Cabardo v. Patacsil (In re Patacsil), Case No. 20-23457-A-7, Adv. No. 20-02167-A, 2023 Bankr. LEXIS 537 (Bankr. E.D. Cal. Feb. 28, 2023)

The following is a case update written by Jessica Bagdanov a partner at BG Law, analyzing Cabardo v. Patacsil (In re Patacsil), Case No. 20-23457-A-7, Adv. No. 20-02167-A, 2023 Bankr. LEXIS 537 (Bankr. E.D. Cal. Feb. 28, 2023), a recent case of interest:

SUMMARY

The Bankruptcy Court for the Eastern District of California recently issued a decision analyzing the implications of using DocuSign and other electronic methods of signing affidavits and other documents, ultimately sustaining evidentiary objections to trial declarations for improper presentation of sworn written testimony.

To read the full decision: click here.

FACTS

Former employee-Plaintiffs brought a nondischargeability action against their former employers, Ernesto Patacsil and Marilyn Embry Patacsil (the Debtors). Prepetition, the Plaintiffs filed a wage and hour lawsuit against the Debtors and obtained an almost $2 million judgment against the Debtors after a 21-day jury trial. In connection with pretrial procedures in the nondischargeability action, the Debtors filed evidentiary objections to numerous direct testimony declarations submitted by the Plaintiffs on the grounds that, among other things, the declarations were not properly signed in accordance with the Local Bankruptcy Rules for the Eastern District of California, Rule 9017-1 and 9004-1(d), which prohibit the use of DocuSign to properly sign sworn written testimony. See also 28 U.S.C. § 1746, which requires an unsworn affidavit to be made “in writing” under penalty of perjury.

E.D. Local Rule 9004-1 includes specific instructions in its requirement for maintaining manual signatures. For example, in a situation where a non-ECF registered signer uses /s/ to sign a document, the filer must retain the wet signature for three years after the close of a case and is subject to sanctions for failure to comply from the court, U.S. Trustee, and/or U.S. Attorney’s Office. Local Rule 9004-1(c)(1)(D).

The bankruptcy court sustained the evidentiary objections in their entirety, stating that “The Eastern District of California has always required affiants to executed sworn testimony by a manually-created, wet signature.”  The court identified two exceptions to the “wet signature” rule, (1) where a non-ECF registered user may use /s/ to sign an electronic document so long as the registered electronic filer possesses the original wet signature at the time of filing, or (2) an image of a wet signature (i.e., facsimile, scanned document) may be used to prove the existence of execution of the document. Neither exception applied to the facts.

REASONING

In his relatively short decision—just over three pages—Judge Clement methodically addressed the Local Rules as well as relevant case law in the Eastern District of California on the issue in order to reach his conclusion, noting that the Plaintiffs did not allege the existence of an original, manual signature; Plaintiffs simply contended that DocuSign was sufficient. Citing to a 2016 decision from Judge Bardwil, the court emphasized the point that DocuSign signatures are easily capable of manipulation and that such manipulation may not be obvious to opposing parties or the court—i.e., a spouse or child could easily click on the “Sign Here” button in the DocuSign software and essentially forge a signature. In contrast, the court noted that while handwriting is also subject to forgery, it is much less common and much easier to identify and prove than any form of electronic software-generated signatures.

AUTHOR’S COMMENTS

Interestingly, in looking back at the briefing on the evidentiary objections, the Plaintiffs argued that the relevant signatures were “hand-drawn”—just on a computer screen as opposed to paper. Plaintiffs argued that this was sufficient under a reading of the court’s Local Rules 9017-1 and 9004-1(d), because the declarant “used her finger to hand-draw her signature, and therefore the document constitute[d] an originally signed document.” Adv. 20-02167 (Bankr. E.D. Cal.) [Doc. 148].  As outlined above, the court disagreed, stating that Local Rule 9014-1(D)’s use of the word “manual” excludes a wholly electronic signature (i.e., via DocuSign or other similar software). Plaintiffs’ argument also did little to address Judge Clement’s concern regarding the ease of forgery in connection with software-generated electronic signatures. Thus, the decision is unremarkable in the sense that Judge Clement correctly applied the Local Rules and precedent to the facts before him. Query whether the issue could have been easily cleared up via cross-examination at trial or re-direct to lay proper foundation for the substance of the declaration.

Yet, the decision also raises interesting questions about the age in which we live and the complete integration of the Internet into every aspect of the human existence. The average age of an attorney admitted to practice law in California in 2022 was 31 (https://apps.calbar.ca.gov/members/demographics.aspx), and thus has most likely spent her entire youth and adult life using computer software to complete daily activities, both simple and complex. The use of DocuSign is common in real estate transactions, other loan documentation, tax and accounting, as well as in the healthcare industry. Should the legal profession relax its standards of requiring “wet” signatures, especially in light of the recent Covid-19 pandemic and the need for more streamlined procedures? Given the complex regulatory schemes that govern companies like DocuSign, perhaps the software is more secure than we think?

There are remarkably few decisions in the Ninth Circuit addressing the propriety of using DocuSign in court. Recently, two judges of the Southern and Central Districts of California have declined to strike declarations signed by DocuSign. See Workplace Techs. Rsch., Inc. v. Project Mgmt. Inst., Inc., 2021 WL 4895977, at *5 (S.D. Cal. Oct. 20, 2021) (“To the extent these declarations contain information about which the declarants have personal knowledge and are competent to testify, and could be presented in an admissible form, they will be considered.”); Eddie Silva v. Domino’s Pizza, 2020 WL 5894578, at *3 (C.D. Cal. Aug. 1, 2020) (declining to deem declarations with DocuSign signatures as inadmissible especially given “extraordinary circumstances of the pandemic.”).

As for the law in the other California bankruptcy districts regarding the signature requirements for non-ECF registered users:

Bankr. C.D. Cal: holographic (“handwritten in ink”) signatures required, must retain executed original for five (5) years [LBR 9011-1];

Bankr. S.D. Cal.: image of original manual signature permitted as an original signature; original signed paper must be retained for five (5) years [Local Rule 5005-8; 5008];

Bankr. N.D. Cal.: filing of a signed document constitutes the filer’s attestation that the filer possesses an original ink signature, electronic copy of the original ink signature, or a faxed copy of the original ink signature, must retain records for five (5) years [BLR 5005-2].

Bottom line, practitioners should carefully review the local rules for maintaining signatures and ensure compliance on behalf of themselves as well as their legal support staff.

These materials were written by Jessica Bagnaov a partner at BG Law in Woodland Hills, California (jbagdanov@bg.law).  Editorial contributions were provided by Brandon J. Iskander, a partner at Goe Forsythe & Hodges LLP in Irvine, California (biskander@goeforlaw.com).