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Commentary: Digital assets bill before Md. General Assembly caters to industry

Online service providers are pushing a bill in the General Assembly this year to eviscerate long-standing trust-and-estate and commercial law as it applies to so-called “digital assets.”

Under the cross-filed Senate Bill 239 and House Bill 507, the industry would be relieved of the cost and responsibility of handling a person’s digital assets (electronically-stored videos, pictures, manuscripts, emails, social media, and other content) after death. The practical effect will be to strengthen the industry’s hand in continuing to deny families access to the contents of a deceased loved one’s online accounts, irrespective of the decedent’s wishes expressed in any last will and testament.

The legislation purports to solve what is actually an issue manufactured by the online service provider industry itself – namely, fear of running afoul of the privacy requirements of the federal Stored Communications Act. The industry currently relies on the discretion extended under the act and on their terms-of-service agreements with users to deny fiduciaries access to a decedent’s digital assets.

Adopting clear legislation is better than looking to the courts to resolve this issue. Yet the proposed bill falls far short of what is needed. Serving the industry rather than the public, it goes well beyond allaying industry concerns about violating federal law and puts the industry in charge of the disposition of an entire class of assets.

Generally, when a person dies, the personal representative appointed in the last will and testament takes title to the assets of the decedent’s estate and steps into the shoes of the decedent’s contracts that continue as an obligation of the estate. The personal representative then has access to financial accounts, safe deposit boxes, intellectual property (such as copyrighted images and videos), and personal property, including any private written correspondence. Under existing trust-and-estate law, there is no distinction between electronic and non-electronic assets. The industry, however, has been attempting to create one and is now attempting to codify this distinction under the proposed bill.

Radical revisions

In practice, when a social media user dies, the decedent’s fiduciary and/or family members are often denied access to the user’s account and denied the return of the decedent’s assets to the family. The social media operator typically justifies its actions by citing the Stored Communications Act and the privacy provisions in the terms-of-service agreement executed when the account was first opened.

The sensible approach to this issue would be for the industry to use the discretion extended to it under the Stored Communication Act and comply with long-standing tenants of trust-and-estate and commercial law, treating digital assets like other assets accessible to a fiduciary. Any new legislation should simply memorialize such standard treatment by requiring that online service providers either unlock accounts or deliver the contents of accounts to fiduciaries, unless otherwise directed by a will, a power of attorney or a court order.

Delaware, Rhode Island and Connecticut have taken just this approach, and last year Maryland’s General Assembly seemed poised to do the same, with a bill very different from the one now before it.  The industry lobbyists, however, succeeded in defeating last year’s bill.

This year’s radically revised Maryland Fiduciary Access to Digital Assets Act is model legislation the industry is pushing in Maryland and several other states. It allows the industry to address the issue primarily by embedding a so-called “online tool” into the terms-of-service agreements. This online tool would govern the disposition of digital assets subject to the terms-of-service agreement and would trump any contrary provisions in a will.

The industry is so aggressive on this point that it wants sole discretion over the functions of this powerful online tool. The proposed law omits any guidelines on how the tool must operate and be presented to the user. This stands in stark contrast to the detailed provisions of other laws governing Maryland fiduciaries such as the Maryland General and Limited Power of Attorney Act, which actually includes a form power of attorney within the statute.

Delaware model

The industry knows that most users do not read terms-of-service agreements. Even if they did, the users could not change them. They must either accept the terms or pass on the service. These arrangements are what lawyers call “contracts of adhesion,” where one party (the online service provider) sets the terms that the other party (the user) has no power to negotiate when opening the account.  The industry intends that users agree in the interest of the moment, often with no thought for the future, to take-it-or-leave-it terms that will control regardless of what a user may provide in the more deliberate process of drafting a will.

The proposed bill also trumps Maryland commercial law, which requires each custodian of digital assets owned by another party to make reasonable efforts to deliver digital assets to the account owner upon termination of the agreement.

If passed, this legislation will forever allow online service providers to deny fiduciaries access to priceless digital assets. To the extent that any law is required to cut through the industry’s reluctance while recognizing its desire for an online tool, the General Assembly could permit the online tool to control disposition of digital assets only with a specific reference in a will or a power of attorney.

But the overall approach should be consistent with the successful model set by neighboring Delaware, which has legislation that simply memorializes and confirms application of longstanding trust-and-estate and commercial law as applied to digital assets.

Bill McComas, a partner at Bowie & Jensen, practices corporate and technology law; Jay Merwin and Gary Almeter, also partners at the firm, both practice corporate and trust-and-estate law They can be reached at [email protected],  [email protected], and [email protected], respectively.