On October 13, the Northern District of Alabama entered an order compelling an employer and employee to arbitration where the employer demonstrated the existence of an electronic arbitration agreement. Yearwood v. Dolgencorp, No. 6:15-cv-00898-LSC, 2015 U.S. Dist. LEXIS 138993 (N.D. Ala. Oct. 13, 2015). The employee provided an affidavit denying ever having seen or signed such a form electronically. The court held that under the Alabama version of the Uniform Electronic Transactions Act, the burden of proving attribution of the signature to the employee falls on the employer. In support of its motion to compel arbitration, the employer offered evidence demonstrating its practice of requiring employees to complete a series of electronic forms upon hiring, which included the arbitration agreement. The employer also produced evidence demonstrating that the arbitration agreement was executed by someone using the employee’s unique access credentials (user ID and password) on the employer’s online hiring system, and that the employee’s password had to be re-entered at the time of signing. The employer also produced evidence that the employee agreed to use the electronic signature system and agreed to keep her password confidential. Weighed against the employer’s proof of its process and records demonstrating execution, the court held that employee’s blanket denial by affidavit was insufficient to rebut the proof of attribution. The court found that the signature on the arbitration agreement was attributable to the employee and ordered the parties to arbitrate.
On October 26, the National Labor Relations Board issued revised guidance regarding its acceptance of electronic signatures to support a showing of interest. The revised guidance requires electronic signatures to contain the following information: (i) the signer’s name; (ii) the signer’s e-mail address or other known contact information, such as a social media account; (iii) the signer’s telephone number; (iv) the language to which the signer has agreed; (v) the electronic submission date; and (vi) the name of the employee’s employer. If the electronic signature technology used does not support digital signatures that can be independently verified by a third party, then “the submitting party must submit evidence that, after the electronic signature was obtained, the submitting party promptly transmitted a communication stating and confirming” the required information. Electronic submissions should not include personal identifiable information, such as the signer’s date of birth and social security number. Finally, a declaration must be submitted with an electronic signature to: (i) identify the technology used and explain how its controls ensure the authenticity of the signature; and (ii) show that the electronically transmitted information explaining what and when the employees signed is the same information that the employees saw and agreed to.
On October 13, a Michigan Court of Appeals held, in a dispute over the execution of an electronic contract, that a party who documented its electronic presentation, execution and retention process and audit trails was entitled to summary judgment on a contract claim against a party who offered affidavits denying ever seeing or executing the electronic agreement. Harpham v. Big Moose Inspection, No. 321970, 2015 WL 5945842 (Mich. App. Oct 13, 2015). At issue was a contract for home inspection services, which the plaintiffs denied (by affidavit) ever seeing or executing at the summary judgment stage. In support of its motion for summary judgment, the defendant submitted an affidavit describing its usual process for the delivery of electronic contracts to customers via email by a secure link. In addition, the defendant’s affidavit also described an audit trail which showed: (i) when the agreement was posted to the defendant’s secure website; (ii) the date a link to the agreement on the secure website was emailed to the plaintiffs; (iii) the two times someone using plaintiff’s access credentials to the secure site accessed the agreement; (iv) that someone using the same credentials signed the agreement electronically by clicking a button indicating acceptance; and (v) that the defendant generated and stored a record of that agreement. The court noted that under Michigan law, where the party seeking to enforce the signature has provided admissible evidence of attribution, mere conclusory statements regarding the authenticity of a signature are insufficient to avoid summary disposition. The person denying the authenticity of the signature must provide some admissible evidence countering the evidence supporting attribution.
On October 12, North Carolina Governor Pat McCrory (R-NC) signed into law North Carolina SB 370. Effective August 2016, an application for a certificate of title, a registration plate, a registration card, and any other document required by the DMV to be submitted with the application and requiring a signature may be submitted with an electronic signature. The required notification may also be performed electronically. In addition, effective December 1, 2015, upon the satisfaction or other discharge of a security interest in a vehicle for which the certificate of title data is notated by a lien through electronic means, the secured party shall, within seven business days from the date of satisfaction, send electronic notice of the release of the security interest to the DMV through the electronic lien release system. The electronic notice of the release of the security interest sent to the DMV by the secured party shall direct that a physical certificate of title be mailed or delivered to the address noted by the secured party providing notice of the satisfaction or other discharge of the security interest. Upon receipt by the Division of an electronic notice of the release of the security interest, the Division shall mail or deliver a certificate of title to the address noted by the secured party within three business days.
National Labor Relations Board Determines Parties May Submit E-Signatures to Support a Show of Interest
In a September 1 memorandum, the National Labor Relations Board’s (NLRB) general counsel, Robert Griffin, issued guidance for accepting electronic signatures in support of a showing of interest, per the NLRB’s December 15, 2014 final rule that became effective on April 14, 2015. In its final rule, the NLRB concluded that its regulations were “sufficient to permit the use of electronic signatures” to support a showing of interest and called on Griffin to determine the standards for when and how electronic signatures should be accepted. Ultimately, Griffin determined that “the evidentiary standards that the Board has traditionally applied to handwritten signatures apply equally to electronic signatures and that it is practicable to accept electronic signatures in support of a showing of interest.” Current requirements for a support of showing of interest using handwritten signatures do not require the employee to provide personal contact information; however, the requirements Griffin outlined in the memorandum “are more stringent than what is currently required for non-electronic signatures,” including the prerequisite that an employee provide personal contact information when submitting electronic signatures. In accordance with Congress’s intention that the NLRB, and other Federal Agencies, “accept and use electronic forms and signatures, when practicable,” the NLRB will now accept electronic signatures along with handwritten signatures, effective immediately.
In 2014, the Consumer Financial Protection Bureau (“CFPB”) initiated an eClosing pilot program. The eClosing pilot was intended to assist the CFPB in evaluating the use of electronic records and signatures in the residential mortgage closing process. The pilot program has now been completed and on August 5, 2015 the Consumer Financial Protection Bureau (“CFPB”) released a report detailing its findings (“Report”). In the Report, the CFPB indicates that eClosings present a significant opportunity to enhance the closing process for both consumers and the mortgage industry.
The pilot program focused on the mortgage closing process and measured borrowers’ (i) understanding (both perceived and actual) of the process, (ii) perception of efficiency, and (iii) feelings of empowerment. The program also sought to quantify objective measures of process efficiency. The program was conducted over four months in 2014 with seven lenders, four technology companies, settlement agents, and real estate professionals. About 3000 borrowers participated in the study – roughly 1200 completed the CFPB’s survey.
The CFPB sought to determine if an electronic closing process improved the borrowers’ (i) understanding of the transaction, (ii) perception of efficiency, and (iii) feeling of empowerment. These three criteria were measured in multiple ways. To gauge understanding, the borrower was asked about their perceived understanding of the terms and fees, costs, and their rights and responsibilities. To determine the borrower’s actual understanding of their mortgage, they were given an eight question quiz. Five questions were about mortgages generally and three about their mortgage, specifically. To evaluate the efficiency of the transaction, the CFPB measured the difference between eClosings and paper closings in terms of delays, errors in documents, and the time required between steps in the process. Borrowers were also asked about their perceptions concerning efficiency. Finally, in order to gauge the borrower’s feeling of empowerment, the CFPB asked about the borrower’s feelings of control, his or her role, and the role(s) of others in the process. Read more…
Court Holds That Evidence of Clickwrap Assent Not Always Sufficient When Evidence Disputing Assent is Presented
On June 29, in Jim Schumacher, LLC v. Spireon, Inc., Civ. Action No. 3:12-cv-00625-TWP-CCS, a Tennessee federal judge denied the motion for partial summary judgment as to the breach of contract claim because there was evidence that the plaintiff did not use the defendant’s portal or authorize an agent to use the defendant’s portal to manifest assent to the modified contract terms even though the defendant had digital evidence of such assent to the clickwrap agreement, thus creating a factual dispute. In 2005, the plaintiff became a reseller of the defendant’s vehicle location devices. In 2009, the defendant modified its agreement, and placed the modified agreement on its customer portal website through which resellers manage purchases, sales, and customer data. Visitors to the portal were required to click “I Accept” or “I Decline” before being permitted to access any other information on the portal. The defendant produced digital evidence demonstrating that someone with the correct login and password accepted the 2009 agreement, and further digital evidence that someone with the correct login and password accepted an agreement in 2010 as well. The plaintiff claims that he did not use the portal after the defendant placed the 2009 agreement on the portal, and thus could not have assented to the clickwrap agreement. During this time, the plaintiff also did not authorize his representative to agree to the terms of the 2009 amendment, nor did he give any other users the ability to execute the agreement on his behalf. The plaintiff filed a lawsuit alleging a breach of contract claim and a fraud claim based on the 2005 agreement. Read more…
The Indiana Court of Appeals reversed and remanded for further proceedings a trial court’s grant of partial summary judgment and held that because the plaintiff did not show that it controlled the electronic mortgage note (“Note”) for purposes of 15 U.S.C. § 7021(b) as of the date the foreclosure was filed, it had not established that it was the party entitled to enforce the Note as of that date. The plaintiff was not the original lender, and instead, received the mortgage by assignment. The plaintiff filed a complaint to foreclose the mortgage shortly after taking assignment. The Note stated that the only authoritative copy was the copy within the Note Holder’s control. 15 U.S.C. § 7021 provides conditions under which a party can have control and the court found that the evidence put forward by the plaintiff in support of the motion for summary judgment did not properly address satisfaction of those conditions. Specifically, the court stated that the plaintiff did not present evidence demonstrating that control over the Note had been transferred to the plaintiff in accordance with the requirements of 15 U.S.C. 7021. The court specifically noted in the decision that the plaintiff, upon demonstrating it had received a transfer of control, would be entitled to the same rights as the holder of a written promissory note under UCC Article 3, and that delivery, endorsement and possession of a physical note were not required. Good v. Wells Fargo Bank, N.A., No. 20A03-1401-MF-14 (Ct. App. Ind. 2014).
On January 8, Kofax Limited, a California-based software company, released SignDoc Enterprise, a product that allows lenders to capture and process electronic signatures. The software gives consumers the ability to sign and return documents securely from their personal computer or mobile device. The software also supports “click to sign” and handwritten signatures, and can capture biometrics at the time of signing for greater security and authentication.
Recently, the SBA issued a procedural notice highlighting the acceptance of electronic signatures in its 7(a) and 504 Loan Program. The notice, which outlines various performance standards, is intended to encourage more lenders and agencies to accept electronic signatures. The announcement comes only weeks after the House Small Business Committee introduced legislation intended to “streamline and simplify the loan application process.” The ESIGN Act, enacted in 2000, made valid the use of electronic signatures in signing contracts and documents online, thus streamlining business operations and eliminating paper burdens for consumers.
On September 26, Virginia Attorney General Mark Herring issued a letter declaring that the Virginia State Board of Elections is not legally precluded from directing general registrars to accept voter registration applications with electronic signatures. “It is my opinion that, although no law requires the acceptance of mailed voter registration applications with electronic signatures, the State Board of Elections is not precluded from directing that general registrars accept such applications, and the State Board, in its discretion, may do so[.]” The letter also stated that the Board of Elections also has authority to establish standards to ensure the security of voter information and to verify the authenticity and validity of the electronic signatures. The letter validates the Board of Election’s decision to accept electronic signatures during the 2013 gubernatorial election.
On August 21, the CFPB announced the companies that have been selected to participate in its residential mortgage eClosing pilot program. The program is intended to explore how the increased use of technology during the mortgage closing process may affect consumer understanding and engagement and save time and money for consumers, lenders, and other market participants. Specifically, the program seeks to aid the CFPB in better understanding the role that eClosings can play in addressing consumers’ “pain points” in the closing process, as identified by the CFPB in an April 2014 report. The three-month pilot program will begin later this year, and the participants include both technology vendors that provide eClosing solutions and creditors that have contracted to close loans using those solutions.
Minnesota Appellate Court Holds Email Signature Not Necessarily Evidence Of Intent To Sign Attachments
On June 2, the Minnesota Court of Appeals held that under the Uniform Electronic Transaction Act (UETA), an electronic signature in an email message does not necessarily evidence intent to electronically sign an attached document, and that whether the sender has electronically signed the attachment is dependent on certain facts and circumstances. SN4, LLC v. Anchor Bank, No. A13-1566, 2014 WL 2441343 (Minn. Ct. App., Jun. 2, 2014). A multifamily real estate purchaser sued a bank after negotiations between the parties over the sale of two properties held by the bank fell through. The purchaser claimed that the bank breached its contract by refusing to sell at a price the purchaser claims was established through a series of emails between the parties. The trial court rejected the buyers’ argument that the bank electronically subscribed to the agreement under the UETA and held that the purported agreement did not satisfy the statute of frauds because only the buyers subscribed to it. The appeals court affirmed, holding that under UETA each transaction must be examined to determine whether the parties agreed to conduct the transaction by electronic means. Here, the court held, there was no express or implied agreement between the parties that the bank would electronically sign the agreement. Further, the court held that even assuming the parties agreed to conduct the transaction electronically, the bank did not electronically sign the agreement. The court explained that “whether a sender has electronically signed an attached document depends on the circumstances, including whether the attached document itself contains the sender’s electronic signature and whether the attached document is intended to be a draft or final version.” In this case, the purported agreement the buyers sought to enforce was attached to an electronically signed email, but the signature lines in the attached agreement lacked the bank’s handwritten or electronic signature. The court added that the subject email and subsequent emails indicated that neither party considered the agreement to be final.
Recently, the Department of Transportation’s Federal Motor Carrier Safety Administration published a proposed rule to allow the use of electronic records and signatures to satisfy the agency’s regulatory requirements. The rule would permit the use of electronic methods to sign, certify, generate, exchange, or maintain records so long as the documents accurately reflect the information in the record and can be used for their intended purpose. The proposal seeks to implement the Government Paperwork Elimination Act (GPEA) and the Electronic Signatures in Global and National Commerce Act (E–SIGN), and would apply only to documents that the agency’s regulations obligate entities or individuals to retain—it would not apply to forms or other documents that must be submitted directly to the agency. Comments on the proposal are due by June 27, 2014.