Exceptional service Dykema delivers The State of Electronic

Exceptional service. Dykema delivers. The State of Electronic Contracting and Online Consent UETA and E-SIGN turn 15 Presented by Steve Tupper California | Illinois | Michigan | Minnesota | Texas | Washington, D. C. www. dykema. com

The Statutes • Uniform Electronic Transactions Act ("UETA") – 47 states – Michigan enacted October 14, 2000 – Illinois ( 5 ILCS 175/1 -101), New York(NY CLS State Technology § 301 et seq. ), and Washington (Chapter 19. 34 RCW) have their own electronic records and signatures statutes • Electronic Signatures in Global and National Commerce Act ("E-SIGN”) – Federal Legislation – Basically enforces UETA across states • 1 Exceptional service. Dykema delivers.

Why? • Statutes of Frauds – Transfer of an interest in land – Surety – Contracts that can’t be performed within a year – Sales of goods for more than $1, 000 (MCL 440. 2201) • Courts had addressed telegram, mailgram, sound recordings, etc. , but there was still uncertainty 2 Exceptional service. Dykema delivers.

Key Provisions • A contract cannot be denied effect solely because it is in electronic form or solely because it bears an electronic signature. • Enables electronic agents • Record retention requirements are satisfied by electronic records. • Enables electronic equivalents of most kinds of commercial paper and documents of title; called “transferable records. ” 3 Exceptional service. Dykema delivers.

Electronic Signatures • Electronic signature: “[A]n electronic sound, symbol or process attached to or logically associated with a [contract or other] record and executed or adopted by a person with the intent to sign the record” • Record: “[I]nformation that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form. ” • Provisions for notarization 4 Exceptional service. Dykema delivers.

Examples of Electronic Signatures • Sound • Graphic signature • Graphic symbol • Digital Signature 5 Exceptional service. Dykema delivers.

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Electronic Agents • “[A] computer program or an electronic or other automated means used independently to initiate an action or respond to electronic records or performances. . . without review or action by an individual. ” • Examples – e. Bay proxy bidding – Program trading 12 Exceptional service. Dykema delivers.

Record Retention • If a rule of law requires that a party keep and maintain records, electronic records satisfy those requirements so long as: – The electronic records accurately reflect the information; and – The electronic records remain accessible to all persons who are entitled to access • Includes checks • Electronic records are “originals” • Regulatory exceptions for law enforcement and national security 13 Exceptional service. Dykema delivers.

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Transferable Records • Basically, electronic – Notes – Documents (of title) • UETA supports any kind of electronically signed record that would, if it were on paper, qualify as a note or a document of title under Michigan law • Creates electronic counterpart of most kinds of commercial paper 15 Exceptional service. Dykema delivers.

Transferable Records • The key to the system is the central computer that makes sure that only one identifiable person may hold a given transferable record at any time. • Also important because UCC Article 9 requires that one have “control” of electronic chattel paper in order to perfect a security interest in it. • UCC 9 -105. “A secured party has control of electronic chattel paper if a system employed for evidencing the transfer of interests in the chattel paper reliably establishes the secured party as the person to which the chattel paper was assigned. ” • Could Bitcoin’s system be the right way to do this? 16 Exceptional service. Dykema delivers.

Transferable Records A system satisfies [the requirement] if the record or records comprising the chattel paper are created, stored, and assigned in such a manner that: (1) a single authoritative copy of the record or records exists which is unique, identifiable and, except as otherwise provided in paragraphs (4), (5), and (6), unalterable; (2) the authoritative copy identifies the secured party as the assignee of the record or records; (3) the authoritative copy is communicated to and maintained by the secured party or its designated custodian; (4) copies or amendments that add or change an identified assignee of the authoritative copy can be made only with the consent of the secured party; (5) each copy of the authoritative copy and any copy of a copy is readily identifiable as a copy that is not the authoritative copy; and (6) any amendment of the authoritative copy is readily identifiable as authorized or unauthorized. 17 Exceptional service. Dykema delivers.

What E-SIGN and UETA don’t do • UETA, by its terms, doesn’t apply to: – Laws regarding wills, codicils or testamentary trusts; or – The Uniform Commercial Code other than the portions dealing with certain statutes of frauds, sales or leases of goods and certain provisions dealing with notes and documents of title. • E-SIGN doesn’t apply to contracts or other records if they are: – Governed by state laws regarding adoption, divorce or other matters of family law; – Court orders, notices or other official court records, including briefs and pleadings; 18 Exceptional service. Dykema delivers.

What E-SIGN and UETA don’t do • E-SIGN doesn’t apply to contracts or other records if they are: – Consumer notices, including notices of: • Cancellation or termination of utility services; • Default, acceleration, repossession, foreclosure or eviction, or the right to cure under a rental or credit agreement regarding the primary residence of an individual; • Cancellation or termination of health or life insurance benefits; and – Product recalls; and – Any document required to accompany the transportation of dangerous or toxic materials. 19 Exceptional service. Dykema delivers.

What E-SIGN and UETA don’t do • Change other substantive contract law – It’s just a form and means of adopting and proving • Require any private party to enter into contracts using electronic records or signatures 20 Exceptional service. Dykema delivers.

Differences: E-SIGN • Preemption – Prevents state-by-state Tower of Babel – Doesn’t preempt verbatim state enactments of UETA • Michigan’s won’t be preempted • California’s has lots of carve-outs that are preempted • Consumer protection – Requires that certain consumer notices may not be transmitted electronically unless the consumer consents (and consents electronically) 21 Exceptional service. Dykema delivers.

Differences: E-SIGN • Promotion of international electronic commerce – Promote UETA-like models, including the United Nations Commission on International Trade Law (UNCITRAL) model – Permit parties to determine their own authentication technologies and models – Permit proof of validity and authentication models – Take a nondiscriminitory approach to electronic signatures of other jurisdictions 22 Exceptional service. Dykema delivers.

Differences: UETA • Items UETA covers that E-SIGN doesn’t – The ways parties may deliver information to each other; – The ways parties may contractually vary the requirements from those contained in UETA; – Attribution of an electronic record or electronic signature to a party; – Which party bears the risk of transmission errors; – Methods of resolving errors in transactions with electronic agents; 23 Exceptional service. Dykema delivers.

Differences: UETA • Items UETA covers that E-SIGN doesn’t – Use of electronic records as evidence in criminal or civil proceedings; and – When and where a record is deemed to have been sent and received. 24 Exceptional service. Dykema delivers.

Case Law • E-SIGN confirms that electronic documents meet the Federal Arbitration Act’s "written provision" requirement. Campbell v Gen. Dynamics Gov't Sys. Corp. (2005, CA 1 Mass) 407 F 3 d 546, 16 AD Cas 1361, 151 CCH LC P 60002. • Electronic agreement can satisfy Copyright Act's writing and signature requirements. Assignment of copyright to MLS. Metro. Reg'l Info. Sys. v Am. Home Realty Network, Inc. (2013, CA 4 Md) 722 F 3 d 591, 107 USPQ 2 d 1487. • Meets Maine Statute of Frauds for agreements not performable within a year. Roger Edwards, LLC v Fiddes & Son, Ltd. (2003, D Me) 245 F Supp 2 d 251, affd (2004, CA 1 Me) 387 F 3 d 90. 25 Exceptional service. Dykema delivers.

Case Law • ADA (42 USCS §§ 12101 -12213) and Minn. Human Rights Act (Minn. Stat. §§ 363 A. 01 -363 A. 41) requirements met where deaf athlete accepted defendant athletic program’s code book with binding arbitration and forum selection clauses. Siebert v Amateur Ath. Union of United States, Inc. (2006, DC Minn) 422 F Supp 2 d 1033. • Arbitration requirement enforceable where contract with arbitration provision also contained provision for electronic acceptance of contract and distributor proved that retailer electronically accepted contract. Caguas Satellite Corp. v Echostar Satellite LLC (2011, DC Puerto Rico) 824 F Supp 2 d 309. 26 Exceptional service. Dykema delivers.

Case Law • The fact that employee received and signed an arbitration agreement electronically did not render the agreement unconscionable. Fox v Computer World Servs. Corp. (2013, DC Dist Col) 920 F Supp 2 d 90. • E-mails between debtor and creditor supplier's agent satisfied writing requirement of PACA (7 C. F. R. § 46. 46(e)(1)). In re Cafeteria Operators, L. P. (2003, BC ND Tex) 299 BR 411. • Electronic correspondence can satisfy requirement of MCR 2. 507(H) that settlement “is in writing, subscribed by the party against whom the agreement is offered or by that party’s attorney. ” Kloian v. Domino’s Pizza, L. L. C. , 273 Mich. App. 449 (2006). 27 Exceptional service. Dykema delivers.

Case Law • No intent to conduct business electronically or to grant a license with respect to trademark when communication was to a general mailing list and did not expressly grant the claimed license. Audi AG v. D’Amato, 469 F. 3 d 534 (6 th Cir. , 2006). • MCL 566. 132(2) requirement that waiver by financial institution be in writing and signed was met by e-mail correspondence between loan customer and loan rep. Goodell v. Citi. Mortgage, Inc. , 2013 U. S. Dist. Lexis 96056; WL 3466969 (E. D. Mich. , 2013). 28 Exceptional service. Dykema delivers.

Best Practices – Your Communications • Include a footer in all e-mails that makes it clear that the email does not include an electronic signature unless otherwise expressly stated. • It’s best to have the default effect be that the communication is not signed. “Unless otherwise expressly stated in this communication, nothing in this communication is intended to constitute an electronic signature. ” • You can always expressly state that the communication is signed. 29 Exceptional service. Dykema delivers.

Best Practices – Your Communications • Never say anything in an e-mail that you wouldn’t write on a piece of paper and sign manually with ink. 30 Exceptional service. Dykema delivers.

Best Practices – Acceptance and Consent • Be clear about what is being accepted. – Don’t make the user scroll too much. – If there’s more off-screen or below the fold, make that obvious. – Have an option to print or e-mail the terms and to access the terms at a later date. • Make assent really, really obvious. – Big “I Accept” button – Statement that clicking has the same effect as a manual signature in ink on paper – Don’t allow access to the thing in question if the “I Accept” button is not pressed. 31 Exceptional service. Dykema delivers.

Best Practices – Acceptance and Consent • If dealing with a consumer transaction, be mindful of the consumer disclosure requirements in 15 U. S. Code § 7001(c). • Think about documentation and attribution information before you build your implementation (capturing and storing time, date, IP address, and other information that has evidentiary value in proving that the person signed the record). 32 Exceptional service. Dykema delivers.

Best Practices • Generally speaking, what works (or doesn’t work) in the paper and ink world will work (or fail to work) in the electronic world. 33 Exceptional service. Dykema delivers.

Questions 34 Exceptional service. Dykema delivers.

Best Practices 35 Exceptional service. Dykema delivers.

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