganflyer-x6/features/flir-camera.php (last visited Oct. 7, 2013)) (discussing a thermal infrared camera that enables drones to locate “individuals based on body heat”).

29 Id. (citing Gary Mortimer, Wi-Fi Aerial Surveillance Platform, WASP drone, SUAS NEWS (Aug. 15, 2010), http://www.suasnews.com/2010/08/587/wi-fi-aerial-surveillance-platform-wasp/); Kim Zetter, DIY Spy Drone Sniffs Wi-Fi, Intercepts Phone Calls, WIRED (Aug. 4, 2011), http://www.wired.com/threatlevel/2011/08/blackhat-drone (discussing the ability of drones to access wireless networks and intercept communications).



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