eSignature and ePayment News and Trends

Achieving Digital Transformation and Securing Digital Assets


eSignature and ePayment News and Trends

eSignature and ePayment News and Trends


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 is our fourth bulletin for 2019, again 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 provide an analysis of Washington state's move to repeal its Electronic Authorization Act. In addition, we cover 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 new monthly bulletin Blockchain and Digital Assets News and Trends.


Washington state seeks repeal of Electronic Authorization Act

By Margo H.K. Tank and R. David Whitaker

The Washington state legislature is seeking to repeal the state's Electronic Authorization Act, retaining only the definition of "digital signature" for use in other statutes after repeal. Additionally, by repealing the EAA, the bill seeks to remove conflict with the 2015 Washington statute that recognized the applicability of the ESIGN Act to certain federal and state transactions. Taken as a whole, the current trend in Washington state law appears to recognize the application of the ESIGN Act to Washington state transactions and the enforceability of electronic signatures.

Read more.



Electronic signature

SEC approves amendments to FINRA Rule to permit use of electronic signatures for discretionary accounts: The SEC recently approved proposed FINRA Rule 4512 (the proposal was previously covered here), which will permit the use of electronic signatures for discretionary accounts. A valid electronic signature would be any electronic mark that clearly identifies the signatory and complies the ESIGN Act, SEC guidance relating to the ESIGN Act, and the FINRA guidance provided by staff through interpretive letters. The rule is limited to discretionary accounts maintained by member firms where associated persons of such firms are authorized to exercise discretion.

FDIC proposes rule to allow signature cards to be signed electronically: On April 4, 2019, the Federal Deposit Insurance Corporation proposed a rule that would provide an alternative method to satisfy the "signature card" requirement for determining co-ownership of an account, as well as add a conforming amendment that would allow the signature card to be signed electronically. The FDIC notes that while its prior published guidance has allowed signature cards to be signed electronically, it is proposing this official change to eliminate any uncertainty regarding the published guidance.

Artificial intelligence

US lawmakers introduce bill that would require certain large companies to audit their "automated decision systems": Senators Ron Wyden (D-OR) and Cory Booker (D-NJ) have introduced the Algorithmic Accountability Act, which would direct the Federal Trade Commission to promulgate regulations that require certain entities to conduct automated decision impact and data protection impact assessments of high-risk automated decision making systems − both existing and new systems prior to implementation. Any violation would be considered an unfair or deceptive act or practice. Covered entities include those companies that (i) had greater than $50 million in average annual gross receipts over prior three taxable years;  (ii) possess or control personal information on more than 1 million consumers or consumer devices; (iii) are substantially owned, operated, or controlled by a person, partnership, or corporation that meets the first two requirements; or (iv) are certain data brokers or other similar entities.

In introducing the bill, Senator Wyden stated, "Computers are increasingly involved in the most important decisions affecting Americans" lives – whether or not someone can buy a home, get a job or even go to jail. But instead of eliminating bias, too often these algorithms depend on biased assumptions or data that can actually reinforce discrimination against women and people of color. Our bill requires companies to study the algorithms they use, identify bias in these systems and fix any discrimination or bias they find."


Blockchain generally

North Dakota House passes concurrent resolution to request study of blockchain technology: On April 3, 2019, the North Dakota House passed concurrent resolution no. 3004, which requests that the Assembly's Legislative Management study the potential value of implementing blockchain technology and utilizing it in state government administration and affairs.

Kansas revises law to allow electronic delivery of certain meeting notices related to preferred stock: On April 10, 2019, the governor of Kansas approved a bill (SB 82) that amends provisions of the State Banking Code relating to certificate of existence and the method of delivery for certain notices, including allowing notice by certified mail or electronically pursuant to the Kansas's adoption of the Uniform Electronic Transactions Act to all stakeholders at least five days in advance of a meeting to vote on the issuance of preferred stock.

Arkansas revises its UETA to address blockchain technology and smart contracts: On April 17, Arkansas adopted HB 1944, which revises its Uniform Electronic Transactions Act to address blockchain technology and smart contracts. The new law states that a contract that contains a smart contract term and relates to a transaction shall not be denied legal effect, validity, or enforceability.

West Virginia allows use of electronic form and signature when making offer of optional uninsured and underinsured coverage: On March 25, 2019, the governor of West Virginia approved a bill (HB2617) relating to the form for making an offer of optional uninsured and underinsured coverage by insurers and requires the insurance commissioner to provide for the use of electronic means of delivery and electronic signing of the form.

Remote online notarizations

Arizona enacts remote online notary: On April 10, 2019, the governor of Arizona signed SB 1030, which authorizes remote online notarization and provides for regulation of online notaries. Supporting regulations have not yet been enacted.

Washington also enacts remote online notary: On April 26, 2019 Washington enacted Senate Bill 5641 enabling Washington notaries to perform remote online notarizations. The law becomes effective October 1, 2020.

Maryland seeks to join states enacting RON: On April 8, 2019 Maryland’s legislature passed Senate Bill 678 enabling Maryland notaries to perform remote online notarizations. The bill awaits the governor’s signature.

Tennessee adopts emergency regulations supporting RON: In May 2018, Tennessee enacted HB 1794/SB 1758 adopting RON to be effective as of July 1, 2019. To meet the July 1 deadline, Tennessee has enacted emergency regulations to support RON. The Tennessee Secretary of State plans to promulgate non-emergency rules as soon as practicable to replace the emergency rules.

Electronic wills

Arizona enacts law allowing for electronic wills: On April 1, 2019, the Arizona governor signed into law a bill (HB 2054) establishing requirements and procedures for electronic wills. An electronic will must be created and maintained in an electronic record, contain the testator's electronic signature, contain the electronic signatures of at least two people who meet certain statutory requirements, and contain a copy of the testator's government-issued ID card.



Bitcoin dealer sentenced to prison and ordered to forfeit profits. On April 8, 2019 a US citizen living in Mexico was sentenced to two years in prison and ordered to forfeit more than $800,000 in profits realized from operating an unlicensed money transmitting business in connection with the sale of hundreds of thousands of dollars in bitcoin to more than 1,000 persons in the United States, without registering with the US Treasury Department's Financial Crimes Enforcement Network (FinCEN) and without implementing necessary anti-money laundering protections.

Peer-to-peer exchanger assessed monetary penalty. FinCEN assessed a civil money penalty against Eric Powers for willfully violating the Bank Secrecy Act (BSA). Mr. Powers operated as a peer-to-peer exchanger of convertible virtual currency without complying with the BSA's money services business (MSB) requirements, including (a) registration with FinCEN as an MSB; (b) establishing and implementing an effective written anti-money laundering (AML) program; (c) detecting and adequately reporting suspicious transactions; and (d) reporting currency transactions. According to FinCEN, a peer-to-peer exchanger is a natural person engaged in the business of buying and selling convertible virtual currency, who typically advertises and markets his or her services through classified ads, specifically designed web platform websites, online forums, other social media, and word of mouth. FinCEN noted that Mr. Powers posted on various forums advertising his intent to purchase and sell bitcoin for others, and that he completed sales and purchases by (i) physically delivering or receiving currency in person; (ii) sending or receiving currency through the mail; or (iii) coordinating wire transactions. Note that to show "willfulness," FinCEN needs only to show that the individual acted with either reckless disregard or willful blindness. Powers admitted to these violations and FinCEN assessed him a $35,350 civil money penalty.

DOJ indictment of virtual currency trading company. The DOJ announced on March 26, the indictment of Patrick McDonnell, the owner and operator of CabbageTech, a purported virtual currency trading company, on nine counts of wire fraud.


Virtual currency

  • NY regulator rejects Bittrex's currency exchange license. The New York State Department of Financial Services rejected Bittrex's application for a virtual currency license due to severe compliance failures. In a letter sent to the company and made public on Wednesday, April 10, DFS said it had issued several deficiency letters since the exchange first submitted an application, addressing Bittrex's anti-money laundering procedures, Office of Foreign Assets Control compliance and its coin listing process, but that substantial issues remained unaddressed.

  • NY DFS official publishes op-ed on Bittrex license denial. On April 18, the Executive Deputy Superintendent for Banking of the New York Department of Financial Services (DFS), Shirin Emami, published an article explaining the DFS's denial of Bittrex's application for a currency exchange license. The article was updated after publication to add a response from Bittrex.

  • NY regulator grants virtual currency license to Tagomi Trading. The New York State Department of Financial Services on March 27 announced it has granted a virtual currency business activity license to Tagomi Trading LLC, a virtual currency trading company. Tagomi is the 14th company to receive a BitLicense from the DFS.



Court holds that ACA International invalidated prior FCC rulings on definition of an ATDS: In Gadelhak v. AT&T Corp, (N.D. Ill. Mar. 29, 2019), the court held that the defendant's system did not constitute an automatic telephone dialing system because the system did not store numbers that have been generated using a random or sequential number generator. In reaching this decision, the court concluded that while ACA International (previously covered here) only expressly sought review of a 2015 FCC Declaratory Ruling, its reasoning supports the interpretation that it nullified the FCC's previous rulings on the definition of an ATDS (see prior analysis of similar cases here). Therefore, the court reviewed the statutory language "unburdened by the Commission's definitions" and concluded that to be an ATDS, a dialer needs to generate telephone numbers randomly or sequentially. The defendant's system did not do that, and thus it was not an ATDS.

Governmental agency validly prohibits use of electronic signatures: In Grube v. Pennsylvania Labor Relations Board, 2019 WL 1468547 (Comm. Ct. of Pa. Apr. 2, 2019), the court held that the Pennsylvania Labor Relations Board was not required to allow bargaining unit authorization cards that are submitted to the Board to be signed electronically by bargaining unit members. The court noted the Pennsylvania Uniform Electronic Transactions Act provides that each governmental agency shall determine whether and to what extent it will accept electronic records and electronic signatures. Here, the Board's applicable regulation requires written cards, signed and date by employees. The Board’s decision to require original signatures was reasonable and within its discretion, the court concluded.

Fourth Circuit finds TCPA exemption for government-backed debt violates First Amendment. In AAPC, Inc. v. FCC, 2019 WL 1780961 (Apr. 24, 2019), the Fourth Circuit unanimously held that the TCPA exemption for government-backed debt violated the First Amendment because it was a content-based restriction on speech and did not pass a strict scrutiny review. In reaching this decision, the court only severed the flawed portion of the statute – the exemption for government-backed debt – and not entirety of the automated call ban, as requested by the plaintiffs.  In reaching this decision, the court vacated the district court's award of summary judgment to the government and remanded for further proceedings as appropriate.


Online contract formation and electronic signatures

Motion for arbitration denied due to failure to authenticate. In Beattie v. TTEC Healthcare Solutions, Inc., 2019 WL 1594254 (D. Colo. April 15, 2019), TTEC Healthcare, as the employer, failed to present sufficient evidence authenticating the plaintiffs as having accepted, through the employer's clickwrap onboarding process, the arbitration agreement. Applying Colorado law, the court noted the employer's failure to present evidence indicating the security measures and protocols utilized by the employer's onboarding process to protect the integrity of the information provided to employees and to maintain the security of and restrict access to the plaintiffs' onboarding online accounts. The court also noted the lack of evidence "of an actual electronic signature or initials" or a timestamp indicating the date and time the plaintiffs read and signed the arbitration agreement.

Court enforces electronic contract with forum selection clause. In Western Technologies, Inc. v. Omnivations II, L.L.C., 2019 WL 1499483 (Ct.App. TX April 5 2019), the dispute centered on applicable law and forum selection in Texas with respect to a failure by Western (an Arizona corporation) to pay for software development services provided by Omni (a Texas limited liability company). As part of contract negotiations, Omni circulated a draft subscription and services agreement which provided that Texas law and venue applied and further stated that "[p]lacement of a purchase order by Customer, whether in writing, on the internet or by e-mail shall mean acceptance of these Terms that are deemed incorporated in any purchase order and shall form the contract between the parties. Digital signature by Customer shall be proof of agreement." While the agreement was never signed, manually or digitally, Western paid Omni for certain services, requested an addendum to the agreement, never indicated any disagreement with the agreement's provisions, and continued to do business with Omni for nearly a year. The court held that Omni established specific jurisdiction by Western's acceptance of the agreement pursuant to its terms − through the issuance of a purchase order and the purchase of software development services.


M. Tank and D. Whitaker, "So you want to go digital…" Intellectual Property and Technology News (North America), Issue 41, Q1 2019

M. Tank and D Whitaker, "Trends in electronic signatures: strategies for addressing risk using biometric data," a white paper for Wacom

M. Tank and D. Whitaker, "The Effectiveness of Clickwrap for Legally Enforceable Agreements," a white paper for DocuSign


DLA Piper webinar with M. Tank, D. Whitaker, E. Beane, and T. Springer, ADA and Digital Accessibility, Wednesday, May 22, 2019. Register here.

M. Tank is speaking on "The Emerging Peer-to-Peer Economy: How Blockchain and Marketplace Lending Can Drive Economic Innovation" at the Future of Financial Regulation Public Policy Conference being held at the Antonin Scalia Law School at George Mason University on May 15, 2019.