In Case You Missed It (October 2024)
Bradley Arant Boult Cummings LLP
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Our attorneys regularly publish relevant legal and business articles, by way of our Bradley blog network, to help inform readers and keep you up to date on the latest business trends and issues. This newsletter serves as a space to revisit or discover blog posts you might have missed over the course of the last month.
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The cannabis industry in the United States has developed within the context of conflicting and evolving federal and state laws, and businesses in the cannabis industry must navigate a wide array of legal challenges. These challenges extend to those businesses that provide services or otherwise interact with cannabis companies.
Bradley’s Cannabis Industry team has a deep understanding of the many unique legal and business issues that impact companies – including hemp companies – operating in this sector. We monitor industry trends and legislative developments to provide timely and proactive guidance to clients. Our multidisciplinary team of attorneys also helps businesses successfully identify and mitigate risk and recognize opportunities for sustainable growth. We have substantive experience advising on a wide range of matters, including banking, regulatory compliance, licensing, intellectual property, taxation, corporate transactions and dispute resolution.
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Discouraging Discouragement: In Kemp v. Regeneron Pharmaceuticals, the 2nd Circuit Finds FMLA Violation Without Outright Denial of Benefits
Most employers have gotten the hang of handling FMLA requests:?Make sure the employee is eligible; get paperwork from the provider;?and monitor the amount of time taken.?Whether all supervisors are overjoyed with every employee’s desire to take off due to a qualifying condition is another matter.?But if you follow the procedures and grant the FMLA leave, can you still interfere with an employee’s rights? In Kemp v. Regeneron Pharmaceuticals, the Second Circuit says you can. Read more.
Not My Problem: Connecticut Federal Court Rules Hemp Lawsuit Is a State Issue
I adore the film (and, as always, I stress the word “film”) Trading Places. It has it all: Eddie Murphy hitting his prime, a wonderfully smug Dan Akroyd, Jamie Lee Curtis doing her thing, and it’s all wrapped up in a caper-turned morality tale about the orange juice futures market. There are so many wonderfully quotable lines from that movie, but when I read a recent decision from a federal court in Connecticut remanding a hemp case to state court, the one that came to mind was “[n]obody wants to buy your drugs here, Louie.” Read more.
Substantial Performance v. Material Breach
All breaches are not created equal. A minor, technical breach may be deemed “immaterial.”?Other breaches – so-called “material” breaches — deprive the non-breaching party of something important or essential to the purpose of the contract. Whether a breach is material or immaterial is normally a question for the finder of fact.?The answer determines what remedy is available to the non-breaching party.?A material breach excuses performance by the non-breaching party and may provide a basis to rescind the agreement altogether.?An immaterial breach does not excuse performance by the non-breaching party, as one Kansas homeowner learned in a decision released last week.?Read more.
Arizona Court Says Preschool Isn’t School, Showing That Sometimes There Isn’t a “Right” Decision
Legend has it that Alice Cooper originally titled his hit “Preschool’s Out Forever.” I made that up, but it occurred to me when I read a headline from Law360 that read “Under Pot Law, Preschool Isn’t ‘School,’ Ariz. Court Rules.”
This is one of those decisions that makes you wonder how we ended up in this place – even if the decision may have been the correct result under the law. Read more.
Navigating Claims-Made Policies: Five Lessons from Match Group LLC v. Beazley Underwriting Ltd.
As many policyholders are acutely aware, the insurance landscape is complex, with numerous insurers offering a wide range of available insurance programs. ?While some coverage forms are standard, many are unique to specific industries and even to individual insurance companies. This diversity makes it critically important for policyholders to know the risks that their particular insurance policy covers and their responsibilities when seeking coverage. And often nowhere are these coverage nuances more crucial to properly understand than in determining what constitutes a “claim” under a given insurance policy and knowing how and when to provide notice of that claim to the insurer. This is especially true in the context of “claims-made” policies, which generally only provide coverage for claims made during the policy period.?Read more.
Michigan Court Prohibits Sale of Illegal Marijuana in a Ruling Straight Out of “Duh” Magazine
Believe it or not, I actually spend a lot of time deciding whether something is worth taking the time to write about. Cannabis news is developing as rapidly as any area of the law, and there are only so many hours in a day. I’ll admit up front that this was a close call.
There could be some angle that I’m not quite getting that would allow for unlicensed marijuana sales in states that have adopted marijuana licensing regimes, but I’m leaning towards thinking this may be one of the silliest, most obvious cases I’ve seen in years (and I see some wild cases in this line of work). Read more.
CFPB Issues Final Rule Implementing Section 1033 of Dodd-Frank Act
On October 22, 2024, the Consumer Financial Protection Bureau (CFPB) finalized its long-anticipated rule implementing Section 1033 of the Dodd-Frank Act. The 594-page final rule arrives nearly one year after the CFPB’s proposed rule, which received over 11,000 comments from industry participants concerning its implementation. The rule requires institutions that issue credit cards and hold transaction accounts, among others, to provide information about transactions, costs, charges, and usage to consumers and authorized third parties in electronic form upon request. While the text of the final rule closely adheres to the 2023 proposed rule, there are several substantive changes to the rule’s scope, secondary uses, and the compliance period.?Read more.
Federal Grant Recipients and Applicants Face New and Increased Obligations to Disclose Potential Wrongdoing
Mandatory disclosure obligations significantly changed for federal grant recipients, sub-recipients, and applicants on October 1, 2024. The amended federal regulation establishing these mandatory disclosures (2 C.F.R. § 200.113) not only expands the scope of conduct that must be reported but it also lowers the standard of evidence triggering the mandatory disclosure. The regulation, which is a component of the Office of Management and Budget’s Uniform Guidance, applies to all federal grants, including approximately $350 billion disbursed under the American Rescue Plan Act (ARPA). Read more.
Solar Industry Group Releases New Standard for Solar Supply Chain Transparency
The Solar Energy Industries Association (SEIA), a leading solar industry group, recently published a new supply chain traceability standard, Standard 101, for public comment. The standard is intended to provide “a rubric that manufacturers and importers can follow to trace product origins from raw materials to finished goods.” With Standard 101, SEIA seeks to create a foundation for ethical operations throughout the solar supply chain. Read more.
Texas Senate Committee Mulls Future of THC-Infused Beverages
Last week, the Texas Senate Committee on State Affairs held a hearing to discuss how the Lonestar State might soon regulate THC-infused beverages. Led by committee chair Sen. Bryan Hughes, the hearing heard from members of Texas agencies and representatives of companies in the hemp industry, all discussing the need for reasonable regulations, as well as from citizens urging a total ban of the products. We break this down a bit more below but suffice it to say that this will be a hot topic during this next legislative session in Austin. Read more.
The Pentagon Finalizes Sweeping Cybersecurity Rules for DOD Contractors
On October 11, 2024, the United States Department of Defense (DOD) published a final rule implementing its Cybersecurity Maturity Model Certification (CMMC) program, which is designed to verify that defense contractors are adequately protecting sensitive information from cybersecurity threats. The CMMC applies to contractors who process, store, or transmit Controlled Unclassified Information (CUI) or Federal Contract Information (FCI), which is most DOD contractors. The final rule is the culmination of a half-decade long process and part of the federal government’s response to recurrent and increasingly sophisticated cyberattacks targeting the defense industrial base.?Read more.
Where Are We on Noncompetes? Update on the Federal Role
As related to the Federal Trade Commission’s nationwide ban on noncompete agreements, the FTC has appealed the federal court injunction in Texas to the federal Fifth Circuit Court of Appeals in New Orleans. Recall that the FTC issued its nationwide ban, with limited exceptions, on April 23, 2024. That rule was enjoined on a limited basis on July 3, 2024, by a Texas federal district court. The Texas district court later struck down the FTC ban on a nationwide basis on August 20, 2024. Recently, on October 18, 2024, the FTC filed its appeal of that ruling. So, our noncompetes are safe for now as we likely will not have a final decision on the FTC noncompete rule for another year or more. Read more.
11th Circuit Confirms International Arbitration Award in Guatemalan Hydropower Project Dispute
Last week, the 11th Circuit Court of Appeals confirmed an international arbitration award in a case involving a failed hydroelectric project in Guatemala.?The project involved an Engineering, Procurement, and Construction agreement (EPC contract) to build a new hydroelectric power plant on the Ocbolay River in Guatemala. The owner terminated the EPC contract for convenience after a local indigenous group objected to the project, blocked access to the construction site, and threatened those working on it.?The owner subsequently initiated arbitration before the International Chamber of Commerce against the contractor for the return of unearned advance payments.?The arbitral tribunal ruled in favor of the owner and ordered the contractor to return approximately $7.5 million in unearned advance payments.?The arbitral tribunal further ordered the contractor to keep in place a security bond until the advance payment was returned. Read more.
Federal District Court in Florida Holds FCA’s Qui Tam Provisions Unconstitutional
In the Supreme Court’s 2022 decision in United States ex rel. Polansky v. Executive Health Resources, Inc., three justices expressed concern that the False Claims Act’s qui tam provisions violate Article II of the Constitution and called for a case presenting that question. Justice Clarence Thomas penned a dissent explaining that private relators wield significant executive authority yet are not appointed as “Officers of the United States” under Article II. Justice Brett Kavanaugh and Justice Amy Coney Barrett, concurring in the main opinion, agreed with Justice Thomas that this constitutional issue should be considered in an appropriate case. Read more.
Update: Federal Government Tells You to Believe What It Says, Not What It Does, in Case That Could Invalidate Federal Marijuana Prohibition
As you read along here, try this mantra: Trust your eyes. Don’t allow yourself to be gaslit.
You may recall from our previous post that we think the United States Supreme Court could overrule the marijuana provisions of the federal Controlled Substances Act if it was presented with the right case. That case is now making its way through the federal courts and seems to be on a collision course with the High Court. Read more.
Cybersecurity Awareness Month Spotlight: The 5 Most Essential Reads from Online & On Point
October is Cybersecurity Awareness Month, making it an ideal time to revisit the most impactful and widely-read blog posts on our Cybersecurity & Privacy blog from the past year. As cyber threats become more sophisticated and widespread, staying informed is crucial. Our top five blog posts cover a range of vital issues: the alarming rise in healthcare data breaches and their impacts (Alexis Buese, Eric Setterlund), the new era of mandatory cybersecurity incident reporting (Sinan Pismisoglu), the significant legislative changes addressing ransomware (Sinan Pismisoglu, Eric Setterlund), essential immediate steps to take following a data breach (Erin Jane Illman, Brett Lawrence), and how a recent, $4.1 million FCA settlement underscores the importance of cybersecurity compliance (Daniel Fortune, Lyndsay Medlin). Take a moment to explore these articles and stay ahead in the ever-evolving cybersecurity landscape. Read more.
Wait? My CBD Business May Be Racketeering? A Potential Existential Crisis We Have Been Warning About
Even the most responsible hemp operator should understand that it operates in a world full of risk. But I doubt many of them believe they might be accused of racketeering. Last week, the U.S. Supreme Court heard arguments about whether to sanction a commercial trucker’s attempt to bring a racketeering claim against CBD companies, whose allegedly mislabeled products the trucker claims led to his firing. Read more.
Federal Appeals Court Says Certain THC-O Products Are Legal Contrary to DEA Interpretation
The 1984 film The Terminator featured a deadly robot assassin who looked like a regular guy (if by “regular guy” you mean a young, jacked Arnold Schwarzenegger). The horror of it all was that the victims could not tell if the robot was a human or a fake – organic or synthetic.
The Terminator’s debut on Budding Trends brings us to today’s topic: Are hemp-derived products containing THC-O legal? The answer depends on whether THC-O is organic or synthetic under the eyes of the law.
We have a bit more clarity since the Fourth Circuit recently issued a decision that, in part, addressed the legality of hemp-derived products containing THC-O under the 2018 Farm Act. Our friends at Law360 have a nice summary of the facts, if you are interested. Read more.
DOJ Expects Corporate Compliance Programs to Keep Pace with Artificial Intelligence
On September 23, 2024, the U.S. Department of Justice (DOJ) revised its Evaluation of Corporate Compliance Programs (ECCP). The revisions addressed several areas, including whistleblower protections and the role of data analysis. But of particular note, the updated ECCP now includes new expectations for how such programs address the risks of disruptive technologies, such as artificial intelligence (AI). Read more.
Federal Appeals Court Upholds “Zero-Tolerance” Cannabis Policy Under North Carolina Law
When you work in the cannabis business, you get used to answering questions that don’t always make sense. One question we get most often is whether an employee can use a legal product that nonetheless may cause the employee to fail a drug test conducted by her employer.
We have a bit more clarity since the Fourth Circuit recently issued a decision that, in part, addressed “zero-tolerance” drug policies under North Carolina law. Our friends at Law360 have a nice summary of the facts, if you’re interested. Read more.
TD Bank’s Historic $3.1B Money Laundering Settlement a Warning to All Financial Institutions
On October 10, 2024, Attorney General Merrick Garland announced that TD Bank agreed to pay over $1.8 billion in penalties to resolve the U.S. Department of Justice’s (DOJ) investigation into money laundering and Bank Secrecy Act (BSA) violations. When combined with agreements with the Federal Reserve, Office of the Comptroller of the Currency (OCC), and the Treasury Department’s Financial Crimes Enforcement Network, the Toronto-based bank will pay approximately $3.09 billion in penalties. TD Bank also consented to a five-year probationary term and multi-year monitoring requirements. Significantly, the bank pleaded guilty to felony charges of conspiracy to commit money laundering – the first bank in history to do so. Read more.
No. 8 Employers Have 15 Working Days to Contest a Citation but Have the Option to Negotiate a Settlement with OSHA Before That Deadline
What happens if OSHA issues a citation and you do not agree with any or all of it? You have 15 working days from the date you receive the citation to contest in writing the citation, proposed penalty, and/or the abatement date. Read more.
“No Good Deed Goes Unpunished”: 11th Circuit Criticizes Government’s Failure to Exercise Prosecutorial Discretion?
The phrase “no good deed goes unpunished” represents the figurative irony that results when one seeking to help gets penalized instead. United States v. Moore, a recent decision from the 11th Circuit Court of Appeals, reflects the court’s concern that the expression had been interpreted as a literal directive by a prosecutor in the United States Attorney’s Office for the Southern District of Florida (USAO-SDFL). While the ruling arises from an unusual factual scenario, the court’s holding is rooted in the concept that the prosecutor, presumably motivated by his mission “to enforce and defend the laws of the United States of America,” improperly balanced that obligation with the reasonable exercise of prosecutorial discretion. Read more.
Does Kamala Harris Support Marijuana Legalization? Squaring Words with Actions in an Evolving Political Environment
As she did just prior to becoming the Democratic Party nominee for president,?Vice President Kamala Harris has announced her support for legalizing adult-use marijuana use at the federal level. Just to remind you of the interesting times we are living in, the veep did so?during a guest appearance on the sports podcast “All the Smoke.”
“I just think we have come to a point where we have to understand that we need to legalize it and stop criminalizing this behavior,”?Harris said. Harris made a point to argue that her support of legalization was not new, saying that “I have felt for a long time we need to legalize it.” Read more.
Keeping the Family Harmony Playing Sweetly: Risk Avoidance for Owners of Family-Owned Companies
Business divorces take place in all types of private companies, including those owned and operated by family members. But families that are willing to engage in thoughtful planning can head off some of the internal conflicts that lead to business divorces, and if the exit of a family member from the company does becomes unavoidable in the future, the proactive steps discussed here can limit the negative impacts the business and the family may otherwise have to confront. The effort by the family to avoid or limit the downsides of a business divorce begins by adopting a clear governance structure and also requires all owners to sign off on a business prenup that controls when a family member/owner departs from the business.?Read more.
Merely Copying In-House Counsel Does Not Necessarily Establish Attorney-Client Privilege
Businesses who employ in-house attorneys frequently assume that copying their lawyer on internal communications shields the communications from discovery because of the attorney-client privilege.? In 1981, the U.S. Supreme Court articulated the rule that the attorney-client privilege protects communications (a) between attorneys and clients (b) that are maintained in confidence and (c) that were made for the purpose of obtaining or providing legal advice (see Upjohn Co. v. United States, 449 U.S. 383, 389 (1981)). The Upjohn court made it clear that the privilege applies not only to the lawyer’s communications that convey legal advice, but also to the client’s “giving of information to the lawyer to enable [the lawyer] to give sound and informed advice.” Based on this rule, confidential communications between a lawyer and client may NOT be protected by the attorney-client privilege if the communication is NOT made for the purpose of obtaining or providing legal advice. Read more.
Alabama Supreme Court’s Recent Ruling on Indemnity Clauses Could Impact Construction Contracts: Key Drafting Considerations
Hark! A recent Alabama Supreme Court indemnity decision, Mobile Infirmary Association v. Quest Diagnostics Clinical Laboratories, may require you to retrieve your drafting pen. Although not a case involving a construction dispute, Mobile Infirmary does address a key component of risk shifting in construction contracts — the indemnity clause. Put simply, contractual indemnity is the right of one party (the indemnitee) to claim reimbursement for a loss from another party (the indemnitor). Unlike nearly every other state, Alabama does not (yet) statutorily restrict when indemnity clauses between project owners, general contractors, and subcontractors are enforceable. Instead, its courts decide an indemnity clause’s validity through different enforcement tests (depending on the type of clause at issue). Read more.
Why Can’t Weed Be Friends? How Marijuana and Hemp Businesses Can Both Win, and Win America
We at Budding Trends have devoted thousands of words (and nearly as many pop culture references) to the escalating tension between the marijuana and hemp industries. It seems that to many in the cannabis industry this is a zero-sum game. But it’s far from a game. The tension has had significant effects on both industries at the federal, state, and local levels and has created a culture of fear amongst potential consumers instead of a welcoming of products that have tremendous potential benefits for so many Americans. Read more.
No. 7 OSHA Can Issue Citations for Unsafe Work Conditions That Do Not Violate Any Specific OSHA Standard
Many employers have a false notion that OSHA cannot issue a citation if there is no specific standard violated.
The reality is, however, that OSHA has a catchall/gap filler provision that allows it to cite an employer even if no specific standard was violated: the “General Duty Clause,” Section 5(a)(1) of the Occupational Safety and Health Act. OSHA can cite employers for violation of the General Duty Clause if a recognized serious hazard exists in their workplace and the employer does not take reasonable steps to prevent or abate the hazard. The General Duty Clause is used only where there is no standard that applies to the particular hazard. Read more.
When Is “Yours” Not Yours? Pennsylvania Superior Court Interprets “Your Computer” Definition in Commercial Property Policy
Sometimes defining the simplest phrases proves anything but simple. So learned the insurer in a property loss and bad faith case brought by its insured and decided earlier this year by the Pennsylvania Superior Court (Watchword Worldwide v. Erie Ins. Co., 308 A.2d 728 (Pa. Superior Ct. 2024)). Read more.
Recent EEOC Activity and What to Watch For
In recent weeks, the EEOC has filed a number of lawsuits on behalf of individuals, alleging a range of employment claims. Here, we provide a brief overview of those lawsuits and the issues that may be on the EEOC’s mind. Read more.
Whistleblower Language in Separation Agreements Results in Large Settlements with SEC
On September 9, 2024, the Securities and Exchange Commission (SEC) announced settlements with seven public companies relating to their use of separation agreements that the SEC says violate whistleblower protection rules by preventing the employees from claiming any monetary reward for future whistleblowing. The companies agreed to pay over $3 million combined to settle the SEC’s allegations. Read more.
Mistake No. 7 of the Top 10 Horrible, No-Good Mistakes Construction Lawyers Make: Not Paying Attention to Your Arbitrator or Judge During a Hearing
I have practiced law for 40 years with the vast majority as a “construction” lawyer. I have seen great… and bad… construction lawyering, both when representing a party and when serving over 300 times as a mediator or arbitrator in construction disputes. To be clear, I have made my share of mistakes. I learned from my mistakes and was lucky enough to have great construction lawyer mentors to lean on and learn from, so I try to be a good mentor to young construction lawyers. Becoming a great and successful construction lawyer is challenging, but the rewards are many. The following is No. 7 of the top 10 mistakes I have seen construction lawyers make, and yes, I have been guilty of making this same mistake. Read more.
Senate Proposal Would Closely Regulate, Not Ban Most Hemp Products
During this time of great tension and competition between the marijuana and hemp industries, it is refreshing to see efforts at compromise. The initial draft of the Cannabinoid Safety and Regulation Act, proposed last week by Oregon Sen. Ron Wyden, would represent a momentous compromise in creating a regulatory framework for hemp-derived cannabinoids. And it appears to have the support of key stakeholders in the hemp industry. Read more.
Preserving Business Value in High-Net-Worth Divorces: The Mutual Benefits of Adopting a Win-Win Approach
Entrepreneurs are incredibly devoted to the success of their business, but even a thriving company may be severely impacted by a high conflict marital divorce. When a couple decides to part ways, the ripple effects can extend beyond their personal lives and potentially jeopardize the business they worked so hard to build. Although the couple may have irreconcilable conflicts that require a divorce to take place, preserving the value of their business should be a mutual goal. While their marriage may not be salvageable, both spouses share an interest in maintaining the success (and the high value) of their company as they go through their divorce.?Read more.
South Carolina Clears Path for Hemp Beverages
It’s hard to be surprised when you’ve been writing and talking about government decisions about the cannabis industry over the past decade. But I’ll admit that my eyebrows raised when I read a recent letter from the solicitor general of South Carolina stating that, as a general rule, hemp beverages containing less than .3% delta-9 THC on a dry weight basis are legal. Read more.
CFPB Submits Proposed Order Banning Navient from Federal Student Loan Servicing and Orders the Company to Pay $120 Million for Wide-Ranging Student Lending Failures
On September 12, 2024, the Consumer Financial Protection Bureau (CFPB) filed a stipulated proposed order in its suit against the student loan servicer Navient, formerly known as Sallie Mae. If entered, the order will resolve the claims in the CFPB’s January 2017 complaint, which accused Navient of forbearance steering and other breakdowns in its income-driven repayment program. Forbearance steering occurs when a borrower is placed in a general forbearance, even though the borrower would be better off in an income-driven repayment plan. Read more.
No 6. But No One Was There? OSHA Can Still Cite for Unsafe Work Conditions Where Workers Were Not Exposed
We often hear, “OSHA can’t cite me because I didn’t employ the injured worker.” Unfortunately, this statement is often untrue.
Under OSHA’s Multi-Employer Doctrine, if you are an employer on a worksite where other companies are also performing work (e.g., construction sites and oil/gas well sites), you can be subject to citation for workplace hazards to which other companies’ employees are exposed. OSHA created the Multi-Employer Doctrine in recognition that there are many circumstances in which multiple employers will be working on a single worksite at the same time thereby affecting the working conditions to which all workers are exposed. Read more.
Trump Expresses Support for Marijuana Reform, Coy on Psychedelics
Cannabis consumers can be forgiven for feeling the need for a more liberal cannabis policy as they weather this seemingly unending campaign cycle.
Republican presidential candidate Donald Trump recently made clear how he would be voting personally on the legalization of the recreational use of marijuana. Read more.
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