In the ancient times (i.e. before email), there was little doubt about how a person evidenced their intent to be bound by a written agreement – he or she manually signed the document. This resulted in what is known as a “wet signature” (the wet part being the ink from a pen, as signing in pencil, crayon or blood had, over the years, become frowned upon in the legal community). Then along came email, and while it has been in general use for two decades or so by now, courts today are still resolving its application to the law.
In a recent case, In re Misty G. O’Connor (BK 18-11779), the US Bankruptcy Court for the Western District of New York was presented with a case requiring it to determine whether an email could be “signed” by the sender without the existence of any wet signature (either an original or a PDF or other electronic version).
In December 2016, Misty O’Connor formed a new company, Misty Shores Events, LLC, to operate a wedding venue then under construction on the misty shores of Lake Erie. On the (what turned out to be) erroneous assumption that the facility would soon be ready to begin sending newlyweds off in wedded bliss, the LLC started scheduling wedding dates and accepting deposits, including a $1,000 deposit from Craig Markham, whose daughter booked the venue for her June 16, 2018 wedding.
Unfortunately for all concerned, the venue that Misty Shores Events planned to open never saw the light of day, and, to make matters worse, failed to return any of the ten deposits it received. In March of 2018, in an effort to make amends, Ms. O’Connor sent an email to Ms. Markham, in which she wrote that she was “personally trying to pick up the pieces of my business not opening” and that she “agreed to pay each couple monthly payments until their full deposited amount is paid in full.” As the reader can likely surmise from the very existence of this blog article, Ms. O’Connor failed to return Mr. Markham’s deposit.
A couple of months after sending the email, Ms. O’Connor filed for personal bankruptcy. The Chapter 7 trustee later issued a notice to Ms. O’Connor’s creditors that he had recovered assets and set a deadline for filing proofs of claim. Mr. Markham timely filed his claim for $1,000. Notwithstanding that Ms. O’Connor included the customers who paid deposits to LLC (including Mr. Markham) in her personal schedule of unsecured creditors, the trustee rejected Mr. Markham’s claim, taking the position that the return of the deposit was the obligation of the LLC (which had no assets) and not Ms. O’Connor (who did).
This brings us to the point of this blog article. The Statute of Frauds, as set forth in New York General Obligations Law, requires certain matters to be in writing in order to be enforceable, including guaranties. The relevant part of the law provides:
“Every agreement, promise or undertaking is void, unless it or some note or memorandum thereof be in writing, and subscribed by the party to be charged therewith, or by his lawful agent, if such agreement, promise or undertaking . . . [i]s a special promise to answer for the debt, default or miscarriage of another person.”
In particular, the law requires not only that the promise be in writing, but that it be subscribed (signed) by the party to be charged. Was Misty’s email a writing signed by her, such that she was personally bound by it? Or would the absence of her actual signature on any document prevail? In this case, the Court had little difficulty in finding that the email satisfied the Statute of Frauds.
The first issue to decide was whether the email constituted a “writing.” Back in the early days of email (namely 2000), New York adopted the Electronic Signatures and Records Act (the “Act”). Under the Act, an electronic record, such as an email, “shall have the same force and effect as those records not produced by electronic means.” As a result, the Court held that “the email enjoys the same status of a writing in the form of a letter etched with ink on paper.”
Having quickly disposed of the “is it a writing” issue, the Court then turned to the “was it subscribed” issue. In this respect, the manner in which Ms. O’Connor concluded her email made this a particularly easy call for the Court.
Those of you who recall the days when people sent letters will be familiar with the process of manually signing your name at the end of the letter, either by itself or above your typed name. In this case, Ms. O’Connor provided the electronic equivalent of a wet signature – she typed her first name above her full name at the end of the email. This quite easily satisfied the requirements of the Act, which provides that “unless specifically provided otherwise by law, an electronic signature may be used by a person in lieu of a signature affixed by hand. The use of an electronic signature shall have the same validity and effect as the use of a signature affixed by hand.” The Act defines an electronic signature as one “an electronic sound, symbol, or process, attached to or logically associated with an electronic record and executed or adopted by a person with the intent to sign the record.” By typing “Misty” above her full name, Ms. O’Connor cut through the fog of whether the email was subscribed by her, and the Court overruled the trustee’s objection to Mr. Markham’s claim.
There are a number of lessons that can be learned from this case. First, above all else, be very careful when booking one of your children’s most meaningful days at a location that hasn’t opened for business. Someone has to be the first event at a new venue, but it doesn’t necessarily have to be you. Second, if you’re dealing with a start up business, make sure someone with some resources has agreed, at the outset, to at least return any deposits and other sums paid if your event doesn’t happen. And third, if you’re going to go through the trouble of forming a venture for the purposes of protecting yourself from personal liability, don’t provide after the fact guarantees if you can help it.