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May 1, 2018



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

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 digital transformation requires careful planning to ensure regulatory compliance, a smooth integration with existing business technology and a positive customer experience.

This bulletin is the first 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 the DC Circuit’s recent – and long-awaited – decision concerning the Telephone Consumer Protection Act. In addition, we will cover recently enacted federal and state laws, federal and state regulatory activities, fresh judicial precedent and other important news.



Because of the federal Electronic Signatures in Global and National Commerce Act (ESIGN) and equivalent state laws, companies are delivering important disclosures and other information that traditionally needed to be presented “in writing” electronically instead. In addition, the medium of choice for communicating with consumers electronically is rapidly migrating from email to text messaging. As a result, understanding the requirements of the Telephone Consumer Protection Act (TCPA) are is a must. This edition’s Insight looks at the most recent judicial examination of the FCC’s interpretation of the TCPA. Read it here.


Two bodies of law in the United States generally govern the legality of electronic signatures and electronic records: the Electronic Signature in Global and National Commerce Act (ESIGN) and state adoption of the Uniform Electronic Transactions Act (UETA). Here is a quick look at each of them, plus notes on other selected laws governing digital transactions.




Arizona requires secretary of state to draft electronic notarization requirements: On March 16, 2018, the governor of Arizona signed into law a bill that transfers the requirements for electronic notarization from statute to the rulemaking authority of the secretary of state. To do so, the law repeals the statutory requirements related to electronic notarization and requires the secretary of state to adopt rules for implementing electronic notarization by December 31, 2019.

Indiana becomes fifth state to allow remote online notarization: On March 13, 2018, the governor of Indiana signed into law a bill that will allow Indiana notaries to perform remote online notarizations. The law also requires the secretary of state to establish standards related to remote online notarization, such as standards for audio visual communication technology and identity proofing. The law specifies various requirements for remote notarial acts, including requirements covering registration, record keeping and maintenance of records. The four other states allowing remote online notarization are Montana, Virginia, Texas and Nevada. Contact the authors for summaries.


New Indiana law governing electronic wills: On March 8, 2018, the governor of Indiana signed legislation that governs electronic wills, electronic trust instruments and electronic powers of attorney. The legislation allows testators to electronically sign documents so long as there are two witnesses in the physical presence of the signer to witness the signature.


Arizona passes two laws that expand the use of blockchain technology, including through a use of a “regulatory sandbox program”:

On April 3, 2018, the governor of Arizona signed legislation that expands the scope of blockchain technology transactions to apply to written transactions within Arizona’s Corporations and Associations law. Arizona amended its Uniform Electronic Transactions Act to state that blockchain technology applies to electronic transactions within the Corporation and Associations law and that “writing” or “written” within that law includes blockchain technology.

On March 22, 2018, the governor of Arizona signed legislation making Arizona the first state to adopt a “regulatory sandbox program” that allows companies to test new products and technologies – such as those employing blockchain technology – without needing to acquire licensure or other needed authorization. Instead, companies will apply to the state Attorney General’s Office to participate in the sandbox program. The test period lasts for two years (with a possible one-year extension) and allows up to 10,000 Arizona residents to use the product (unless the company demonstrates adequate capitalization and risk management process to handle a greater number).

Tennessee passes law explicitly recognizing legality of smart contracts: On March 22, 2018, the governor of Tennessee signed legislation that amended existing law to explicitly recognize the legality of and to define “distributed ledger technology” and “smart contracts.” The legislation, which amended Tennessee’s Uniform Electronic Transactions Act, states that a contract cannot be denied legal effect solely because that contract is executed through a smart contract. The legislation further states (i) that a cryptographic signature that is generated and stored through distributed ledger technology constitutes an electronic signature and (ii) that a record or contract secured through distributed ledger technology constitutes an electronic record. Tennessee became the second state to adopt such legislation, with Arizona doing so last year.

The governor of Wyoming signs five bills that expand the use of blockchain technology within Wyoming

Wyoming Money Transmitter Act – virtual currency exemption: This bill exempts virtual currencies from Wyoming’s Money Transmitter Act. This exemption allows entities that buy, sell, issue or have custody of payment instruments or store value that are in virtual currency, or who receive virtual currency for transmission to another location in Wyoming to operate without licensure. Virtual currency means any type of digital representation of value that is used as a store of value or medium of exchange and that is not recognized as legal tender by the US government.

Open Blockchain Tokens – exemptions: This bill, nicknamed the “utility token bill,” exempts “open blockchain tokens” (eg, utility tokens) from securities and money transmitter laws. To qualify as an open blockchain token, (i) the token must be able to be redeemed for products or services and (ii) the token was not sold to the initial buyer as a financial investment.

Electronic Corporate Records: This bill amends the Wyoming Business Corporations Act to authorize corporations to (i) use distributed or other electronic networks or databases for creating or maintaining corporate records, (ii) provide notice to a shareholder by an electronic transmission to a data address provided by the shareholder, (iii) identify a shareholder by a data address, (iv) accepting shareholder votes signed by network signatures that correspond to a data address and (v) keep records administered by or on behalf of, or maintained by, the corporation on one or more distributed or other electronic networks or databases, provided the records are kept in written form or in another form capable of conversion into written form within a reasonable time.

Limited Liability Companies – Series: This bill provides for the establishment of a designated series of members, managers, transferable interests or assets to be treated as a separate unit of the LLC for certain purposes.

Property Taxation – Digital Currencies: This bill exempts “virtual currencies” from property taxation. Virtual currency means any type of digital representation of value that is (i) used for exchange, accounting or to store value and (ii) not recognized as legal tender.

Chamber of Digital Commerce (CDC) and Electronic Signature and Records Association (ESRA) joint letter criticizes state “smart contracts” legislation: In April 2018, the CDC and ESRA issued a joint letter responding to recent state “smart contracts” legislation. The letter stated cryptographic signatures are already captured within the definition of “electronic signature” as set forth in UETA and ESIGN and that these laws already ensure that electronic records, electronic signatures and contracts in made or memorialized in electronic format enjoy the same legal status as pen and ink contracts. Therefore, legislation that defines blockchain technology or smart contracts – no matter how well intentioned – is harmful because it (i) creates redundancy, (ii) creates inconsistency and (iii) ESIGN preempts any state law that gives special effect to a specific technology.



FinCEN letter to Senator discusses when ICOs may be required to register as a money services business: In a February 13, 2018 letter from the Financial Crimes Enforcement Network, FinCEN stated that “under existing regulations and interpretations, a developer that sells convertible virtual currency, including in the form of ICO coins or tokens, in exchange for another type of value that substitutes for currency is a money transmitter and must comply with AML/CFT requirements that apply to this type of MSB.” With that said, FinCEN acknowledged that “ICO arrangements vary” and that if an ICO is structured such that if it involves an offering or sale of securities or derivatives, it could fall under the Security Exchange Commission’s or the Commodity Future Trading Commission’s authority. In those cases, the AML/CFT requirements of that regulator would control. FinCEN noted that it was working closely with the SEC and the CFTC to clarify how ICO activities implicate the regulatory authority of those agencies.

The Federal Trade Commission takes action against fraudulent “chain referral schemes”: In March 2018, the FTC announced a lawsuit against four individuals who allegedly promoted deceptive money-making schemes involving cryptocurrency. The schemes promised that participants would earn large returns by paying cryptocurrency (eg,bitcoin or Litecoin).

The Federal Trade Commission announces the creation of a Blockchain Working Group: The FTC recently created an internal FTC Blockchain Working Group. The FTC created this working group because of the developments in cryptocurrency that broadly affect the FTC’s work. Specifically, the FTC highlighted how cryptocurrencies and related technology will affect the FTC’s consumer protection and competition mission in at least six different ways:


Using cryptocurrency to pursue “old” fraudulent schemes: This occurs when fraudsters try to capitalize on new technology by dressing up old schemes.

Payment: This occurs when fraudsters seek payment in cryptocurrency (eg, ransomware scams).

New schemes: Examples of new schemes that the FTC has seen include charging consumers thousands of dollars for bitcoin mining machines and then failing to deliver the computers until they were useless (or not providing the computers at all).

Defendant’s assets: Even if cryptocurrency is not part of the defendant’s alleged illegal behavior, he or she may have cryptocurrency assets to turn over if obtained as part of the alleged misconduct.

Competition policy: Because cryptocurrency and blockchain technologies could disrupt existing industries, the FTC would work to ensure that competition determines the products available in the marketplace.

New solutions: Many entrepreneurs will use blockchain technology to address difficult consumer issues, like micropayments and secure identity.

The Federal Motor Carrier Safety Administration amended its regulations to allow electronic records and signatures to satisfy regulatory requirements: On April 16, 2018, the Federal Motor Carrier Safety Administration amended its regulations to allow the use of electronic methods to generate, certify, sign, maintain or exchange records so long as the documents accurately reflect the required information and can be used for their intended purpose. This rule applies only to those documents that FMCSA’s regulations obligate entities or individuals to retain; it does not apply to forms or other documents that must be submitted directly to FMCSA unless there are already procedures in place in the regulations for electronic submission to FMCSA.



New York AG requests information from 13 cryptocurrency exchanges: On April 17, 2018, New York Attorney General Eric Schneiderman sent letters to 13 cryptocurrency exchanges requesting information on their operations, internal controls and safeguards to protect customer assets. The AG’s inquiry is part of its Virtual Markets Integrity Initiative, which is designed to “increase transparency and accountability” and to better inform enforcement agencies, investors and consumers. The questionnaires that were sent to each platform request information falling into the following seven topics: (1) Ownership and Control, (2) Basic Operation and Fees, (3) Trading Policies and Procedures, (4) Outages and Other Suspensions of Trading, (5) Internal Controls, (6) Privacy and Money Laundering and (7) Protection Against Risks to Customer Funds. At the conclusion of its process, the AG’s office will analyze the responses and present what it has learned to the public.



Scanned email attachment with typed name does not qualify as an electronic signature: In Solartech Renewables, LLC v. Vitti, the State of New York Supreme Court, Appellate Division, held that a side letter, which was scanned and attached to an email, containing the defendant’s typed name did not constitute the defendant’s electronic signature. Under New York’s Electronic Signatures and Records Act, an electronic signature has the same validity and effect as the use of a signature affixed by hand. To fulfill ESRA’s purpose, emails needed to be considered equivalent to signed writings when that was the sender’s intent because it was not possible to affix a handwritten signature to the email (or other record transmitted electronically). Here, the court stated that the same logic does not apply to a scanned paper document. The defendant could have signed the document before scanning it, but instead only typed her name. The court highlighted that the defendant included a signature line for the plaintiff and expressly requested that the plaintiff’s representative sign it. The court noted that the ordinary letter did not “transform into an electronic record simply by virtue of its attachment to an electronic record (ie, defendant’s email), revert to a non-electronic record when printed and signed, then transform into an electronic record again when the signed copy was scanned and attached to a new email.” The court concluded that because no document was signed, the alleged contract did not satisfy the statute of frauds.



Strong electronic records system allows for enforcement of agreement even in absence of signed agreement: In Cobble v. 20/20 Communications, Inc., the United States District Court for the Eastern District of Tennessee concluded that the defendant’s use of its onboarding software convincingly established that the plaintiffs could not have completed the hiring process without executing employment agreements, which included a forum selection clause. As part of a lawsuit surrounding overtime wages, the parties were disputing whether the plaintiff agreed to a forum selection clause, and, if so, whether it was enforceable. The plaintiff denied that he ever signed the employment agreements and noted that the defendant had not produced the original, signed documents (to which the defendant replied that it had ended its use of the relevant software and had only been able to save a limited number of executed agreements, which did not include the plaintiff’s). To complete the hiring process, a prospective employee would have received an email with a link to the onboarding portal, along with a unique username and password. Once logged in, the prospective employee would have needed to complete a series of steps, including scrolling through the entire employment agreement before signing his or her name in an empty box next to the words “Employee Signature.” The prospective employee could not advance to the next step without doing so. The onboarding software would then save a copy in PDF format and gave the prospective employee the ability to save or print a copy. The court concluded that based on this system description, the defendant had established that the plaintiff had agreed to the forum selection clause, even in the absence of a signed copy of the agreement. The court then concluded that the forum selection clause was enforceable against the plaintiff.

Court finds sufficient evidence to authenticate plaintiff’s electronic signature: In Prasad v. Pinnacle Management Services Company, LLC, the United States District Court for the Northern District of California held that the defendant presented sufficient evidence to authenticate the plaintiff’s signature – even though plaintiff never checked the box next to the signature line labeled “AGREED” – and on that basis concluded that there exists a valid agreement to arbitrate. Under California’s Uniform Electronic Transactions Act (UETA), an electronic signature has the same effect as a handwritten signature. Because the plaintiff was disputing the signature’s validity, the defendant needs to prove by a preponderance of the evidence that the signature is authentic. Under UETA, authenticating a signature depends on the particular facts of the case. Here, the plaintiff could not have accessed the online application platform unless he or she agreed to the arbitration agreement. To agree, the plaintiff would have needed to type in her signature and would not have needed to check the AGREED box. Once the plaintiff signed and agreed to the arbitration agreement, then she could have accessed the online application. The defendant produced a signed and dated agreement that also contained the last four digits of the plaintiff’s social security number. In analyzing whether the defendant successfully authenticated the plaintiff’s signature, it noted that “the burden of authenticating an electronic signature is not great.” With that threshold established, the court held that the defendant’s submitted evidence – which included the signed agreement, with the last four digits of the plaintiff’s social security number and dated the same date as her employment application (which the plaintiff indisputably signed) and the fact that the plaintiff could not access the application without signing the agreement – was sufficient to authenticate the signature on the arbitration agreement.

Court finds jurisdiction exists in ADA case against nonresident e-commerce retailer: In Theberge v. Sportswear, Inc., the United States District Court for the District of Massachusetts held that personal jurisdiction existed over the nonresident e-commerce retailer in an ADA action brought by a consumer who is legally blind. The plaintiff alleged that the defendant’s website limited accessibility to consumers who suffer from visual impairments (eg, the website was incompatible with screen readers) and who seek to purchase products from the website. The court concluded that Massachusetts’s long-arm statute authorized the court to exercise personal jurisdiction over the defendant because the defendant transacted business in Massachusetts (as it generated 3.78 percent of its revenue from online sales and featured products with the names of Massachusetts schools and sports teams) and because the denial-of-access claim occurred in Massachusetts and arises from that activity. The court further concluded that exercising personal jurisdiction over the defendant comported with due process because (i) the claim relates to the defendant’s activities in Massachusetts; (ii) the defendant availed itself of the forum’s economic activities by targeting Massachusetts residents; and (iii) it would be fair and reasonable.


Tank and Whitaker, “Legal and Regulatory Update,” at the Electronic Signatures and Records Association Spring Members’ Meeting, May 9, 2018

Tank and Whitaker, “eSignatures, Blockchain and Smart Contracts, Oh My! The New Landscape for Digital Transactions,” Clear Law Institute Webinar, May 31, 2018

Tank and Whitaker, “Building a Foundation of Knowledge: Communicating the Viability of eNotes to Your Legal Team,” at the MERS User Conference, June 20, 2018


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

M. Tank, D. Whitaker, P. Fry, “Smart” Contracts, Blockchain & Commercial Law, Chamber of Digital Commerce (with contributions from A. Grant) (2018) – available soon


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