Private Law in the Digital Age – Dan Kelly

Post by Dan Kelly

Private law aficionados enjoy teaching, and discussing, many of the classic common law cases, Hawkins v. McGee (in contracts), Pierson v. Post (in property), and Vosburg v. Putney (in torts).  But, of course, private law is still relevant for, and able to provide insights into, new legal issues emerging in the twenty-first century.  One of these issues is fiduciary access to digital assets.

The issue: what rules should govern the disposition of a person’s digital assets, from electronic communications to digital property, after death or disability?  In 2014 the Uniform Law Commission (ULC) completed the Uniform Fiduciary Access to Digital Assets Act (UFADAA).

The Uniform Fiduciary Access to Digital Assets Act is an important update for the Internet age.  A generation ago, files were stored in cabinets, photos were stored in albums, and mail was delivered by a human being.  Today, we are more likely to use the Internet to communicate and store our information.  This act ensures account-holders retain control of their digital property and can plan for its ultimate disposition after their death.  Unless the account-holder instructs otherwise, legally appointed fiduciaries will have the same access to digital assets as they have always had to tangible assets, and the same duty to comply with the account-holder’s instructions.

This official description of the UFADAA sounds rather uncontroversial: essentially, the Act establishes a default rule that fiduciaries (including executors, guardians and conservators, agents under powers of attorney, and trustees) will have the same access to digital assets as they do for tangible assets and the same fiduciary duties to act for the benefit of the represented person or estate.  The Act was necessary, according to the ULC, because companies that store digital assets on their servers (“Providers”) typically have restrictive terms-of-service agreements governing access to this type of property.  Delaware enacted a modified version of the UFADAA in 2014, and, thus far in 2015, legislation based on the Act has been introduced in at least 26 other states.

However, despite the ULC’s statement that the “UFADAA does not break new legal ground; it simply applies the tried and true laws governing fiduciaries to the digital assets that are widely used today,” the Act has met with stiff resistance in nearly every state legislature.  In a recent article, War and PEAC in Digital Assets: The Providers’ PEAC Act Wages War with UFADAA, 29 Probate & Property 4 (July/August 2015), Karin Prangley investigates why large Providers, including Yahoo, Google, and Facebook, are opposing UFADAA and through NetChoice, their trade association, are sponsoring an alternative model act, the Privacy Expectation Afterlife Choices Act (PEAC).  (Hat tip: Gerry Beyer of Wills, Trusts & Estates Prof Blog for his post.)

According to Prangley, the Providers, despite providing input into the drafting of the UFADAA, are now objecting to the uniform law because “they do not agree that authorized fiduciaries, as a default, should have access to a deceased or disabled user’s electronic communications.” (41) Further, NetChoice argues that, whereas the PEAC Act complies with federal privacy law, including the Electronic Communications Protection Act, which “sets ‘Privacy On’ by default,” the ULC proposal is “essentially creating a ‘show me everything’ rule for whoever becomes the fiduciary.”  NetChoice criticizes the UFADAA for focusing only on the fiduciary’s interests; it claims that, by contrast, the PEAC Act embraces a more “balanced” approach that “balances the interests of all parties – the privacy of the deceased user; the privacy of people with whom the deceased corresponded; the needs of the fiduciary; and existing federal law.”  Virginia recently adopted the PEAC Act, and Oregon is considering it.

As state legislatures deliberate on whether UFADAA, PEAC, or some other legislation will best address the issue of fiduciary access to digital assets, legislatures will analyze and weigh a number of issues.  They also should keep in mind the following economic or functional considerations:

• First, in establishing a default rule for fiduciary access to digital access, what rule would most decedents want? According to Prangley, one of the reasons that the Providers are arguing against the UFADAA is because the “Providers believe that the majority of their users do not want their fiduciary to have access to their electronic communications.” (41)  How do we know?  Is there any empirical evidence?  Even if (hypothetically) a majority of users who specify their wishes on “Inactive Account Manager” (or a similar service for managing one’s digital afterlife) explicitly restrict access for their fiduciaries, these users are not necessarily representative of all users.

• Second, what are the administrative and litigation costs of UFADAA versus PEAC? Prangley suggests: “When compared with UFADAA, the PEAC Act requires much more involvement by the probate court for a fiduciary to obtain access to digital assets.” (42-43)  She continues: “The PEAC Act’s necessity of a court order in every instance in which a fiduciary seeks access to electronic communications or digital assets would increase the number and complexity of cases in a probate court’s workload. . . . Although it is unclear how many cases would arise under the PEAC Act, it appears that any such cases would be more time-consuming and complex than what is seen in a typical probate estate.” (43)  These concerns about probate costs seem significant, especially as American succession law increasingly has shifted toward nonprobate transfers and less court oversight.

• Third, are there functional differences between tangible property and digital property? (And, if so, which direction do these differences cut?)  For example, I would think that the time and effort for fiduciaries to handle digital assets (like emails) will be far greater than for tangible assets (like letters).  Compare electronic versus traditional discovery and how e-discovery has revolutionized the litigation process.  See, e.g., Burke T. Ward et al., Electronic Discovery: Rules for a Digital Age, 18 B.U. J. Sci. & Tech. L. 150 (2012).

This final question also raises the issue of whether we need a law of the horse for digital assets.  Compare Frank H. Easterbrook, Cyberspace and the Law of the Horse, 1996 U. Chi. Legal F. 207, with Lawrence Lessig, The Law of the Horse: What Cyberlaw Might Teach, 113 Harv. L. Rev. 501 (1999).  Regardless, the disposition of digital assets after death or disability involves interesting issues at the intersection of property, contract, trusts and estates, and fiduciary law.  And the law that applies is very much unsettled.

Update: I should also have noted that, just one month ago, the ULC promulgated major revisions to the original UFADAA in the Revised Uniform Fiduciary Access to Digital Assets Act (Revised UFADAA). According to the ULC’s press release, “[t]he revised act clarifies the application of federal privacy laws and gives legal effect to an account holder’s instructions for the disposition of digital assets. While the 2014 UFADAA provided fiduciaries with default access to all digital information, the revised act protects the contents of electronic communications from disclosure without the user’s consent. Fiduciaries can still access other digital assets unless prohibited by the user.” For a helpful chart from the ULC comparing the original UFADAA, the PEAC Act, and the Revised UFADAA, see here. It will be interesting to see how the Revised UFADAA is received by state legislatures that are or soon will be considering legislation to address fiduciary access to digital assets. (Thanks to Rob Sitkoff for bringing this development to my attention.)