E-Sign of Things to Come from the Texas Supreme Court

The Texas Supreme Court recently grappled in Aerotek, Inc. v. Boyd with the manner in which Texas court must evaluate proof of electronic signatures in the context of an arbitrability dispute. In doing so, the Court established firm ground rules for other enforcement battles likely to arise in the world of e-commerce and electronically-signed contracts.

What happened?

Before the case arrived at the Texas Supreme Court, four temporary contractors employed by Aerotek sued for wrongful termination. Based on an agreement to arbitrate any dispute that was alleged to have been electronically signed by the temporary contractors in their on-boarding paperwork, Aerotek moved to compel arbitration. Aerotek relied on testimony of a program manager who showcased the online employment paperwork system before the trial court. The employees successfully defeated Aerotek’s motion with a blanket denial that they had ever seen, nor “e-signed,” any arbitration agreement in the on-boarding paperwork.

The Fifth Court of Appeals in Dallas had affirmed the trial court’s ruling in a split decision, with the majority holding that only the testimony of a technical expert could conclusively establish what happened on the day of the “clicks” in question. In the absence of conclusive evidence, the majority deferred to the trial court’s resolution of disputed evidence in favor of the temporary contractors. The dissent complained the majority was setting a standard that no one could ever meet to prove up an electronic signature. The court of appeals declined to grant en banc review, and four justices dissented (a rare event).

What then?

On further appeal, the Texas Supreme Court disagreed with the two lower courts. It reversed and remanded the case for the trial court to compel arbitration as requested by Aerotek.

Chief Justice Hecht, as author of the majority opinion, agreed with the reasoning found in the dissenting opinion below and held that the testimony of the program manager conclusively established the electronic signatures were valid and attributable to the temporary contractors. The majority opinion noted: “Aerotek’s evidence of the security procedures for its hiring application and its operation is such that reasonable people could not differ in concluding that the employees could not have completed their hiring applications without signing the [arbitration agreements] . . . The employees’ simple denials are no evidence otherwise.”

Justice Boyd dissented, arguing the holding gives far too much credence to testimony that seeks to attribute an individual’s login to “clicks” recorded in the system. He expressed his concern that if someone is necessarily lying—either the employees or the employer—that someone can just as easily be the person testifying about how the system works. He insisted that the trial court is empowered to resolve that disputed fact issue and advocated that the Texas Supreme Court is not in a position to determine the veracity of witnesses.

What now?

This case is important for all Texas businesses relying on electronic signatures, whether the validity needs to be confirmed or challenged. Things we now know:

• A mere denial will not suffice to avoid an electronic signature.
• A challenger must attack the reliability of any security and tracking procedures.
• Reliable systems should compile a stored record linking the person to the record.
• Even a non-expert can explain how the system works to enforce the signature.

In an ever more paperless world, the decision in Aerotek highlights the advantages and potential pitfalls of a computer-assisted electronic signature process. If you need help drafting electronic documents such as employment agreements or other business contracts, or if you want to make sure your business is protected from a similar challenge, reach out—we are ready to assist you at BoyarMiller with all your transactional, employment, and dispute-resolution needs.

Author Whitney Brieck is a trial and appellate lawyer with experience advocating inside the courtroom as well as working for judges behind the appellate bench, which uniquely situates her to counsel clients through all stages of commercial disputes.