SENATE COMMITTEE ON JUDICIARY

MINUTES OF THE

SENATE Committee on Judiciary

Seventy-First Session

February 7, 2001

The Senate Committee on Judiciarywas called to order by Chairman Mark A. James, at 8:38 a.m., on Wednesday, February 7, 2001, in Room 2149 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

COMMITTEE MEMBERS PRESENT:

Senator Mark A. James, Chairman

Senator Jon C. Porter, Vice Chairman

Senator Mike McGinness

Senator Maurice Washington

Senator Dina Titus

Senator Valerie Wiener

Senator Terry Care

STAFF MEMBERS PRESENT:

Bradley A. Wilkinson, Committee Counsel

Allison Combs, Committee Policy Analyst

Francis Allen, Committee Manager

Carolyn Allfree, Committee Secretary

Ann Bednarski, Committee Secretary

Heather Dion, Committee Secretary

Barbara Moss, Committee Secretary

OTHERS PRESENT:

Frank W. Daykin, Commissioner, National Conference of Commissioners on Uniform State Laws (NCCUSL)

Renee L. Lacey, Chief Deputy Secretary of State, Office of the Secretary of State

Senator James opened the meeting with “Committee Rules -- 71^st Session Senate Committee on Judiciary” (Exhibit C). He pointed out that although committee minutes will follow the regular approval process, rule number 10 states that audio and video recordings of the committee meetings may be purchased at the gift shop in the Legislative Building. There being no questions regarding the committee rules, Senator James indicated he would accept a motion to adopt the rules.

SENATOR PORTER MOVED TO ADOPT THE COMMITTEE RULES FOR THE SENATE COMMITTEE ON JUDICIARY.

SENATOR MCGINNESS SECONDED THE MOTION.

THE MOTION CARRIED UNANIMOUSLY.

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Further, Senator James indicated that most measures heard by the Senate Committee on Judiciary would be reserved for later work sessions. He explained this procedure would allow work to be channeled from the committee to the Senate floor in a judicious fashion. The senator stated that, at his discretion and when deemed appropriate, there may be instances when bills would be voted upon the same day as heard. He indicated that meetings of the Senate Committee on Judiciary would be held Monday through Friday at 8:30 a.m. Questions regarding bill tracking would be addressed by either himself or the committee manager.

Senator James declared an attempt would be made to accommodate the schedules of individuals who wish to testify on bills. However, given the exigencies of the 120-day session it may not always be possible. He pointed out that more videoconferencing rooms are available in Las Vegas and requested advance notice should videoconferencing be desired. Senator James indicated no joint meetings had been scheduled with the Assembly at the present time; however, there would be meetings at appropriate times with respect to specific legislation.

The secretary called roll and all senators were in attendance. Senator James introduced the staff of the Senate Committee on Judiciary and explained their duties.

Continuing, Senator James mentioned a Legislative Commission subcommittee, the subject of which was encouraging corporations and other businesses to conduct business in Nevada. The subcommittee, created out of legislation in the Seventieth Session of the Nevada Legislature, proposed the establishment of a business court in Nevada. He said the subcommittee investigated whether or not to have a business court and the manner in which it would be established. Working with the Supreme Court of Nevada, the subcommittee learned that the creation of an entirely new court system would be a constitutional and lengthy process. However, the Nevada Supreme Court, as well as the Second Judicial and Eighth Judicial District Courts, were sufficiently enthused and the business court was established by court rule.

In summary, Senator James stated a business court now exists in Nevada that was initiated in the Legislature but carried forward by the court system. He pointed out that business court judges now exist to function primarily in complex business and commercial litigation matters. The judges will move court dockets forward and hasten the process of other cases. The senator said the subcommittee also studied a number of other issues within its charter. He pointed out that Allison Combs, Committee Policy Analyst, acted as research analyst to the subcommittee and would give an overview of its activities.

Allison Combs, Committee Policy Analyst, Legislative Counsel Bureau, introduced a document entitled “Encouraging Corporations and Other Business Entities to Organize and Conduct Business in Nevada” (Exhibit D. Original is on file in the Research Library.). Ms. Combs indicated the interim study under Senate Concurrent Resolution (S.C.R.) 19 of the Seventieth Session, created originally as a study of the business court, was subsequently expanded to methods of encouraging businesses to come to Nevada. There were three primary components: (1) the issue of the business court and whether or not any changes to the business laws would be required, (2) general economic development, and (3) the secretary of state’s office.

SENATE CONCURRENT RESOLUTION 19 OF THE SEVENTIETH SESSION: Directs Legislative Commission to conduct interim study of methods to encourage corporations and other business entities to organize and conduct business in this state (BDR R-534)

Ms. Combs indicated the business court began operation January 2001. The subcommittee approved two recommendations: (1) endorsement of the recommendation of business courts; and (2) creation of the business court by constitutional amendment, should it be needed in the future. There were several recommendations that pertained to updating and continuing to provide the best statutes possible for businesses incorporating in Nevada. Ms. Combs pointed out that Senate Bill (S.B.) 51 would be heard in the Senate Committee on Judiciary, Friday, February 9, 2001. The changes are primarily to Title 7 of the Nevada Revised Statutes (NRS) and affect various aspects of business operations, including signature requirements and the powers of incorporators, as well as domestication.

SENATE BILL 51: Makes various changes concerning requirements for formation, maintenance and management of business associations (BDR 7-255)

Continuing, Ms. Combs indicated there is a need for most states to peruse electronic commerce, as well as the Internet. A number of recommendations were adopted in the area of intellectual property law, which included antidilution provisions under Nevada’s trademark laws; providing remedies for companies whose trademarks are disseminated on the Internet without authorization; and clarification on the use of digital signatures, which grew into the Electronic Transactions Act. There was also a recommendation for an “anti-spamming statute” to prohibit the use of the Internet as an offensive tool to disrupt business operations by sending unsolicited communications. In addition, Ms. Combs pointed out there were recommendations to require Internet businesses in Nevada to prominently post a statement regarding their privacy practices on their Web sites. Finally, with regard to the rapid growth of the entertainment industry in Nevada, there was a recommendation for a formal, but voluntary, mechanism for allowing minors who perform in various entertainment venues in the state to have their contracts reviewed and judicially approved.

In the area of economic development and diversification, Ms. Combs said the subcommittee reviewed a number of different areas perusing the different entities involved. Recognizing the important role of these organizations, as well as the vital role they would play in Nevada’s future, the subcommittee developed a comprehensive recommendation urging them to strengthen their coordination of efforts to attract businesses throughout the state. She pointed out there were recommendations supporting efforts in rural Nevada with projects such as the Ruby Gas Pipeline.

With regard to the Office of the Secretary of State, Ms. Combs indicated the subcommittee recognized this role is essential to Nevada’s ability to attract and retain businesses. In many cases, the Office of the Secretary of State is the first point of contact for businesses incorporating in Nevada. She said many of the recommendations to improve the operation of the Office of the Secretary of State were budget-related. The subcommittee supported the efforts of the Office of the Secretary of State to work with the Governor, as well as the money committees, to improve its operation, Ms. Combs stated.

Further, Ms. Combs indicated the subcommittee expressed strong support for the efforts and goals of the Office of the Secretary of State to become more user-friendly, improve its technology, and provide state-of-the-art mechanisms for its clients. The efforts also included such basics as expanding office hours to accommodate work on the East Coast, as well as providing expedited same- day, or faster, services.

Referring to question 1 on the ballot that dealt with the constitution in regard to the enhancement of businesses to encourage them to come to Nevada, Senator Washington inquired whether or not the subcommittee reviewed the constitutional amendment, and if so, had they reached any conclusion. He lamented that question 1 “went down in flames” and suggested the general public did not understand the question. The senator asked whether there was a way to encourage, educate, or discuss the question.

In response, Ms. Combs explained that the constitutional amendment proposed to amend the constitution to remove what is commonly referred to as “the anti-donation clause.” She said the state is prohibited from investing state money in a business, with the exception of certain education-type purposes. The subcommittee perused the issue, as well as the ballot question, and supported the issue for purposes of economic development and to allow venture capital-type issues in the future. However, because it had been reviewed by the Legislature twice, the subcommittee felt it should go forward on its own as a ballot initiative, Ms. Combs said.

Although he expressed appreciation for the accomplishments of the subcommittee, Senator Washington reiterated his concern about public misunderstanding regarding the reason the provision is in the Nevada Constitution. He wondered whether the Legislature could educate and encourage the general public to research the foundation of the provision in the Nevada Constitution, and the reason why it may, or may not, be necessary to pass a constitutional amendment.

Ms. Combs indicated there had been testimony from groups supporting the initiative who expressed concern regarding sufficient understanding of the provision and from whence it came. The groups planned to launch a large public information campaign; however, it did not appear that much was accomplished in that vein. She pointed out the issue would be a policy decision for the Legislature, should that body choose to reinitiate the process.

Answering Senator Washington’s question, Senator James indicated the subcommittee had recommended a bill draft request that would initiate the process. Senator Washington asked whether it was a constitutional amendment or broad legislation in that area. Ms. Combs replied it was broad legislation generally based upon the passage of the amendment. Senator James added it was also based upon legal arguments that could make the provisions more flexible. He said the full committee turned it into recommendations and not legislative proposals.

Senator James noted that a number of bills emanating from the recommendations of the subcommittee would come to the Senate Committee on Judiciary, while others, such as dilution of trademarks, would go to the Senate Committee on Commerce and Labor.

Senator James opened the hearing on Senate Bill (S.B.) 29.

SENATE BILL 29: Ratifies technical corrections made to NRS and Statutes of Nevada. (BDR S-1072)

Bradley A. Wilkinson, Principal Deputy Legislative Counsel, Legislative Counsel Bureau, submitted a document entitled “Draft Explanation of 2001 Ratification Bill” (Exhibit E). He explained that the ratification bill makes technical corrections to the statutes adopted in the previous session of the Legislature. He noted these were not substantive changes to the law, but merely made the NRS appear identical to the current printed version. The reason for the ratification bill is because Article 4, section 17, of the Nevada Constitution requires that whenever a section of the NRS is amended, the full text of that section must be represented in the bill. Basically, this is addressed by conflict amendments. Mr. Wilkinson noted that late in the Legislative Session, when time is of the essence, technical conflicts are no longer addressed but postponed until the next Legislative Session and included in the bill.

Additionally, Mr. Wilkinson said the ratification bill includes corrections to typographical and clerical errors, as well as things that do not change the actual substance of the law. Therefore, a good portion of the ratification bill is attributable to the changing century; consequently, all forms in the NRS with reference to the 1900s have been omitted.

Senator Titus requested further explanation regarding page 43, section 77, paragraph 2, of the “Draft Explanation of 2001 Ratification Bill.” Mr. Wilkinson explained this section of the bill duplicated another bill; therefore, the duplicative section was removed.

Referring to page 108 of S.B. 29, and pursuant to Senator Titus’ question, Senator James maintained that technical corrections were made in order to make the internal references of the NRS read properly. He clarified that the amendments were made in 1999, adopted through other legislation, and the ratification bill reconciled the internal references. Mr. Wilkinson agreed, and said the bolded and italicized language that appears new is, in fact, not new. Senator James declared the language is 2 years old. Mr. Wilkinson said, “Exactly.”

Senator James inquired whether or not there was anything in the Ratification Bill that was more than internal references and correction of technical errors in terms of the way references are made. Mr. Wilkinson answered no, the only things found in the ratification bill are reconciliation of conflicts, manifest, clerical, and typographical errors; as well as obvious errors the Legislative Counsel determined could be changed and put into the NRS immediately after session without further legislative action. The changes are merely technical corrections, as opposed to the revisers bill that makes substantive changes to the law. Asked whether the codified NRS reads the same as the ratification bill, Mr. Wilkinson maintained that it did.

Senator James closed the hearing on S.B. 29 and opened the hearing on Senate Bill (S.B.) 49.

SENATE BILL 49: Adopts Uniform Electronic Transactions Act. (BDR 59-258)

Frank W. Daykin, Commissioner, National Conference of Commissioners on Uniform State Laws (NCCUSL), explained that S.B. 49 adopts and encompasses sections 2 through 35 of the Uniform Electronic Transaction Act (UETA), as proposed by the NCCUSL and adopted by a number of states. Mr. Daykin said S.B. 49 responds to the growing use of electronic communications instead of paper writing. The states, through the NCCUSL, are seeking to address the questions in S.B. 49. In the meantime, Congress enacted a bill that defers to the states if they adopt the Uniform Law Act. Mr. Daykin indicated the federal statute, known as the Electronic Signatures in Global and National Commerce Act (ESIGN), Public Law 106-229, in effect states that electronic records and signatures shall be recognized.

Senator James inquired whether ESIGN would require the state to adopt UETA, or be defaulted to ESIGN, or if both would apply. In response, Mr. Daykin said section 102 of ESIGN states:

A state statute, regulation, or other rule of law may modify, limit, or supersede the provisions of section 101 [which is the general recognition] . . . only if the statute, regulation, or rule of law constitutes an enactment or adoption of the Uniform Electronic Transactions Act as approved and recommended for adoption by the NCCUSL in 1999.

Mr. Daykin indicated that any exception to the scope of ESIGN, enacted by a state “under section 3 (b)(4) of such Act, shall be preempted to the extent” it is inconsistent with this title; in other words, the state does not get complete freedom of action but UETA essentially takes the place of ESIGN should it be adopted.

Senator Washington inquired whether or not UETA is a precursor to taxation of commerce. Mr. Daykin stated that UETA has nothing to do with taxation. In response, Senator Washington said it appeared to him that, should the federal government usurp the authority provided the states by the Constitution and legislation is adopted regarding signatures and documents, it could be a caveat or a door opening to actual taxation of trade via the Internet. He suggested the state might be setting itself up to allow the federal government or the Department of Taxation to begin taxing commerce while disregarding the states’ ability to tax commerce within its borders.

Mr. Daykin responded by explaining that the state would be exercising its own legislative powers in enacting UETA; therefore, regardless of whether or not ESIGN is valid, an appropriate act would still exist in the state to conform and ease the way for businesses conducting business in several states. He asserted that the state is not in any way validating ESIGN by complying with it. Mr. Daykin expressed the opinion that Congress somewhat reluctantly acknowledged that the states have the power, but the function of ESIGN is to nudge them toward uniformity in this regard. However, the case for uniformity is strong enough without any federal nudge, Mr. Daykin opined.

Referring to information received from the National Commission on Uniform State Laws (NCUSL), Senator James noted that 23 states had adopted UETA and it had been introduced before the legislatures of 11 states in 2001, including Nevada. Therefore, 34 states had either adopted UETA or were in the process of doing so in some form or another.

Senator Porter asked what impact UETA would have on electronic Internet gaming. Mr. Daykin indicated that UETA does not specifically treat gaming; however, it would validate the use of electronic signatures as incident to treating all forms of electronic transmission and signature. He surmised that should an individual place a bet electronically and sign the chit in a manner acceptable to both the bookmaker and himself, the validity of the signature would be recognized as a matter of state law.

Senator James requested Mr. Daykin to commence with the introduction of S.B. 49 followed by a section-by-section explanation.

Mr. Daykin pointed out that UETA basically set out the provisions for a valid record and signature, as well as providing for mutual agreement on the requirements for authentication between two parties to a transaction. Later sections of S.B. 49, beginning with section 37, adapt legislation enacted in previous legislative sessions which recognize the work of the secretary of state pursuant to enactment of digital signatures as used in chapter 720 of NRS as a form of electronic signature. He said further sections gave digital signatures a particular “magical value,” stating it will attach to all electronic signatures. The force of the digital signature will now carry the particular establishment of its authenticity by the secretary of state. Mr. Daykin noted that should two individuals intend to exchange electronic documents, each individual would be required to execute the documents with a digital signature registered with the secretary of state. In that way both individuals would be assured the signatures were authentic.

Senator James asked two questions: (1) Are there other methods to authenticate a signature other than through a digital signature; and (2) In what other ways could an individual enter into an electronic transaction that would be recognized other than by a registered digital signature? In response, Mr. Daykin quoted section 11 of S.B. 49: “‘Electronic signature’ means 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.” Therefore, Mr. Daykin said, either individual could adopt some other electronic form of signature to which both parties agree.

Asked the manner by which a digital signature could be adopted, Mr. Daykin said at the present time in Nevada the digital signature act would be the only way to put a signature on a public record. However, in an electronic transaction between two individuals, each person could specify his or her electronic signature and it would be valid.

Senator James queried whether or not an electronic signature must be specified manually, or underlined by a manual signature in some manner. Mr. Daykin indicated that UETA did not state such a specification. He explained that should an individual send an e-mail message informing another person that anything sent to him/her would be authenticated by an agreed-upon sequence of letters, an electronic signature by mutual agreement for correspondence between them would be established. However, the agreement would not affect anything sent to any other person.

Asked how an individual would know whether or not another person was using the identical sequence of letters, Mr. Daykin said there was no way to know, which is the strength of the registered system of digital signatures. He asserted that this method would not undercut the value of the state program and the secretary of state could establish a program if technology evolved a different method. Mr. Daykin pointed out that section 34 of S.B. 49 says each governmental agency of the state shall determine which electronic signatures it will accept. In addition, the secretary of state can do the same with respect to communications within its area.

Senator James questioned whether the attempt by UETA to provide effective transactions executed by electronic non-digital signatures would generate litigation regarding e-mail messages that include an adopted, but not registered, signature. He further queried whether or not litigation could occur if an individual denied sending an e-mail message on a particular machine or day regarding an exchange effectuating a transaction. The senator asked how the uniform law commissioners would deal with the portent of such litigation due to the fact that a law now exists stating a court cannot deny effect to a transaction that takes place by means of an electronic signature.

Referring to section 22, subsection 2, of S.B. 49, Mr. Daykin indicated the provision applies only to transactions between parties, each of whom have agreed to conduct transactions by electronic means. Whether the parties agree to conduct a transaction by electronic means is determined from the context and surrounding circumstances, including the conduct of the parties. He surmised that, in any event, there could be litigation as to whether or not a manual signature is, in fact, a signature. A handwriting expert would be called in to verify the signature should it be denied, Mr. Daykin declared. Senator James agreed this type of situation happens frequently.

Mr. Daykin said parties conducting electronic transactions would be given a set of rules by UETA. Should a promissory note be accepted in a transaction of this sort, Mr. Daykin asserted that a digital signature should appear on it before sending money. Senator James agreed and said that UETA is attempting to set rules on activities already taking place.

Senator Washington reported a conflict between section 11 and section 23 of S.B. 49 in regard to electronic signatures, sounds and symbols, or the process of either automated or digital signatures. He noted a requirement that a record follow after the signature, either a hard copy or a document on which both parties agree.

In response, Mr. Daykin indicated that section 10 of S.B. 49 defines “electronic record,” and section 16 of S.B. 49 defines “record,” which were created by the National Conference of Commissioners for use in the Uniform Commercial Code and other documents. Therefore, a record can be inscribed on a tangible medium (hard copy) or stored in an electronic medium, if it is retrievable. He explained that an e-mail message is an electronic medium until downloaded; therefore, if it is unable to be downloaded it is not considered a record insofar as the sender is concerned because it is not in perceivable form.

Senator Care asked what types of transactions are referred to in UETA. Mr. Daykin explained that bank transmittal of funds are “mostly” governed by Article 4 (a) of the Uniform Commercial Code, which is chapter 104A of NRS; therefore, UETA is not particularly interested in banking transactions. More particularly, UETA is concerned with electronic franchise agreements that are entirely electronic in its negotiation, or ordering merchandise on the Internet, and stockbroker transactions.

Mr. Daykin pointed out that S.B. 49 picked up digital signature as a form of electronic signature, which at the present time is the most “authenticatable.” He noted that 2 years ago electronic digital signature was placed in some sections of the NRS, but has been broadened to electronic signature; however, it is still subject to the acceptance of both parties.

Referring to section 26 of S.B. 49 in regard to change or error and the law of mistake, Senator Wiener asked what would transpire should a transaction be erroneous. Mr. Daykin explained the parties would be bound to follow any agreed-upon security procedure. Asked whether the agreement would also require an electronic signature, Mr. Daykin indicated the agreement could be reached with electronic signature or by ordinary pen-and-ink signature, but in any event, it would require some sort of official agreement. He pointed out section 26, subsection 1 of S.B. 49:

If the parties have agreed to use a security procedure to detect changes or errors and one party has conformed to the procedure, but the other party has not, and the nonconforming party would have detected the change or error had that party also conformed, the conforming party may avoid the effect of the changed or erroneous electronic record.

In reference to section 31, subsection 6 of S.B. 49, Senator Wiener queried whether or not the receipt of the record would be binding. In response, Mr. Daykin pointed out section 31, subsection 7 of S.B. 49:

If a person is aware that an electronic record purportedly sent under subsection 1, or purportedly received under subsection 2, was not actually sent or received, the legal effect of the sending or receipt is determined by other applicable law. Except to the extent permitted by the other law, the requirements of this subsection may not be varied by agreement.

Mr. Daykin added that the effect of the parties’ knowledge is determined under other law. Senator James asked whether Mr. Daykin was referring to the law of fraud. He answered, “Yes, the law of fraud or rules of evidence.” Senator James suggested it could be negligence by how the parties gained awareness and what was done with the knowledge. In response to that suggestion, Mr. Daykin gave the following scenario:

Senator Wiener telephoned and informed me that somebody was playing with her e-mail machine and had sent an order for “X” number of widgets that had not been authorized. The individual manufacturer of the widgets, or a responsible officer, would be bound by her warning because her voice was identified on the telephone. She would not have to pay for the order should it be sent.

Senator Wiener referred to section 33 of S.B. 49, “Each government agency of this state shall determine whether, and the extent to which, it will create and retain electronic records and convert written records to electronic records,” and asked whether specific regulations would be required to determine what each governmental agency would accept. Referring to section 34 of S.B. 49, Senator Wiener expressed concern about and asked how agencies would do business if they did not recognize the same electronic documents or transactions. With respect to the latter question, Mr. Daykin said each state government was responsible for organizing its agencies to deal with one another. Uniformity was not required among the states, but must be uniform within the state.

Senator Care referred to section 5 of S.B. 49, reading:

”Automated transaction” means a transaction conducted or performed, in whole or in part, by electronic means or electronic records, in which the acts or records of one or both parties are not reviewed by a natural person in the ordinary course in forming a contract, performing under an existing contract or fulfilling an obligation required by the transaction.

Senator Care then referred to and section 19 of S.B. 49, stating:

“Transaction” means an action or set of actions occurring between two or more persons relating to the conduct of business, commercial or governmental affairs.

Senator Care said the two sections appeared contradictory because the definition of “automated transaction” refers to one or both parties, whereas the definition of “transaction” refers to two or more persons. Mr. Daykin indicated there must be at least two persons engaged in a transaction, and once engaged they both become parties to that particular transaction. He pondered whether or not “both” could be construed as more than two and said if two persons are party to a transaction, both parties would be defined as just the two persons. Should another person be party to a binding transaction, all parties would be required to agree.

Senator James said the point was whether or not the transaction was automated; therefore, a transaction can involve two people when one was automated and not physically participating in the transaction.

In reference to section 31, subsection 4, paragraph (a) of S.B. 49, “If the sender or recipient has more than one place of business, his place of business is the place having the closest relationship to the underlying transaction,” Senator Care expressed confusion regarding whether the location refers to the closest geographical relationship, or whether it is the location at which someone with more than one or two locations does the bulk of obvious business. He pointed out that issues arise in contract law, such as where contract negotiations take place and where the contract is to be performed. Senator Care asked the definition of “closest relationship.”

Mr. Daykin defined “closest relationship” as not the geographical location, but the substance of the connection of the place to the transaction. He explained that should a company have several places of business and all transactions involving sales of a commodity are handled out of a certain office, that location would be the place of business in that particular commodity transaction. On the other hand, for a different commodity transaction, another location could be the place of business.

Senator Care, referring to section 29 of S.B. 49, “In a proceeding, evidence of a record or signature must not be excluded solely because it is in electronic form,” asked whether or not the section could say “may not be excluded,” and leave some discretion with the court when addressing admissibility of evidence.

In response, Mr. Daykin indicated he did not recall any discussion on the matter and expressed suspicion that somebody originally wrote “shall,” which was changed to “must,” and if it had been changed to “may” there would be very little difference between the words. He pointed out that “may” denies the authority to do it, and “must,” although more emphatic, still has the same legal effect. He conjectured that Senator Care identified an error of style. In defense of the NCCUSL, Mr. Daykin said this subject was discussed on the legislative floor but was never properly styled. He reported that “a bunch of us” sat down in a room off the legislative floor and purported to style it because, at the time, California had the bill in the hopper. In any event, Mr. Daykin, stated the term “must” should be kept because it appeared in the uniform act; however, he reiterated, there is no real difference in legal effect between “must” and “may” in this particular instance.

Senator McGinness requested an explanation of section 35 of S.B. 49, “In applying and construing this uniform act, consideration must be given to the need to promote uniformity of the law with respect to its subject matter among states that enact it.” Mr. Daykin acknowledged that section 35 of S.B. 49 was boilerplate inserted into every uniform act that says courts should try to construe the act in a way uniform with other states. Senator McGinness queried whether or not the state could be giving up ultimate authority by having that section in the bill. Mr. Daykin answered, “No, because consideration must be given without taking away authority.” Senator James pointed out the court could say it considered and rejected California’s interpretation of “must.”

Senator Porter clarified that Nevada’s agencies may develop regulations to interpret sections of federal law, such as the insurance commissioner and the secretary of state in regard to securities. Mr. Daykin agreed and further explained that the secretary of state would act to determine which electronic signatures would be accepted. Likewise, the Department of Taxation would decide which electronic signatures would be accepted on tax returns.

Senator James read a letter from the National Notary Association (NNA) (Exhibit F), regarding NNA’s position on digital signatures as a substitute for the consumer protections offered by the notarial process. He noted that a position paper, or legal brief, on electronic digital signature laws and electronic notarization (Exhibit G) was attached to the NNA letter. The senator indicated he would request the secretary of state’s office give attention to the letter and the merit of the proposed suggestions, particularly the ESIGN issue and the preemptive effect of the federal law. Senator James declared the NNA has its own agenda.

Mr. Daykin pointed out that section 102 of ESIGN, with regard to the exception, stated “ . . . may modify, limit, or supersede the provisions of section 101 . . . only if the statute . . . (1) constitutes an enactment or adoption of the Uniform Electronic Transactions Act . . ., or (2) (A) specifies the alternative procedures . . . and (B) makes specific reference to this Act . . .”

Therefore, in adopting UETA, it is not necessary to make specific reference to it. Should another law be adopted which would vary from UETA, it would be required to make specific reference, Mr. Daykin said.

Senator James clarified that UETA could be referenced in any event. Mr. Daykin agreed, but stated that the reference is not required by federal law. He maintained the NNA has useful suggestions regarding notarial information and practice. Senator James expressed appreciation for the efforts of the NCCUSL in delving into the subject in an academic fashion to prepare a well thought-out act that considered the legal and economic ramifications of adoption. The senator declared UETA is an important step for every state and pointed out that it emanated from the committee aimed at developing more business in Nevada. He suggested it would be worthwhile to take a second look at it to ensure correct decisions are made.

Renee L. Lacey, Chief Deputy Secretary of State, Office of the Secretary of State, indicated the Office of the Secretary of State supports the adoption of UETA and the changes to the sections on digital signatures to bring them into conformance with UETA and ESIGN. She submitted a document entitled “Draft Comments by the National Conference of Commissioners on Uniform State Laws, Submitted by Secretary of State Dean Heller in support of Senate Bill 49” (Exhibit H. The original is on file in the Research Library.), and requested it be mentioned in the legislative record. Ms. Lacey said the draft comments would answer questions, such as how to construe agreements, and she noted that sections of UETA have been cross-referenced.

Senator James expressed his appreciation to the Office of the Secretary of State and affirmed that the document would be included in the records of hearings on S.B. 49 for use in future interpretation of the law. Ms. Lacey indicated the Office of the Secretary of State would be prepared to address the concerns of the NNA at future work sessions.

Senator James indicated his intention to (1) allow S.B. 49 to gestate with everyone involved in terms of its import, (2) solicit comments from members of the State Bar of Nevada, and (3) discuss the bill in another hearing or work session to consider any recommended amendatory language in regard to the addition of the preemption issue. The senator expressed his appreciation to Mr. Daykin for his testimony. Mr. Daykin indicated he would be available for the work session.

Senator James closed the hearing on S.B. 49.

There being no further business to come before the committee, Senator James adjourned the meeting at 10:08 a.m.

RESPECTFULLY SUBMITTED:

Barbara Moss,

Committee Secretary

APPROVED BY:

Senator Mark A. James, Chairman

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