It's Official: You Can Now Sign on the Digital Line. After passage by overwhelming majorities in both houses of Congress, President Clinton signed into law new e-commerce legislation, permitting contracts to be signed online. The Electronic Signatures in Global and Economic Commerce Act eliminates legal barriers to using electronic technology to form and sign contracts, collect and store documents and send and receive notices and disclosures. Consumer protections built into the law require that consumers must agree to electronic transactions, and consent to receiving electronic records. A company using the digital signature law must also confirm that the consumer has the hardware and software required to receive its online documents. Certain notices, such as health insurance coverage terminations, must still be sent on paper. The new law takes effect October 1, 2000. Also passing e-commerce legislation this past month were Ireland, the Philippines, and the Canadian Provinces of Ontario and British Columbia.
From the European Union: Distance Selling Directive Issued; Value Added Tax of Online Sales Planned. Flexing its increasing muscle, the European Union has issued a Distance Selling Directive which provides certain consumer to distance selling of all types, including online sales through e-commerce. The Value Added Tax initiative will likely pass despite American objections, and will make it more difficult for US companies to sell to consumers and businesses in Europe.
U.S. Supreme Court: ERISA’s Private Right of Action for Prohibited Transaction Extends to Non-Fiduciary. §406(a) of the Employee Retirement Income Security Act of 1974 (ERISA) bars a fiduciary of an employee benefit plan from causing the plan to engage in certain prohibited transactions with a "party in interest." Finding itself on the wrong side of such a transaction, Salomon, Smith Barney defended on the grounds that as a non-fiduciary, no private cause of action could be brought against it, but only against the fiduciary who brought the transaction to it. The District Court denied Salomon’s Motion for Summary Judgment, the Seventh Circuit reversed, and the Supreme Court reversed the Seventh Circuit, holding that a private cause of action exists under §502(a)(3) for an action to be brought pursuant to §406(a), even against a non-fiduciary who is involved in the prohibited transaction. Harris Trust and Savings Bank, as Trustee for the Ameritech Pension Trust, et al, vs. Salomon Smith Barney, et al, No. 99-579 (6/12/00 )
Commodities: "Hedge to Arrive Contracts" Do Not Equal Futures. Plaintiff farmers who entered in to "flexible hedge-to arrive" contracts to deliver grain to defendant grain merchants could not void said contracts by characterizing them as futures contracts under purview of Commodities Exchange Act (CEA). Such contracts were "forward contracts" not covered by CEA since: (1) grain was to be delivered at a particular time and place; (2) both parties were "industry participants"; and (3) delivery of grain could not be deferred indefinitely. Nagel v. ADM Investor Services, Inc., Nos. 99-3236 et al. Cons. (6/7/00). Appeal, N.D. Ill., E. Div. Aff'd.
Securities; First Impression: Failure to Reference Illinois Law in Refund Demand Insufficient Notice Under IL Securities Law. In a case of first impression under Illinois law, and in spite of several cases holding that the intent of the Act be liberally construed, the Seventh Circuit has ruled that Plaintiff’s notice, although timely, was insufficient under the Illinois Securities Law. The notice, a letter sent by Plaintiff, read: "I am making a complaint against Schneider Securities Inc., and Tom Graffton [sic] (stockbroker). He misrepresented Masa [sic] Gaming stock. * * * I believe that there was a [sic] act of fraud. I lost over $50,000. I demand my money back." The Court, considering the Summary Judgment Motion de novo, ruled that Plaintiff’s demand for his "money back" was not the equivalent of asking to void the sale, as is authorized under Section 13(b) of the Act. Further, Plaintiff was not clear about whether he wanted only the $50,000 he lost, or the $73,500 he invested. Finally, Plaintiff did not reference Illinois law in his notice letter, so did not properly elect his remedy. Jacks v. Schneider Securities, Inc., No. 99-3193 (6/27/00). Appeal, C.D. Ill., Aff'd.
Internet "Data Haven" To Be Established off the Coast of England. Promising complete privacy and no government interference (and the likely avoidance of internet regulation and taxation), HavenCo this fall will launch its service for the secure storage of data, websites and email, for businesses and individuals seeking privacy. Headquartered in a World War II gun tower off England’s windy shoreline, in the Principality of "Sealand," the island will become a data haven linked by satellite, and utilizing sophisticated encryption techniques.
Unemployment Taxes Not Owed for Artists, Independent Sales Reps. Petitioner, an importer and wholesaler of giftware and collectible figurines, was assessed unemployment taxes plus interest for payments made to certain free-lance artists, independent manufacturers and others, by the Illinois Department of Employment Security (IDES), which contended that the workers were employees. The trial court affirmed, but the Appellate court reversed, ruling that the workers at issue were not employees, having met the 3 part test of Section 212 of the Unemployment Insurance Act, 820 ILCS 405/212. Enesco Corp vs. Doherty, 1-99-0501, First District, Fifth Division (June 9, 2000)(Hartman, J.)
Retainer Agreement Providing that Client Pay Fees & Costs for Collection of Attorneys’ Fees Owed, Held Void, and a Possible Violation of Ethics Rules. A provision of a lawyer’s retainer agreement which required the client’s payment of fees and costs the lawyer might incur in collecting the fees and costs owed by his client, was stricken as void, and deemed "unfair and potentially violative of the Rules of Professional Conduct," by a 1st District Appellate Court. Finding that the attorney had undertaken representation of the client before the contract was signed, and that a fiduciary relationship had already been established before the contract was signed, the Court ruled that those facts were sufficient to raise a presumption of undue influence. Noting that the collection provisions of the retainer agreement contemplated the lawyer’s suit against his own client, pitting them as potential adversaries, the Court found that "such a provision clearly is unfair and potentially violative of the Rules of Professional Conduct barring an attorney from representing a client if such representation may be limited by the attorney's own interests." The Court did, however, affirm fees owed for the attorney’s work done to benefit the client Lustig vs. Horn, 1-99-0965, First District, Fifth Division (June 9, 2000)(Hartman, J.)
Court Refuses to Extend Retaliatory Action to Wage Payment Claim. Noting that the Illinois Supreme Court has not extended the right to bring a retaliatory discharge action to a firing based on Plaintiff’s making a claim under the Illinois Wage Payment and Collection Act, the Appellate Court affirmed the trial court’s dismissal of the case. Even though one Appellate Court case from 1987 recognized such a claim, the Illinois Supreme Court has consistently refused to expand the tort of retaliatory discharge to actions other than workers compensation claims and whistle blowing claims. . McGrath v. CCC Information Services, Inc., 1-99-0655, 1st District, 2nd Division (June 6, 2000)(McBride, J.)
Sign of the Times: Hacker Insurance Now Available from Lloyds of London. Insurer Lloyds of London is now offering hacker insurance to clients of an internet security service provider. The coverage includes compensation for business and technology costs incurred as a result of an incident of computer hacking.