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, our Insights piece highlights a recent case involving remote online notarization as well as provides an update on the current status of remote online notarization in the U.S. 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.


RON technology does not replace notarial duties – the lesson from Fang vs. Nexus Development Holdings LLC

Identity fraud exists in in-person and remote interactions. Notaries are used to protect against identity fraud and are responsible to verify the identity of a principal as the person the principal purports to be. However, fraudsters may succeed when notaries fail to fulfill their duties when conducting in-person or remote notarizations. Identity fraud forms the basis of the first lawsuit filed in connection with a notarial act performed using remote online notarization (RON). Read more.




FedNow”: Federal Reserve issues new rules to facilitate instant payments. The Federal Reserve Board has announced the issuance of new rules to provide the regulatory framework necessary to support an interbank real-time gross settlement service with integrated clearing functionality. Known as the FedNow Service, it is intended to be available on a 24x7x365-basis and to support instant payments in the US. According to its May 19 announcement, the Board hopes to bring the FedNow Service online in 2023. Effective October 1, 2022, the rules will be included as a new subpart to Regulation J (12 C.F.R. part 210), which has traditionally provided the regulatory framework for the collection and return of checks through the Federal Reserve System (subpart A) and the terms and conditions governing funds transfers over the Fedwire Funds Service (subpart B).

  • One feature of new subpart C is its incorporation of the provisions of Article 4A of the Uniform Commercial Code, or the UCC, to transfers over the FedNow Service, to the extent that these provisions are not otherwise inconsistent with the Board’s rules. The Board based the decision to do so on the belief that the benefits of such a structure outweighed the burdens of needing to determine whether, and to what extent, a particular transaction may be governed by one or more provisions found in UCC Article 4A, the Electronic Funds Transfer Act (EFTA), or the Board’s FedNow Service rules. These benefits included the ability for financial institutions to be protected from consequential damages (unless provided otherwise in express written agreement), which is believed to reduce costs associated with the speedier transactions. To the extent that a transfer conducted over the FedNow Service is also an “electronic fund transfer” under the EFTA, the provisions of both subpart C and the EFTA would govern, with the EFTA prevailing over any inconsistency – providing a level of consumer protection to immediately settled consumer transactions.
  • Although the primary objective of the new rules will be to provide real time funds availability, the Federal Reserve did not define what it means to provide funds “immediately.” In an effort to speed settlement, the rule limits instances where a beneficiary’s bank may request additional time to determine whether to accept a payment order only in instances where the bank has a reasonable basis to believe that the beneficiary is not entitled or permitted to receive the payment. Examples of these situations discussed in the rule’s commentary include situations where the recipient may be barred by U.S. sanctions or where there is known fraudulent activity.
  • Finally, the Fed will continue to work with industry stakeholders to refine and address erroneous or misdirected payments. Currently, the sending bank has 60 calendar days after notice that a payment order has been accepted or that its settlement account was debited to inform a Federal Reserve Bank of facts concerning unauthorized or erroneously executed payment orders for purposes of UCC Article 4A.

Digital disclosures

FTC seeks to modernize guidance on preventing digital deception: The Federal Trade Commission (FTC) is seeking input on modernizing its guidance titled “.com Disclosures: How to Make Effective Disclosures in Digital Advertising.” The FTC stated that “some companies are wrongly citing the guides to justify practices that mislead consumers online. For example, firms have claimed that they can avoid liability under the FTC Act by burying disclosures behind hyperlinks, a practice that can expose consumers to financial fraud, intrusive surveillance, and other harms.”


Electronic records

Virtual currency

Missouri amends money laundering law to incorporate cryptocurrency: On June 16, 2022, the governor of Missouri approved HB 1472, which amended Missouri’s money laundering law to include cryptocurrency, thus making it a criminal offense of money laundering if a person engages in specified financial transactions that involve cryptocurrency.

Blockchain technology

Hawaii enacts law creating a blockchain and cryptocurrency taskforce: On June 17, Hawaii enacted SB 2695, which creates the blockchain and cryptocurrency task force. The task force must submit a report of its findings and recommendations to the legislature by the time frame established in SB 2695.

Digital assets

Iowa enacts law concerning contract enforceability regarding smart contracts and distributed ledger technology: On June 13, 2022, the governor of Iowa signed HF 2443, which (1) amended Iowa’s Uniform Electronic Transactions Act to delete reference to distributed ledger technology; and (2) added a new section to Iowa law addressing the legal effect of distributed ledger technology and smart contracts. The new section states that a record, signature, or contract shall not be denied legal effect or enforceability solely because it was created, generated, sent, signed, adopted, communicated, received, recorded, or stored by means of distributed ledger technology or a smart contract. HF 2443 also added a new section addressing the conveyance of real estate evidenced by an electronic record. Specifically, the law states that any transaction subject to the new chapter governing distributed ledger technology and smart contracts that is evidenced by an instrument affecting real estate – as defined under Iowa law – and intended to provide the specified constructive notice, or any instrument that is required by law to be recorded by the office of the county recorder, must be evidenced by a document that complies with the provisions of Iowa’s law governing conveyances in a format suitable for recording and conforming with the document standards established by the electronic services system.

Iowa enacts “Article 12” of the UCC: On June 13, 2022, the governor of Iowa signed HF 2445, which enacts into law a new provision of the Uniform Commercial Code that governs “controllable electronic records.” The Uniform Law Commission (ULC) and the American Law Institute (ALI), as the joint sponsors of the Uniform Commercial Code (UCC), established a committee that began work in 2019 on drafting proposed amendments to the UCC, including drafting the new Article 12, that serves as the basis for Iowa’s law. See here for our initial thoughts on the new Article 12. In short, Iowa’s new law extends the concept of control, as set forth in the UCC, to “controllable electronic records,” thus expanding the types of digital assets for which a party can establish control.



Electronic signature and contract formation

Court denies motion to compel arbitration for lack of inquiry notice of arbitration agreement: In Brooks v. IT Works Marketing, Inc., 2022 WL 2079747 (E.D. Cal. June 9, 2022), the court concluded that the plaintiff was not on inquiry notice regarding the terms of use that contained the arbitration agreement for the following reasons:

  1. the website did not provide a reasonably conspicuous notice of the terms; the terms were contained in a tiny grey hyperlink displayed against a slightly lighter grey background and located at the bottom left corner of each webpage.
  2. the plaintiff did not unambiguously manifest assent to be bound by the terms of use. While the plaintiff had to check a checkbox (while the plaintiff argued that she never visited the website but purchased instead through a third-party, the court did not appear to consider this a factor, and instead focused on webpage design) the checkbox required the user to agree to a different agreement that was referred to as the “Terms & Conditions,” and which did not contain the arbitration agreement. Further, the court agreed with precedent that hyperlink terms presented in a relatively small font and nondescript colors are not reasonably conspicuous, even if in close proximity to a button or checkbox to be clicked by the user, and here, the hyperlink was not even particularly close to the relevant buttons.

For these reasons, the court concluded that the defendants failed to show that a valid contract containing an arbitration provision was formed between the parties.

Court vacates grant of motion to compel arbitration: In Barrows v. Brinker Restaurant Corporation, 36 F.4th 45 (2nd Cir. May 31, 2022), the court concluded that the plaintiff had created a triable issue of fact regarding the validity of the signatures on the arbitration agreement. The defendant put forth evidence (1) of an arbitration agreement purporting to contain the plaintiff’s electronic signature; (2) that the IP address used to sign the arbitration agreement belonged to the defendant; (3) that the plaintiff was working at the defendant’s restaurant on the day the arbitration agreement was signed; and (4) including employee declarations that the electronic signing process required that the signer log-in with a temporary password based on certain information, including the last four digits of the person’s social security number, before creating a new password. The defendant also produced a hand-signed paper arbitration agreement from the other named plaintiff. The plaintiff denied completing any electronic paperwork during her initial hiring. In analyzing the evidence, the court found that while the plaintiff had to create a temporary password, the information required to do so could be found on a standard I-9, which the plaintiff had completed. Further, even though the IP address demonstrates that the agreements were ostensibly executed at the defendant’s restaurant on the day the plaintiff worked, the fact that the electronic signature originated from a device that the defendant controlled and possessed might lead one to infer that it was the defendant’s agents who signed the documents (an inference, the court noted, it must draw at the motion-to-compel stage). Finally, the fact that the defendant produced a hand-signed paper agreement for the other named plaintiff casted doubt on the defendant’s suggestion that all its employees must have completed the paperwork electronically. Taken together, the plaintiff created a triable issue of fact regarding the validity of the electronic signature.

Court denies defendant’s claim that relying on electronically executed insurance agreement was not reasonable under the circumstances: In Preferred Contracts Insurance Company Risk Retention Group, LLC v. Patterson, 2022 WL 1752189 (M.D. Tenn. May 31, 2022), the defendant completed an insurance application that contained material misrepresentations but attempted to argue that the plaintiff should be estopped from relying on the information in the application because it was not reasonable to do so under the circumstances. The defendant argued that the plaintiff insurer should have applied greater scrutiny to the application because, in part, it was executed electronically. The court stated that the defendant’s contention that “new technology” that allows documents to be executed electronically “creates a new dynamic” obligating parties to view electronically signed documents with increased scrutiny is misplaced. The court highlighted that Tennessee’s Uniform Electronic Transactions Act does not allow a party to deny the legal effect of a document solely because it is in electronic form.

Court upholds motion compelling arbitration: In Soni v. Solera Holdings, LLC, 2022 WL 1402046 (5th Cir., May 4, 2022), the court upheld the lower court’s motion to compel arbitration despite the plaintiff’s claims that he did not sign the arbitration agreement – the court found he presented no evidence to sufficiently support his claims, including how the electronic signature on the arbitration agreement is not his – as well as that the defendant violated Texas’s Uniform Electronic Transactions Act. The plaintiff alleged that the defendant violated the requirement regarding the provision of information in writing; in response, the court concluded that the plaintiff failed demonstrate how the law applied. The law only applies if “a law requires” one person to “deliver information in writing to another person.” The Federal Arbitration Act does not impose a delivery requirement; thus, the Texas UETA requirement does not apply.

Court finds valid agreement to arbitrate exists: In Hudson v. Peak Medical New Mexico No. 3 LLC, 2022 WL 1442973 (D. N.M. May 6, 2022), the court granted the defendant’s motion to compel arbitration because the court held that the defendant properly authenticated the arbitration agreement. To authenticate the document, the court analyzed the Federal Rules of Evidence and determined that the employee declaration that provided a detailed description of the system used to electronically sign the arbitration agreement combined with the mutual arbitration agreement that bore the plaintiff’s name, employee ID number, and a date and time stamp and which was accessed by the defendant’s employee via the defendant’s electronic signature system was sufficient.


Court denies motion to compel arbitration: In Trinity v. Life Insurance Company of North America, 78 Cal. App. 5th 1111 (Cal. Ct. App. May 17, 2022), the court affirmed the lower court’s order denying the defendant’s motion to compel arbitration because the evidence presented by the defendant did not compel a finding that the plaintiff agreed to the arbitration agreement electronically. As evidence, the defendant provided a self-generated acknowledgment created by the defendant’s internal system that stated that the plaintiff electronically acknowledged the employee handbook – which contained the arbitration agreement – and a declaration from an employee relations managing director attesting to the process for delivering and receiving acknowledgment of the handbook electronically. The defendant did not have a copy of the email purportedly sent to the plaintiff confirming the plaintiff’s actions. The court found that the fact that the employee relations managing director could not explain the apparent non-existence of the email combined with his lack of understanding of how the auto-generated acknowledgements were created – such as who had access to them and whether they could be manually altered or created – was sufficient to conclude that the evidence did not compel a finding that the plaintiff agreed to arbitrate her claims.

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Embracing digital evolution: Our new business report

Interview with Margo H.K. Tank by Börsen-Zeitungon cryptocurrency regulation


DLA Piper ranked in The Legal 500. DLA Piper is pleased to announce that the firm's FinTech practice has been ranked Tier 2 nationwide in The Legal 500 United States 2022 guide. The guide also recognizes Margo Tank as a "Leading Lawyer" and David Whitaker as a “Key Lawyer.” Overall, the firm received 52 practice rankings and 42 individual lawyer rankings in this edition.

DLA Piper lawyers ranked in Chambers FinTech 2022. DLA Piper is pleased to announce that the editors of this newsletter, Margo Tank and David Whitaker, have been ranked by Chamber & Partners in the area of USA FinTech Legal: Data Protection and Cyber Security. Margo Tank was also ranked in the area of FinTech Legal: Blockchain & Cryptocurrencies. In total, the firm received 19 firm rankings and 14 individual lawyer rankings in the Chambers FinTech 2022 guide.


Cryptocurrency and Digital Asset Regulation, published by the American Bar Association and co-edited by Deborah Meshulam and Michael Fluhr, including chapters by Meshulam and Fluhr and by Margo H.K. Tank and Andrew Grant

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.