1. DIGITAL LEGAL DOCUMENTS:
Jurisprudence Analysis and Relevant Cases
R. David Whitaker
Partner
This presentation is offered for informational purposes only, and the content should not be construed as legal advice on any matter.

3. Background
Federal and state laws validate use and acceptance of electronic signatures and electronic records
Uniform Electronic Transactions Act (UETA) – 1998 (49 jurisdictions)
Federal Electronic Signatures in Global and National Commerce Act (ESIGN Act) – 2000
Reasons for slow adoption
Lack of regulatory guidance and judicial precedent
Crisis de jour
Interoperability
Build v. buy
2019 and beyond
Customer demand/expectation for digital transformation at all-time high
How to ensure enforceability and avoid regulatory missteps
How to digitally transform

4. Agenda A brief overview of US law on electronic contracting
The key risks when presenting information in an electronic environment to ensure enforceability and avoid unfair and deceptive claims
Emerging judicial and regulatory issues:
Authentication
Attribution and authority
Presentation of terms
Enforceability of terms
Retention and audit trails
Relying on third-party electronic signing processes
Resources

5. eSignature legal framework
UETA - state solution
ESIGN - federal solution
Both laws act as overlay statutes
Authorize replacing writings with electronic records
Authorize replacing ink signatures with electronic signatures
Require affirmative opt-in by parties
The outliers
New York, Illinois, Washington
The really “out there” outlier – California
Preemption
Global framework
Simple, advanced and qualified

6. The five pillars
A record or signature may not be denied legal effect or enforceability solely because it is in electronic form
If a law requires a record to be in writing, an electronic record satisfies the law
If a law requires a signature, an electronic signature satisfies the law
If a law requires the preservation or production of an “original,” the “original” requirement is satisfied by an electronic record
Electronic records can satisfy writing and original requirements so long as the electronic record:
Accurately reflects the information in the record to be produced after it was first generated in its final form, and
Remains accessible for later reference

7. The scope of the statutes
Both laws apply to the use of electronic records and signatures in virtually any business-to-business or consumer transaction, unless specifically excluded:
Certain “bad things are gong to happen to you” notices
Statutes that are “special” – UCC Articles 4A, 5, 8 and 9
Wills, codicils, testamentary trusts
Governmental transactions
Covers (among many other things):
Residential and commercial real estate transactions (subject to filing rules)
Commercial and consumer loans and leases (equipment, aircraft, etc.)
Contracts and licenses (employment, procurement, software, etc.)
Sales and leasing of goods (retail installment sales, chattel paper, etc.)
Insurance policies
Most securities transactions
Most tax documents
Notarization and recording (generally)

8. Definitions of an “electronic signature” and an “electronic record” under ESIGN and UETA
“Electronic signature” means:
an electronic sound, symbol, or process
attached to or logically associated with a record
executed or adopted by a person with the intent to sign the record
Includes:
Traditional ink signatures
Typed names
A click-through on a software program’s dialog box combined with some other identification procedure
Biometric measurements
A digitized picture of a handwritten signature

9. Definitions of an “electronic signature” and an “electronic record” under ESIGN and UETA
A complex, encrypted authentication system
Electronic voice transmission
Recording may be required to establish proof (and possibly to meet the “attached or logically associated” standard)
Beware contract limitations on use of voice signatures
“Electronic record” means a record created, generated, sent, communicated, received or stored by electronic means
A “record” is information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form

10. Electronic signatures and records are enabled: but now what?
Attribution, authority and intent are key to enforceability BUT specific requirements are NOT addressed in ESIGN or UETA
Record presentation, retention and integrity are key to enforceability BUT specific requirements are NOT addressed in ESIGN or UETA
Both ESIGN and UETA are self-effectuating laws, so where do you look to fill in the gaps:
Sector specific regulation/guidance
Judicial decisions
Rules of evidence
Industry standards

11. Doing business in an electronic environment: key risks
Authentication, attribution and authority risk:
The risk is that the signer says “that is not my signature”
Is the signer who they say they are?
Did the signer have the authority to sign?
Was the signer’s signature created by someone else?
Compliance risk:
The risk is that the rules and regulations are not met
Laws governing the underlying transaction
Requirements of ESIGN and UETA
Unfair and deceptive acts and practices (UDAAP/UDAP)

12. Doing business in an electronic environment: key risks
Enforcement risk:
The risk is that the agreement or disclosure is not enforceable
Was the agreement clearly presented?
Clear and conspicuous
Button labeling
Deep linking
Was the agreement effectively presented?
Notice, intent and assent
Placement of the signature “call to action”
The absence of clarity or “ceremony”
Intent to sign
Was the signer given an opportunity to retain a copy?

13. Doing business in an electronic environment: key risks
Repudiation risk:
The risk is that the signer will question the record’s integrity
“That is not the record that I signed or the disclosure that I received”
Admissibility risk:
The risk is that the electronic record is not admissible into evidence
Introduction into evidence will require proof of integrity:
Identification to original transaction
Freedom from alteration
Chain of custody

14. Consequences of failing to address key risks
Unenforceable transaction (arbitration, limitations on liability and indemnification clauses fail, etc.)
Loss of negotiability/devalued asset
Liability for unauthorized transaction
Choice of law
Loss of IP
Loss of control of data
Statutory penalties
Class actions
Enforcement actions:
CFPB, FTC, IRS, FDA, DOJ, FCC, OCC
State AG

15. Authentication risk: attribution and authority
Legal sufficiency vs. attribution
UETA and ESIGN answer the question “is it a signature?”
Do NOT answer the question “is it your signature?”
Attribution must be proven
May be proven by any means, including surrounding circumstances or efficacy of agreed-upon security procedure
Burden of proof is on person seeking to enforce signature
Authority must be established
Individuals – watch out for contracting by minors and individuals with “diminished capacity”
Representatives
Various strategies available
Case illustrations:
Mansour v. Kmart Corp., Inc., 2018 WL (D. Md. July 2018)
Stonewall of Woodstock Corp v. Stardust 11TS, LLC and Oliver Block, WL (2018)

16. Compliance risk ESIGN 101(c) for consumer transactions
Transaction-specific legal requirements
Timing issues – what to deliver when, and in what order
Presentation issues – may need special colors, font sizes or positioning of certain terms or provisions vis-à-vis other elements of the record in order to meet requirements for clarity, conspicuousness, and fairness
Retention – by both provider and recipient
Guiding principle: do no harm – use the electronic medium to enhance, not obscure, effective delivery
Case illustration:
Consumer Financial Protection Bureau v. TCF National Bank, Memorandum Opinion and Order, Civ. No (US Dist. Ct. Minn. (September 8, 2017)

17. Enforcement risk
The effective presentation of terms and intent to agree must be established
Agreement terms must be effectively presented
Clearly identified
Designed to call attention to
Available prior to agreement
Placed in a logical location
Use of hyperlinks
Reasonable opportunity to review and retain
Need to establish an intent to agree
Clearly labeled call to action
Clearly associated with the terms being agreed to
Case illustrations:
Berkson v. GOGO LLC, United States District Court for the Eastern District of New York. 97 F.Supp.3d 359 (E.D.N.Y. 2015)
National Federation of the Blind v. The Container Store, Inc. 904 F.3rd 70 (1st Cir.) (2018)

18. Repudiation and admissibility risk
Preserving evidence of data integrity, screen shots and process flows is essential
Design document management systems with system and record protections in mind (such as developing backup procedures, audit logs and encryption methods to enable the demonstration that the records have not been tampered with, data deterioration procedures, system security safeguards)
Document that the policies and procedures were followed (who did what when as a general matter)
Audit document management for quality as part of ongoing continuous improvement process
Case illustrations:
Lorraine v. Markel American Ins. Co., 241 F.R.D. 534, 538 (D.Md. 2007)
In Re Vee Vinhnee, 336 B.R. 437 (9th Cir. BAP (Cal.) 2005)
Adams v Superior Court [Adams v. Quicksilver, Inc.], no. G (Cal. App. 4th Div. Feb. 22, 2010) (unpublished)

19. Accepting third-party electronically signed documents
Growing trend
Companies look to accept documents that have been signed using third party processes and are then presented to the company for acceptance and reliance.
Three general categories of electronic records that have been signed using a third party’s electronic signature process:
Records delivered electronically with a “flattened” electronic signature -- that is, without certain metadata (e.g., descriptive, structural and administrative)
Records that have been flattened by being printed out, and delivered to the company on paper or sent by facsimile
Records delivered electronically with “dynamic” attributes, including metadata about the signing process and the integrity of the document

20. Accepting third-party electronically signed documents
Procedures and training
Eligibility and acceptance criteria to address the “key risks”
May vary by document type
May vary by transaction size or liability exposure
Acceptance procedures
Acceptable platforms/formats
Training for intake employees
What to look for:
Stare-and-compare
Inspection of metadata
Inspection of accompanying audit logs
Reps and warranties or certification
Retention of transmittal communications

21. Key resources
Standards and Procedures for Electronic Records and Signatures
The Law of Electronic Signatures, 2018 Edition, Thomson Reuters Publishing
Enabled by Lenders, Embraced by Borrowers, Enforced by the Courts: What You Need to Know About eNotes, MERSCORP Holdings, Inc. (2017)
Electronic Retail Installment Sales Contracts in California, The Review of Banking & Financial Services, Vol. 33, No.12 (December 2017)
It’s the Message, Not the Medium!, The Business Lawyer, Vol. 60, No. 4 (2005)
Special Considerations For Perfection Opinions Covering Electronic Chattel Paper As Collateral, Journal of Equipment Lease Financing (Spring 2015)
Smart Contracts Legal Primer, Chamber of Digital Commerce (2018)
eSignature and ePayment News and Trends, monthly newsletter from DLA Piper– available at under Insights and at the DLA Piper Linkedin Page

22. Questions? R. David Whitaker Partner +1 312 368 2199