The COVID-19 pandemic has unsurprisingly resulted in many people in the business community, including lawyers, transacting business remotely. With that uptick comes more contracts utilizing electronic signatures and remote depositions and notarizations. Not only is the use of an e-signature generally more convenient for the parties involved in a transaction, but an e-sig provides many more layers of security and protection from claims of forgery than a wet-signature because the process requires the user to confirm her identity to bind her signature to that identity through a digital certificate.
So what happens when there’s a contractual dispute, and one of the parties is seeking to enforce a contract while the counterparty is claiming that its electronic signature has been forged? On October 26, 2023, Justice Daniel J. Doyle of the Monroe County Commercial Division dealt with just that in AJ Equity Group LLC v Office Connection, Inc., in which he held that the defendant’s mere denial that she e-signed an agreement was not sufficient to dismiss a breach of contract claim, but also that the plaintiff was not entitled to summary judgment on its breach claim for failure to explain the relevance and significance of the signature certificate showing that the electronic signature was valid.
In March of this year, the plaintiff filed an action predicated on the defendant-seller’s purported breach of a Receivable Purchase Agreement (“Agreement”). Karen Minc (“Ms. Minc”) purportedly signed the Agreement on behalf of defendant-seller, and simultaneously executed a guarantee (“Guarantee”), by which she guaranteed the prompt and complete performance of defendant-seller’s obligations to the plaintiff. In both the Agreement and the Guarantee, Ms. Minc, a Michigan resident, consented to personal jurisdiction in New York and to service of process by mail. Just two months later, defendant-seller purportedly defaulted under the Agreement, and Ms. Minc purportedly defaulted under the Guarantee.
The plaintiff brought suit against the defendant-seller and Ms. Minc. In Ms. Minc’s Answer, she claimed that she did not enter into the Agreement or Guarantee and denied that her signature appeared anywhere on the documents. She also asserted affirmative defenses for lack of personal jurisdiction, as well as invalid and insufficient service of process.
Motion Practice and the Court’s Decision
Shortly after Ms. Minc filed her Answer, the plaintiff moved for summary judgment on its causes of action against the defendant-seller for breach of the Agreement and against Ms. Minc for breach of the Guarantee. Six days later, Ms. Minc filed a motion to dismiss the Complaint.
The Court granted summary judgment to the plaintiff as against the defendant-seller on the breach of contract claim because the plaintiff submitted an affidavit attaching the Agreement and remittance history, as well as a sworn statement verifying the defendant-seller’s default.
With respect to Ms. Minc’s motion to dismiss, the essence of her argument was that she did not sign the Agreement, and as such, she did not consent to New York subject matter jurisdiction (as the Agreement’s terms stated New York law would apply), or personal jurisdiction (the Agreement allowed service of process by regular mail). The motion to dismiss was solely supported by a barebones affidavit in which Ms. Minc denied that she signed the Agreement and the Guarantee and that the signature on the documents was not hers.
In opposition, the plaintiff submitted a memorandum of law in which it pointed to an “e-signature” with a “signature certificate” on the documents that it claimed unequivocally showed that a “Karen Minc” at an IP address located in Michigan consented to an e-signature through her email address.
While this appeared to be sufficient evidence that Ms. Minc actually signed the Guarantee, much to the plaintiff’s chagrin, the Court held that the mere existence of the e-signature coupled with the signature certificate was not by itself enough to establish the absence of a material issue of fact as to whether the Guarantee was signed by Ms. Minc. The Court thus denied summary judgment on breach of the Guarantee claim, holding in pertinent part:
“Although generally a bald allegation of forgery is insufficient to defeat a motion for summary judgment, in this case Ms. Minc’s denial of signature coupled with the plaintiff’s failure to submit evidence, or even explain, relative to the e-signature certificate creates an issue of fact necessitating denial of the motion. Although e-signatures are considered valid in New York, the plaintiff’s failure to explain the “signature certificate” prevents this Court from determining whether the procedures used complied with either the New York Electronic Signatures and Records Act (ERSA) (NY State Tech § 301 et seq.) or are sufficient for the Court to determine that defendant Karen Minc intended to be bound by the agreement.”
The Court also denied Ms. Minc’s motion to dismiss finding that she did not meet her burden for dismissal based on “documentary evidence” under CPLR 3211(a)(1). While Ms. Minc provided an affidavit in which she denied that it was her signature on the documents, the Court stated “[n]either affidavits, deposition testimony, nor letters are considered documentary evidence within the intendment of CPLR 3211(a)(1)” because they are not unambiguous and thus cannot conclusively dispose of a plaintiff’s claim.
The Court also stated that it did not need to reach the jurisdictional and choice of law provisions raised in the motion to dismiss insofar as those arguments were “necessarily dependent” on whether Ms. Minc signed the agreement, and her affidavit was insufficient documentary evidence to establish that on a motion to dismiss.
The problem with the parties’ submissions on their motions in the AJ Equity Group case was the evidence, or lack thereof.
On the one hand, to obtain summary judgment it is necessary that the movant establish its cause of action or defense “sufficiently to warrant the court as a matter of law in directing judgment” in its favor (see CPLR 3212 [b]), and do so by tender of evidentiary proof in admissible form. Although the existence of the electronic signature and certificate should have been a slam dunk for the plaintiff, it failed to substantiate their relevance by proof in admissible form.
On the other hand, the defendant’s unsubstantiated sworn denial of signing the Agreement and Guarantee was not enough to warrant dismissal under CPLR 3211(a)(1) based on “documentary evidence.” The careful practitioner should be aware of the limits of this ground for dismissal before attempting to rely solely on an affidavit as to its proof.