Legal Defensibility of e-Signatures Tested In Simulated Trial

On June 17, the law firm of Lord, Bissell & Brook LLP, along with electronic-signature firm DocuSign Inc. and sponsors, staged a 2-hour mock trial to demonstrate the unique issues that a challenge to electronically signed documents presents.

The event included a summary of applicable e-signature law, the trial demonstration and an expert panel discussion.

Other sponsors were Georgia State University School of Law, Georgia State University Department of Risk Management and Insurance, and Insurance Journal.

Applicable e-Signature Law

The federal Electronic Signatures in Global and National Commerce Act (ESIGN), along with state-adopted versions of the model Uniform Electronic Transactions Act (UETA), establish a foundation for implementing e-signature and e-record processes. ESIGN doesn't preempt state versions of e-signature laws entirely; however, such state laws must be based on a pristine version of the model UETA. As a result, state laws that are not “pristine” versions of UETA might be preempted in whole or part by ESIGN. With its broad preemption provisions and interplay with UETA, ESIGN provides a basis to develop a national e-signature strategy.

ESIGN doesn't require anyone to use or accept an electronic signature or record, but the law specifically provides that neither a signature nor e-record can be denied legal effect solely because it is in electronic form. Under ESIGN, an e-signature can be as simple or complex as:

• Clicking “I Agree”;
• Saying “I Agree” into a recording device;
• A digital signature using PKI (public key infrastructure) technology;
• An electronic image captured on a peripheral device; or
• Any other way an electronic sound, symbol or process can be attached to or logically associated with an electronic record that is adopted by a person with the intent to sign.

Although ESIGN specifically exempts certain areas from coverage, exemptions are narrow and ESIGN covers most types of commercial transactions.

Under ESIGN, for instance, an archived e-record will satisfy statutory requirements that a contract or other document be retained “in writing,” if the electronic record is maintained in a form that all parties can retrieve later for reference. ESIGN also recognizes that records of a transaction (whether completed electronically or not) may be archived exclusively electronically, but failure to archive records that can be accurately reproduced could make the agreement the e-record represents unenforceable, and bring regulatory sanctions for failing to maintain the proper records.

Proving The Electronic Signature

The mock trial involved an electronically signed life-insurance application. The plaintiff, a very sympathetic widow, produced a paper copy of an insurance application that was different from what the company produced. As a result, the trial involved a challenge between the widow's paper copy and the company's electronic records. The mock trial included the widow's moving story and the company's testimony detailing its electronic-signature process, which was based on the DocuSign Express Web-based e-signature service.

Electronically signed documents are essentially computer records, which courts have long allowed as evidence. Under the Federal Rules of Evidence, and most similar state laws, objections to the admissibility of computer records are typically based on challenges to authenticity of computer records and challenges to computer records under the hearsay rule. Precedent surrounding these types of challenges has been exhaustively developed. As a result, the mock trial didn't focus on admissibility arguments and methods; instead, most of the testimony was directed at how to develop the credibility of the competing documents, where the original record was created electronically.

Using encryption and related technologies, an electronically signed document can be effectively locked so that subsequent alterations are virtually impossible (tamper-proof), or readily detectable (tamper-sensitive). Key mock-trial testimony centered on the storage of the electronically signed, encrypted and hashed insurance application within a secure central data repository. Tom Gonser, a DocuSign executive vice president, testified that “once a document is placed into the system, it can be viewed, but the chances of it being modified are not likely because the system checks the fingerprint or hash each time it is opened to be sure the hash values still add up. If the document were somehow changed, the values would not add up, and the signers would be notified.”

Also critical to system trustworthiness was its ability to collect and record real-time transaction-related data in the mock trial. Systems such as the one described in the mock trial are designed to capture audit-trail data specific to the critical elements of a particular transaction. The audit-trail data included the date and time the late husband signed his electronic life-insurance application and the contents of that document at the precise moment it was electronically signed.

Ultimately, the expert panel generally recognized that an effective e-signature process incorporates technology and redundant processes that could improve a company's ability to defend and enforce electronically signed documents. For example, the ability to make a document essentially tamper-proof and tamper-sensitive with common encryption and hashing technologies, and the ability to collect audit-trail data are not available when dealing with paper documents signed in wet ink. Equally as important, however, is how the proponent of the e-signature uses trial testimony to explain its system and the technology that makes that system secure, and the documents e-signed tamper-proof and tamper-sensitive. Without effective trial witnesses and testimony that a jury will understand and believe, the potential benefits of the electronic-signature process and its technology will be lost.

On June 17, the law firm of Lord, Bissell & Brook LLP, along with electronic-signature firm DocuSign Inc. and sponsors, staged a 2-hour mock trial to demonstrate the unique issues that a challenge to electronically signed documents presents.

The event included a summary of applicable e-signature law, the trial demonstration and an expert panel discussion.

Other sponsors were Georgia State University School of Law, Georgia State University Department of Risk Management and Insurance, and Insurance Journal.

Applicable e-Signature Law

The federal Electronic Signatures in Global and National Commerce Act (ESIGN), along with state-adopted versions of the model Uniform Electronic Transactions Act (UETA), establish a foundation for implementing e-signature and e-record processes. ESIGN doesn't preempt state versions of e-signature laws entirely; however, such state laws must be based on a pristine version of the model UETA. As a result, state laws that are not “pristine” versions of UETA might be preempted in whole or part by ESIGN. With its broad preemption provisions and interplay with UETA, ESIGN provides a basis to develop a national e-signature strategy.

ESIGN doesn't require anyone to use or accept an electronic signature or record, but the law specifically provides that neither a signature nor e-record can be denied legal effect solely because it is in electronic form. Under ESIGN, an e-signature can be as simple or complex as:

• Clicking “I Agree”;
• Saying “I Agree” into a recording device;
• A digital signature using PKI (public key infrastructure) technology;
• An electronic image captured on a peripheral device; or
• Any other way an electronic sound, symbol or process can be attached to or logically associated with an electronic record that is adopted by a person with the intent to sign.

Although ESIGN specifically exempts certain areas from coverage, exemptions are narrow and ESIGN covers most types of commercial transactions.

Under ESIGN, for instance, an archived e-record will satisfy statutory requirements that a contract or other document be retained “in writing,” if the electronic record is maintained in a form that all parties can retrieve later for reference. ESIGN also recognizes that records of a transaction (whether completed electronically or not) may be archived exclusively electronically, but failure to archive records that can be accurately reproduced could make the agreement the e-record represents unenforceable, and bring regulatory sanctions for failing to maintain the proper records.

Proving The Electronic Signature

The mock trial involved an electronically signed life-insurance application. The plaintiff, a very sympathetic widow, produced a paper copy of an insurance application that was different from what the company produced. As a result, the trial involved a challenge between the widow's paper copy and the company's electronic records. The mock trial included the widow's moving story and the company's testimony detailing its electronic-signature process, which was based on the DocuSign Express Web-based e-signature service.

Electronically signed documents are essentially computer records, which courts have long allowed as evidence. Under the Federal Rules of Evidence, and most similar state laws, objections to the admissibility of computer records are typically based on challenges to authenticity of computer records and challenges to computer records under the hearsay rule. Precedent surrounding these types of challenges has been exhaustively developed. As a result, the mock trial didn't focus on admissibility arguments and methods; instead, most of the testimony was directed at how to develop the credibility of the competing documents, where the original record was created electronically.

Using encryption and related technologies, an electronically signed document can be effectively locked so that subsequent alterations are virtually impossible (tamper-proof), or readily detectable (tamper-sensitive). Key mock-trial testimony centered on the storage of the electronically signed, encrypted and hashed insurance application within a secure central data repository. Tom Gonser, a DocuSign executive vice president, testified that “once a document is placed into the system, it can be viewed, but the chances of it being modified are not likely because the system checks the fingerprint or hash each time it is opened to be sure the hash values still add up. If the document were somehow changed, the values would not add up, and the signers would be notified.”

Also critical to system trustworthiness was its ability to collect and record real-time transaction-related data in the mock trial. Systems such as the one described in the mock trial are designed to capture audit-trail data specific to the critical elements of a particular transaction. The audit-trail data included the date and time the late husband signed his electronic life-insurance application and the contents of that document at the precise moment it was electronically signed.

Ultimately, the expert panel generally recognized that an effective e-signature process incorporates technology and redundant processes that could improve a company's ability to defend and enforce electronically signed documents. For example, the ability to make a document essentially tamper-proof and tamper-sensitive with common encryption and hashing technologies, and the ability to collect audit-trail data are not available when dealing with paper documents signed in wet ink. Equally as important, however, is how the proponent of the e-signature uses trial testimony to explain its system and the technology that makes that system secure, and the documents e-signed tamper-proof and tamper-sensitive. Without effective trial witnesses and testimony that a jury will understand and believe, the potential benefits of the electronic-signature process and its technology will be lost.