A fact of business today is that customers – both consumers and other businesses – and employees expect to transact digitally. To remain competitive, companies find themselves increasing their efforts to digitally transform their businesses.

Successfully implementing this transformation requires careful planning to ensure regulatory compliance, a smooth integration with existing business technology and a positive customer experience.

Each issue will feature in-depth insight on a timely and important current topic.

In this issue, for our Insights piece, we provide an analysis of a recent Supreme Court decision that significantly narrows the definition of an “automatic telephone dialing system.” In addition, this edition includes reports on other recently enacted federal and state laws, federal and state regulatory activities, fresh judicial precedent and other important news.

For related information regarding blockchain and digital assets, please see our monthly bulletin Blockchain and Digital Assets News and Trends.

INSIGHT

TCPA: Supreme Court narrows definition of ATDS, but pitfalls remain

The Telephone Consumer Protection Act (TCPA) has long been one of the most litigated statutes in the United States. A key question in much of that litigation revolved around what technology constitutes an “automatic telephone dialing system” (ATDS). The TCPA defines an ATDS to mean “equipment which has the capacity – (A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.” At issue has been whether the phrase “using a random or sequential number generator” modifies only “produce” or both “store or produce.” On April 1, 2021, the Supreme Court unanimously answered the question. Read more.

LEGISLATIVE DEVELOPMENTS

STATE

Digital identity

Wyoming passes law establishing attribution requirements for acts taken through digital identity. On April 1, 2021, the governor signed into law the Digital Identity Act (SF39), which defines personal and organizational identity and establishes the requirements for attribution taken through a digital identity.

Electronic signatures and records

Colorado revises its Corporations and Associations Act to expand the ability to conduct business activities electronically. On April 19, 2021, the governor signed into law bill HB21-1124 which revises the Corporations and Associations Act to better facilitate a business entities’ ability to conduct business activities electronically by (a) defining terms that relate to electronic communications, such as delivery, email, electronic transmission, and notice; (b) specifying how notice may be given by electronic transmission; and (c) establishing requirements for remote participation in shareholders’ and directors’ meetings.

Oklahoma revises its General Corporation Act to expand ability to conduct business activities electronically. On April 19, 2021, the governor approved SB 228 into law, which authorizes the electronic transmission of certain notices, clarifies procedures for certain consents, establishes procedures for certain document form, signature, and delivery; and authorizes certain electronic transactions.

Washington revises its Business Corporations Act to allow for increased electronic communications. On April 16, 2021, the governor signed SB 5005 which amended the Business Corporations Act to allow corporations to give notices and other communications to shareholders and directors by email and other forms of electronic transmission without obtaining their consent. If a corporation previously gave notices to a shareholder only by mail or other methods of delivery not involving electronic transmission, the corporation must notify the shareholder it intends to give notices by electronic transmission before starting them. Notably, a notice may not be given by email or other electronic transmission: to a shareholder after the shareholder notifies the corporation in writing of an objection to receiving notice by email or other electronic transmission; or to a shareholder or director after the corporation is unable to deliver two consecutive notices by email or other electronic transmission to the email address, network, or processing system, and the inability becomes known to the corporation

Maryland amends insurance law to allow the Insurance Commissioner to both send and receive electronic communications in certain circumstances. On April 13, 2021, the governor approved SB226, which authorizes the Maryland Insurance Commissioner to send certain notices and communications electronically – such as renewal application forms – and insurers to send certain notices electronically to the Insurance Commissioner as well – such as a renewal application.

Remote online notarization

Three new states add RON: The following states have joined the 29 existing states that have adopted remote online notarization (RON) (AK, AZ, CO, FL, HI, ID, IN, IA, KY, LA, MD, MI, MN, MO, MT, NE, NV, ND, OH, OK, PA, TN, TX, UT, VT, VA, WA, WI, WY).

  • Kansas – On April 21, the governor signed SB106 to be effective January 1, 2022;
  • New Mexico – On March 15, the governor signed SB12 to be effective January 1, 2022; and
  • West Virginia – On April 19, the governor signed SB469 to be effective on June 17, 2021.

Virginia also revised its existing RON laws by enacting HB2064 effective March 11, 2021. For more information, see our COVID alert.

REGULATORY DEVELOPMENTS

FEDERAL

House Financial Services Committee reauthorizes task forces on artificial intelligence and financial technology. On April 20, 2021, Congresswoman Maxine Waters (D-CA), Chairwoman of the House Financial Services Committee, announced the reauthorization of the Financial Technology and Artificial Intelligence Task Forces.

FTC addresses harnessing AI without inadvertently introducing bias or other unfair outcomes. On April 19, 2021, the FTC published a post setting out lessons on how to use AI truthfully, fairly, and equitably. The FTC began the post by stating that it has decades of experience enforcing three primary laws important to developers and users of AI: (a) Section 5 of the FTC Act, which prohibits unfair or deceptive practices; (b) the Fair Credit Reporting Act, where algorithms can be used to deny people credit, insurance, housing and other benefits; and (c) the Equal Credit Opportunity Act, which makes it illegal to discriminate based on a protected class. The FTC listed the following lessons:

  • Start with the right foundation: If a data set is missing information from particular populations, using that data to build an AI model may result in unfair decisions against legally protected groups.
  • Watch out for discriminatory outcomes: The FTC noted that it is important for companies to test their algorithm – both before deploying it and after – to ensure it doesn’t discriminate against a protected class.
  • Embrace transparency and independence: The FTC stated that as a company develops and uses AI, it should think about ways to embrace transparency and independence, such as by conducting and publishing results of independent audits.
  • Don’t exaggerate what your algorithm can do or whether it can deliver fair or unbiased results: Because under the FTC Act, statements must be truthful, non-deceptive, and backed-up by evidence, companies should not overpromise on what the algorithm can deliver.
  • Tell the truth about how data is used: The FTC cautions companies to be careful about how they get the data to power their model.
  • Do more good than harm and hold yourself accountable.

CASE LAW

FEDERAL

ADA

Circuit court overturns district court in finding that “public accommodations” under Title III of the ADA do not include websites. In Gil v. Winn-Dixie Stores, Inc., 2021 WL 1289906 (11th Cir., Apr. 7, 2021), the court stated that the statutory language in Title III of the Americans with Disabilities Act (ADA) was “unambiguous and clear” – it described “twelve types of locations [and] [a]ll of these listed types of locations are tangible, physical spaces.” Therefore, a website is not a place of public accommodation under Title III. Next, the court stated that the absence of “auxiliary aids” on the defendant’s website did not act as an “intangible barrier” causing the plaintiff to be discriminatory excluded, denied services, or otherwise treated differently than other persons in physical stores – the place of “public accommodation.”

Electronic signatures and general online contract formation

Court finds that valid contract did not exist where unilateral change made to document after party electronically signed. In Rowland v. Sandy Morris Financial & Estate Planning Services, 2021 WL 1287563 (4th Cir., Apr. 7, 2021), the court held that no contract was formed where the defendant added material terms, using ink, to an asset management agreement after the plaintiff had signed it electronically. In noting the necessity of retaining contract formalities during electronic execution, the court stated the following: “The electronic age has not made the formalities of contract less crucial, but more so—it is imperative that parties turn square corners and ensure that the documents on which signatures are affixed are as identical as possible and certainly identical as to all material terms. In the past, parties meeting face-to-face might have interacted with other people who could testify as to disputed facts over contract formation. When personal contact (and perhaps extrinsic evidence) is reduced, and documents are swapped back and forth via email or [electronic signature providers], there may be fewer such people. All we are left to rest on are the formalities.”

Court upholds arbitration agreement entered into via mobile app. In Emmanuel v. Handy Technologies, Inc., 922 F.3d 1 (1st Cir., March 22, 2021), the court upheld the lower court’s conclusion that the plaintiff validly agreed to the arbitration clause under Massachusetts law when accessing the defendant’s mobile app on her phone. In doing so, the court analyzed whether having only a portion of the agreement visible, including not having the arbitration provision visible, prior to clicking “Accept” and not requiring the plaintiff to scroll through the entire agreement before clicking “Accept” impaired the contract’s enforceability. The court stated that the screen displaying the portion of the agreement was clearly visible to the plaintiff and made clear that additional text could be viewed by scrolling. Further, the court stated that if the plaintiff was arguing that she did not receive reasonable notice of the terms because the app did not require her to scroll through its full terms before clicking “Accept,” the court found that contention unpersuasive. Therefore, the court found that the plaintiff had reasonable notice of the arbitration agreement.

Court upholds online agreement because, at minimum, plaintiff was on “inquiry notice” regarding its existence. In Arencibia v. AGA Service Company, 2021 WL 1318225 (S.D. Fla. Apr. 8, 2021), the court upheld a travel insurance agreement because even if the plaintiff did not read its terms, he was on inquiry notice of its existence. Specifically, the plaintiff was instructed that by clicking the relevant button, he would be indicating his acceptance of the policy that was accessible via hyperlink.

RECENT EVENTS

In the 2021 edition of Chambers FinTech, Chambers and Partners identified DLA Piper as “one of the foremost firms in the country for transactional FinTech matters.” Partners Margo H. K. Tank and David Whitaker were recognized individually for their work in FinTech.

Partners Margo H. K. Tank and David Whitaker have each been named “Acritas Stars – independently rated lawyers” for 2021. Acritas Stars are client-nominated attorneys recognized for their stand-out performance in private practice.

The Financial Times has ranked DLA Piper second on its lists of Most Innovative Law Firm and Most Digital Law Firm in the FT North America Innovative Lawyers 2020 report. The Financial Times particularly noted our pro bono legal work on behalf of the UN’s World Food Programme, which the authors of this publication assisted with.

RECENT PUBLICATIONS

The Law of Electronic Signatures, 2020 - 2021 Edition (Thomson Reuters) is an essential guide to electronic signatures and records laws, including the context in which the laws were adopted and the ways in which the authors believe the drafters intended them to be interpreted. The publication is prepared by authors, including Margo Tank and David Whitaker, with more than 30 years combined experience that includes involvement with the drafting and passage of Electronic Signatures in Global and National Commerce Act (ESIGN), the preparation of the Uniform Electronic Transactions Act (UETA), the creation of SPeRS™ (the Standards and Procedures for electronic Records and Signatures), and serving as counsel to the Electronic Signatures and Records Association. The insights they provide will be indispensable to anyone seeking to understand the impact of, and the liability associated with, using electronic signatures and electronic records.

These insights include:

  • Details on the legal requirements for using electronic signatures and records, including delivery, presentation, signing, and record retention
  • Comprehensive tables itemizing the state variations to the uniform UETA language
  • Special considerations for using electronic signatures and records in connection with emerging and evolving technology
  • Using electronic records and signatures in specialized transactions and documents, such as securities, chattel paper, and mortgages
  • Analysis of the interplay between ESIGN, UETA, and many other key laws and regulations
  • Identification and summaries of recent legal developments and court cases impacting electronic signatures and records

The MBA Compliance Essentials Remote Online Notarization State Surveys, developed by DLA Piper, provides a comprehensive look at RON requirements in each state that has enacted RON legislation. These fully editable surveys are organized by category of requirements, including registration, technology, seal and signature, certificates of RON acts, journal, authentication, session, recording, and additional requirements. Companies can purchase the full package which includes surveys for all states that have enacted RON legislation along with a matrix summarizing state requirements, or companies can purchase information about individual states as needed. Read more.