Electronic Signatures Come of Age: From Elections to Commerce and Beyond

Yesterday, the Utah Supreme Court, interpreting Utah's version of the Uniform Electronic Transactions Act (UETA) held that electronic "signatures" gathered through the website of an independent candidate for Utah state governor are valid to put the candidate's name on Utah's November ballot. Court's Opinion. The court's decision is a huge step forward in recognizing the legal efficacy of electronic signatures that may reverberate around the nation.
 

UETA and ESIGN

Legislatures in 47 states have enacted a version of the UETA aimed at achieving the speed, efficiency and cost benefits that can be realized through electronic legal, business, commercial and governmental transactions, while assuring reliability and authenticity. Wikipedia on UETA. Congress has enacted the Electronic Signatures in Global and National Commerce Act (ESIGN) with similar goals for interstate and international commerce. Wikipedia on ESIGN. The Utah decision yesterday is one of the most detailed UETA decisions in the country, and appears to be the first to apply UETA to state or federal election law.

UETA and ESIGN are rare examples of law leading technology. States began enacting UETA in 1999, and ESIGN was adopted in 2000. Few technology systems existed at the time that met the reliability requirements of the statutes. The technology has been catching up to the law ever since. UETA is intended to remove barriers to electronic commerce by defining acceptable electronic recording standards to assure the authenticity and integrity of the electronic communications, electronic signatures and electronic storage.

Authenticity of Signatures over the Internet

The Internet, including blogs and social networks such as Facebook and Twitter, is changing the economics of mass communication, allowing messages to find an audience more because of the power of the message than the wealth of the person sending the message. This leveled power of communication is affecting all human interaction around the world. As applied to commercial and legal transactions, including elections, a critical issue in Internet communication is how to authenticate the person to make sure that the person is who he purports to be and to make sure that his apparent expression of intention is real and reliable. The increasing percentage of commerce done electronically shows that people are becoming more and more confident in the reliability of Internet commerce.

The Utah Case

But courts, companies and individuals have been slow to implement the available state (UETA) and federal (ESIGN) legislation aimed at encouraging and validating electronic commerce and electronic signatures. Yesterday's opinion by the Utah Supreme Court will help change that.

Farley Anderson wants to run for governor of Utah without affiliating with a major political party. Anderson collected the minimum 1,000 signatures consisting both of pen-and-paper signatures and of electronic messages to his website announcing his candidacy. Anderson tendered these paper and electronic signatures to the county clerks for the counties in which the signers live, and the county clerks certified that Anderson had obtained more than the minimum number of valid signatures if both the paper and the electronic signatures were counted. The Utah Lieutenant Governor, Gregg Bell, however, rejected all of the electronic signatures as invalid under Utah election law, and held that Anderson had therefore not qualified to have his name placed on the November ballots.

Relying heavily on Utah's version of UETA, the Utah Supreme Court held that the web-based communications that Anderson gathered constituted "signatures" within the meaning of the state statute setting the number of signatures required to get on the state November ballot.

Impact of Anderson Around the Nation

The Utah decision resolved many of the fundamental issues presented by UETA, and resolved them in a way that energizes UETA. UETA will have a broader application in states that follow Anderson than most commentators would have predicted.

"Transaction"

For example, UETA applies to transactions between two or more persons who agree that all or part of the transaction can be consummated and/or recorded electronically. A “transaction” is “an action or set of actions occurring between two or more persons relating to the conduct of business, commercial, or governmental affairs.” “Transactions” specifically include real estate and real estate recording transactions. UETA applies to most of the instruments used in real estate transactions, such as liens, deeds, mortgages, affidavits, non-testamentary trusts and notes, but “does not apply to a transaction to the extent it is governed by: (1) a law governing the creation and execution of wills, codicils, or testamentary trusts" and certain transactions under the Uniform Commercial Code. Lt. Governor Bell interpreted "transaction" as not including Anderson's method of acquiring signatures. The court disagreed. It held that the foregoing four exceptions (wills, codicils, testamentary trusts and certain UCC transactions) are narrow, and by implication UETA applies to a broad range of transactions, including elections.

Purpose: Facilitating Electronic Transactions

UETA provides that the act must be construed and applied (1) to facilitate electronic transactions consistent with other applicable law; (2) to be consistent with reasonable practices concerning electronic transactions and with the continued expansion of those practices; and (3) to effectuate its general purpose to make uniform the law with respect to the subject of this Act among States enacting it. UETA provides that, in general, the same deference given to tangible media such as paper should be extended to intangible media that are capable of storing, transmitting and reproducing information in human perceivable form. The Utah Supreme Court recognized that the policies sought to be advanced by UETA suggest that close questions will be resolved in favor of validating electronic recording.

State Agency Exemptions

Lt. Governor Bell argued that UETA allows governmental agencies to reject the use of electronic signatures. The Utah Supreme Court interpreted the language that Bell relied upon ("a state agency may ... make rules that identify specific transactions that the agency will never conduct by electronic means") narrowly. The court held that a state agency could exempt transactions that otherwise would be governed by UETA only if the agency complied with detailed rulemaking requirements.

Agreement to Electronic Transaction

UETA “applies only to transactions between parties each of which has agreed to conduct transactions by electronic means. Whether the parties agree to conduct a transaction by electronic means is determined from the context and surrounding circumstances, including the parties' conduct.” Lt. Bell argued that the "transaction" in question was between him as the chief election officer of the state and Anderson, and that the electronic transaction was invalid because Bell had not agreed with Anderson to conduct the transaction by electronic means. The court rejected this argument and held that the parties whose consent was needed were the nominee-hopeful and persons who signed the petition. Since Bell was not a party to the transaction whose authenticity was at issue, Bell's consent was irrelevant.

Preventing Fraud

Lt. Bell's final argument was that good ol' tactile paper is just plain more reliable than ephemeral electrons. The Utah Supreme Court's reaction to this is worth quoting:

The Lt. Governor ... contends that electronic signatures attached to a certificate of nomination lack 'apparent authority' as genuine signatures. This position is based on a theory that a holographic signature is self-authenticating because the reviewing party may merely look at the signature and see that someone put pen to paper to sign their name. In contrast, an electronic signature lacks apparent authority, because it appears as a typed list of names.... We are unpersuaded that an electronic signature presents special concerns regarding candidate fraud; a candidate could as easily handwrite or type fraudulent names onto a certificate of nomination.

Moreover, electronic signatures may be a better deterrent to candidate fraud because an electronic signature incorporates readily verifiable personal, but non-public, information. For instance, the signors of Mr. Anderson's petition apparently had to enter a security code that corresponds to the last four digits of their drivers license number before their signature would be counted.
 

Conclusion

Even advocates of electronic signatures and electronic commerce will be surprised that electronic signatures have been accepted in what might have seemed the most unlikely of contexts -- in validating signatures for nominating a candidate in a public election. The Anderson opinion is an important development in recognizing and interpreting UETA and in the march toward the expanded use and understanding of digital transactions.