New federal decision on esignatures

["jmessing" <jmessing@law-on-line.com>]

A recent though unpublished federal appeals bankruptcy decision, IN THE MATTER OF: PIRANHA INC, DEBTOR, US Court of Appeals for the Fifth Circuit, December 9, 2003 may prove relevant to our work. Although an unpublished decision may not be cited as precedent to a court, the decision and its reasoning under the Uniform Electronic Transactions Act (UETA) may be instructive.

The case involved a disputed written resignation of a director that paved the way for a bankruptcy filing on behalf of the company. The director, Steele claimed that his resignation was not effective under UETA, a uniform state law that is intertwined with the federal esign law. He claimed that his purported electronic signature was improperly attributed to him. Another director, Berger, argued in favor of the electronically signed resignation.

The relevant portions of the opinion follow.

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   1. Steele's Form 8-K


    Berger's primary contention is that, because the Form 8-K filed with the SEC contains Steele's electronic signature, he may not disavow it now under § 107(a) of the UETA, and it must therefore stand as the written resignation required by Piranha's bylaws and Delaware law. Berger points to Section 107(a)'s dictate that "[a] record or signature may not be denied legal effect or enforceability solely because it is in electronic form ."*fn11 Steele, however, does not attempt to deny the legal effect of his signature "solely because it is in electronic form," but because he did not "execute[], adopt[] or authorize[]" it as required by Treasury Regulation S-T.*fn12 In essence, Steele contends that the Form 8-K was filed in error, three hours after being forwarded to him via email by Piranha's legal department for his review.


    As the district court noted, sections 109(a) and (b) of the UETA indicate that a document bearing an electronic signature may be contested on these very grounds. Section 109(a) states that an "electronic signature is attributable to a person if it was the act of the person;"*fn13 section 109(b) explains that "[t]he effect of an electronic record or electronic signature attributed to a person under subsection (a) of this section is determined from the context and surrounding circumstances at the time of its creation, execution, or adoption ...."*fn14 Section 109(b) makes clear that a litigant may challenge the effect of his electronic signature by discussing its "context and surrounding circumstances" in front of the reviewing court. In the instant case, Steele did just that, contending that the Form 8-K was filed in error and that he did not execute, adopt, or authorize the electronic signature it contained. We cannot say that the Bankruptcy Court committed clear error by agreeing with him.


     2. Steele's Actions Prior to June 16


    The Bankruptcy Court also found that Steele's actions between May 25 and June 16 were more consistent with his having remained a director of Piranha than with his having resigned effective either May 25 or May 29. This, in turn, forecloses a conclusion of oral resignation.
....

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*fn11 6 Del. Code Ann. § 107(a) (2003)(emphasis added).
*fn12 17 C.F.R. § 232.302(a) (2003).
*fn13 6 Del. Code Ann. § 109(a) (2003).
*fn14 6 Del. Code Ann. § 109(b) (2003).