2017 NSBA Annual Meeting Bankruptcy Section Seminar Sign Here, Please: The Use of Digital Signatures in Nebraska Samuel Turco, Jr. Sam Turco Law Offices October 13, 2017 Embassy Suites La Vista
Sign Here, Please The use of Digital Signatures in Nebraska Bankruptcy Cases Prepared by Samuel J. Turco, Jr. SAM TURCO LAW OFFICES,P.C., L.L.O 3006 S 87 th Street, Omaha, NE 68124 5000 Central Park Drive, Suite, 204, Lincoln, NE 68504 Tel. (402) 614-7171 Sam.Turco@SamTurcoLawOffices.com
Federal Rule of Bankruptcy 9011. Signing of Papers; Representations to the Court; Sanctions; Verification and Copies of Papers (a) Signature. Every petition, pleading, written motion, and other paper, except a list, schedule, or statement, or amendments thereto, shall be signed by at least one attorney of record in the attorney s individual name. A party who is not represented by an attorney shall sign all papers. Each paper shall state the signer s address and telephone number, if any. An unsigned paper shall be stricken unless omission of the signature is corrected promptly after being called to the attention of the attorney or party Rule 9011 does not specifically state that a debtor represented by an attorney has to sign the bankruptcy petition. However, such a requirement is inferred from court rules and forms. Federal Rule of Bankruptcy Procedure 1008. Verification of Petitions and Accompanying Papers All petitions, lists, schedules, statements and amendments thereto shall be verified or contain an unsworn declaration as provided in 28 U.S.C. 1746. I declare under penalty of perjury that the information provided in this petition is true and correct. I request relief in accordance with the chapter of title 11, United States Code, specified in this petition. X Signature of Debtor Nebraska Local Rule 9011-1. Signatures A. Petitions, lists, schedules and statements, amendments, pleadings, affidavits, and other documents which must contain original signatures or which require verification under Fed. R. Bankr. P. 1008 or an unsworn declaration as provided in 28 U.S.C. 1746, shall be filed electronically and may include, in lieu of the actual signature, the signature form described in subsection C. B. The attorney of record or the party originating the document shall maintain the original signed document for all bankruptcy cases at least one year after the case is closed. In adversary proceedings, the parties shall maintain the original document until after the
case ends and all time periods for appeals have expired. Upon request, the original document must be provided to other parties or the Court for review (Fed. R. Bankr. P. 9011 applies). C. The pleading or other document electronically filed may indicate a signature, e.g., s/jane Doe. The CM/ECF filer login and password may constitute the signature of said party on any electronically filed pleading (i.e., affidavits, petition, schedules). The attorney of record or the party originating the document shall maintain the original signed document. Upon request, the original document must be provided to other parties or the Court for review. D. The following procedure applies when a stipulation or other document requires two or more signatures: 1. The filing attorney shall initially confirm that the content of the document is acceptable to all persons required to sign the document and shall obtain the physical signatures of all parties on the document. For purposes of this Rule, physical, facsimile, or electronic signatures are permitted. A document may be signed in counterparts (Fed. R. Bankr. P. 9011 applies). 2. The filing attorney then shall file the document electronically, indicating the signatories, e.g., s/jane Doe, etc. 3. The filing attorney shall maintain the signed document for all bankruptcy cases at least one year after the case is closed. In adversary proceedings, the parties shall maintain the signed document until after the case ends and all time periods for appeals have expired. Upon request, the signed document must be provided to other parties or the Court for review. Must a debtor sign the bankruptcy petition? CASE LAW In re Benton (Bankr. E.D. Mich., 2016), Case No 09-36642-dof Debtors failed to report that they received lottery winnings prior to the filing Chapter 13 and failed to report ownership of a home. The debtor s original attorney was diagnosed with cancer and transferred all his bankruptcy client files to another attorney, however the files were transported in an open trailer and it is possible that original signed paperwork was lost. No one could produce original wet ink signatures or copies of any signed paperwork. After the debtors were indicted for bankruptcy fraud they filed a motion to dismiss the bankruptcy case since no one could produce the originally signed bankruptcy documents.
Outcome: The bankruptcy court refused to dismiss the bankruptcy case even though nobody could produce signed documents. The court focused on the following: o The debtors attended a 341 hearing and acknowledged that the signed the bankruptcy paperwork. o When the debtors converted the case to chapter 7, they attended a second 341 hearing and again testified that they signed the paperwork. o The bankruptcy court ruled that there is no requirement in the Bankruptcy Code that a debtor actually sign the bankruptcy petition and schedules. Rather, it is enough that a debtor authorize the filing of a case. Several Courts have ruled that a debtor must sign the bankruptcy petition: Briggs v. LaBarge (in re Phillips), 317 B.R. 518 ( 8 th BAP 2004), 2004 LEXIS 1784) This is the controlling case in the 8 th Circuit. Attorney Briggs files a bankruptcy petition that had not been signed by the debtor and was sanctioned. The 8 th Circuit Bankruptcy Appellate Panel upheld sanctions and ruled that debtors must sign the bankruptcy petition and schedules. (The sanctions were subsequently reversed by the 8 th Circuit Court, but the requirement of a debtor to sign a petition was upheld.) Although Rule 9011 does not specifically state that a debtor must sign a petition, the 8 th BAP inferred the requirement by noting the following: o The Supreme Court has power to issue rules that govern bankruptcy practice and procedure. o Fed. R. Bankr. P. 1001 provides that bankruptcy rules and forms govern all bankruptcy cases. o Official forms require a debtor s signature. o Fed. R. Bankr. P. 1008 requires all signatures to be verified and to contain an unsworn declaration. In re: Whitehill, 514 B.R. 687 (M.D. Fla. 2014) (The debtor s attorney filed schedules when the debtor had not reviewed or signed the documents. The court imposed sanctions, including monetary sanctions of $15,000.00.)
In re: Bradley, 495 B.R. 747 (S.D. Tex. 2013) (The attorney s actions which included forging by electronic signature defiled the temple of justice and were in bad faith.); In re: Stomberg, 487 B.R. 775 (S.D. Tex 2013)(The Court held that there are no circumstances that would ever justify an attorney filing the debtor s petition or schedules without first obtaining his signature. Sanctions were imposed.); In re: Wenk, 296 B.R. 719 (E.D. Va. 2002) (A debtor s attorney filed a Skeletal petition without any signature in order to get the benefit of the automatic stay. The Court found that the practice was no less egregious than filing an electronic petition without an original signature. The court imposed sanctions under a separate order.). Lawyers altering signed documents: In re Harmon, 435 B.R. 758 (Bankr. N.D. Ga, 2010) The U.S. Trustee s Office investigated the law firm of Robert J. Semrad & Associates LLC. In a review of 22 cases, the U.S. Trustee found that there were differences between the signed documents and the electronically filed documents in all but three of those cases. 18 out of 22 cases revealed material changes made to documents after they were signed. Specifically, the U.S. Trustee found changes to: a. Property Valuation b. Claims Valuation c. The security status of creditors claims d. The list of creditors e. The Statement of Financial Affairs f. The Means Test form; and g. The terms of the proposed Chapter 13 Plan. In re Moore, 1012 Bankr. LEXIS 4770; 2012 WL 4846535. FACTS: During an adversary proceeding counsel for the debtor provided the court with the debtor s wet-ink signature that was not an exact replica of the petition electronically filed with the court. Entire sections were marked out and words and numbers handwritten over the typed text. The date on the filed petition did not match the handwritten date on the wet-ink copy. The debtor testified that he saw the attorney make changes to the petition as it was being signed, but was never given the opportunity to review the final copy. OUTCOME: The debtor s attorney was sanctioned for materially altering the signed petition without obtaining an updated signature.
In re Daw, 2011 Bankr. LEXIS 279. The court learned that an attorney who was practicing before the court was filing documents using the court's ECF system, but was not complying with the requirement that he file a signature page, showing that the client signed the document, within five days of the date the document was filed, and it ordered the attorney to submit the missing signature pages. The attorney submitted signature pages in 17 out of the 20 cases that were at issue, but admitted during a hearing before the court that he often had clients sign a draft of documents he filed and filed amended documents without having the client review and sign the document that was filed. The court found that the attorney violated Fed. R. Bankr. P. 9011(b) and the court's local rules by filing documents that had not been reviewed and signed by his clients, and it ordered the attorney to complete six credit hours of continuing legal education in ethics within one year and decided to report his conduct to the Idaho State Bar. The court found that the attorney did not intend to deceive the court. However, in submitting documents that had not been reviewed or signed by his clients, he misrepresented the facts. Digitally signed Bankruptcy Pleading In re Mayfield, 2016 Bankr. LEXIS 2613 (E.D. CA 2016) Attorney Pauldeep Bains was sanctioned by the bankruptcy court for filing a case where the debtor signed the petition, schedules, statement of financial affairs and other documents using a digital signature provided by www.docusign.com in violation of that court s local rules. The court made many interesting comments in this opinion: the ease with which a DocuSign affixation can be manipulated or forged. o The court offered no explanation of how exactly one would manipulate or forge such a signature. The UST ask what happens when a debtor denies signing a document and claims his spouse, child or roommate had access to his computer an could have clicked on the Sign Here button. o Most computers have password requirements, but most postal mailboxes do not, yet we allow attorneys to mail bankruptcy petitions to debtors for signature. How can we be sure a spouse, child or roommate didn t sign a mailed petition? A bankruptcy case is not a contract where all parties have agreed to use electronic signatures. Treating software-generated electronic signatures as original signatures would, as the UST contends, increase the possibility of confusion and mischief in the signature process (especially where less scrupulous e-filers are involved) o The primary mischief in the signature process occurs when attorneys materially change the signed schedules and file such altered schedules without obtaining an
updated signature. Digital signatures prevent this practice since the debtor (and therefore the UST) has proof of what they did and did not sign. ELECTRONIC SIGNATURES Electronic Signatures in Global and National Commerce Act of 2000. (The E-sign Act ): A signature, contract, or other record relating to such transaction may not be denied legal effect, validity, or enforceability solely because it is in electronic form. Both the Uniform Electronic Transactions Act (UETA) and the E-SIGN act define an electronic signature as an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record. This definition can be broadly interpreted. All of the following are means for giving an electronic signature: clicking a mouse to show intent to sign, writing with a stylus on a smartphone or tablet, or even typing one s name in an email message. SPECIFIC EXCEPTIONS. a statute, regulation, or other rule of law governing the creation and execution of wills, codicils, or testamentary trusts; A State statute, regulation, or other rule of law governing adoption, divorce, or other matters of family law; or the Uniform Commercial Code, as in effect in any State, other than sections 1-107 and 1-206 and Articles 2 and 2A Court orders or notices, or official court documents (including briefs, pleadings, and other writings) required to be executed in connection with court proceedings; Any notice of cancellation or termination of utility services (including water, heat, and power); A notice of default, acceleration, repossession, foreclosure, or eviction, or the right to cure, under a credit agreement secured by, or a rental agreement for, a primary residence of an individual; A notice of cancellation or termination of health insurance or benefits or life insurance benefits (excluding annuities)
Recall notice of a product, or material failure of a product, that risks endangering health or safety Any notice document required to accompany any transportation or handling of hazardous materials, pesticides, or other toxic or dangerous materials. Digital Signatures vs. Electronic Signatures All digital signatures are electronic signatures, but not all electronic signatures qualify as digital signatures. A digital signature is an electronic signature that has been verified. The digitally signed document has been encrypted and secured through a mathematical process known as Public Key Cryptography. Nebraska Digital Signature Act, Neb. Rev. Stat. 86-611 Nebraska has adopted the Uniform Electronic Transactions Act (UETA) and allows for digital signatures. The Nebraska Secretary of State maintains a list of those vendors that choose to be certified as meeting the standards of Nebraska s digital signature act. Currently the only vendor that is certified is DocuSign. (Other vendors may also meet the Nebraska standards, but they have not bothered to be certified with the State.) Bankruptcy Fee Agreements: May a debtor electronically sign a bankruptcy fee agreement? Bankruptcy Code Section 528: Requirements for debt relief agencies: (a) A debt relief agency shall (1) not later than 5 business days after the first date on which such agency provides any bankruptcy assistance services to an assisted person, but prior to such assisted person s petition under this title being filed, execute a written contract with such assisted person that explains clearly and conspicuously (A) the services such agency will provide to such assisted person; and (B) the fees or charges for such services, and the terms of payment;
(2) provide the assisted person with a copy of the fully executed and completed contract; Nebraska Local Rule 9011 relates to petitions, lists, schedules and statements, amendments, pleadings, affidavits, and other documents which must contain original signatures. It does not specifically refer to written fee agreements required under 528(a). Nor are written fee agreements filed with the bankruptcy court, so it would appear that legal retainer agreements may be signed digitally. Pros and Cons of using Digital Signatures in Bankruptcy Pleadings Pros: 1. Signatures may be obtained quickly. 2. Pleadings may be amended immediately as new information is obtained, thus improving the accuracy of bankruptcy pleadings. 3. Debtors get an immediate copy of what they digitally sign. 4. Documents cannot be altered after signing. Every page of a digitally signed document is stamped with a tamper-proof encrypted code. If the document is altered after it is signed the stamp indicates that an unapproved change was made. 5. Many debtors do not have access to fax machines or printers. Digital signatures avoid the need of printing documents. 6. Time Stamp: Digitally signed documents indicate exactly when a document was signed. 7. Bank account balances change daily. Income averages required by the Means Test change monthly. Digital signatures help bankruptcy attorneys get updated pleadings signed quickly. 8. Many debtors live hundreds of miles away from their attorney. By the time a physically signed document has been mailed back to their attorney, the information in it has become outdated. 9. A third-party vendor, such as www.docusign.com, can verify when a document was signed and what exactly was signed. The temptation for debtor attorneys to alter a signed
document is greatly lessened since the debtor and the signature vendor have proof of what was signed. 10. Wet ink signatures on paper exist on only a few pages in a 50 to 80 page bankruptcy petition. It is too easy to alter the information on the pages attached to the signature pages. 11. A debtor can be asked to input information as they sign the bankruptcy petition, such as the amount in their bank accounts at the time they are signing the petition. Cons: 1. Many debtors and attorneys feel uncomfortable with using digital signatures. 2. A concern exists as to whether a debtor who clicks a Sign Here button as seriously as signing a paper document in ink. 3. If married debtors share a common email address, concerns may arise as to whether one spouse digitally signed for the other. (This same concern also exists for petitions mailed to married debtors.) 4. Computer files are susceptible to damage and without proper computer backup systems the original signatures may be lost. (For this reason it is advisable that the debtor s attorney keep a hard copy of the digitally signed documents.) 5. Digital signatures, like all technological products, are highly dependent on the technology it is based on. In this era of fast technological advancements, many of these tech products have a short shelf life. 6. Lack of Experience. Few courts seem to expressly allow the use of digital signatures. PRACTICAL USES OF DIGITAL SIGNATURES 1. Fee Agreements & Disclosures 2. Engagement Letters 3. Letters of Understanding 4. Warning Letters
RECOMMENDED GUIDLINGS FOR USING DIGITAL SIGNATURES IN BANKRUPTCY PLEADINGS 1. Attorneys should print and mail a hard copy of the digitally signed document to the debtor with a cover letter. The cover letter should direct the debtor to immediately contact the attorney if they did not sign the document digitally or if there are errors in the document. 2. Attorneys should print and retain a hard copy of the digitally signed document and its audit trail for the time period that Local Rules require an original document to be retained. 3. Debtors should sign an Authorization Form allowing for the use of digital signatures during the bankruptcy case, and said authorization should be signed in wet-ink on paper. 4. If a husband and wife share the same email address, the attorney should call the debtors and verbally confirm from each debtor that they signed the bankruptcy petition and schedules digitally.
IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF NEBRASKA IN THE MATTER OF:, Debtor(s). ) ) ) ) ) ) CASE NO: CHAPTER DECLARATION & AUTHORIZATION OF DIGITAL SIGNATURES COMES NOW the Debtor and he/she hereby declares that he/she/they signed the bankruptcy petition and schedules digitally under penalties of perjury. The debtors further acknowledge that they received a copy of the digitally signed bankruptcy pleading and schedules. The undersigned debtor(s) hereby authorize that future bankruptcy documents may be signed by them digitally. DATE: Debtor Co-Debtor