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Financial Services Law Insights and Observations


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  • District Court rules email can be a signed, written instrument for purposes of amending a partnership agreement


    On August 15, the U.S. District Court for the Southern District of New York granted defendants’ motion for summary judgment, ruling in part that an email could constitute a “written instrument” for purposes of amending a partnership agreement. The plaintiff is one of 33 limited partners in a funding entity formed to pool investments into a fund for litigation-related financing ventures. The plaintiff sued the defendants (the partnership’s general partner and asset manager) asserting four causes of action tied to their alleged failure to dissolve the partnership by a deadline established in the partnership agreement. Cross-motions for summary judgment were filed by the parties, in which the court reviewed plaintiff’s claims as to whether there was a valid amendment extending the term of the partnership, whether the limited partners received notice of this proposed amendment, and whether the limited partners approved the amendment or failed to raise objections within 25 days.

    While the defendants argued that an August 2019 email constitutes a valid amendment of the partnership term, the plaintiff countered that the email “is not a written instrument, is not signed, and does not specify the duration of the extension.” The court first reviewed the text of the partnership agreement, which stated that it “may be amended ‘only by a written instrument signed by the General Partner.’” While the agreement does not define what constitutes a “written instrument,” the court wrote, it “provides that ‘[a]ll notices, requests and other communications to any party hereunder shall be in writing (including electronic means or similar writing).’” As such, the court concluded that an email could constitute a “written instrument” for the purposes of amending the agreement.

    With respect to whether the email was “signed,” the court discussed the federal Electronic Signatures in Global and National Commerce Act (E-SIGN Act), which provides that “a signature . . . may not be denied legal effect . . . solely because it is in electronic form,” and pointed to several court decisions that similarly determined that the “law demands only demonstration of a person’s intent to authenticate a document as her own in order for the document to be signed [and that] [m]any symbols may demonstrate this intent.” In the present action, the court determined that “the e-mail speaks in the plural using ‘we’ and refers to the senders in third person as ‘your General Partners.’” Moreover, the court held that the plaintiff’s “unsubstantiated assertion” that the email is unsigned “is insufficient to create a genuine issue of fact with respect to [managing members’] intent to sign the e-mail.” The court also rejected the plaintiff’s argument that that the email is not a valid amendment because it did not specify the duration of the extension, pointing to language in the email stating that the fund will be extended until 2021. The court further disagreed with the plaintiff’s assertion that the amendment was not approved, noting that unrebutted statements provided by one of the managing members demonstrated that none of the limited partners aside from the plaintiff objected to the proposed extension.

    Courts E-SIGN Act E-Signature

  • District Court: Pressing the “acknowledge button” is a signature under E-SIGN


    On March 31, the U.S. District Court for the District of Columbia granted summary judgment on behalf of a plaintiff consulting firm, ruling that the defendant breached the terms of a binding contract entered into with the plaintiff, which he “signed” by pressing an “acknowledge button” on a Proprietary Information and Assignment of Inventions Agreement (PIIA). According to the court’s memorandum opinion, the case involves a dispute concerning the rights in a software program developed by the defendant while working at the firm. Previously, the court granted partial summary judgment to the plaintiff, which declared that the parties had an enforceable contract under which the defendant had assigned his rights in the software program to the plaintiff. At the time, the defendant argued that even though he had pressed the acknowledge button, “he ‘never understood’ nor ‘intended’ himself to be bound by the PIIA[.]” As such, he challenged the plaintiff’s assertion that he had assented to the PIIA. The court disagreed, concluding that evidence established “that the PIIA itself drew an ‘equivalence’ between acknowledging and agreeing,” and that “since there was no separate signature line, nor any instructions or directions to print and sign the PIIA, [defendant] had ‘no reason to think that [plaintiff] expected a more formal acceptance of the’ PIIA than the acknowledgement he provided.” Accordingly, the court concluded that “acknowledging” the PIIA amounted to the defendant’s signature in this context, thus satisfying the E-SIGN Act for purposes of satisfying the statute of frauds and binding the defendant to its terms, which included assigning any of his rights in the software to the plaintiff.

    In granting summary judgment in favor of the plaintiff on its breach of contract claim, the court first reiterated its previous position that undisputed evidence showed that the defendant acknowledged the PIIA, that the defendant intended to acknowledge the PIIA, and that acknowledgment constituted a signature for purposes of the E-SIGN Act. The court also determined that the plaintiff carried its burden of proof as to showing the plaintiff breached the PIIA and that the plaintiff was sufficiently damaged by the defendant’s breaches.

    Courts E-SIGN Act E-Signature

  • District court holds no private right of action under E-SIGN Act


    On October 26, the U.S. District Court for the District of Colorado denied, in relevant part, an individual’s motion for summary judgement, holding that no private right of action exists under the Electronic Signatures in Global and National Commerce (E-SIGN) Act. The plaintiff had asserted a violation of E-SIGN by an auto-dealership, who allegedly failed to advise the plaintiff of: (i) the right to receive paper copies (rather than electronic copies) of certain records; and (ii) the right to withdraw previously provided consent to receiving records in electronic form.

    In ruling against the plaintiff’s motion, the court noted that where Congress creates specific means for enforcing a statute, a court will assume that Congress did not intend to allow any additional rights of action beyond those specified. When applied to the E-SIGN Act, the court found that no standalone remedy is necessary, as any violation of the E-SIGN Act would be “self-effectuating.” Any failure to “[d]emonstrate the proper consent for electronic service would only expose the party required to deliver the information in writing to whatever sanctions the law requiring written disclosure provides.” Therefore, the court found that “Congress appears to have provided no separate remedial scheme for violation of the E-SIGN Act's consent provisions, as no standalone remedy is necessary.”

    Courts E-SIGN Act E-Signature Private Right of Action

  • E-SIGN modernization bill passes Senate committee

    Federal Issues

    On September 16, the U.S. Senate Committee on Commerce, Science, and Transportation voted 14-12 to approve S. 4159 (the “E-SIGN Modernization Act”), sponsored by Senator Thune, the majority whip. As previously covered by Infobytes, the E-SIGN Modernization Act would amend E-SIGN to remove the requirement that consumers reasonably demonstrate they can access documents electronically before they can receive an electronic version. Instead, consumers would be allowed to obtain documents electronically once they are provided with disclosure information and consent to receiving documents through such means. The E-SIGN Modernization Act was opposed by several consumer advocacy groups, including the National Consumer Law Center, which argued in a letter to the committee that the bill “would increase fraud and effectively prevent access to legally required information and records about the transactions to which consumers are bound.”

    Committee Ranking Member Senator Cantwell had offered, but later withdrew, an amendment that would have rejected all the changes introduced under the E-SIGN Modernization Act and, among other things, required the Secretary of Commerce and the Federal Trade Commission to evaluate and report to Congress, within a year after S. 4159’s enactment, the benefits and burdens of E-SIGN’s requirement for consumers to reasonably demonstrate that they can access documents electronically before receiving electronic versions.

    The legislation is currently pending approval by the full Senate.

    Federal Issues Federal Legislation E-SIGN Act E-Signature U.S. Senate

  • Senators introduce E-SIGN modernization bill

    Federal Issues

    On July 2, three Republican senators introduced a bill that would make electronic transactions easier by simplifying how consumers signal their acceptance of them. Sens. John Thune, Jerry Moran, and Todd Young introduced S.4159, the “E-SIGN Modernization Act,” which would allow companies to use electronic documents instead of paper ones if they secure the consumer’s consent to the substitution. Under the original E-SIGN Act passed 20 years ago, consumers also had to demonstrate to the company that they could access the records in the electronic form.

    “Computers, smart phones, and other devices are more reliable and accessible than ever before,” Thune said in a press release accompanying the bill. “This legislation makes necessary updates to E-Sign to reflect these advancements in technology and make it easier for consumers to receive documents electronically.”

    The bill also would no longer require transaction parties to obtain new consents when hardware or software changes. Instead, the company would simply disclose the updated requirements and notify the consumer of their right to withdraw consent without penalty.

    Federal Issues Federal Legislation E-SIGN Act E-Signature U.S. Senate

  • SBA, Treasury release additional PPP FAQs

    Federal Issues

    On April 15 and 14, the Small Business Administration (SBA) and the Treasury Department (Treasury) provided additional guidance to the Paycheck Protection Program (PPP) frequently asked questions (FAQs) to address lender concerns about, among other things, application submissions, signature requirements, and applications from SBA employees and family. Some of the FAQs include the following guidance:

    • Lenders may submit loan applications through E-Tran only after collecting the same borrower information and certifications contained in the application form, and performing a good faith review of the borrower’s payroll calculations.
    • Lenders that submitted applications prior to April 14 without collecting the required borrower information and certifications must do so as soon as possible before loan closing.
    • Lenders may accept scanned copies of loan applications, borrower certifications, and other required documents. E-sign compliant electronic signatures and consents may also be accepted.

    On April 13, one of the SBA and Treasury FAQs—also included on FinCEN’s website along with FAQ 18—discusses beneficial ownership requirements for PPP loans. For new customers, lenders meet their beneficial ownership obligations by collecting the following information from natural persons with ownership stakes in the applicant of 20 percent or greater: “owner name, title, ownership %, TIN, address, and date of birth.” SBA and Treasury also released an FAQ that addressed lender submission requirements prior to issuing PPP loans. FAQ 21 states that lenders are required to sign the lender application form for the PPP (SBA Form 2484) in order to issue PPP loans, but lenders do not need a separate SBA Authorization. Terms and conditions in the lenders’ promissory note must be consistent with CARES Act sections 1102 and 1106 as well as the PPP Interim Final Rule. Additional FAQs from this date address nonbank lenders, the $10 million loan cap, and the affiliation rules applicability to various kinds of businesses.

    Please see Buckley’s dedicated SBA page, which includes additional SBA resources.

    Federal Issues Agency Rule-Making & Guidance Department of Treasury SBA CARES Act Small Business Lending Covid-19 E-Signature

  • Montana Secretary of State provides definitions and conditions for technology-based notarizations

    State Issues

    The Montana Secretary of State’s website enumerates four ways to perform notary services in the state. They include traditional notarization, In-Person Electronic Notarization (IPEN or eNotarization), Remote Online Notarization (RON), and remote notarization. The webpage also describes the conditions unique to each type of notary service.  This guidance follows the enactment of full RON, remote notarization on tangible records, as well as IPEN last fall.

    State Issues Covid-19 Montana E-Signature Notary

  • Texas Department of Banking issues extension for public and family trust company reporting

    State Issues

    On April 1, the Texas Department of Banking issued a notice to trust companies announcing a 31-day extension for (1) public trust companies to report on Condition and Income and (2) exempt family trusts to report Annual Report of Condition and Income and Certification of Exempt Status. The announcement also authorized the use of electronic signatures on both filings mentioned.

    State Issues Covid-19 Texas Banking E-Signature

  • NYDFS encourages insurance licensees to use E-Signatures

    State Issues

    The NYDFS issued guidance encouraging regulated insurance persons to use and accept electronic signatures and records to facilitate insurance transactions in instances that cause no consumer harm. The NYDFS reminded licensees that both New York’s Electronic Signatures and Records Act and the federal Electronic Signatures in Global and National Commerce Act permit the use of electronic signatures and records if the consumer consents. The NYDFS also stated it does not require consumer consent be obtained in any particular way.

    State Issues Covid-19 New York NYDFS Licensing Insurance Licensing E-Signature

  • Massachusetts Securities Division relaxes notarization and signature requirements for certain filings

    State Issues

    On March 24, the Massachusetts Securities Division issued an Emergency Notice giving temporary relief from certain filing requirements for corporate finance filings and financial professional registrations during the Covid-19 outbreaks. The Division will not require manual signatures or notarizations for securities registration applications, exemption filings, securities notice filings, and consent to service of process forms and will accept e-signatures and copies of signed documents where required. The Division will also permit electronic submission of Forms U4 without physical signatures from individual agents or investment advisor representatives, provided that certain requirements are met, and will accept alternatives to a notarized Criminal Offender Record Information acknowledgment form. Finally, the Division will allow investment advisers up to 45 additional days to perform any Form ADV filing, updating, or customer delivery requirements. This guidance will remain in effect until April 30, unless extended or rescinded.

    State Issues Covid-19 Massachusetts Securities Notary E-Signature


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