A Problem Like Ephemeral Messaging: Holding a Moonbeam in Your Hand - ALSO IN THIS ISSUE - ARIAS US
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A Problem Like
Ephemeral Messaging:
Holding a Moonbeam
in Your Hand
ALSO IN
THIS ISSUE
How Much Disclosure
is Enough?
A Coming Safe Harbor:
Working with the
Cannabis Industry
Are Cut-Through
Clauses Enforceable?
Q2 • 2021
TABLE OF CONTENTS
FEATURES
2 A Problem Like Ephemeral Messaging:
Holding a Moonbeam in Your Hand
By Kirsten Fraser and Andrew Foreman
2A
Problem Like Ephemeral 17 A
re Cut-Through Clauses ALSO IN THIS ISSUE
Messaging: Holding a Enforceable?
Moonbeam in Your Hand By Robert M. Hall 1 EDITOR’S LETTER
By Kirsten Fraser and
Andrew Foreman 24 CASE SUMMARIES
20 S
pring Conference Recap
By Rob Kole 25 RECENTLY CERTIFIED
7H
ow Much Disclosure
is Enough?
By Susan E. Mack BACK COVER
BOARD OF DIRECTORS
13 A
Coming Safe Harbor:
Working with the
Cannabis Industry
By Robin Dusek
EDITORIAL POLICY — ARIAS • U.S. welcomes manuscripts of original articles, book reviews, comments, and case notes from our members dealing with current and emerging issues
in the field of insurance and reinsurance arbitration and dispute resolution. All contributions must be double-spaced electronic files in Microsoft Word or rich text format, with all
references and footnotes numbered consecutively. The text supplied must contain all editorial revisions. Please include a brief biographical statement and a portrait style photo-
graph in electronic form. The page limit for submissions is 5 single-spaced or 10 double-spaced pages. In the case of authors wishing to submit more lengthy articles, the Quarterly
may require either a summary or an abridged version, which will be published in our hardcopy edition, with the entire article available online. Alternatively, the Quarterly may elect
to publish as much of the article as can be contained in 5 printed pages, in which case the entire article will also be available on line. Manuscripts should be submitted as email at-
tachments. Material accepted for publication becomes the property of ARIAS • U.S. No compensation is paid for published articles. Opinions and views expressed by the authors are
not those of ARIAS•U.S., its Board of Directors, or its Editorial Board, nor should publication be deemed an endorsement of any views or positions contained therein.
COVER ARTWORK: MARHARYTA MARKO /YURI RUGGERI/GETTY IMAGES
EDITOR’S LETTER
With Spring in full swing, we bring but are now in brackets [2]. This new
you another action-packed issue of style is easier on our technical editors,
the Quarterly. We begin with an article saves ARIAS a little time and money in
from the technology side, as Kirsten production cost, and is consistent with
Fraser and Andrew Foreman from Por- many professional magazines. We
ter Wright Morris & Arthur LLP give hope you find it a bit more readable.
us “A Problem Like Ephemeral Mes-
saging: Holding a Moonbeam in Your
Hand.” For those of you who don’t
know, ephemeral messaging is a type
of text message that lasts for a limit-
ed period of time and then disappears Larry P. Schiffer
(ask your kids or grandkids about Editor
Snapchat). The article discusses this cannabis risks, but are very wary of the
phenomenon in the business context legal minefield of inconsistent feder-
and explores how discovery rules are al and state laws. Robin helps them
trying to address these messaging sys- navigate this problem and offers some
tems. Will we see this in reinsurance “hope” for the future with the possi-
arbitrations? Maybe, so we thought bility of a safe harbor. With New York
you should be ready for it. recently legalizing recreational mari-
juana, this article is very timely.
Next, we have another excellent eth-
ics article, “How Much Disclosure Finally, Robert M. Hall of Hall Arbi-
is Enough?” Authored by founding trations (and another member of the
ARIAS Board Member Susan E. Mack, a Quarterly Editorial Board) answers the
member of the Ethics Committee, the age-old question, “Are Cut-Through
article tackles the nettlesome issues of Clauses Enforceable?” Cut-through
disclosure by arbitrator candidates in clauses provide a very valuable ser-
the panel selection process. vice for certain types of insurance and
reinsurance relationships, but could
Following Susan’s piece is an emerg- cause unintended consequences for
ing issues article based on recent de- other relationships. Bob gives us some
velopments in the cannabis industry guidance on these clauses.
and the efforts by insurers (and, ulti-
mately, reinsurers) to insure the in- Now is a great time for you to join
dustry. Titled “A Coming Safe Harbor: these authors and submit your own
Working With the Cannabis Industry” article to the Quarterly. Submissions
and authored by Robin C. Dusek of are welcomed on all topics related to
Saul Ewing Arnstein & Lehr LLP (and insurance and reinsurance arbitra-
new member of the Quarterly Editori- tions and mediations. Don’t let your
al Board), this article provides a useful thought leadership languish—send us
roadmap for insurers and reinsurers your articles and you, too, will see your
to follow as they try to navigate the name on these pages.
inconsistent and changing legal land-
scape of this growing industry seg- Finally, for those who pay attention to
ment. This is a big issue because rein- citation form, you will notice that our
surers are very interested in covering endnotes are no longer in superscript
ARIAS • U.S. QUARTERLY – Q2 · 2021 1
PRESERVING EVIDENCE A Problem Like Ephemeral Messaging: Holding a Moonbeam in Your Hand By Kirsten Fraser and Andrew Foreman Even if you think you’ve never heard Ephemeral messages, sometimes teenagers to communicate, think of ephemeral messaging, you’ve called self-destructing messages, are again. Wickr describes its target au- probably heard of ephemeral messag- essentially text messages that disap- dience as military installations, gov- ing. While the term itself may not be pear after a fixed period of time. Snap- ernment agencies, private enterprise, well known, it’s likely you know of at chat is not alone in the ephemeral and individuals [3], and Confide was least one ephemeral messaging app, messaging space—there’s also Wickr, created to be the Snapchat for profes- especially if you know anyone un- Confide, and CoverMe, while Signal, sionals [4]. More and more, individuals der the age of 25: Snapchat. Nearly Telegram, WeChat, WhatsApp, Face- and businesses are turning to ephem- half of U.S. internet users under age book Messenger, and Instagram offer eral messaging as a secure means 25 use Snapchat [1], and hundreds of ephemeral messaging as an option. of communicating. millions of users worldwide send And in case you might have thought ephemeral messages through the of Snapchat (and, by proxy, ephem- While there are legitimate business Snapchat app daily [2]. eral messaging) as just a way for uses for ephemeral messaging, its use 2 www.arias-us.org
can also raise questions and present ephemeral messaging may be a useful Justice views ephemeral messaging
challenges within the context of lit- tool for arbitration panel members to apps with a suspicious eye. Indeed, in
igation or arbitration. In this article, confer with one another candidly when the 2017 version of its Foreign Corrupt
we aim to explain in broad terms the a call, video conference, or other oral Practices Act (FCPA) Enforcement Pol-
nature of ephemeral messaging, iden- communication isn’t feasible, with- icy, the DOJ took aim at ephemeral
tify some of the challenges ephemeral out the risk of disclosure or breach of messaging apps, requiring companies
messaging raises in relation to doc- the confidentiality requirements that to prohibit employees from “using
ument preservation and discovery, usually accompany arbitration. software that generates but does not
describe some recent cases involving
ephemeral messaging, and provide
suggestions and ideas for litigants and
arbitrators alike to consider. While there are
Ephemeral Messaging Basics legitimate business
uses for ephemeral
Ephemeral messaging apps (aka disap-
pearing messaging apps) allow users
to share content that is automatically
deleted immediately after it’s viewed
or within a defined period of time af-
messaging, its use can
ter receipt. The length of time a mes-
sage will remain visible can usually
be controlled by the sender. Messages
also raise questions
can contain text, images, or videos, de-
pending on the platform, and they are
and present challenges
generally end-to-end encrypted and
stored on your personal device. Of- within the context of
ten there is screenshot protection to
prevent the recipient from bypassing
the self-destruct feature. Ephemer-
litigation or arbitration.
al messages thus function much like
oral communications—once the con- Litigation and Arbitration appropriately retain business records
versation has ended, the communica- Challenges or communication” as a remediation
tions live on only in the memories of While there are legitimate reasons for measure to receive full cooperation
the participants. using ephemeral messaging, it can credit in connection with volun-
also create challenges. For example, it tarily self-disclosed misconduct [5].
The business case for ephemeral mes- may complicate corporate compliance In 2019, the DOJ refined its policy to
saging can be robust, depending on obligations by circumventing regula- loosen the outright prohibition on
the needs of an organization. The ben- tory retention requirements, violat- ephemeral messaging apps—it now
efits can include saving on data stor- ing the duty to preserve, and violating requires that companies implement
age, protecting trade secrets, protect- corporate information governance “appropriate guidelines and con-
ing against data breaches, controlling programs. And even if ephemeral mes- trols on the use of personal
e-discovery costs, and maintaining saging is used only for non-nefarious communications and ephemeral
privacy. If confidential communica- reasons, it can give the appearance messaging platforms” as remedia-
tions no longer exist, there is no risk of impropriety. tion [6]. However, the DOJ remains
of their inadvertent (or intention- skeptical of ephemeral messaging
al) disclosure. By the same token, For example, the U.S. Department of apps, noting they “undermine the
ARIAS • U.S. QUARTERLY – Q2 · 2021 3
PRESERVING EVIDENCE
As you might imagine,
limited than in litigation, sanctions
for spoliation of evidence likely come
within the arbitrators’ authority.
the disappearing nature In discovery under the Federal Rules,
of ephemeral messages
ESI must be produced in a form “in
which it is ordinarily maintained or
in a reasonably usable form” [11]. That
can cause problems said, “[a] party need not provide dis-
covery of electronically stored infor-
when it comes to these mation from sources that the party
identifies as not reasonably accessible
because of undue burden or cost” [12].
duties and obligations, As you might imagine, the disappear-
and courts and litigants ing nature of ephemeral messages can
cause problems when it comes to these
are just starting to wade
duties and obligations, and courts and
litigants are just starting to wade into
these issues. For example, does the
into these issues. “duty to preserve relevant informa-
tion” require a company to change the
functioning of an ephemeral messag-
company’s ability to appropriately litigants have a duty to preserve rel- ing app to preserve (rather than de-
retain business records” [7]. evant information when litigation is lete) messages going forward? Devel-
reasonably foreseeable” [9]. This duty oping case law says yes. Are ephemeral
The U.S. Securities and Exchange Com- requires parties to retain documents, messages “reasonably accessible” if it
mission (SEC) likewise is mistrustful of suspend destruction, and put in place is possible to retrieve them through
ephemeral messaging apps. In a 2018 litigation holds, and it includes elec- extraordinary means, since not every-
National Exam Program Risk Alert, the tronically stored information (ESI), thing deleted electronically is unre-
SEC advised registered broker-deal- such as text messages. Failure to pre- coverable? More and more parties are
ers and investment advisers that they serve ESI can lead to sanctions un- turning to stipulated ESI orders to set
should specifically prohibit “business der Rule 37(e), as seen in certain of the boundaries, defining what is and
use of apps and other technologies the cases discussed below, although is not “reasonably accessible.” And if
that can be readily misused by allow- the rule “does not apply when in- messages haven’t yet been deleted, is
ing an employee to send messages or formation is lost before a duty to there an obligation to intervene and
otherwise communicate anonymous- preserve arises” [10]. prevent their deletion or turn them
ly, allowing for automatic destruction over in discovery? Probably.
of messages, or prohibiting third-par- While arbitral discovery is usually less
ty viewing or back up” to comply with onerous than discovery in civil litiga- At one point, Snapchat revealed that
the SEC’s books and records rule [8]. tion, the same preservation and spoli- over a six-month period it had pro-
ation issues may nevertheless appear duced unopened messages to law en-
Turning to civil litigation, parties also in arbitration, and the litigation rules forcement in response to about a doz-
have a duty to preserve evidence where regarding preservation provide guid- en search warrants [13]. The messages
litigation is reasonably anticipated ance for an arbitration panel address- had not self-destructed because they
or ongoing—or, as the Federal Rules ing these issues. Although the scope of had not been opened. These issues are
of Civil Procedure put it, “… potential discovery in arbitration is often more not isolated to the courts: arbitrators
4 www.arias-us.org
may soon find themselves in a similar represented an intentional act “to In deciding whether to impose sanc-
position, being asked to issue discov- withhold and destroy discoverable ev- tions under Rule 37(e) for spoliation of
ery orders, draw adverse inferences, idence” [19]. While the court held that ESI, the court explained that it should
and apply sanctions in connection “[t]his intentional, bad-faith spolia- consider whether “(1) the ESI should
with ephemeral data. tion of evidence was an abuse of the have been preserved in the anticipa-
judicial process and warrant[ed] a tion or conduct of litigation; (2) the
sanction,” the court declined to deter- ESI is lost because a party failed to
Recent Cases Involving mine the appropriate severity of the take reasonable steps to preserve it;
Ephemeral Messaging sanction, as it dismissed the case on and (3) [the ESI] cannot be restored
In three cases over the past few years, merits in summary judgment [20]. or replaced through additional dis-
ephemeral messaging has played a covery” [23]. “Before terminating the
central role in the dispute. In each In WeRide Corp. v. Kun Huang, after action, the Court must find that ‘the
case, ephemeral messaging proved the start of litigation, the defendant party acted with the intent to deprive
problematic (or at least potentially so). CEO instructed his company to use another party of the information’s use
DingTalk to correspond internally in the litigation’” [24].
In Waymo LLC v. Uber Technologies, [21]. A company 30(b)(6) witness con-
Inc., Waymo claimed that Uber mis- firmed the company was unable to The defendants continued to de-
appropriated its trade secrets [14]. recover any DingTalk ephemeral mes- lete emails older than 90 days, de-
The litigation was beset by discovery sages, although the CEO said he had leted entire email accounts, wiped
disputes. Waymo filed motions, mo- stored some messages but could not laptops, and began using DingTalk.
tions in limine, and multiple requests find a vendor to extract them [22]. Taking all of this conduct togeth-
for relief for Uber’s alleged discovery The plaintiff moved the court to issue er, the court found it appropriate to
misconduct [15]. In a comprehensive sanctions against the defendants for issue terminating sanctions under
discovery order prior to trial, the court spoliation of evidence. Rule 37(b) and (e) [25].
ruled on the extent to which Uber’s
litigation misconduct might feature
at trial. The court allowed Waymo to
At one point, Snapchat
argue that Uber’s use of ephemeral
messaging was to purposefully con-
ceal evidence that it had stolen trade
secrets, while also allowing Uber to ar-
gue that its ephemeral messaging use
revealed that over a
was legitimate [16]. There was no final
resolution of the issue, as the case set-
tled before trial.
six-month period it had
After litigation began in Herzig v. Ar-
produced unopened
kansas Foundation for Medical Care,
Inc., the plaintiffs installed Signal on messages to law
enforcement in response
their phones, with the app set to de-
lete messages [17]. One of the plain-
tiffs disclosed that they were messag-
ing over Signal at his deposition [18].
The court inferred that the messages to about a dozen
search warrants.
sent over Signal would have been re-
sponsive and held that the plain-
tiffs’ installation and use of Signal
ARIAS • U.S. QUARTERLY – Q2 · 2021 5
PRESERVING EVIDENCE
9. Fed. R. Civ. P. 37(e), Comm. Notes.
What Does This Mean for You? could have been preserved is deleted.
Based on the issues presented in 10. Fed. R. Civ. P. 37(e), Comm. Notes.
Waymo, Herzig, and WeRide, arbitra- With a greater understanding of the
tors and parties need to be proactive function and legitimate use of ephem- 11. Fed. R. Civ. P. 34(2)(E)(ii).
about addressing issues related to eral messaging as well as the ques-
12. Fed. R. Civ. P. 26(b)(2)(B) (emphasis
ephemeral messaging. The case law tions and challenges it can present in
added).
suggests that decisions about the use the context of litigation or arbitration,
of ephemeral messaging should be parties and arbitrators should be well 13. “Who Can View My Snaps and Stories.”
based on specific business justifica- positioned to handle any ephemeral 2013. Snap. Accessed at https://newsroom.
tions and not made “on the fly” (and messaging issues that may arise. snap.com/viewing-snaps-stories
especially not once there is already a
14. 2018 U.S. Dist. LEXIS 16020 (N.D. Cal.
duty to preserve evidence). As with NOTES
1. Statista. 2021. Percentage of U.S. in- 2018).
other types of ESI, when litigation or
ternet users who use Snapchat as of 3rd
arbitration is reasonably anticipated, 15. Id. at *13–14.
quarter 2020, by age group. Accessed at
parties should take steps to preserve https://www.statista.com/statistics/814300/
any ephemeral messages that still ex- snapchat-users-in-the-united-states-by-age/. 16. Id. at *69–70.
ist and disable automatic deletion of
2. Statista. 2021. Number of daily active Snap- 17. 2019 U.S. Dist. LEXIS 111296 (W.D. Ark.
messages. Once litigation or arbitra-
chat users from 1st quarter 2014 to 4th quar- 2019).
tion begins, parties may need to de-
ter 2020. Accessed at https://www.statista.
termine whether responsive ephem- 18. Id. at *12–13.
com/statistics/545967/snapchat-app-dau/.
eral messages exist, discuss with each
other the role of ephemeral messaging 3. Wickr. 2021. Who is Wickr for? Accessed at 19. Id. at *13.
in discovery, and negotiate whether https://wickr.com/.
20. Id. at *15.
ephemeral messages should be part of
the discovery plan. 4. Carr, Austin. 2014. Confide: A Snapchat for
Professionals, Not Sext-Obsessed Teens. Fast 21. 2020 U.S. Dist. LEXIS 72738, at *29 (N.D.
Company. Accessed at https://www.fastcom- Cal. 2020),
Where ephemeral messaging is in pany.com/3024603/confide-a-snapchat-for-
play, arbitrators should understand professionals-not-sex-obsessed-teens. 22. Id.
how the ephemeral messaging apps
5. Davis Polk & Wardwell LLP. 2018. USAM In- 23. Id. at *31–32 (internal quotation marks
used by the parties function, includ-
sert: 9-47.120 – FCPA Corporate Enforcement omitted).
ing whether automatic deletion can
Policy. Accessed at https://www.davispolk.
be disabled and whether use of the 24. Id. at *32.
com/sites/default/files/doj_policies_2018.
app can be avoided entirely. Arbitra- pdf.
tors should also understand the im- 25. Id.
plications of a party’s decision to use 6. U.S. Department of Justice. 2020. Foreign
Kirsten Fraser is a senior
ephemeral messaging—did the party Corrupt Practices Act of 1977: 9.47.120 – FCPA
associate at Porter Wright
start using ephemeral messaging be- Corporate Enforcement Policy. Accessed at
Morris & Arthur LLP who
https://www.justice.gov/jm/jm-9-47000-for- focuses her practice on
fore arbitration was reasonably an-
eign-corrupt-practices-act-1977#9-47.120. commercial litigation and
ticipated for one of the legitimate
internal investigations.
business reasons described above, 7. Id.
or is the situation more like WeRide,
Andy Foreman, a partner
where the CEO’s instruction to use 8. U.S. Securities and Exchange Commission.
at Porter Wright Morris &
ephemeral messaging came after the 2018. National Exam Program Risk Alert. Of-
Arthur LLP, concentrates
fice of Compliance Inspection and Examina-
start of litigation? Finally, arbitrators his practice on complex
tions. Accessed at https://www.sec.gov/files/ commercial litigation and
should be prepared to craft discovery OCIE%20Risk%20Alert%20-%20Electron- reinsurance disputes.
orders and relief, such as sanctions or ic%20Messaging.pdf.
adverse inferences, if evidence that
6 www.arias-us.org
ARBITRATOR DISCLOSURE AND WITHDRAWAL
How Much Disclosure is Enough?
By Susan E. Mack
As one of the ethics partners at the law interest or relationship likely to affect A related subject addressed by Com-
firm of Adams and Reese LLP, it is my their judgment. Any doubt should be re- ments 4 and 5 to Canon IV is an ar-
frequent pleasure to assist other firm solved in favor of disclosure. bitrator’s withdrawal from service
lawyers in resolving conflicts of inter- on the arbitration panel. Comment 4
est and related disclosure issues, given This article will explore the pragmat- addresses withdrawal mandated by an
applicable state bar rules. As one of the ic ramifications of this broad call for arbitrator’s inability to reconcile his or
co-founders of ARIAS·U.S. and a proud disclosure affecting an arbitrator’s her “duty to disclose and some other
member of the ARIAS·U.S. Ethics Com- [1] ability to fairly arrive at an award. obligation, such as a commitment to
mittee, I embrace this opportunity to What are minimum disclosure stan- keep certain information confiden-
provide insights about disclosure is- dards for arbitrators? Are there cur- tial.” Comment 5 addresses an arbi-
sues addressed by our own society’s rent best practices for disclosure and, trator’s withdrawal for other “good
benchmarks and, specifically, the if so, what are these practices? What reason,” including “serious personal or
ARIAS·U.S. Code of Conduct, Canon IV. are the best methods and appropri- family health issues.”
ate times for disclosure? And, impor-
To refresh our collective memories, tantly, what happens if, upon motion This article will explore when and
Canon IV succinctly states the follow- for vacatur pursuant to the Federal whether an arbitrator should with-
ing: Arbitration Act (9 U.S.C. Section 10 et draw or, alternatively, consider that
seq.), a reviewing court determines a different and less drastic cure is in
DISCLOSURE: Candidates for appoint- that the disclosure provided is order. Finally, this article will discuss
ment as arbitrators should disclose any simply not enough? what happens to the tripartite panel
ARIAS • U.S. QUARTERLY – Q2 · 2021 7
ARBITRATOR DISCLOSURE AND WITHDRAWAL
when one of its three members does conflicts that relate to same. parties that others could reasonably
indeed withdraw. Should the panel Consider the following language: believe would be likely to affect the
be entirely reconstituted, or will the candidate’s judgment [emphasis mine].
interests of justice and due process 1. Before accepting an arbitration
be served by replacing only the ar- appointment, candidates for appoint- Comment 1 is a further refinement
bitrator who has tendered his or ment as arbitrators should make a to Canon IV’s admonition that arbi-
her resignation? diligent effort to identify and disclose trators must disclose “any interest or
relationship likely to affect their judg-
ment.” The wording of Canon IV alone
frames necessary disclosure in terms
It is axiomatic of what the arbitrator himself or her-
self subjectively deems likely to affect
that an arbitrator the ability to resolve the matters in
controversy in the arbitration proceed-
should disclose
ing. But Comment 1 adds the perspec-
tive of what, objectively, “others” could
“reasonably believe would be likely to
any involvement, affect the candidate’s judgment.”
by employment or Here are the minimum standards that
should satisfy the reasonable beliefs of
“others” analyzing adequacy of disclo-
otherwise, with the sure:
actual contracts or Identifying the issues central to the
dispute. By means of the umpire
questionnaire to be distributed to
claims at issue. the party-appointed arbitrators as
well as the umpire, counsel should
disclose enough initial facts about
Minimum Standards and any direct or indirect financial or per- the dispute that all panel members
Best Practices for Arbitrator sonal interest in the outcome of the will know if they have addressed
Disclosure proceeding or any existing or past fi- the involved principles previous-
Comment 1 to Canon IV makes clear nancial, business, professional, family ly by expert testimony or publica-
that it is not enough for an arbitra- or social relationship that others could tions and presentations. For example,
tor to advise the parties to an arbi- reasonably believe would be likely to if a given controversy involves
tration, through counsel, of any ob- affect their judgment, including any the Extra-Contractual Obligations
vious conflicts that the arbitrator relationship with persons they are Clause, the dispute description
readily remembers. Comment 1 evi- told will be arbitrators or potential agreed upon by counsel should in-
dences the expectation that arbitra- witnesses. Such disclosures should in- dicate that differing interpreta-
tors will undertake an affirmative clude, where appropriate and known tions of this clause are central to the
responsibility to (1) determine the is- by a candidate, information related arbitration proceeding. That will al-
sues underlying the arbitration and to the candidate’s current employ- low the conscientious panel member
understand the identities of counsel, er’s direct or indirect financial inter- to disclose whether he or she has tes-
parties, and witnesses as well as oth- est in the outcome of the proceedings tified, presented or written about this
er interested parties and (2) seek out or the current employer’s existing or subject, as required by Comment 2 (a)
and disclose any present or potential past financial relationships with the to Canon IV.
8 www.arias-us.orgIt is axiomatic that an arbitrator questionnaire [2], he or she should circumstances that only the party tech-
should disclose any involvement, by consult his or her arbitration records nically appoints the arbitrator, the pur-
employment or otherwise, with the for other matters involving these pro- pose of this rule is to require disclosure
actual contracts or claims at issue (see fessionals. To meet this minimum of the relationships between the can-
Comment 2 (c) to Canon IV). Whether standard, I recommend that the ar- didate and the parties as well as the
it is necessary for an arbitrator to dis- bitrator keep a spreadsheet that does candidate and either party’s counsel or
close his or her service on other arbi- the following: (1) identifies matters third-party administrator or manager;
trations where an award was issued chronologically and in relation to the such relationships that must be dis-
on facts and/or circumstances similar involved parties; (2) identifies other closed include appointment as an ar-
to the described arbitration is not ex- members of the panel on each matter; bitrator where the party’s counsel and/
pressly addressed in Canon IV or its (3) sets forth all counsel and their law or party’s third party administrator or
Comments. The issue is relevant be- firms; and (4) identifies company rep- manager acted as counsel or third party
cause, for example, several property/ resentatives and third-party adminis- administrator or manager for a party
casualty reinsurance arbitrations deal trators or managers for each party [3]. making the appointment.
with whether cedents have appropri-
ately allocated settlements to different Additionally, I recommend that each Determining the current employer’s
years and different layers of reinsur- arbitration listing on the spreadsheet financial interest in the proceedings.
ance treaties. On the life side, several refer to when and how each proceed- Typically speaking, ascertaining one’s
arbitrations deal with the purported ing was resolved. This measure serves own potential financial interest in the
ability of reinsurers to raise rates on to satisfy the inquiry contained within proceedings is a simple affair. For ex-
yearly renewable term treaties. the ARIAS·U.S. standard questionnaire ample, if an arbitrator has equity hold-
as to whether other matters involv- ings in a publicly traded party to an
The results in these proceedings may ing any of the same panel members, arbitration, these holdings, as known,
well differ based on the facts, the trea- parties, counsel or company repre- should be disclosed. But Comment 1
ty wording, and the course of dealing sentatives resolved after the final also places an obligation on the arbi-
of the parties. Unless information hearing and award or, if not, wheth- trator to disclose the following:
about prior arbitrations is specifically er they resolved before or after the
requested by counsel, no affirmative organizational meeting. ... where appropriate and known by a
disclosure is required unless the arbi- candidate, the candidate’s current em-
trator believes that his or her prior ser- Accurate recordkeeping then enables ployer’s direct or indirect financial in-
vice is likely to affect his or her judg- the arbitrator to disclose, in the words terest in the outcome of the proceedings
ment in the present arbitration. of Comment 1, “… any direct or indirect or the current employer’s existing or
financial or personal interest in the past financial or business relationship
If an arbitrator believes the issues outcome of the proceeding or any ex- with the parties that others could rea-
description is insufficient, a com- isting or past financial, business, pro- sonably believe would be likely to affect
munication to secure more infor- fessional, family or social relationship the candidate’s judgment.
mation should be directed to both that others could reasonably believe
parties’ counsel. would be likely to affect their judg- At a minimum, those working for a
ment.” This recordkeeping also allows company should disclose all known
Keeping accurate records so that re- for compliance with Comment 2 (b) to marketing, financial and business
currence of parties, counsel and com- Canon IV by disclosing the following: relationships actually known, as re-
pany representatives may be ascer- quired by the plain language of Com-
tained. Once an arbitrator learns of … the extent of previous appointments ment 1. I submit that current best
the involved parties, their counsel, as an arbitrator by either party, ei- practice goes beyond that minimum.
their third-party administrators or ther party’s counsel or either party’s Realistically, it would be difficult, at
managers, and their company repre- third-party administrator or man- a time after the proceeding, to justi-
sentatives by means of the umpire ager; while it may be true in some fy the arbitrator’s state of knowledge
ARIAS • U.S. QUARTERLY – Q2 · 2021 9ARBITRATOR DISCLOSURE AND WITHDRAWAL
about his or her current employer at will provide verbal updates to his or immediately when an arbitrator re-
the time of disclosure. For that reason, her completed umpire questionnaire. calls interests or relationships that he
I advise the prudent arbitrator work- or she has failed or neglected to dis-
ing in a law firm to conduct a confi- By contrast, current best practice close previously. Further, the arbitrator
dential conflicts-of-interest scan to mandates that the party-appoint- should explain why the disclosure was
determine the extent to which other ed arbitrators disclose their present not made earlier, such as inadvertence
lawyers represent (or are adverse to) and potential conflicts by means of or a good-faith belief that the disclo-
the parties. Similarly, I advise an exec- a writing directed to all counsel and sure was not germane to the particular
utive currently working for an insurer panel members. This measure guards interests or relationships presented by
or reinsurer to make direct inquiries against an arbitrator’s inadvertent the arbitration proceeding.
about that employer’s relationships omission of a necessary disclosure.
with a party, without disclosing that Ideally, these written disclosures will But aside from these exceptional cir-
the party is involved in an arbitration take place shortly after all panel mem- cumstances, there are routine touch-
that may well be subject to confidenti- bers receive the position statements points at which additional disclosure
ality strictures. invariably exchanged prior to the or- should be seriously considered. These
ganizational meeting. In that way, touchpoints include the dates on
arbitrator disclosure may be made which counsel reveal the identities
The Continuing Duty to early in the proceeding, but after the of fact and expert witnesses. Prior to
Disclose; Timing and Method arbitrator learns as much as possible those dates, it is likely that the arbi-
of Disclosures about the parties, their relationships trator does not have enough knowl-
Comment 3 to Canon IV sets forth a and the issues in contention from the edge about the witnesses to make
baseline standard that the timing of position statements. informed disclosures. Another obvi-
disclosure should be “no later than ous touchpoint is immediately before
when arbitrators first meet or com- Comment 6 to Canon IV advis- commencement of the final hearing.
municate with both parties.” At the or- es that “the duty to disclose all in- As counsel have made most of their
ganizational meeting, minimum stan- terests and relationships is a con- written submissions by then, key in-
dards dictate that the party-appointed tinuing obligation throughout the formation in those submissions may
arbitrators verbally advise counsel of proceeding.” As is aptly noted, sup- well trigger additional meaningful
their disclosures, while the umpire plemental disclosure should be made disclosure.
What happens if, upon a party’s mo-
tion to vacate, a reviewing court finds
arbitrator disclosures to be insuffi-
...there are routine cient? Simply put, Canon IV’s dictates
are more stringent than the prepon-
touchpoints at which
derance of recent U.S. case law about
unacceptable arbitrator disclosure.
On the principal issue as to whether
additional disclosure arguably insufficient arbitrator dis-
closure will allow a party to vacate an
should be seriously
arbitration award, reviewing courts
have been reluctant to disturb the
validity of an arbitration award in all
considered. but the most extreme circumstances.
See, e.g., Monster Energy Company
v. City Beverages, LLC 940 F. 3d 1120
(9th Cir. 2019).
10 www.arias-us.orgSpecific grounds for vacating an arbi-
tration award under 9 U.S.C. Section 10
Only when the situation
include (1) where the award was pro-
cured by corruption, fraud or undue
means and (2) where there was evident
cannot be resolved or
partiality or corruption in the arbitra-
tors, or either of them. In the Second
will continue for an
Circuit, the party seeking to vacate
an arbitration due to an arbitrator’s undetermined length
of time should the
purported “evident partiality” faces a
“high hurdle.” Scandinavian Reinsur-
ance Co. Ltd. v. St. Paul Fire & Marine
Ins. Co., 668 F.3d 60, 72. (2d Cir. 2012).
Courts in the Second Circuit are gen- arbitrator withdraw.
erally hesitant to vacate arbitration
awards because of arbitrator nondis-
closure alone. National Indemn. Co. v.
IRB Brasil Resseguros S.A., 164 F. Supp. appeals cases that vacate arbitra- opposed to any long-past, attenuated
3d 457, 475 (2016). As clarified in Ap- tion awards based on an arbitrator’s or insubstantial connections between
plied Industrial Materials Corp v. Ova- evident partiality. Only the Monster Monster and the arbitrator.
lar Makine Ticaret Ve Sanavi, A.S., 492 Energy case in the Ninth Circuit il-
F. 2d 132, 137 cited with approval in Na- lustrates the most extreme of undis- While it is currently improbable that a
tional Indemnity Company 164 F. Supp. closed conflicts, whereby vacatur for reviewing court will opine that a given
3d at 475, “evident partiality” suffi- “evident partiality” would be ARIAS·U.S. arbitrator’s disclosures are
cient to vacate an arbitration award is deemed appropriate. not enough, I recommend that arbi-
described as follows: trators should adhere to the more as-
The Monster Energy arbitration was pirational standards of Canon IV. Not
Unlike a judge, who can be disqualified conducted under the auspices of only will adherence assure a just out-
in any proceeding in which his impar- JAMS. The single arbitrator’s writ- come, but doing otherwise is to place
tiality might reasonably be questioned, ten disclosure statement omitted an ill-advised bet that case law stan-
an arbitrator is disqualified only when that the arbitrator had a substantial dards will remain unchanged.
a reasonable person, considering all ownership interest in JAMS, and JAMS
of the circumstances, would have to had administered 97 decisions for
conclude that an arbitrator is partial Monster in the past five years. Monster Arbitrator Withdrawal: When
to one side. Energy, 940 F.3d at 1136. These facts is this Step Necessary?
were only discovered after the pro- To best respect confidentiality stric-
Furthermore, unlike the reference in ceeding concluded. tures, arbitrators disclosing informa-
Canon IV, Comment 1 to the arbitra- tion about their past and concurrent
tor’s “diligent effort to identify any Where the arbitration award was in arbitrations should not identify the
conflicts,” the Applied Industrial court favor of Monster, these facts were suf- parties to those arbitrations or related
declined to impose on the arbitrator a ficient to prompt the Ninth Circuit’s confidential details. Comments 3 and
“free-standing duty to investigate” for reversal of the district court’s denial 4 to Canon IV envision the scenario
present or putative conflicts. Id. at 138. of vacatur. In providing its rationale, where counsel presses for identifying
the Ninth Circuit Court of Appeals details as to another of an arbitrator’s
A review of recent Second Circuit stressed the significance and imme- proceedings in which a confidentiality
case law fails to disclose any court of diacy of the undisclosed interests, as order is in place. If counsel cannot be
ARIAS • U.S. QUARTERLY – Q2 · 2021 11satisfied, the conflict between the dis- would “open the door to significant the ARIAS·U.S. Code of Conduct as well as
closure obligation and the confiden- potential for manipulation.” Id. at 130, Canon IV, Comment 2 were not amended
until 2014 to indicate that records should be
tiality obligation should prompt the hypothesizing that “a party receiv-
kept as to third-party administrators or man-
arbitrator to withdraw. The arbitrator ing unfavorable interim ruling would agers. Therefore, practically speaking, an
should remain only if both counsel are have an incentive to invite the mem- umpire or arbitrator can reasonably explain
aware of an incomplete disclosure, ac- ber designated to resign to forestall an that his or her records do not contain this
knowledge the necessity of same, and anticipated ultimate defeat” (citation information prior to 2014.
provide their informed consent for the omitted). Notably, the case of an arbi-
Susan Mack spent 25 years
continuation of the arbitrator in his trator’s withdrawal is different from as a general counsel and
or her role. the “general rule” espoused in Marine chief compliance officer of
Products Export Corp. v. M. T. Globe both insurers and reinsurers
in the life/health and prop-
This example is Canon IV’s most de- Galaxy, 977 F. 2d 66, 68 (2d Cir. 1992),
erty/casualty sectors of the
finitive reference to a reason prompt- namely, that the arbitration must be insurance industry.
ing arbitrator withdrawal. Other rea- commenced anew when one member
sons may include (1) an arbitrator’s of a tripartite panel dies.
personal or family ill health, (2) un-
avoidable, urgent and unforeseen em-
ployment commitments, or (3) a new Closing Thoughts
awareness of previously undisclosed Exceptions such as arbitrator with-
facts by counsel making clear newly drawal and counsels’ late discovery of
perceived conflicts to the arbitrator. purportedly material non-disclosure
Because arbitrator withdrawal may aside, Canon IV provides a workable
well hinder the parties’ intention to template for how ARIAS·U.S. arbitra-
bring the arbitration to a prompt and tors can reasonably satisfy disclo-
fair resolution, alternative solutions sure obligations on an ongoing basis.
should be seriously considered. For Pragmatic best practices continue to
example, if personal ill health does evolve. Accordingly, I advocate shar-
not equate to a continuing disabili- ing any new practices by interact-
ty, the less drastic solution of post- ing at our ARIAS·U.S. Spring and Fall
poning the final hearing date could Conferences. I look forward to see-
accommodate anticipated recovery ing you at our next conference, slat-
time. Only when the situation can- ed for beautiful Amelia Island, Flori-
not be resolved or will continue for an da, near my home and law practice in
undetermined length of time should Greater Jacksonville.
the arbitrator withdraw.
NOTES
Based on the authority of the Second 1. For purposes of this article, the terms arbi-
trators and panel members include both par-
Circuit’s opinion in Insurance Co. of
ty-appointed arbitrators and umpires unless,
North America vs. Public Service Mu- for clarity’s sake, specific reference must be
tual Insurance Co., 609 F. 3d 122, 129- made due to context.
130 (2d Cir. 2010), the solution to the
withdrawal of one arbitrator from a 2. An aside—in determining how best to ex-
tripartite panel is, in most instances, ercise this disclosure, it is critical to learn
the current parents and other affiliates of the
to replace the arbitrator as opposed
parties. The identity of “parties” can change
to starting the arbitration anew with based on recent acquisitions and divestitures.
an entirely new panel. This court rea-
soned that replacing the entire panel 3. It is notable that Canon I, Comment 4 of
12 www.arias-us.orgRE/INSURING CANNABIS BUSINESSES
A Coming Safe Harbor: Working
with the Cannabis Industry
By Robin Dusek
With the success of recent state-level is perfect and, indeed, not one has insurers and reinsurers providing cov-
legalization and decriminalization ef- passed both chambers of Congress, let erage to cannabis businesses [5]. That
forts, the cannabis industry is boom- alone been signed into law. New lead- safe harbor provision states that “an
ing, and the need for financial services ership in Washington might change insurer that engages in the business
and insurance/reinsurance is acute that, but with or without this legisla- of insurance [6] with a cannabis-relat-
and largely unmet [1]. However, giv- tion, the cannabis industry presents ed legitimate business or service pro-
en the patchwork legal status of can- unique challenges and concerns wor- vider or who otherwise engages with
nabis—legal in some states, illegal in thy of further review. a person in a transaction permissible
others, sometimes treated differently under State law related to cannabis”
based on medicinal or recreational In 2019, the SAFE Banking Act was in- will not be held liable under federal
status, still unequivocally illegal at the troduced in Congress [2]. The original law or regulation [7].
federal level—more traditional busi- act would have provided safe harbor
nesses, including insurers and rein- provisions for financial services orga- The SAFE Banking Act passed the
surers, are rightly hesitant to become nizations that worked with state-legal House of Representatives with bi-
involved. Congress has considered cannabis [3] businesses [4], but the partisan support in 2019, with ap-
various pieces of legislation to address House Financial Services Committee proximately one-third of House Re-
these concerns, but none of these laws expanded the safe harbor to include publicans and all but one Democrat
ARIAS • U.S. QUARTERLY – Q2 · 2021 13RE/INSURING CANNABIS BUSINESSES
voting in support of the bill. However, cannabis do not align. Still, federal For an insurance contract that covers
it stalled in the Senate, where it never lawmakers realize the necessity of tak- a state-legal but federal-illegal canna-
progressed out of committee despite ing some steps to make the differenc- bis business (even with a safe harbor),
bipartisan co-sponsorship [8]. es in the laws more easily managed, the applicability of these types of ex-
and safe harbor is one way to do this. clusions is an open issue. In 2012, the
The House didn’t abandon the bill; in- Hawaiian District Court sided with an
stead, in 2020, it was folded into the insurer that had used federal illegality
legislation for COVID-19 relief (the Cannabis Insurance as the basis for declining coverage for
HEROES Act) and passed the House Considerations the loss of state-legal medical canna-
once again [9]. The SAFE Banking Act The passage of the SAFE Banking Act bis plants under a homeowner’s policy
provisions were, unfortunately, nego- would be a game changer for the can- [15]. A few years later, however, a Colo-
tiated out of the bill that ultimately nabis industry, the banking industry, rado court sided with the insured in a
passed in December 2020. Still, a Sen- and the insurance industry. While coverage dispute where the CGL carri-
ate under Democratic leadership may not all banking institutions or insur- er had relied on a public-policy exclu-
breathe fresh life back into the bill. ance industry participants want to sion to decline coverage for its insured
work with cannabis businesses, some cannabis business. The court pointed
Even if safe harbor is eventually cod- see the sector’s relative resilience [14] out that the insurer, “having entered
ified, there is no reason to be believe during the COVID-19 pandemic, espe- into the Policy of its own will, know-
that federal legalization of cannabis cially as compared to more traditional ingly and intelligently, is obligated to
is imminent, despite Democratic con- industries, as a lucrative opportunity. comply with its terms or pay damages
gressional leadership. The MORE Act, Based on my discussions, there are for having breached it” [16]. It is fair to
which would have decriminalized can- many insurers and reinsurers eager to say that the law on this issue is neither
nabis at the federal level, passed the move into the cannabis space. mature nor clear, and it is possible, if
House in 2020 but had few co-sponsors not likely, courts will take different
in the Senate, and there are no signs So, what are some considerations that views of these exclusions.
this will change anytime soon [10]. industry participants should weigh
That said, it appears fairly evident that before making the leap? Given the lack of clear guidance, will
cannabis legalization is not a passing reinsurers claim that cedents that
fad—in every state where it was on the Federal illegality still matters, even do pay, despite exclusions, have paid
ballot in November 2020, voters sup- if the SAFE Banking Act becomes law. claims ex gratia? While at first blush it
ported legalization efforts [11]. And Due to the confluence of factors re- would seem to verge on bad faith for
legalization is no longer something lating to insuring cannabis businesses an insurer or reinsurer covering a can-
that affects only “blue” states: Missis- (federal illegality, perceived headline nabis business to argue that cannabis
sippi, Montana, and South Dakota are risk, and lack of historical data, for ex- products are excluded from coverage,
among the states recently taking steps ample), there are few insurers relative it may be the case—depending on the
toward legalizing cannabis [12]. to the overall needs of the industry. scope of coverage and definition of the
In addition, nearly all insurers will- insured—that an underwriter believed
At the same time, the legal canna- ing to insure cannabis businesses are coverage to be narrowly focused. As
bis industry has seen enormous job operating on a surplus-lines basis, so such, cedents and reinsurers entering
growth, even during the COVID-19 most policies are not written for the into contracts reinsuring cannabis
pandemic [13]. Given the momentum cannabis industry, and general policy businesses would be wise to commu-
behind state-level legalization but the exclusions may be problematic when nicate regarding the applicability of
overall squeamishness that still exists claims do arise. For instance, policies policy exclusions. These communica-
relating to federal legalization, there may exclude illegality, smoke, or pol- tions can help ensure that the parties
will likely continue to be a period of lution (among others) that theoreti- are on the same page regarding the
years—maybe even decades—where cally could apply to many, or even all, scope of coverage, thereby minimizing
state law and federal law regarding claims that arise. or avoiding future disputes.
14 www.arias-us.orgFederal illegality can also complicate
the relief that federal courts are willing
to consider. In 2020, courts repeatedly
It is an open question
cited the federal illegality of cannabis
when denying relief in commercial whether public policy
will be used as a basis
disputes [17]. Whether this is a blip or a
trend remains to be seen. But any party
touching the cannabis industry in any
respect would be well advised to draft
contracts with severability provisions
to decline to enforce
to ensure that the entire contract does
not fall apart if one provision is found
to be unenforceable. Forum selection
arbitration awards that
clauses should be carefully considered,
as the forum selected may determine
relate to the cannabis
wither a contract is fully enforceable
as written. industry.
Cannabis is illegal in many countries
around the world. Given the issues Convention signatories may be en- may take time to get right. Given the
surrounding the enforcement of can- forced. However, the New York Con- relative lack of coverage capacity at
nabis-related contracts in federal vention permits courts (or the rele- the moment, insurance appears to be
court, reinsurance industry partici- vant “competent authority”) to refuse expensive relative to risk [19]. But this
pants might find themselves comfort- to enforce awards that are contrary may change quickly if the SAFE Bank-
ed by the relative ubiquity of arbitra- to public policy in the country in ing Act passes and the market is flood-
tion clauses in reinsurance contracts. which recognition and enforcement ed with insurers and reinsurers com-
But is this comfort warranted? are sought [18]. forted by the law’s enactment. And
as we all know, when participants are
It should come as no surprise that can- It is an open question whether public losing money on risks, the likelihood
nabis remains illegal in many coun- policy will be used as a basis to decline of disputes increases.
tries around the world. Some coun- to enforce arbitration awards that re-
tries have legalized medical but not late to the cannabis industry. In the Assuming the SAFE Banking Act pass-
recreational cannabis; others have le- absence of clarifying guidance, parties es, the legality of cannabis will still
galized certain cannabis products, but to reinsurance contracts covering the continue to be a maze in the United
not products sold in certain state-legal cannabis industry should carefully States. Even with a safe harbor, can-
medical or recreational dispensaries. consider business partners and decide nabis will still be illegal at the federal
This could have consequences relating whether they prefer to rely on courts level absent the passage of the MORE
to the enforceability of arbitrations or arbitration, based on the specific Act (or something similar). Moreover,
involving cedents or reinsurers locat- parties to a relationship. state-level legality will vary, with each
ed in countries where cannabis prod- state having a different set of laws and
ucts remain partially or entirely illegal. The legality of cannabis will remain a regulations. Staying on top of the laby-
Typically, the New York Convention gray area. The cannabis industry has rinthine complex of laws, regulations,
on the Recognition and Enforcement been flooded with new participants, and standard practices will be difficult
of Foreign Arbitral Awards provides regulations, and laws. Understanding for even the most sophisticated indus-
that arbitration awards between the nature of the risk is a challenge, try participants. Navigating this maze
parties whose home countries are and pricing coverage appropriately is critical for understanding the scope
ARIAS • U.S. QUARTERLY – Q2 · 2021 15INSURING/REINSURING CANNABIS BUSINESSES
of risk insured or reinsured, the best 7. H.R. 1595 – Secure and Fair Enforce- therein … Providing funds in exchange for
forum for resolving disputes, and the ment Banking Act of 2019. 116th Congress equity violates the CSA because it would al-
(2019-2020). “Text.” Accessed at https:// low the investor to profit from the cultivation,
enforceability of judgments. As such,
www.congress.gov/bill/116th-congress/ possession, and sale of marijuana …. Conspir-
it is vital that those entering the space house-bill/1595/text. acy to cultivate marijuana is a crime of moral
do so with their eyes wide open and turpitude.”); Polk v. Gontmakher, No. 2:18-CV-
in conjunction with a competent 8. H.R. 1595. “All Actions.” 01434-RAJ, 2020 WL 2572536 (W.D. Wash.
advisory team. May 21, 2020)(“[A]s this Court has previously
9. Schiller, Melissa. 2020. “U.S. House In- explained to Mr. Polk, it cannot award him an
NOTES cludes SAFE Banking Act in Latest COVID-19 equitable interest in NWCS because to do so
1. See generally National Association of Insur- Relief Package.” Cannabis Business Times, would directly contravene federal law.”); J.
ance Commissioners Cannabis Insurance (c) September 29. Lilly, LLC v. Clearspan Fabric Structures Int’l,
Working Group, “Regulatory Guide: Under- Inc., No. 3:18-CV-01104-HZ, 2020 WL 1855190
standing the Market for Cannabis Insurance,” 10. S. 2227 –MORE Act of 2019. 116th Con- (D. Or. Apr. 13, 2020) (“The Court is persuaded
May 24, 2019. gress (2019-2020). “Cosponsors.” Accessed by the reasoning of the district courts in Tracy
at https://www.congress.gov/bill/116th-con- and Hemphill and finds that awarding Plain-
2. H.R.1595 – Secure and Fair En- g re s s / s e n ate -b il l / 2 2 2 7 /co s p o n s o r s? - tiff damages for lost profits would require the
forcement Banking Act of 2019. 116th searchResultViewType=expanded. Court to compel Defendants to violate the
Congress (2019–2020). “All Actions.” Ac- Controlled Substances Act.”)
cessed at https://www.congress.gov/ 11. Smith, Kelly Anne. 2020. “These States
bill/116th-congress/house -bill/1595/ Passed Provisions to Legalize Marijuana in the 18. New York Convention V(2)(b).
all-actions?overview=closed#tabs. 2020 Election.” Forbes, November 4.
19. Sacirbey, Omar. 2018. “Finding right in-
3. “Cannabis” is used in this article, rather 12. Schaneman, Bart. 2020. “Newly legal surance is key to any marijuana company’s
than the outdated term “marijuana.” See Alex states offer marijuana growers fresh oppor- business plan.” Marijuana Business Daily,
Halperin, “Marijuana: is it time to stop using a tunities, but some greener than others.” Mari- February 28.
word with racist roots?” The Guardian, Janu- juana Business Daily, November 20.
ary 29, 2018. Robin Dusek, a partner in the
13. Barcott, Bruce, Beau Whitney, and Janes-
Chicago office of Saul Ewing
4. H.R.1595 – Secure and Fair Enforce- sa Bailey. 2021. “The U.S. cannabis industry Arnstein & Lehr, represents
ment Banking Act of 2019. 116th Congress now supports 321,000 full-time jobs.” Leafly, insurers, cedents, reinsurers,
(2019–2020). “Text.” Accessed at https:// February 16. and pools across the country
www.congress.gov/bill/116th-congress/ in insurance and reinsurance
house-bill/1595/text/ih. 14. Schroyer, John and Andrew Long. 2021. disputes, including in both
“Cannabis sales records smashed or set in arbitrations and litigation
5. H. Rept. 116-104 - Safe Banking Act of 2020, and insiders expect the gains to contin-
2019. Accessed at https://www.congress. ue.” Marijuana Business Daily, January 22.
gov/congressional-report/116th-congress/
house-report/104. 15. Tracy v. USAA Cas. Ins. Co., No. 11-00487
LEK-KSC. (D. Haw. Mar. 16, 2012).
6. The “Business of Insurance” is de-
fined in Section 14(1) by reference to the 16. Green Earth Wellness Ctr. LLC v. Atain
Dodd-Frank Act, which defines “Business Specialty Ins. Co., 163 F. Supp. 3d 821, 831
of Insurance” as “The term ‘business of (D. Colo. 2016).
insurance’ means the writing of insurance
or the reinsuring of risks by an insurer, 17. See Bart St. III v. ACC Enterprises, LLC,
including all acts necessary to such No. 217CV00083GMNVCF, 2020 WL 1638329
writing or reinsuring and the activities (D. Nev. Apr. 1, 2020) (“Plaintiff cannot
relating to the writing of insurance or the re- prevail for unjust enrichment because
insuring of risks conducted by persons who the parties’ contract involves moral turpi-
act as, or are, officers, directors, agents, or tude. If the Contract is unenforceable, it is
employees of insurers or who are other per- because Plaintiff invested in Defendants’
sons authorized to act on behalf of such per- marijuana cultivation business primarily to
sons.” 12 U.S.C. § 5481. obtain a pathway to an equity investment
16 www.arias-us.orgYou can also read
