3 October 2021 • 9 minute read

Digital Transformation: eSignature and ePayment News and Trends - 3 October 2021

Editors:Margo Tank Elizabeth (Liz) Caires

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 the Uniform Law Commission’s and the American Law Institute’s efforts to draft the new Article 12 to the Uniform Commercial Code, which is designed to extend the concept of control of specified digital property. 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.

INSIGHT

Transferring property rights in digital property – a look at the ongoing development of UCC Article 12

By Margo H.K. Tank, R. David Whitaker, Andrew W. Grant and Liz Caires

Over the past several years it has become apparent that US state law governing the transfer of property rights in assets that consist of, or are evidenced by, electronic records has lagged behind both technological developments and commercial practice. Among these assets are virtual currencies and non-fungible tokens.

In particular, the current structure and terms of Article 9 of the Uniform Commercial Code has impaired efficient transfer of interests in such property. Work has commenced on amendments to the UCC that will address these transfers of rights. Read more.

REGULATORY DEVELOPMENTS

STATE

Tax documentation

Alabama Department of Revenue issues regulations for use and acceptance of electronic signatures under its UETA: The Alabama Department of Revenue recently issued regulations regarding the procedures for the use and acceptance of electronic signatures under Alabama’s Uniform Electronic Transactions Act. The regulations state that any document submitted to the department that requires a signature may be signed with an electronic signature, subject to specified requirements. The regulations note that the rules do not supersede any existing rule or statute related to the electronic filing or signing of documents, including tax returns.

California Department of Financial Protection and Innovation publishes opinion letter on money transmission covering Bitcoin ATMs: On September 2, 2021, the DFPI published an opinion letter concerning whether a company that operated a Bitcoin ATM was acting as a money transmitter. Here, a customer would approach a kiosk and buy Bitcoin by inserting the needed amount of US dollars. The customer would then direct the kiosk to send the Bitcoin to the customer’s personal Bitcoin wallet. The company does not hold virtual currency for the customer and sells Bitcoin from its own inventory. The DFPI stated that because the company’s activities are limited to selling Bitcoin, the company does not require an MTA license because its business does not involve the sale or issuance of a payment instrument, the sale or issuance of stored value, or receiving money for transmission.

INDUSTRY

Money transmission

CSBS approves Model Money Transmission Modernization Act: On September 7, 2021, the Conference on State Bank Supervisors (CSBS) published the Model Money Transmission Modernization Act, which is a model law that seeks to create a single set of nationwide standards. As CSBS noted in an accompanying FAQ, “[c]ommon standards will allow the state system to expand its use of technology platforms, increasing efficiency in the system and enhancing risk detection ensuring consumer funds are protected.” Further, the model law contains a state-alone article governing virtual currency, for those states that would prefer such an approach.

CASE LAW

FEDERAL

Electronic signature and contract formation

Courts uphold electronically signed arbitration agreements:

In Beltran v. Inter-Con Security Systems, Inc. 2021 WL 4170128 (C.D. Cal), the plaintiff challenged the sufficiency of defendant’s declaration authenticating the electronic signature on an arbitration agreement. The court determined that the plaintiff’s challenge failed because the declarant was familiar with the defendant’s hiring practices, had personal knowledge of the secure Internet portal where new applicants applied for positions, and stated that each user had to create a unique username and password and that the system creates a unique “Esign ID” that is produced only if the signer’s password has verified his or her electronic signature.
In Shadan v. Macy’s Corporate Services, LLC, 2021 WL 4304698 (N.D. W.V. Sep. 21, 2021), the court upheld an electronically signed arbitration agreement even though the plaintiff alleged he did not fully understand what he was signing due to his limited English proficiency. The court stated that an individual claiming illiteracy has a duty to acquaint himself with the contract before signing it. The court found that the plaintiff has not alleged any specifical circumstances that would relieve him of his obligation, and therefore, as a matter of law, the court found that the parties had formed a valid and enforceable arbitration agreement.

STATE

Electronic signatures and general online contract formation

Court upholds an in-store electronically signed agreement: In Nicholas Ford, LTD, d/b/a AutoNation Ford South Fort Worth v. Garza, 2021 WL 3931916 (Tex. Ct. App. Sep. 2, 2021), the court upheld an arbitration agreement signed electronically at the dealership’s location despite the plaintiffs’ arguments that (i) the tablet used did not reveal each page’s full contents; (ii) the manager gave general explanations of the pages’ contents; and (iii) the plaintiffs in past transactions had always been provided a fully prepared contract before signing. The court held that this process was not procedurally unconscionable despite the plaintiffs’ argument that the having to sign in a piecemeal fashion, without each page being visible, manipulated them into signing the agreement without reading it first. The court noted there was no evidence in the record that (1) the Garzas were illiterate or had any difficulty speaking, reading, or understanding English; (2) the Garzas had objected to the use of the iPad to sign the contracts or that the iPad on which they signed the various documents was somehow defective or unreadable; (3) AutoNation’s manager had misrepresented any contract terms, refused to allow the Garzas to stop and read the iPad at any point, or refused to allow them to scroll through the documents on the iPad at their leisure; or (4) there were any elements of fraud, imposition, trick, or artifice in the Garzas’ signing of the documents. The court went on to observe that this case presented a modern-day cautionary tale about consumers’ need to carefully review contracts before signing, including asking for a printout. Further, the court noted that if the plaintiffs had felt rushed or pressured, they could have walked away from the sale.

RECENT EVENTS

The Financial Times has ranked DLA Piper second on its lists of Most Innovative Law Firms and Most Digital Law Firms in the FT North America Innovative Lawyers 2020 report. Particularly noted by The Financial Times were our pro bono legal work on behalf of the UN’s World Food Programme – the authors of eSignature and ePayment News and Trends assisted in that work.

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 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.

In case you missed it

Read the latest issue of our bulletin Bank Regulatory News and Trends

Read the latest issue of our bulletin Consumer Finance Regulatory News and Trends

Contacts

Learn more about our eSignatures and ePayments practice by contacting:

Margo H.K. Tank

David Whitaker