Email — Automatically-Generated Signature Block Satisfies UCC Statute of Frauds, Contractual Modification Provisions — Impact of Electric Signatures in Global Commerce Act (ESIGN Act)

Princeton Indus. Prods., Inc. v. Precision Metals Corp., 2015 U.S. Dist. LEXIS 107722 (N.D. Ill. Aug. 17, 2015):

The parties in this case entered into a contract calling for plaintiff, Princeton Industrial Metals ("Princeton") to supply certain machined parts for the defendant, Precision Metals Corp. ("PMC") to use in weapon mounts it was producing for the United States government. This went along smoothly for about two years. Then, on July 21, 2010, the buyer for PMC, Rose Schleifer, sent an email to Kendall Knapik of Princeton with "a schedule for [PMC]" for June through December. The schedule represented an increase in the quantity of parts that PMC had ordered from Princeton. As such, PMC's buyer wrote, "[l]et me know if there will be any problems meeting this schedule." [Dkt. # 12-2, at 65]. Apparently, there were not, as Princeton provided the new numbers, and PMC paid for the shipments [*2]  in due course -- for over a year. But, after September 26, 2011, PMC made no further payments. Defendant has refused to pay the outstanding balance of $100,660.09. Plaintiff has sued under theories of breach of contract and unjust enrichment. The defendant moved for summary judgment, but was unable to prove there was no genuine issue of fact precluding a judgment in its favor. See Princeton Industrial Products v. Precision Metals, 2015 WL 1810319 (N.D.Ill. 2015). Now, the plaintiff seeks summary judgment in its favor.

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The parties agree that the original purchase orders constituted valid [*12]  contracts and could only be modified in accordance with U.C.C. § 2-209. [Dkt. #77, at 7-8; Dkt. # 92, at 2-4]. Princeton thinks Ms. Schleifer's July 21, 2010 email constituted such a modification. PMC thinks it didn't, because it says it was not a "signed" writing.

U.C.C. § 2-209 provides as follows:

   Modification, Rescission and Waiver.

(1) An agreement modifying a contract within this Article needs no consideration to be binding.

(2) A signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party.

(3) The requirements of the statute of frauds section of this Article (Section 2-201) must be satisfied if the contract as modified is within its provisions.

810 ILCS 5/2-209. Thus, the warning about modifications in the purchase orders tracks the applicable Illinois U.C.C. provision. The statute of frauds section, in turn, requires that "there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent . . . ." 810 ILCS 5/201(1).

The email at issue, [*13]  of course, ends with a standard email signature block that includes the name of the sender -- "Rose Schleifer" -- her position -- "Buyer" -- with "Precision Metals, Corp." and the company's address, phone number, fax number, and company email address. For Princeton, this rules the day -- it was in writing and signed by a PMC agent. It points -- oddly consigning the support for its position to a footnote -- to the Electric Signatures in Global Commerce Act ("ESIGN Act"), which provides that "a signature or contract or other recording relating to such transaction cannot be denied legal effect solely because it is in electronic form." 15 U.S.C. 7001(a)(1). The ESIGN Act further provides that an "electronic signature" is "a . . . symbol . . . attached to a contract or other record . . . executed or adopted by a person with the intent to sign the record." 15 U.S.C. 7006(5).

Then, of course, there is the Seventh Circuit's decision in Cloud Corp. v. Hasbro, 314 F.3d 289, 295 (7th Cir. 2002). PMC's brief ignores the holding in Cloud Corp. which, in addition to being mentioned in a footnote in Princeton's brief, was referenced in the Opinion denying PMC's motion for summary judgment [Dkt. # 67, at 3] -- operating under the mistaken assumption that "Illinois is one of four states that has not [*14]  adopted the Federal Esign Act [ESIGN]." [Dkt. #92, at 4 n.1]. But, as the ESIGN Act applies to "all transactions in or affecting interstate commerce," 15 U.S.C. § 1701, it clearly applies to a transaction between an Illinois company and a New York company.3 PMC is confusing the ESIGN Act with the Uniform Electronic Transactions Act. See U.S. Life Ins. Co. v. Wilson, 198 Md. App. 452, 480, 18 A.3d 110, 126 n.5 (2011)(noting that Illinois has not adopted the UETA but has gone with it's own similar version). Illinois's version of the UETA, its Electronic Commerce Security Act, has been in effect since 1999, 5 ILCS 175/1-101, meaning it was in effect when Judge Posner penned the opinion in Cloud Corp., it which the court held that, ESIGN Act or not, "the sender's name on an e-mail satisfies the signature requirement of the statute of frauds." 314 F.3d at 296. And so, "there was adequate evidence of written consent to the modification [of the contract]." 314 F.3d at 297. Why would the email from Ms. Schleifer not amount to the same here?

3   The ESIGN Act allows for limited circumstances in which a state may "modify, limit, or supercede" its provisions. 15 U.S.C. § 7002. But there is no indication that Illinois has undertaken to do so. Indeed, as explained infra, Illinois's own statute's definition of an electronic signature is essentially the same [*15]  as the ESIGN Act's.

PMC seems to argue that it does not because it does not comply with Illinois's Electronic Commerce Security Act, which provides that a signature can be "any symbol executed or adopted, or any security procedure employed or adopted, using electronic means or otherwise, by or on behalf of a person with intent to authenticate a record." 5 ILCS 175/5-105. That's not meaningfully different than the requirement of the ESIGN Act that the Seventh Circuit concerned itself with in Cloud Corp. (and perhaps that's one reason why it did not specifically concern itself with Illinois's Electronic Commerce Security Act).4 Under Cloud Corp., a name on an email satisfies the requirement of a signed writing to modify a contract.

4   The same goes for the U.C.C., which defines the word "signed" as including "any symbol executed or adopted by a party with present intention to authenticate a writing." 810 ILCS 5/2-201.

PMC is adamant, however, and asserts that Ms. Schleifer's email "only contains the standard contact information block" and was not "overtly typed" by her, but "automatically generated by her email system." [Dkt. #92, at 4]. PMC contends, without any evidence to support it, that Ms. Schleifer "had no intention [*16]  of authenticating" the email. [Dkt. # 92, at 4]. But, PMC goes on to submit -- or, perhaps more accurately for our purposes here, to concede -- that "[s]aid contact block appears on all of Ms. Schleifer's emails." [Dkt. #92, at 4] (emphasis supplied). So, to put it another way, that "contact block" identifies the email as coming from Ms. Schleifer, a person with authority to bind PMC, and not from someone else. In other words, it shows that the email was not a forgery.

It authenticates it as Ms. Schleifer's writing. And that's the point. It would seem that, for PMC, nothing can be done through email unless the individual sending the email goes through the physical process of typing her name at the bottom. Its not clear how a recipient or anyone could distinguish between a physically keystroked name and one that is attached to the sender's email automatically. So, for PMC, all electronic commerce would be held hostage to swearing contests over whether an individual typed their name or it was generated automatically by their email account. One might say that's ridiculous or, as Judge Cardozo more artfully put it in regards to the statute of frauds:

   The statute must not be pressed to the extreme [*17]  of a literal and rigid logic. Some compromise is inevitable if words are to fulfill their function as symbols of things and of ideas. How many identifying tokens we are to exact, the reason and common sense of the situation must tell us.

Marks v. Cowdin, 226 N.Y. 138, 143-144, 123 N.E. 139, 141 (1919). History -- as well as reason and common sense -- tells us we have sufficient identifying tokens here.

Before business was regularly conducted by email, the Seventh Circuit had little difficulty finding a writing on a company's preprinted letterhead satisfied the signed writing requirement. Monetti, S.P.A. v. Anchor Hocking Corp., 931 F.2d 1178, 1185 (7th Cir. 1991). See also Perricci v. Systems Assessment & Research, Inc., 2011 WL 5974605, *7 (D.Md. 2011)(writing on company letterhead with printed name and title of the writer satisfied the statute of frauds); MFS & Co., LLC v. Caterpillar, Inc., 2011 WL 4693897, *5 (E.D.Mich. 2011)(purchase order on company's letterhead constituted writing signed by the company); Automotive Spares Corp. v. Archer Bearings Co., 382 F.Supp. 513, 515 (D.C.Ill. 1974)("The facts show that [defendant] sent the document bearing its letterhead containing the essential terms. This conduct is more convincing than the fact that the document does not contain a formal signature."). The signature block at the end of an email, whether typed by Ms. Schleifer or generated automatically by her email program is not discernibly different.

Through all this, it must be remembered that intent to authenticate can be actual or apparent. Restatement (Second) of Contracts § 134 (1981). See [*18]  also Reinagel v. Deutsche Bank Nat. Trust Co., 735 F.3d 220, 227 n.19 (5th Cir. 2013); Flight Systems, Inc. v. Electronic Data Systems Corp., 112 F.3d 124, 129 (3rd Cir. 1997); Just Pants v. Wagner, 247 Ill.App.3d 166, 173, 617 N.E.2d 246, 251 (1st Dist. 1993)(". . . a writing has been considered 'signed' for the purpose of the statute even if it merely contains something which manifests that the instrument has been executed . . . by the party to be charged by it. "); Hamdi Halal Market LLC v. U.S., 947 F.Supp.2d 159, 164 (D.Mass. 2013)("The law demands only demonstration of a person's intent to authenticate a document as her own in order for the document to be signed. Many symbols may demonstrate this intent."); White v. BAC Home Loans Servicing, LP, 2011 WL 4479299, 7 (N.D.Ga. 2011); Overman v. Minnwest Bank South, 2008 WL 2574461, *2 (Minn.App. 2008); In re Bross, 2006 WL 2381542, *4 (S.D.Ohio 2006); Bradley v. Dean Witter Realty, Inc., 967 F.Supp. 19, 27 (D.Mass. 1997).5 Thus, contrary to what PMC seems to be driving at, Ms. Schleifer's intent can be satisfied and shown without her having to testify at a trial. Otherwise, most signatures on most contracts, electronic or otherwise, would have to be tested at trial. And every contractual obligation could be avoided; in other words, fraud could be accomplished by the "extreme . . . literal and rigid" application of the statute of frauds that PMC appears to be espousing.

5   It should also be pointed out that, under Illinois law regarding the interpretation of contracts, it is the objective manifestation of intent that matters, not subjective intent. Apex Digital, Inc. v. Sears, Roebuck & Co., 735 F.3d 962, 966 (7th Cir. 2013); Citadel Group Ltd. v. Washington Regional Medical Center, 692 F.3d 580, 588 (7th Cir. 2012).

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