House Subcommittee Passes Amended E-SIGN Bill

(October 7, 1999) The House CIP Subcommittee approved an amended version of HR 1714, the E-SIGN Act, on Thursday, October 7, which differs from the bill reported by the Commerce Committee on the issue of preemption of state laws. Members of the subcommittee will also likely produce a further revision when the full Judiciary Committee marks up the bill.

The House Judiciary Committee's Subcommittee on Courts and Intellectual Property (CIP) Subcommittee met to mark up HR 1714, the Electronic Signatures in Global and National Commerce (E-SIGN) Act. The original bill was introduced in May by Rep. Tom Bliley (R-VA), the Chairman of the House Commerce Committee, and approved by the Commerce Committee in August.

The CIP Subcommittee reported an amendment in the nature of a substitute offered by Rep. Howard Coble (R-NC) which differs from the Commerce Committee version on the preemption issue.

Instead, it resembles S 761, the Third Millennium Electronic Commerce Act, a bill introduced by Sen. Spencer Abraham (R-MI) last spring.

The is no disagreement over the general principle of promoting electronic commerce by providing for the acceptance of electronic signatures in interstate commerce. However, there is substantial disagreement in some of the details, especially regarding preemption of state legislation pertaining to electronic signatures.

Rep. Coble, the Chairman of the CIP Subcommittee, presided at the markup. He said in his opening statement that "HR 1714 attempts to facilitate the continued success of electronic commerce by ensuring that businesses and customers that contracts created with electronic signatures and electronic records are legally effective in the same way that paper contracts and records are today. I support that goal."

Rep. Howard Coble (R-NC)

He continued that "some states have adopted electronic signatures and records legislation and some have not. In an attempt to solve this problem, the National Conference of Commissioners on Uniform State Laws approved a model law, the 'Uniform Electronic Transactions Act,' and has recommended it to the states for adoption. This model law has widespread support by all parties. Yet, it will take at least 2 to 3 years for the majority of states to adopt it. Many in the e-commerce industry believe it is necessary to adopt federal legislation to 'fill in the gap'."

He stated his objections to the version of the bill reported by the Commerce Committee: "I believe that it imposes unacceptable preemption over state law-making processes, raising concerns regarding constitutional federalism. I also am concerned over the effect of the bill on court rules on admissibility, retaining records for proof in litigation, and legal documentation. I am particularly concerned about provisions in H.R. 1714 which would allow the federal government to go to federal court to restrain a state from enforcing laws they enact."

He then offered his version of HR 1714. "The Amendment in the Nature of a Substitute to H.R. 1714 incorporates, in my opinion, the best elements of H.R. 1714, S. 761 and the UETA so as to preserve constitutionality, federal-state relations, rules on admissibility, retaining of records for proof in later litigation, and the effect on legal documentation while supporting the goals and thrust of the bill," said Rep. Coble.

"It adopts the approach of H.R. 761 as reported by the Senate Commerce Committee in regard to the issue of federal preemption. The federal "gap filler" will be just that, as soon as a state adopts the UETA, or another law that has the same effect, the federal preemption is no longer effective in that state."

The Coble amendment also differs from the Commerce Committee version on the matter of government contracts. The Coble bill, like S 761, applies only to commercial transactions. It does not apply to contracts to which the government is a party.

Also, the Coble amendment includes verbatim the Oxley language pertaining to the Securities and Exchange Act. Rep. Mike Oxley (R-OH), the Chairman of the House Commerce Committee's Finance Subcommittee drafted a section of HR 1714 that applies special rules for the use of electronic signatures in the securities industry.

Rep. Howard Berman

Rep. Howard Berman (D-CA), the ranking minority member of the CIP Subcommittee, said that the Coble amendment "makes substantial improvements in that legislation, although in my view, still not addressing a couple of critical issues." He also said that he was "quite stunned that the Commerce Committee would have reported that bill out."

He offered an amendment to the Coble amendment, which was cosponsored by Rep. John Conyers (D-MI), the ranking minority member of the full Judiciary Committee, and Rep. Zoe Lofgren (D-CA).

Both Rep. Berman and Rep. Lofgren represent California, which has already adopted the Uniform Electronic Transactions Act (UETA).

Rep. Berman stated that "this legislation trumps" other federal statutes and regulations. He cited several agencies which might be adversely affecting, including the Securities and Exchange Committee and the Federal Reserve Board.

He also argued that states ought to be allowed to exclude certain types of contracts. "In California, they excluded the automobile sales finance act, which governs the terms, conditions, and disclosures and warranties of automobile -- there are certain kinds of consumer laws where, here, a particular state legislature looked at some specific laws, wants to push towards electronic commerce, wants to allow electronic signatures, but in some particular area, wants written disclosures of certain terms and conditions, and warranties, in writing automobile laws. They have made a judgment in terms of their transactions."

At this point, Rep. James Sensenbrenner (R-WI) said that "I think consideration of this legislation is premature." He suggested that the subcommittee "perhaps adjourn this markup", and simply wait for the states to adopt the UETA. Rep. Sensenbrenner was a Wisconsin state legislator prior to his election to the U.S. House of Representatives.

He was the only member of the subcommittee who expressed any reservation about the Congress passing an electronic signatures bill. Rep. Berman, however, insisted that a bill be passed promptly because there is a need for a federal bill to cover the transition until the states have adopted the UETA.

At this time the subcommittee recessed so that members could go to a vote on an unrelated matter on the House floor. During the recess, staff and representatives of interested parties conferred.

When the subcommittee members returned from the House floor, Coble, Berman, Conyers, Lofgren, and members of their staffs, conferred at length in the hearing room, still off the record, before resuming the formal subcommittee hearing.

When the subcommittee went back on the record Rep. Coble announced the Rep. Berman's amendment would be withdrawn, but that subcommittee members would work on further revisions to the bill prior to the markup by the full Judiciary Committee. No other amendments were offered.

Rep. Berman stated that "there are some important issues that we need to work on between now and full committee." He added that delay does "not serve either of our interests." One concern of the members was not delaying the process in a way that would prevent the E-SIGN Act from being enacted into law this year.

Rep. Coble thanked Rep. Berman, and said "the staff and the members will begin working on this matter imminently, hoping to lash down all lose ends."

The members of the subcommittee who participated in the mark up were: Howard Coble, Howard Berman, Mary Bono (R-CA), Rick Boucher (D-VA), Chris Cannon (R-UT), John Conyers (D-MI), William Delahunt (D-MA), Bob Goodlatte (R-VA), William Jenkins (R-TN), Zoe Lofgren (D-CA), Edward Pease (R-IN), James Rogan (R-CA), James Sensenbrenner (R-WI).

The Coble amendment was adopted by a unanimous voice vote. Then, HR 1714, as amended, was reported by a unanimous voice vote. The members who were present at the time of the vote were Howard Coble, Howard Berman, John Conyers, Zoe Lofgren, Ed Pease, William Jenkins, and Bob Goodlatte. In addition, James Rogan was in an adjoining room conducting a previously scheduled telephone interview with a Los Angeles radio station at the time of the vote.