Digital Transformation: eSignature and ePayment News and Trends - 7 December 2021

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 the recent infrastructure bill and its implications for crypto “brokers.”  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

Infrastructure bill, including crypto “broker” rules, becomes law

By Tom Geraghty and Kali McGuire

President Joe Biden has signed the Infrastructure Investment and Jobs Act (HR 3684) into law. The legislation includes roughly $550 billion in new spending, of which, $28 billion is expected to be paid for through expanded cryptocurrency and digital asset reporting rules. Read more.

REGULATORY DEVELOPMENTS

FEDERAL

Virtual currency

OCC clarifies bank authority to engage in certain cryptocurrency activities: On November 23, 2021, the Office of the Comptroller of the Currency (OCC) published Interpretive Letter #1179, which clarifies guidance previously issued by the OCC in Interpretive Letter #1170 (previously covered here, and addressing whether banks may provide cryptocurrency custody services), Interpretive Letter #1172 (addressing whether banks may hold dollar deposits serving as reserves backing stablecoin in certain circumstances), and Interpretive Letter #1174 (previously covered here, and addressing a bank’s ability to act as a node on a distributed ledger network and to engage in certain stablecoin activities). Specifically, Letter #1179 states that a bank may legally engage in the activities addressed in those letters provide the bank can demonstrate, to the satisfaction of its supervisory office, that it has controls in place to conduct such activities in a safe and sound manner. To demonstrate such satisfaction, the bank should notify its supervisory office in writing of its intention to engage in the specified activities and the bank should not engage in activities until it receives written notification from the supervisory office of its non-objection.

Federal banking agencies release joint statement on interagency “policy sprint” on crypto-assets: On November 23, 2021, the OCC, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation (collectively, the agencies) issued a joint statement summarizing the agencies’ “policy sprint” on crypto-assets and announcing several initiatives. Throughout 2022, the agencies plan to provide greater clarity on whether specified activities related to crypto-assets are legally permissible, and what their expectations are for safety and soundness, consumer protection, and compliance with existing laws and regulation. These activities include:

• Crypto-asset safekeeping and traditional custody services
• Ancillary custody services
• Facilitation of customer purchases and sales of crypto-assets
• Loans collateralized by crypto-assets
• Issuance and distribution of stablecoins
• Activities involving the holding of crypto-assets on balance sheet.

CASE LAW

FEDERAL

Electronic signature and contract formation

Plaintiff had notice of electronic arbitration agreement: In Lopez v Cequel Communications, LLC, 2021 WL 5112982 (E.D. Ca. Nov. 3, 2021), the court granted the defendant’s motion to compel arbitration. The court concluded that, at the very least, the plaintiff had constructive notice of the arbitration provision and assented to it. The court found the following facts persuasive in reaching its conclusion. Of note, the defendant did not produce evidence of the plaintiff’s signature or that the plaintiff ever clicked on the agreement; however, the court found that these, by themselves, were not sufficient to deny the defendant’s motion. While the court acknowledged that the defendant had failed to provide evidence of the plaintiff’s signature or that he accessed the hyperlink, the court stated that the plaintiff failed to provide any evidence that the defendant deviated from its established business practices when it visited the plaintiff’s home to install Internet services. Such a house call requires that the person who purchases the services sign an agreement on a mobile device; the signature block appears after statements stating that the person signing agrees to the terms, which include an arbitration provision. Further, the plaintiff later received billing statements that included language stating that paying the bill confirms acceptance of the agreement; the statements contained a link to that agreement. Taken together, the court concluded that the plaintiff had, at minimum, constructive notice of the arbitration clause.

Email chain would satisfy statute of frauds: In Arg International, AG v Olin Corporation, 2021 WL 5050051 (E.D. Mo. Nov. 1, 2021), the parties disputed whether they had entered into a contract for the sale of “caustic soda” by the defendant to the plaintiff. The defendant argued that the parties had negotiated a contract, but that it was not signed or executed. The plaintiff argued that the parties formed a contract based on emails, that the defendant made a written offer which the plaintiff verbally accepted, and that by failing to perform, the defendant breached the contract. Regarding whether a contract was formed, the court concluded it was a question of fact, and thus the court could not grant summary judgment to the plaintiff on its claims for breach of contract. The court then analyzed whether there could be a signed writing under Missouri’s statute of frauds. At issue were the emails between the two parties. The court said that while the emails were a “writing” under the statute of frauds, but that whether they were “signed by the party to be charged” was a trickier issue. The court concluded, however, that emails with the defendant’s employee’s name in the header and an italicized “signature” with his contact information were sufficient “authentication which identifies the party to be charged.” The court further noted that while not all the emails in the chain contained a header and footer, when taken in combination, they demonstrated defendant’s intention to be bound by an agreement to provide caustic soda. The court ended by stating that if a jury were to find that a contract existed between the parties, the statute of frauds is not offended by the written agreement in email form that is authenticated by the sender’s name at the header and footer.

STATE

Electronic signatures and general online contract formation

Factual uncertainty over whether plaintiff had valid opportunity to review electronic arbitration agreement before signing: In Cordero v Fitness International, LLC, 2021 WL 5227256 (Nov. 10, 2021), the appellate court concluded there was a factual issue regarding whether the plaintiff had a valid opportunity to review an arbitration agreement before electronically signing. The lower court’s decision, therefore, was reversed and remanded. Overall, the plaintiff had allegedly signed two documents. The plaintiff submitted an application to work for the defendant, but alleged she did so through a third-party app. While the lower court concluded that the plaintiff had validly signed the application that contained an arbitration agreement, the appellate court noted that the signed application document contained a disclaimer suggesting that binding contractual terms would be set forth in a separate document and that the application is not a binding contract. During the plaintiff’s subsequent onboarding process, the plaintiff sat across from the defendant’s employee, with the computer screen facing him and out of the plaintiff’s sight. The plaintiff signed her name on an electronic signature pad. The court noted that the lower court did not address whether this onboarding process formed a valid and binding contract, and thus remanded to the trial court.

Read this next

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

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.

Trending

New York enacts requirements for monitoring employee phone, e-mail and Internet usage

Payment Systems Regulator publishes final report into the supply of card acquiring services

Contacts

Learn more about our eSignatures and ePayments practice by contacting:

Margo H.K. Tank 

David Whitaker