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 Illinois's adoption of the Uniform Electronic Transactions Act (UETA). This issue also 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.
With Illinois’s adoption of UETA, United States near full adoption
With Illinois adopting the Uniform Electronic Transactions Act (UETA), the US has reached near-complete state-by-state adoption of this law. Specifically, on June 25, 2021, Governor JB Pritzker approved SB2176, which enacts the UETA in Illinois, making it the 49th state to do so. The bill repealed Illinois’s prior electronic signature law, the Electronic Commerce Security Act (ECSA). The bill also made corresponding changes to various Illinois laws to conform cross references to the new UETA rather than the prior ECSA. The bill took effect immediately on June 25, 2021. This comes on the heels of Washington adopting its version of UETA in 2020 (previously covered here).
To date, New York is the only state that has not adopted a version of the UETA. New York has the New York Electronic Signatures and Records Act (NYESRA), which provides that “an electronic signature may be used by a person in lieu of a signature affixed by hand. The use of an electronic signature shall have the same validity and effect as the use of a signature affixed by hand.” Further, while not an adoption of UETA, New York courts have held that the New York legislature sought to make NYESRA fully consistent with the Electronic Signatures in Global and National Commerce Act.
Finally, while all states but New York have adopted UETA, not all states have adopted the “uniform” version of UETA. Most notable is California, which contains a greatly expanded list of exemptions, meaning that the use of electronic records and signatures will not apply to such transactions absent other California laws expressly allowing their use. Therefore, careful consideration is encouraged when proceeding electronically in California.
Texas creates work group on blockchain matters. On June 7, 2021, the governor of Texas signed HB 1576, which created a work group that will develop a plan for expanding the blockchain industry in Texas. The work group must submit its report not later than October 31, 2022.
Courts uphold arbitration agreements entered into electronically:
- In Burris v. Tractor Supply Company, 2021 WL 2211779 (S.D. Tex, June 1, 2021), the court dismissed the plaintiff’s contention that he did not “even sign” the relevant document as meritless because the document’s “Agree” button made it clear that clicking it constituted the plaintiff’s electronic signature.
- In Dandridge v. Sherwin Williams, Inc., 2021 WL 2228394 (M.D. Fla., May 26, 2021), the court found that the plaintiff agreed to the arbitration agreements contained in both his initial offer letter and his promotional offer letter. The plaintiff argued, in part, that he did not electronically sign the agreements and that no evidence exists that he consented to do business electronically. The defendant presented evidence that the plaintiff signed both offer letters electronically. Further, regarding consent, the court considered Florida’s Uniform Electronic Transactions Act and concluded that, considering the context and the circumstances – including that the plaintiff used the electronic application process, that he accepted both offers electronically and that he communicated with the defendant via email – that he consented to conduct the transaction by electronic means.
- In Reulbach v. Life Time Fitness, Inc., 2021 WL 2581565 (N.D. Ohio, June 23, 2021), the court found that the plaintiff accepted the defendant’s agreement when he logged into the relevant system, viewed the message containing the agreement and clicked “I Agree,” acknowledging that he had received the message and the attached agreement.
- In Crews v. Maxim Healthcare Services, Inc., 2021 WL 2417732 (W.D. Tenn., June 14, 2021), the court found that the plaintiff agreed to the arbitration provision. In analyzing Maryland’s Uniform Electronic Transactions Act, the court found that the plaintiff’s electronic signature was attributable to the plaintiff. First, the plaintiff signed an electronic signature consent which authorized use of his electronic signature for “[a]ny other employment-related documents.” The consent stated in part that, “By checking the box and clicking the ‘I Agree’ button (all below), you are agreeing that your electronic signature is the equivalent of your handwritten (or wet) signature, with all the same legal and binding effect.” Second, the plaintiff accepted the legal effect of his electronic signature – which was identical in all instances – on all other employment paperwork. The court noted that the only time his “handwritten” signature appeared was on the electronic signature consent form. Finally, the defendant showed the efficacy of the security procedure used to determine that the electronic signature should be attributable to the signer – the plaintiff had to use a unique password to electronically access, receive, review, sign and authenticate documents.
Court finds that defendant signed the agreement when he clicked button to “acknowledge” it: In Apprio, Inc. v. Zaccari, 2021 WL 2209404 (D.C.D.C., June 1, 2021), which involved a dispute over the contractual assignment of intellectual property rights, the court found that the defendant agreed to the “Proprietary Information and Assignment of Inventions Agreement” because he “acknowledged” the agreement. Specifically, the court stated that the defendant clicked on a button that said “Acknowledge” rather than “Agree” but that the contract and context made clear that this was not a meaningful distinction. Instead, the final paragraph of the contract treated the two words as equivalent and connected both to signing. Further, the agreement did not contain a signature line, so the court stated that the plaintiff did not expect a signature. Therefore, the court stated that, given the context of an electronically presented agreement, with no signature line, the agreement terms made clear that “acknowledge” was the key verb and that its final paragraph clarified that acknowledgment would be treated as equivalent to a signature. Because acknowledging the agreement amounted to signing the agreement, the court stated that the defendant was bound by its terms.
Electronic signatures and general online contract formation
Court affirms holding that substantial evidence existed that plaintiff did not sign the arbitration agreement. In Banniester v. Marinidence Opco, LLC, 64 Ca. App. 5th 541 (May 21, 2021), the court upheld the trial court’s conclusion that the employer failed to prove that the employee electronically signed the arbitration agreement. The court noted that substantial evidence existed that the defendant failed to authenticate the electronic signature on the agreement as that of the plaintiff. For example, the plaintiff was not assigned a unique private user name and password, but instead the client ID and pin code was not employee-specific. Because the plaintiff’s evidence showed that she was not the only person who could have executed the arbitration agreement, the court found that the trial court did not commit any legal error in denying the defendant’s motion to compel arbitration.
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 Tank and David Whitaker were recognized individually for their work in fintech.
Partners Margo 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, with which the authors of this publication assisted.
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 the Standards and Procedures for electronic Records and Signatures (SPeRS™) 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.