A number of ESRA founders and members are responsible for the establishment of electronic signatures – the people who laid the foundation for the laws that now enable anyone to make an online purchase, buy an app, pay for a taxi ride, and much more with a mere click or tap. At the annual ESRA conference in November of 2014, a remarkable group of those people formed a keynote panel that took an amazing look back at what it took to bring the future into the present.
Moderated by David Brinkman, CEO of Assuresign, the panel featured:
Steve Bisbee, President and CEO of eOriginal, Inc.
Amy Boss, Trustee Professor of Law at Drexel University’s Thomas R. Kline School of Law
Jeffrey Ritter, a lawyer, academic researcher, UN contributor, entrepreneur, and educator
Pat Fry, former commissioner of the Uniform Law Conference
David Whitaker, counsel for BuckleySandler LLP
To kick off the session, Brinkman brought out a bottle of wine and some glasses for the participant, leading Ritter to quip, “You can’t change the world without a glass of good red wine.”
Two Women Who Said ‘We’re Going to Change Things’
Boss and Fry then recalled their early days as attorneys in a professional dominated by men. Boss remembered: “We said to each other, ‘We’re going to make the men realize who we are. We’re going to change things.’ We made true on that.”
And the two women decided that the area where they would change things involved reacting to the changes in technology that were happening in the early 1980s, when many attorneys didn’t have computers on their desks. Ritter noted that companies had begun sending magnetic tapes containing purchase information to each other, and Boss elaborated: “The banks decided that paper didn’t cut it. Processing was the killer. Technology always leads and the law follows behind. Before any law recognized electronic funds transfer, $1 trillion a day passed over Fedwire.”
“Our economy was at stake,” she added, “and it wasn’t until one of those transfers went horribly wrong that people started to wonder what the law would do with it.”
Fry noted that UCC’s Article 4A on electronic funds transfers was “a major lesson on writing the law” at the time. She continued: “One of the lawyers took it to his operations manager, who said it won’t work and it will cost hundreds of thousands of dollars (in 1980s dollars) to put things together to conform to this. The statute was rewritten to reflect how business was done at that time, rather than how lawyers thought how it should work.”
“Two things were beginning to happen back then,” Boss added. “People were getting rid of paper, and the stuff they were transferring was information, stuff that was intangible. What do you do when your legal system is based on the premise that all transactions must be done on paper and all of them must deal with tangible stuff? We started an ad hoc subcommittee to discuss that and some people thought we were space cadets.”
Ritter interjected, to applause from the attendees: “These women were pioneers. They faced many battles, and what they did led to the fact that 50% of this room is women.”
Fry, however, wanted to also give credit to Fred Miller, who ran the UCC committee at the American Bar Association at the time. “He said we made his career,” she said. “Sometime in the 90s, I took Fred’s classes in Oklahoma. I got the computer into his office. He had a pile of papers for each of the acts in the UCC. Before I left, I showed him how to turn the computer on, but he was a believer.”
Whitaker Joins the Band
Fry and Boss eventually put together a report, with help from another lawyer, and it caught the eye of Ritter, who joined them at breakfast in February 1989 to organize a sub-committee for what they then called ” electronic commercial practices.” Ritter said, “We got it approved that afternoon.”
Turning back to Fred Miller, Whitaker said that he also owed his involvement with UETA and ESIGN to the man. He remembered: “I had been working in a law firm in Tulsa, bored to tears because the work was mundane, and then I found out they were writing commentary on the UCC revisions that were happening. With the permission of my firm, I contributed to that, and Fred told me I would be interested in what was going on at the American Bar Association.
“I went to Boston in the spring of 1989 and knew no one except Fred Miller. All I knew was I was going to UCC meetings. I read that they were going to have a reception at a fancy museum. I took one of the buses they had running out to the museum and a bundle of energy bounced onto the bus and landed on the seat next to me. It was Jeffrey Ritter, who introduced himself. At that moment, my life changed.
“At the reception, Jeff asked me if I liked computers. I owned the original Macintosh and other computers since then, so I said ‘Yes.’ He told me to attend a meeting that was happening after the reception. So I went to this 11:30 PM gathering to meet Amy and Pat, along with Jeffrey and another lawyer, and they told me about their plans. We thought EDI [Electronic Data Interchange] was going to rule the world, and what struck me was that instead of the ABA reacting, like they always did, the proposal was how the Uniform Law Commission and the UCC could get out ahead of those developments.”
Ritter added: “None of us intended to change the world, but we did intend to make a difference. All of us came together with a passion coupled with the momentum that happened.”
Whitaker continued: “Fred Miller and Tom McCarthy should be remembered, along with Ben Wright. The ABA’s lawyers in 1989-1991, they immediately reacted to electronic contracts by saying that you can’t get an electronic signature to prove identity. Ben Wright is a lawyer from Texas who started saying that they were wrong because signatures under US common law have nothing to do with identity. He authored the first book on e-commerce and the law and single-handedly changed the opinion of the entire profession.”
Eliminating Legal Obstacles to Trading
As the group moved forward with their efforts, Boss and Fry recalled, they worked on dealing with the statute of frauds in UCC Article 2, the issues around signature requirements, and the laws concerning information licensing. Boss explained, “Out of the writing and signature requirements came one of the main goals of this drafting project, which was to achieve the certainty necessary to allow businesses to go forward with the comfort to know that there were no legal obstacles to trading. We didn’t want anything to be regulatory because technology was changing so rapidly. We didn’t want to dictate technology or business models.”
Whitaker added: “One of the first movers in the area of tech neutrality was, ironically, the mortgage industry. Jim Newell, an attorney at Freddie Mac, said in 1993 that you could do mortgages electronically. At same time, the Utah Digital Signature Act, the first of its kind in the US, was passed, and it picked a tech winner.”
Ritter said, “What became clear was that because some companies realized [what we were doing] was more informal lawmaking by the ABA, they saw an opportunity to create statutory preference. In Utah and in Europe you saw well-funded initiatives to give preference to a certain outcome.”
Fry explained one example: “German statute required Deutsche Bank’s proprietary system. All of a sudden, everyone in Germany realized they couldn’t do business without Deutsche’s system. That was a lesson in the dangers.”
Whitaker added: “American businesses wanted flexible rules to see what made sense in a specific instance. Today everyone has clicked a checkbox or signed with their finger. In the mid-90s, everyone saw all kinds of possibilities and picking a winner would stifle innovation. For example, the Utah law said that if the consumer ruined the digital key, they had no recourse, which meant that consumer advocacy groups immediately told people to never accept or use a digital key. It was deadly. That level of threat brought us to the cusp of the study committee.”
Ritter picked up the story, backtracking a bit to set up a major event that happened during the 90s: “In 1989, the subcommittee wrote a commentary and report that helped give legal validity to transactions by magnetic tape and third party service providers. It was recognized by the US Dept. of Transportation as a game changer. Out of the blue, we received a call asking us to go to Geneva to meet with people developing standards for electronic data messages and show the report. Suddenly the legal issues were being discussed in the same room as the tech standards.
He added: “That led to what was being done at the UN Commission on International Trade Law. Unlike most changes in law that have evolved over time, suddenly, at a state level, we were trying to figure out rules of engagement for electronic purchases and that moved to the UN trying to figure out the rules globally. About 85% of all organized nations are now using laws that grew out of what we were doing then. It was adopted faster and more consistently than any other law in human history.”
Bisbee Gets Involved
At that point in the discussion, Bisbee had a chance to chime in and begin telling his story, which started later than the others’ tales. “I got involved in the 90s,” he said. “My company built a process and a technology and we had a relationship with banks and mortgage companies. We were told it wasn’t legal. We went to an ABA meeting and were told Jim Newell had a committee with that. Jim directed us to Amy. Amy said it was something for Fred Miller. We worked on developing the statute and the requirements for it.”
Bisbee added: “It was not just about electronic contracts between two people but one that was also binding when a third party was responsible, such as with mortgage notes. The real support we provided was for technology. For most people in the 90s, their frame of reference was mostly buying a book on Amazon, not full financial transactions. When the mortgage industry became aware, people were upset about tech neutrality and electronic records transfer.”
Whitaker stepped in then and said: “The reason for electronic records transfer and electronic chattel paper provision in article 9 of UCC is because Steve Bisbee convinced the Federal Reserve they were wrong about being worried about it.”
He added: “The original UETA wasn’t going to cover consumer transactions. Even Fred Miller was against that. It was only after some work was done on that – a Canadian, John Gregory, was a major player in that – and a report was written saying that you could protect consumers, it was presented to the drafting committee and Fred changed his mind. They put that in the UETA.”
Fry elaborated: “John Gregory wasn’t there as an official representative of the Canadian government but for the Canadian version of UETA, which tracks very closely with our UETA. John’s draft was approved in Canada about a year after ours. John played a significant role in that.”
Boss added: “The Canadian version is so close to UETA and ESIGN that if you put them next to each other, you’d think you were seeing triplicate.”
A Call From the White House
Looking back on those years, Ritter said: “In the US, everything was done from Thursday night until Sunday noon. People were taking their weekends to meet in rooms with no windows at law schools or budget hotels. No one was being paid. It was volunteer.
“We were outclassed around the world. Other countries were spending a lot more money on this than the US. South Korea enacted the first electronic transaction law in 1994, not the US or anyone else. We were driven by passion because we knew we were doing something important.”
But then, as Boss remembered, “the call came from the White House in the mid-90s. Ira Magaziner took it on himself to look into this area. He developed a white paper that would map going forward the US strategy toward e-commerce. When we got that call, they asked us what they should be doing. That started a series of meetings because American businesses had pressure to do electronic business globally and they were putting pressure on the White House.”
Ritter then said: “This is a story I’ve never told publicly. Ira Magaziner reached out to me in 1996 to ask, ‘How do we make this happen without federal law?’ I said you have to threaten them and say you’ll regulate it. He called me later and said he wanted to meet me at the White House. He said, ‘You were right. Who should we have at the meeting?’
“Before the President and Vice-President publicly announced the strategy, across the street at the Department of Commerce there was a meeting of 100 corporate CEOs where the Vice-President said to them, ‘We won’t regulate e-commerce unless you get your act together.’ And they did. That was before ESIGN.”
Asked about the future of ESIGN and UETA, Fry responded: “Every once in a while, we have to say we really mean it. After UETA and ESIGN, we had the Real Property Electronic Recording Act that says ‘We really meant it. You can submit documents electronically.’ We also did the Revised Uniform Law and Notarial Acts, which said, ‘We really meant it. Notaries can notarize electronic records.’ There have been many other times that the Uniform Law Conference has come out to say, ‘You can do this electronically too.’ Every once in a while you have to remind folks that you can use a record that’s on paper or electronic and it’s a record.”
Whitaker noted: “Tom McCarthy spent a year writing the definition of the word ‘record,’ which is in UETA and ESIGN and in every law since then.”
He then tackled the question of the future and said: “Where are we headed? We didn’t know in 1995 and we don’t really know today. We see dimly what’s possible but we don’t know. But it’s all about efficiency and making people educated so they can move commerce forward. We live in a golden age and we don’t realize it. There isn’t a person in this room who does not live a life that Egyptian Pharaohs didn’t imagine.
“The fact that we can do in 10 seconds what used to take five hours at a bank, or buy things on eBay and make an agreement with someone in three minutes, is all about making a more effective and efficient economy. And it’s all about quality of life at the end of the day.”
Whitaker then became a bit emotional when he concluded: “This is a story about how a small group of people, without really intending to, just because of their enthusiasm, and some dumb luck, had the opportunity and privilege to make a difference. It’s the story of how all of us, if we have our passion and are even willing to do things for free, have an opportunity to make a difference.”
Brinkman then concluded the session by introducing a new ESRA award, the Cornerstone Award, which recognizes a person, company or group that has helped lay a cornerstone for where e-signatures are today. He also made Bisbee, Boss, Ritter, Fry, and Whitaker honorary lifetime members of ESRA.
“So now you can have us working for free on weekends for the rest of our lives,” Ritter said to laughter.