eSignature and ePayment News and Trends

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eSignature and ePayment News and Trends

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Happy National ESIGN Day! Eighteen years ago this week, Congress passed the Electronic Signatures in Global and National Commerce Act, ensuring the legal validity of contracts entered into using electronic signatures and records. National ESIGN Day was established by Senate Resolution 576 and House Concurrent Resolution 290 on June 30, 2010.

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.

This bulletin is the third in a series aiming to help companies identify important and significant news and legal developments impacting digital offerings. Each issue will feature in-depth insight on a timely and important current topic. In this issue, we look at recent developments in website accessibility under the Americans with Disabilities Act. In addition, we will cover recently enacted federal and state laws, federal and state regulatory activities, fresh judicial precedent and other important news.

INSIGHT

IS YOUR WEBSITE ADA COMPLIANT?
A BRIEF LOOK AT THE CURRENT LEGAL STATUS

Websites too face regulatory issues around compliance with the Americans with Disabilities Act and other rules involving accessibility and accommodation. In this Insight, we provide a brief overview of the state of laws and rules around website accessibility in the US, including the position taken by the Department of Justice that the Americans With Disabilities Act (ADA) applies to public-facing websites utilized by places of public accommodation; the current status of proposed regulatory action to establish regulatory standards for website accessibility; and the developing judicial guidance. Find out more.

LEGISLATIVE DEVELOPMENTS

FEDERAL LAWS

  • On May 24, 2018, President Trump signed into law the Economic Growth, Regulatory Relief, and Consumer Protection Act, which in addition to loosening restrictions imposed by Dodd-Frank also seeks to reduce synthetic identity fraud by allowing financial institutions and permitted entities (eg, service providers) to validate fraud protection data, pursuant to electronically received consumer consent, through a database maintained by the Commissioner of the Social Security Administration. Before the entity can submit a request to the database, the entity must have received the consumer's consent, which can be accomplished electronically. If done electronically, the entity must capture the person's electronic signature in accordance with ESIGN. See our publication Bank Regulatory News and Trends for further analysis of this law.

STATE LAWS
Blockchain

  • Colorado law addresses using blockchain to secure government records: On May 30, 2018, the governor of Colorado signed into law legislation that requires the governor's office of information technology (OIT), the department of state and the department of regulatory agencies to take certain actions to protect state records containing trusted sensitive and confidential information from criminal, unauthorized, or inadvertent manipulation or theft. Specifically, it requires OIT to annually assess the data systems of each public agency for the benefits and costs of adopting and applying distributed ledger technologies such as blockchains. Further, it requires the department of state to consider research, development, and implementation for encryption and data integrity techniques, including distributed ledger technologies such as blockchains. Finally, the legislation specifies that institutions of higher education may include distributed ledger technologies within their curricula and research and development activities.
  • Connecticut creates blockchain working group: On June 6, 2018, the governor of Connecticut signed into law legislation that creates a blockchain working group designed to foster the expansion of the blockchain industry in Connecticut and to recommend policies and state investments to make Connecticut a leader in blockchain technology. The working group must submit a report on its findings and recommendations by January 1, 2019.
  • Maryland to study cryptocurrencies: On May 15, 2018, the Maryland governor approved legislation that calls for the Maryland Financial Consumer Protection Commission to study cryptocurrencies, initial coin offerings, cryptocurrency exchanges and other blockchain technologies and to include recommendations in its 2018 report to the governor regarding state action to regulate cryptocurrencies, initial coin offerings and cryptocurrency exchanges. The legislation, titled the Financial Consumer Protection Act of 2018, also alters the definition of "unfair or deceptive trade practice" to be "unfair, abusive, or deceptive trade practice" and increases the threshold from $6,000 to $25,000 for which loans are subject to the Maryland Consumer Loan Law.
  • Vermont to study blockchain uses: On May 30, 2018, the governor of Vermont signed into law legislation that modifies the definition of "blockchain" and "blockchain technology," creates studies for expanding the use and promotion of blockchain technology, enables the creation of blockchain-based limited liability companies, creates a study for the potential use of blockchain technology in government records and enables the creation and regulation of personal information protection companies.

Insurance

  • Louisiana authorizes electronic delivery of insurance coverage notices: In May, the governor of Louisiana signed into law legislation that allows any notice or any other document required by law in an insurance transaction or that is to serve as evidence of insurance coverage to be delivered, stored and presented by electronic means, if such means meets the requirements of the Louisiana Uniform Electronic Transactions Act. To send notices electronically, the recipient must have consented in a manner similar to that required under ESIGN.

Notary

  • Minnesota enacts the Revised Uniform Law on Notarial Acts and allows for the use of remote notarization: On May 20, 2018, the governor of Minnesota approved legislation that enacts the Revised Uniform Law on Notarial Acts. While this law creates certain standards for notarial acts and allows for the use of electronic notarization, it also allows for the use of remote notarization. Specifically, the law allows for remote notarization via communications technology, which means an electronic device or process that allows a notary public physically located in this state and a remotely located individual to communicate with each other simultaneously by sight and sound and that, as necessary, makes reasonable accommodation for individuals with vision, hearing, or speech impairments.

Motor Vehicles

  • Colorado law clarifies stance on use of electronic documents in the issuance of certificates of title for vehicles: On June 6, 2018, the Colorado governor signed into law legislation that clarified existing law by stating that a certificate of title, a document necessary to issue a certificate of title, or a signature on the record or document may not be denied legal effect solely because it is an electronic record, document, or signature. Further, the law states that for a record, document, or signature to be legally valid, the person does not need to obtain a written power of attorney because the record, document, or signature is in electronic form.

REGULATORY DEVELOPMENTS

FEDERAL DEVELOPMENTS

  • FTC announces hearings on competition and consumer protection in the 21st century: On June 20, 2018, the FTC stated that it will hold a series of public hearings on whether changes in the economy, evolving business practices, new technologies, or international developments might require adjustments to competition and consumer protection enforcement law, enforcement priorities, and policy. The 15 to 20 public hearings will take place in the fall and winter. Among the topics that the hearings will address are:
    • The intersection between privacy, big data and competition
    • The Commission's remedial authority to deter unfair and deceptive conduct in privacy and data security matters and
    • The consumer welfare implications associated with the use of algorithmic decision tools, artificial intelligence and predictive analytics.
  • SEC adopts new rule that allows certain registered investment companies to post shareholder reports online:On June 5, 2018, the SEC adopted new rule 30e-3 under the Investment Company Act of 1940 that allows a registered management company (and any separate series thereof) or a unit investment trust to satisfy its obligation to transmit certain shareholder reports by making them freely accessible at a specified website address, so long as they send investors by mail a paper notice each time a shareholder report is available online. This paper notice must include the website address and instructions for the investor to elect – at any time – to receive either all future reports in paper or to request to receive certain reports in paper. While the effective date is January 1, 2019, it specifies a two-year transition period, meaning that the earliest that a fund can rely on the rule is January 1, 2021.

CASE LAW

STATE CASE LAW

  • Court finds material facts in dispute regarding formation of electronic arbitration agreement: In Murray v. Manorcare-West, 2018 WL 2436583 (N.J. Sup. Ct. May 31, 2018), the court vacated the trial court's decision because significant material facts were in dispute regarding whether the plaintiff entered into an enforceable arbitration provision electronically. All the defendant's employees are assigned a unique username and password that allows them to log into the defendant's portal. The defendant circulated an arbitration agreement through its portal, and its records indicate that the plaintiff logged into the portal using her login credentials and acknowledged the arbitration agreement. The plaintiff instead contends that she has difficulty reading English, that she does not own or know how to use a computer, that she did not enter into the arbitration agreement and that, when necessary, management would operate the computer and open training sessions for the plaintiff using her unique login credentials. Additionally, the plaintiff contended that she did not have access to the defendant';s computer during the month when she supposedly acknowledged the arbitration agreement.

FEDERAL CASE LAW

  • Courts continue to uphold arbitration agreements entered into electronically when there is no genuine issue of material fact regarding their formation: In Wilson v. Alorica, Inc., 2018 WL 2229703 (N.D. Ala. May 2018) and in Hulwick v. CBOCS East, Inc., 2018 WL 2933684 (N.D. Ind. June 11, 2018), the courts held that the plaintiff electronically entered into an arbitration agreement because the defendant produced an electronic record showing that the plaintiff's unique login and password were used to access and acknowledge the arbitration agreement. In both cases, the plaintiff only argued that the plaintiff did not remember executing the agreement. Additionally, in both cases, the courts found that the defendant had provided sufficient evidence to prove that the plaintiff electronically entered into the arbitration agreement.
  • Court finds that electronic contracting process for credit card may not have established a written contract under Virginia law: In Carlos v. Patenaude & Felix A.P.C., 2018 WL 2714576 (9th Cir. June 6, 2018), which concerns defaulted debt, the court analyzed whether, as required by Virginia law, the plaintiff signed at least one of the documents constituting the credit card agreement that references and incorporates the others. The court said there was no document in the evidence submitted that bore the plaintiff's signature. Specifically, the court stated that a material dispute surrounded whether the plaintiff signed the electronic application because the circumstantial evidence submitted by the defendant – which consisted of a declaration from the original creditor and a screenshot that indicated the plaintiff "signed" something, but not what was signed – was not sufficient to overcome the plaintif's testimony that he did not sign anything indicating that he would be bound by the card agreement. Next, the court rejected the defendant argument that the plaintiff signed the card agreement when he called and activated his account over the phone using an automated system. Specifically, the court stated that the defendant failed to explain how that method of activation produced a document referencing and incorporating the other documents in the contract and bearing the plaintiff's signature. Finally, the court stated that the defendant did not produce any evidence that the plaintiff signing the back of the credit card satisfied the writing requirement.
  • Courts continue to take different approaches regarding use of electronic signatures in bankruptcy proceedings: First, in In re Klitsch, 2018 WL 3004644 (Bankr. M.D. Pa. June 13, 2018), the court concluded that, absent specific requirements in the statute or local rules, wet ink signatures are not required. With that said, the court concluded that the attorney rather than the clients electronically signed the relevant documents and that the attorney and his law firm should be sanctioned for filing bankruptcy petitions without securing the clients' signatures. Second, in In re Foster, 2018 WL 2672077 (Bankr. W.D. Wash. Apr. 6, 2018), the court held that the bankruptcy rules for the court in Washington were "not ambiguous and that there is no reasonable way of interpreting it to not require obtaining and retaining original, handwritten, 'blue ink' signatures for a period of at least five years." Therefore, the court found that the attorney and his law firm violated the local rule by filing documents with electronic signatures even though the debtors had not provided original "blue ink" signatures.
  • Eleventh Circuit finds that claims regarding website accessibility under ADA are not moot: In Haynes v. Hooters of America, LLC, 2018 WL 3030840 (11th Cir. June 19, 2018), the court held that the plaintiff's claims, which include that the defendant's website was not accessible to a screen reader, presented a live controversy and were not rendered moot by a previous settlement with a different plaintiff in an almost identical lawsuit.
  • Third Circuit rules that equipment used to send text messages was not an autodialer under recently narrowed definition: In Dominguez v. Yahoo, Inc., 2018 WL 3118056 (3rd Cir. June 26, 2018), the court held that the plaintiff could not provide any evidence that creates a genuine dispute regarding whether the defendant's SMS service had the present capacity – as required by the DC Circuit's ruling, which we covered here – to function as an autodialer. Instead, the record indicates that the SMS service could only send messages to numbers that a user individually and manually input into the system. The court granted summary judgment in favor of the defendant.
  • Courts continue to uphold the validity of electronic signatures: In the following cases, courts upheld the validity of electronic signatures, usually with minimal discussion:
    • Delgado v. Ally Financial, 2018 WL 2128661 (S.D. Cal. May 8, 2018) – arbitration clause in electronic note and disclosure statement bearing borrower's undisputed electronic signature enforceable
    • Wilson v. Alorica, 2018 WL 2229703 (N.D. Ala. May 16, 2018) – agreement to arbitrate may be electronically executed – use of unique user ID and password to sign agreement sufficient for attribution
    • Wade v. Furmanite America, Inc., 2018 WL 2088011 (S.D. Texas May 4, 2018) – court finds that "recent technological advances…have made electronic signatures trustworthy, valid and enforceable"
    • March-Westin Company, Inc. v. Swinerton Builders, Inc., 2018 WL 2471451 (June 1, 2018) – Master Services Agreement contained relevant signatures that were executed electronically

RECENT EVENTS

On May 10, 2018, Andrew Grant spoke at the American Society of Business Publication Editors conference on "Website Accessibility under the American with Disabilities Act."

On May 9, 2018, Margo Tank and David Whitaker presented at the Electronic Signature & Records Association Member Meeting in Portland, Oregon on "eSiganture Legal and Regulatory Issues."

On May 31, 2018, Margo Tank and David Whitaker presented on "eSignature, Blockchain and Smart Contracts, Oh My," for the Clear Law Institute.

On June 20, 2018, Margo Tank and David Whitaker presented at the MERS User Conference in Reston, Virginia on "Enforceability of eNotes."

COMING EVENTS

On July 13, 2018, David Whitaker will provide the Keynote Topic at the USFN 2018 Legal Issues in Mortgage Servicing Seminar on "E-Signatures and Electronic Loan Documentation in Real Estate Finance."

READ IT NOW

M. Tank and D. Whitaker, The Law of Electronic Signatures, Thomson Reuters (2018 Edition)

In this issue