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BAR JOURNAL A N O FFICIAL P UBLICATION
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H AWAII S TATE BAR A SSOCIATION A PRIL , 2020 $5.00
TABLE O F C ON TE NTS VO LUM E 24 , N U M B E R 4
EDITOR IN CHIEF Carol K. Muranaka BOARD OF EDITORS Christine Daleiden David Farmer Susan Gochros Ryan Hamaguchi Cynthia Johiro Edward Kemper Laurel Loo Melvin M.M. Masuda Melissa Miyashiro Eaton O'Neill Lennes Omuro Brett Tobin
ARTICLES 44
Interview of Chief Justice Mark Recketenwald by Edward Kemper
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The Future Infrastructure of Business: A Primer on Blockchain and the Evolving Regulations by J. P. Schmidt and Tung Chan
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OF NOTE
HSBA OFFICERS President P. Gregory Frey President-Elect Karin Holma Vice President Levi Hookano Secretary Russ Awakuni
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Notice of Discipline
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HSBA Happenings
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Court Briefs
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Case Notes
Treasurer Paul Naso
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YLD OFFICERS
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President Addison Dale Bonner Vice President/President-Elect Christopher St. Sure Secretary Kyleigh Nakasone Treasurer Tiffany Kaeo
Classifieds
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EXECUTIVE DIRECTOR Patricia Mau-Shimizu GRASS SHACK PRODUCTIONS Publisher Brett Pruitt Art Direction Debra Castro Production Beryl Bloom
Hawaii Bar Journal is published monthly with an additional issue in the fourth quarter of each year for the Hawaii State Bar Association by Grass Shack Productions, 1111 Nuuanu Ave., Suite 212, Honolulu, Hawaii 96817. Annual subscription rate is $50. Periodical postage paid at Honolulu, Hawaii and additional mailing offices. POSTMASTER: Send address changes to the Hawaii Bar Journal (ISSN 1063-1585), 1100 Alakea St., Ste. 1000, Honolulu, Hawaii 96813.
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On the cover: A Special Place by Maurice B. Hutchinson. Hutchinson “Hutch� is A native of Rochester, New York, and has lived in Hawaii since 2003. Hutch retired from the U.S. Marine Corps in 2006 after 30 years of service and started to pursue his artwork full-time. His artwork has been shown in numerous juried and open exhibitions in the U.S. (Honolulu and New York City), exhibited internationally (Beijing, PRC) and exhibited in numerous on-line publications and galleries. His work has also won several American Art Awards (2009 and 2017). To see more of his work visit www.mauricehutchinson.com.
Notices and articles should be sent to Edward C. Kemper at edracers@aol.com, Cynthia M. Johiro at cynthia.m.johiro@hawaii.gov, or Carol K. Muranaka at carol.k.muranaka@gmail.com. All submitted articles should be of significance to and of interest or concern to members of the Hawaii legal community. The Hawaii Bar Journal reserves the right to edit or not publish submitted material. Statements or expressions of opinion appearing herein are those of the authors and not necessarily the views of the publisher, editorial staff, or officials of the Hawaii State Bar Association. Publication of advertising herein does not imply endorsement of any product, service, or opinion advertised. The HSBA and the publisher disclaim any liability arising from reliance upon information contained herein. This publication is designed to provide general information only, with regard to the subject matter covered. It is not a substitute for legal, accounting, or other professional services or advice. This publication is intended for educational and informational purposes only. Nothing contained in this publication is to be considered as the rendering of legal advice.
munity Outreach Court on Oahu aims to help individuals who are experiencing homelessness and who have pending charges for non-violent, low-level offenses such as sleeping in public parks or driving without a license. These citations
By Edward Kemper 1. Before we discuss your work as the Chief Justice of the Hawaii Supreme Court, could provide us with a brief description of your legal background and career before being appointed as Chief Justice? Thank you for giving me this opportunity to discuss the work of the judiciary. I began my legal career as a law clerk to the late Chief United States District Judge Harold M. Fong, who was a wonderful role model. I have worked as a civil litigator, first as an associate at Goodsill Anderson Quinn & Stifel, and later as a partner at Marr Jones & Wang. I also worked as an Assistant U.S. Attorney, where I handled criminal prosecutions in areas including financial institution fraud and environmental crimes, as well as civil actions under the False Claims Act. From 2003 to 2007, I served as Director of the Department of Consumer Affairs. I became Chief Judge of the Intermediate Court of Appeals in 2007, where I was fortunate to have my predecessor Jim Burns as a mentor. I joined the Supreme Court in 2009 as an Associate Justice, when the court was led by Chief Justice Ronald Moon, another outstanding mentor, and I became Chief Justice in September 2010. 2. After your appointment as Chief Justice and beyond your normal work in that arena, were there any surprises, and, if so, what were they? The single biggest surprise was learning the extent of the judiciary’s role in addressing the root causes, and the impacts, of the disputes that come before our family and criminal courts. The judiciary offers a fair and impartial forum where community members can peacefully resolve their disputes, and we strive to ensure that the peace they find is a lasting one. To do that well - to truly solve problems rather than merely close files - part of our role must be helping the people who come before us address the underlying causes of what brought them before the courts. To that end, the judiciary has worked hard to come up with innovative programs that address problems that can give rise to contact with the court system. Three programs that launched during my term come to mind. Our Com-
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Chief Justice Mark
Recktenwald can pile up quickly, and unpaid fines or outstanding warrants make it even harder for them to get back on their feet. Community Outreach Court offers the opportunity for individuals to resolve their cases through community service. The program also teams them up with counselors and service providers who help address their various needs — from employment, to substance abuse treatment, to housing. Originally established in Honolulu and Wahiawa District Courts, as well as the Waianae Public Library, this
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program was created in partnership with the Department of the Prosecuting Attorney and the Office of the Public Defender, and it expanded to Windward Oahu in the summer of 2019. Additionally, our family courts have collaborated with the Department of Education to create an early intervention program to prevent truancy. This program, which launched in Waianae and has since expanded to Kauai and the Big Island, connects students identified by the school as being chronically absent (or who have the potential to become so) with a resource team including judiciary staff and judges who can help identify and address the causes giving rise to their absences. The data we have collected shows that the program works: districts where the program has been implemented have seen significantly reduced truancy petitions. As another example, our Veteran’s Treatment Court is targeted at veterans in the criminal justice system who have mental health or drug abuse issues. It provides veterans with a higher level of supervision and connects them to resources at the Veterans Administration that they have earned through their service to this country. Until we established this court, we were not systematically identifying those who needed these kinds of service and who were eligible to take advantage of them. Significantly, Veteran’s Treatment Court provides peer counseling, which enables other veterans to share guidance and support with someone going through the program. These are three examples of innovative models of judicial administration, which I believe enable us to better serve the community. The legislature has been an invaluable partner in these efforts, and we are grateful for their ongoing support. 3. During your current term as Chief Justice what would you describe as the judiciary’s achievements during your administration and have there been any disappointments? Over the past decade, the judiciary has accomplished some exciting things. First and foremost, we have fulfilled our mission of administering justice in an impartial, efficient and accessible manner. I am thankful for the tireless work of our judges, staff, and volunteers, who treat court users with respect and aloha, and uphold the highest levels of professionalism. In addition to the day-to-day work of the courts, I am proud of the ways in which the judiciary has consistently strived to improve how we serve the community. For instance, our Access to Justice Commission has implemented effective programs to provide services to people facing civil
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legal problems who cannot afford an attorney, such as the establishment of self-help centers in courthouses across the state. We introduced electronic filing to our criminal and civil courts, enabling court business to be more streamlined and efficient. Thanks to a task force led by retired Chief Judge Craig Nakamura, we are undertaking a comprehensive review of procedures in our circuit court civil courtrooms. The Task Force recommendations are currently pending before the Supreme Court. We have held fifteen Courts in the Community programs, bringing Supreme Court oral argument in actual cases to high school students statewide. Moreover, in the fall of 2019, we opened the new Keahuolu courthouse in Kona on time and on budget, a much-needed resource for the West Hawaii community. Additionally, our bench has become more diverse, with 43% of our full time judges being women, including 55% in district and family courts; in 2016, the American Constitution Society rated Hawaii number one for the judiciary that best represents the diversity of the population it serves. We also established our Environmental Court in 2014 with the support of the legislature. The Environmental Court is only the second of its kind in the nation and considers both criminal and civil cases that implicate questions of environmental law. The establishment of the court has ensured that our judicial institutions have the capacity to reach just and consistent results in these kinds of cases. Finally, we have fostered a strong relationship between the bar and the judiciary, which has enabled many of these programs to be successful. To cite one example, we held a productive bench-bar conference last year, a biannual program that we reinstated in 2012. The bench-bar allows for direct, honest feedback from practitioners and has resulted in positive changes in our legal system because of candid discussions between judges and attorneys. While I am incredibly proud of the strides the judiciary has made towards increasing access to justice, I recognize there is still a lot of work to be done to ensure that everyone in our community can rely on the court system to provide just solutions to their problems. In the next year, we will continue the work of ensuring the courthouse doors are open to all, and technology is one tool we plan to leverage, as I will discuss more below. We are also requesting $500,000 from the legislature this session in support of civil legal services. Our courts are constantly innovating to better serve the community, and we have come a long way in the past several years towards ensuring that everyone in the state, regardless of background or income, can turn to the court system to resolve their issues. But there is still much work to be done, and we will continue to do that work in earnest.
4. What changes in the court system would you like to see implemented in the near future? There are several efforts to improve the legal system that I believe will make a positive impact on the justice system in Hawaii. For example, as a result of feedback received at the HSBA Judicial Administration Committee’s 2016 Criminal Law Forum, a blue-ribbon task force was created to examine criminal pretrial practices and make recommendations on how best to change those procedures, with the goals of maximizing public safety, court appearances, and pretrial release of accused individuals who do not pose a danger or flight risk. During the 2019 legislative session, the legislature considered the task force’s recommendations and passed reform measures that established prompt bail hearings, issuance of the least restrictive conditions for defendants released on bail, and other changes to achieve a more just and fair pretrial release and detention system. One of the recommendations was to develop an electronic reminder system to remind criminal defendants of their court dates. In late 2018, the judiciary launched such a system. As of January 2020, in the second circuit alone, the eReminder system issued 2,691 subscriptions and sent over 22,000 text messages reminding defendants about their court dates. The raw data so far indicates that the failure to appear rate is lower for those criminal defendants in Hawaii who were sent text reminders when compared to those who did not receive texts, which is encouraging. I would also like to more effectively address the needs of people in the criminal justice system with mental health issues. In November of last year, the Hawaii State Judiciary and Governor Ige, in partnership with the State Justice Institute, hosted a state-level summit on improving governmental response to community mental illness. Summit participants heard from national experts
about frameworks for communities to determine how and when those suffering from mental illness move from the community to the criminal justice system and back again. Thanks to the success of the summit and the partnerships formed, circuits have begun mapping the mental health services available in their communities in order to determine gaps in resources. Furthermore, the judiciary and the Department of Health have been working closely on a number of different approaches to improve the response to those with mental illness who come into contact with the criminal justice system, including a proposal to direct non-violent defendants who are charged with petty misdemeanors into appropriate community-based treatment. I look forward to seeing the full impact that these initiatives and others will have on the justice system, and remain committed to working with other government and community partners to maintain public safety, make the justice system run more efficiently, and improve the response to those defendants suffering with mental illness.
Judge Daniel R. Foley (ret.) wMediation wArbitration wMoot court wMock trial
Dispute Prevention and Resolution 1003 Bishop Street Suite 1155 Honolulu, HI 96813
Phone:
808.523-1234
judgefoley2000@hotmail.com
www.dprhawaii.com
5. Now that most of the civil courts in the Hawaii Court system have instituted electronic filing of pleadings, how is that going, and how is this new system being received? Bringing our electronic filing system to all civil courts in the state was a massive undertaking, but it was well worth the effort. We are so incredibly grateful for the hard work of Judge Gary Chang and the Judiciary Information Management System (JIMS) team, and for the support of the HSBA. The JIMS team, along with subject matter experts from each circuit, spent months gathering information about what our civil courts need in an electronic filing system, deciding how the system should look and work, and troubleshooting. Pat Mau-Shimizu, HSBA executive director, and the HSBA staff
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went above and beyond in spreading the word to practicing attorneys and offering training sessions. Thanks to the tireless efforts of these folks and so many others, the launch went smoothly. Now, anyone can file civil documents with the court long after the courthouse closes, online, seven days a week. Looking ahead, we are receiving valuable feedback from practitioners about how the new system is functioning. We invite members of the bar to engage on this issue, and our electronic filing working group, led by Judge Paul Wong and Judge Chang, is dedicated to reviewing suggestions and responding to user concerns. If you have comments on electronic filing that you would like to share, you can reach out to pao@courts.hawaii. gov. We are listening, and we are always striving to improve our existing program to better meet the needs of the people who use it. For instance, we already made enhancements to eCourt Kokua based on practitioner feedback, and as a result, searching for a case by party name is now easier. As we continue to improve our existing systems, we will also take what we have learned from this process and apply it to implementing electronic filing in family court. Family court presents a number of unique challenges for an e-filing system, and Judge Paul Murakami will be leading the working group dedicated to considering those issues and crafting a family court e-filing system that works well for Hawaii’s needs. 6. How does the judiciary track proposed new legislation that could affect the court system, and do court representatives regularly submit testimony and appear at legislature? If so, could you give some examples of appearances in the last couple of years? The judiciary has a team of individuals who help track and analyze legislation each session. This team consists of
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the judiciary’s Legislative Coordinating Office, the administrative senior management team, administrative judges, staff attorneys, and many other subject-matter experts. Generally, the judiciary defers to the legislature to make policy decisions on the laws that govern sentencing and other matters. However, we do provide feedback on technical concerns, offer comments about possible unintended consequences, and suggest clarifying language in a bill. We also testify on bills that directly affect our operations or that could impact the independence of our judges, such as bills relating to judicial selection and retention. The American Judicature Society has provided additional support on bills related to judicial independence, and we are appreciative of their efforts. Funding for the judiciary is appropriated through the legislature; thus, each session, the judiciary introduces budget requests for consideration by the legislature. We are actively engaged with the legislature before and during session to advocate for our requests, and we routinely share information about how the funding will impact the administration of justice in the long run. Furthermore, our Administrative Director Rod Maile, Deputy Administrative Director Brandon Kimura, and I meet with legislators, sometimes over 100 times in a year, to answer questions related to the administration of justice. During those meetings, I appreciate the opportunity to share general information about the judiciary and hear ideas on how to improve systems and processes. We are also thankful to the HSBA, the county bars, and their membership for testifying in support of our budget requests each year. Input from the bar is critical to making the needs of the circuits known to legislators and is appreciated. We are grateful to the legislature for their support of our budget requests over the years, which most recently led to funding to complete the Keahuolu Courthouse in Kona, in addition to funding for two new family judge positions in the first and fifth circuits.
pro bono initiatives. Thanks to their support, the courts are now more acccessible for people who are facing civil legal issues. We are also appreciative for the tireless efforts of the Access to Justice Commission and the able leadership of its past and present chairs, Judge Dan Foley (ret.), Justice Simeon Acoba (ret.), and Judge Joseph Cardoza (ret.). Since its establishment over a decade ago, the Commission has made important strides towards ensuring that everyone in our state has equal access to the courts. Each year, the Access to Justice Commission celebrates all attorney volunteers at the Annual Pro Bono Celebration at the Hawaii Supreme Court. In addition, the neighbor island self-help centers host a recognition luncheon for their volunteers annually, and in the past year, similar events were held for volunteers at the Honolulu and Kapolei Access to Justice Rooms. I look forward to every opporunity I have to personally thank the attorneys who contribute their time and talent to ensuring that all of Hawaii has access to resources that can help when their legal rights are at stake. Two of our most visible pro bono programs are the self-help centers and appellate pro bono program. Both of these would not be possible without the aid of attorney volunteers, and both are shining examples of the commitment of HSBA and county bar members have to advancing the cause of justice here in Hawaii. The selfhelp centers and access to justice rooms are invaluable resources for our courts and a signature accomplishment of the Access to Justice
7. What are your views on the pro bono activities of the Bar, and what efforts is the court system doing to assist in supporting pro bono activities? I am proud to be the Chief Justice in a legal community that is generous with sharing its time and talent to represent others pro bono. Whether it be sitting down for a few minutes at a pop-up clinic or taking on a complex case from start to finish, the impact that pro bono attorneys make on the lives of those whose rights are at stake cannot be understated. We are grateful to the HSBA, the county bar associations, and their members for their support of
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Commission. They simply would not exist without the support of the HSBA and its members who generously volunteer their time, along with administrative support from the Legal Aid Society of Hawaii. At each center, volunteer attorneys provide information to individuals who are representing themselves in civil legal cases, which enables them to more effectively tell their side of the story. The first self-help center opened on Kauai in 2011, and we now have centers operating in courthouses throughout the state. To date, more than 27,800 people have been assisted at the centers at little to no cost to the public, and nearly 665 attorneys have volunteered their time to help these individuals navigate the legal system. Another meaningful pro bono initiative is the Appellate Pro Bono Program. The HSBA Appellate Section and Volunteer Legal Services were instrumental in establishing the program, which began as a pilot in 2015 and has since become permanent. We are exceptionally thankful for their support in getting it off the ground and their work in ensuring its continued success. More than 50 attorneys have volunteered to represent clients through the program. Volunteer Legal Services even hosted a CLE last summer to promote the program. While the self-help centers and the appellate pro bono program are two of the most visible of Hawaii’s access to justice accomplishments, there are many other pro bono initiatives that deserve recognition. Other programs include the Hawai i Online Pro Bono Service, which is similar to an online version of a walk-in advice clinic and which is also led by Volunteer Legal Services, and the numerous other attorneys who represent clients pro bono. The William S. Richardson School of Law also holds an annual Access to Justice Conference, and we are deeply grateful to the law school and Dean Avi Soifer for their ongoing work to increase the availability of legal services in the community. Thanks to the efforts of pro bono volunteers, the Hawaii Access to Justice Commission, the Hawaii Justice Foundation and Hawaii’s legal services providers, HSBA and the county bar associations, and many others, we have received national recognition for our access to justice efforts. According to the 2016 Justice Index, released by the National Center for Access to Justice, Hawaii is ranked third in the country for practices aimed at making access to justice a reality for all people. None of what has been accomplished thus far would exist without the support and commitment of the bar and every attorney who commits their time and resources to pro bono. While there is still much work to be done, I look forward to seeing what can be accomplished together in years to come.
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8. There have been some concerns about the lack of uniformity between the different circuit courts. Do you share those concerns or issues, and, if so, what has been your reaction? There are areas where increased uniformity would benefit both the bar and the courts when done in a manner that respects the differences among circuits. In this regard, efforts have been underway to achieve greater uniformity in court forms where appropriate. Most recently, with the rollout of civil online filing, we have streamlined and simplified the way subpoenas and summons are issued by attorneys through the use of electronic court forms. These forms have been made uniform across the state. In addition, we have been engaging in a plain language court form effort thanks to a grant from the State Justice Institute. This grant allowed us to select commonly used district court civil forms, make them more understandable to lay persons, and ensure uniformity across all circuits. This effort will help self-represented litigants while also achieving greater uniformity of court forms in appropriate and meaningful ways. As we go forward, we will continue to find opportunities for improved uniformity and appreciate feedback received from the bar about areas to address. 9. Is there one future change in the Hawaii Court system that you would most like to see? And if so, what is it? And what is the likelihood of that change occurring? I would like to see the continued use of technology to meet the needs of court users. As the expectations of court users rapidly change with the emergence of new technologies, we continue to explore ways to utilize that technology in a thoughtful and deliberate manner, with the goal of making the judicial system more efficient and accessible. One of the biggest advances that we have made so far is the roll-out of civil e-filing this past fall, which provides for electronic filing of documents seven days a week and access to court records online. As mentioned earlier, in January 2019, we launched a free e-reminder system for criminal cases. Since its launch, parties to criminal cases are able to receive text reminders about pending court dates. Thanks to the initial success of the criminal e-reminders, I am proud to share that the system will expand to civil and family court cases, and will allow court users, media, and any other interested individuals to receive text reminders as well. The enhanced and expanded e-reminder system will be available later this summer, and we look forward to seeing the impact that it will have on how people engage with the courts.
Another technology that I would like to see utilized in district court is online dispute resolution, or ODR, for small claims cases. We are working with the company TurboCourt to develop an ODR platform that will allow parties involved in small claims cases to engage in the legal process without needing to visit a brick and mortar courthouse. Through this ODR platform, all parties to small claims cases, including self-represented litigants, will be able to electronically submit pleadings, records, and other filings to the court, and then engage in mediation online. If the parties come to a mutual resolution, then they will be able to settle their claims entirely online. However, if a mutual resolution is not achieved, they can request by agreement to have a judge rule on the records filed through the platform, or they can take the case to
trial. The ODR system will have e-mail reminders to encourage parties to keep moving forward in the online process, and we anticipate the program will have other features that can help parties navigate the process. The ODR pilot will launch in the First Circuit later this year. We plan to assess the impact that this system will have on all court users, including those self-represented litigants, and I look forward to seeing how this technology can be utilized to make the courts more accessible in the years to come. 10. Is there any formal interplay between the Hawaii Supreme Court or the Hawaii Court system with the Hawaii Federal District Court? If so, could you describe that interplay? In terms of our formal relationship,
the Hawaii Federal District Court and the Ninth Circuit Court of Appeals from time to time certify questions to the Hawaii Supreme Court. This arises when the federal courts, usually sitting in diversity, are faced with an undecided issue of state law. Informally, we try to create opportunities for collaboration between the state and federal courts on issues of mutual interest. Many federal judges were themselves involved in the state court system at one time or another, and so many of us know each other personally or professionally. We have hosted lunches, for instance, that bring together federal and state judges, which provide an excellent opportunity for discussion. In addition, we often see each other at HSBA or other professional events.
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11. How would you describe the interrelationships of the judges on the Hawaii Supreme Court and the Hawaii Intermediate Court of Appeals? My fellow justices and I have excellent professional relationships with our colleagues on the ICA. Chief Judge Lisa Ginoza must be commended for her excellent leadership; she and the rest of the ICA team are hardworking, thoughtful jurists, whom my colleagues and I deeply respect. Of course, the majority of the Supreme Court’s cases come from an application for writ of certiorari from the ICA, and accordingly, we cannot and do not discuss pending cases. But we always endeavor to support the ICA, which has a significant caseload, in whatever way we can, and we often collaborate professionally in other capacities, such as by serving on committees or working on other judiciary initiatives together. 12. The Supreme Court has been having oral arguments at various high schools. What schools has the Court made appearances at, and how have the oral arguments been received by the students and teachers? Through our Courts in the Community program, the Supreme Court has held fifteen oral arguments, in actual cases, at high schools across the state. We have visited central, Leeward, and Windward Oahu, Maui, Kauai, and the Big Island. Since our first program at Farrington High School in 2012, we have reached over 5,000 students from across the state. Most recently, the court held oral argument at Waipahu High School in November 2019; it drew nearly 500 students from Leeward Oahu. Courts in the Community is an incredibly meaningful educational opportunity for the students who participate. The program helps students better understand the role of the courts in a democracy. A key reason this program works is that students have the opportunity to learn about the case before the justices arrive on campus. Volunteer attorneys prepare students for the arguments by breaking down the legal issues and leading moot court exercises. Additionally, after oral arguments, the students are given a chance to pose questions to the attorneys, and then to the justices. From these questions, students learn more about the justices’ role in the government and their work on their court. We are incredibly grateful for our many partners who make this program such a success. HSBA, the Hawaii State Bar Foundation, and the county bar associations have been crucial partners in coordinating volunteers and facilitating partnerships with local schools. We are deeply appreciative for the many volunteer attorneys who dedicate
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hours to helping students understand the proceedings, and to the students from William S. Richardson School of Law who help plan those lessons. Finally, we are thankful to all of our partner schools and their administrators, teachers, staff, and students who have welcomed us to their campuses. Thank you to the many hard-working people who make these events possible, and we are looking forward to continuing the program. 13. I understand that you have given speeches before various nonlegal groups. Which speech or speeches did you feel were the most interesting given the responses you received? I have had the pleasure of speaking to many non-legal groups, including, among others, students at the University of Hawaii-Manoa and Hawaii Pacific University; the Pacific Century Fellows, an interdisciplinary group of young community leaders; various rotary groups; and young people participating in the Lawakua program, which teaches at-risk youth martial arts. I find opportunities like these incredibly profound because they provide the chance to discuss the role of the judiciary in our democracy and to promote transparency of the court system. Speaking to folks outside the legal community allows for meaningful civic engagement. The integrity of the courts depends on the buy-in of the public and engaging the community about who we are and what we do is crucial to achieving that goal. I hope that by connecting with people of many different backgrounds, we promote the message that the courts play an important role in our democracy, and when a problem arises, the courts can be an effective resource to resolve that dispute. I also hope to convey the importance of giving back to the community. For non-lawyers and lawyers alike, volunteering for causes you are passionate about can make a big difference. Opportunities exist within the courts for non-lawyers to contribute to the judiciary’s access to justice mission. For instance, the second circuit led the way in establishing a volunteer court navigator program, in which volunteers (no J.D. required) help direct self-represented parties around the courthouse, provide them information about courtroom procedures, identify those who may need language assistance, and point them towards court resources like the self-help center. Since June 2018, more than 700 people have received assistance from volunteer court navigators. We are lucky to have so many committed volunteers, lawyer and non-lawyer alike, who dedicate time and resources to serving the public. No matter your background, our community needs your skills, talent, and dedication.
The Future Infrastructure of Business: A Primer on
Blockchain and the Evolving Regulations by J. P. Schmidt and Tung Chan
Blockchain, a digital public ledger that records online transactions, seems to be making news everywhere. Multi-governmental bodies, individual governments, and reputable analysts are declaring blockchain technology to be the “Fourth Industrial Revolution.”1 The International Monetary Fund dedicated an entire issue of its Finance & Development publication on the ways digital and crypto currencies will reengineer money around the world.2 In June 2017, the World Bank launched a Blockchain Innovation Lab. Putting it to practical use, the World Bank issued its own bond on a blockchain raising over AUD $110 million in 2018 and another AUD $50 million in a second tranche this August.3 Financial industries have flocked to blockchain in anticipation of unprecedented savings. The Insurance Journal published a report by Quincy Analytics estimating that insurance companies could achieve real transaction cost savings of ten to 25% across the value chain.4 In a 2019 whitepaper, Accenture estimated that blockchain can provide the mortgage industry with an overall cost-savings of over $25 billion.5 Facebook introduced its plans to launch its Libra currency on a blockchain in 2020, attracting the atten-
tion of government regulators around the world. To many, however, the blockchain feels inaccessible and too complex to understand. This article is a non-technical primer on blockchain, first looking at blockchain’s origins. Second, this article will explore blockchain’s basic functions and how businesses are already finding blockchain applications tremendously useful. Finally, this article will explore the ways some governing bodies are trying, and struggling, to regulate this new and evolving technology.6 Blockchain Background So, what is blockchain? Is understanding blockchain like trying to learn Klingon? It might feel that way, but keep in mind that most people do not need to fully understand technology that they use every day. For example, many of us use the internet for hours each day, but how many people really understand how it works? Most probably do not. The good news is that in many ways, it is not necessary to know the technical details of the internet or, for that matter, a blockchain to appreciate and adopt the technology. Approaching advanced technology by understanding its use is the way most of us
incorporate it into our daily lives without unpacking all the complexities behind it. As always, a deeper understanding is better, but for the majority of the non-developer population, an overview of blockchain’s function and practical use is the way to approach and interact with the technology. The more useful question, then, may not be “what is blockchain” as much as it is “what can blockchain do?” Bitcoin and the Beginning For many, what blockchain can do starts with Bitcoin. It is the earliest cryptocurrency on blockchain that has achieved the broadest adoption, attracting the fervor of businesses and speculators alike. Bitcoin’s volatility and scandals make the front page of every major news outlet and fortunes have been built and lost in Bitcoin’s wake. At a market capitalization of over $160 billion, Bitcoin’s influence is no longer disputed. Bitcoin’s origin story is shrouded in mystery, although the prevailing understanding is that Bitcoin was originally created by Satoshi Nakamoto. Satoshi Nakamoto’s actual identity remains
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heavily debated. Nevertheless, many believe Bitcoin started on August 18, 2008 when Satoshi Nakamoto published a whitepaper entitled “Bitcoin: A Peer to Peer Electronic Cash System.” (https://bitcoin.org/bitcoin.pdf). The white paper provided a model for a decentralized cash system through coding and cryptography, by creating Bitcoin, a digital asset that would be recorded on a blockchain. Satoshi Nakamoto’s whitepaper addressed the problem of how to make sure electronic cash was tracked and spent without duplication. For example, when a customer makes an electronic payment through his bank account, the bank makes sure the payment is tied to the actual funds in the customer’s account. The bank deducts the payment from the account on a ledger and at the end of the day, the customer and anyone he pays trust that the bank will accurately verify and reconcile all transactions against the recorded cash in the account, how the customer, the bank, and the payee know that payment has been accounted for and not duplicated. Removing the bank from the equation, how could this electronic transfer work? In the digital world, records can easily be changed and duplicated endlessly. A personal ledger would be wholly unreliable and unaccountable. No one could verify if the person was accurately tracking his funds or whether he was sending funds from the account that had already been sent to someone else. There would be serious problems of trust and risk of duplication without the bank as the trusted middleman. Satoshi Nakamoto’s solution was to create a “trustless” ledger. Simplified, his idea was to create a public ledger that everyone could look at that was completely transparent. Each electronic “coin” would have a cryptographic, unique identity that would be tracked on this public ledger. As the coin moved from payment to payment, every movement would be visible and tracked on the public ledger. The ledger would not need
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to rely on a bank or anyone else to make sure there were no duplications or to reconcile against a physical account. This ledger would not be hosted on a server, controlled and owned by a government or authority, but instead would be distributed on computers around the world called “nodes.” Anyone with the right equipment could run a node, and this distribution of nodes to be run by millions of computers around the world makes a public blockchain a decentralized and “distributed” ledger. Every time information was entered on the ledger for a transfer of Bitcoin, a number of these nodes had to all agree to the entry. After the entry was approved, that entry into the ledger would be stored in a block which would then be chronologically linked to the prior block, thereby creating a chain of blocks: blockchain. To make this electronic cash system reliable, the ledger had to be immutable, meaning no one could get on the ledger and erase an entry. The ledger also has to be transparent so anyone with a computer could see every entry on the ledger. This new decentralized system of electronic cash offered a number of attractive features over the centralized money system that currently relies on banks, credit card companies, and other centralized authorities. The decentralized nature of a blockchain eliminated the risk of a centralized authority controlling the cash system and deciding all facets of transfer policies, including the order of transfers and fees. Blockchain eliminated the risk of the centralized authority being hacked, held hostage, or otherwise captured. Blockchain also eliminated the middleman, reducing the time, fees, and human errors associated with more intermediaries. Satoshi Nakamoto had thought through these issues to present a truly innovative change to the old cash system. Before Bitcoin, After Bitcoin, and Ethereum In contemplating blockchain, it should be noted that virtual currency had
a life of its own in gaming before the cryptocurrency revolution. Although cryptographically secured chain of blocks had been introduced in the early ‘90s, the popularization of virtual currencies took place in the online gaming world as part of ingame purchases through games like Mario Brothers and its Mushroom coins in the early ‘80s. In 2003, the release of a game called MapleStory was a turning point. It allowed micro-purchases of online coins via digital transactions and online payments. MapleStory also helped usher in more interchange between coins or tokens in the gaming world and currencies in the “meatspace,” a gamer reference to the “real world.” In 2004, the wildly popular online game World of Warcraft (“WOW”) was released with its in-game currency that could be used to buy weapons, armor repair, and other things. Eventually, rare items began to be sold outside the game. Fungi Tunics were sold for 50,000 Norathian platinum pieces that could take players 150 hours to earn but could be bought on eBay for $500.00.7 Virtual, digital currency was being converted to fiat money, also known as money backed by a government like the US dollar or Japanese Yen, and in a short period of time, the separation between online gaming and real-world currencies became a thinning membrane. One dedicated WOW gamer who became interested in Bitcoin was a teenager named Vitalik Buterin. In 2010, he experienced a loss in WOW that disenchanted and devastated him. In explaining how the loss led him to blockchain, Buterin stated: “[O]ne day Blizzard [from WOW] removed the damage component from my beloved warlock’s Siphon Life spell. I cried myself to sleep, and on that day, I realized what horrors centralized services can bring. I soon decided to quit.”8 He turned his interest instead to Bitcoin and the decentralized blockchain. Eventually finding Bitcoin too limiting, he envisioned a protocol on blockchain that was programmable with “if then”
statements instead of just a ledger. In late 2013, Buterin “birthed” Ethereum and its token, the Ether. Since then, Ether has become the second largest cryptocurrency in the world reaching a market capitalization of over $184 billion in 2018 and Ethereum has become the dominant protocol for programmable code on a blockchain. While an Ethereum-based blockchain records exchanges of its Ether tokens like Bitcoin does, Ethereum’s extraordinary potential is that it can also be easily coded to run more complex transactions called “Smart Contracts” that are basically crafted from “if… then…” conditional statements. Smart contracts can be used as the basis of Decentralized Applications (“Dapps”). A key feature of Ethereum that helped usher in the blockchain revolution was that it also provided a way for developers to create their own cryptocurrencies, “ERC-20” tokens that are built on the platform and compatible with Ethers. In 2016-2017, this ability for developers to create Dapps and to easily create their own ERC-20 tokens to run the transactions resulted in an explosion of projects and cryptocurrencies. Developers created ERC-20 tokens with unprecedented ease and electronically issued them to purchasers all over the world through the internet as “ICOs” or “initial coin offerings,” a nomenclature that intentionally and unfortunately evoked IPOs. In 2017, over $10 billion was raised by the issuance and sales of these kinds of cryptocurrencies, most of them ERC-20 tokens; in 2018, over $11.4 billion was raised. In the beginning, these ICOs were almost entirely unregulated. The frenzy for cryptocurrencies resulted in a proliferation of exchanges in the business of trading tokens for other tokens or converting tokens to government “fiat” currencies like the dollar or the yen. Exchanges like Coinbase, Kraken, Bittrex, Bitstamp, Poloniex, Shapeshift, and others have a market cap of over $300 billion and exchange around $67 billion per day, more or less, depending on volatility of the market. Most of the bigger exchanges
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are custodial, in that they hold the consumers’ tokens until a trade takes place and are centralized. Decentralized exchanges are being developed that are non-custodial. Another variation of blockchain has become popular with large organizations trying to capture the cost-savings and efficiencies that blockchains can potentially offer, known as “private” or “permissioned” blockchains. The “privacy” refers to blockchains that are accessed by permission and are not open to the public. These restricted blockchains are being developed and tested for back office and middle office purposes like supply chain management, tracking, investment bank processing, insurance administration, shipping processes, distribution services, and intergovernmental agencies’ administration. BLOCKCHAIN USE CASES What businesses, investors, analysts, and everyone else interested in blockchain want to see are “use cases” that provide real world benefits. In August 2018, PricewaterhouseCoopers, PwC, surveyed 600 executives from fifteen territories. Eighty four percent said their companies are involved in blockchain.9 Some of the most advanced use cases by major corporations, intergovernmental agencies, and governments around the world have been in the following areas. Enterprise Corporations are interested in streamlining enterprise, or back and middle office, systems using blockchain technology to reduce intermediaries and improve transparency and lower operational costs. Enterprise Ethereum Alliance is a group of over two hundred members, including JP Morgan, British Petroleum, MasterCard, Intel, Microsoft, Ernst and Young, Royal Bank of Canada, and Pfizer who are working on blockchain enterprise projects. B3i is a consortium of eighteen major insurance market participants around the world who are working on insurance applications using the blockchain. B3i launched its first product, a property
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catastrophe excess of loss reinsurance product, in July 2019, and are now preparing for renewals in the new year.10 It is estimated that insurance companies could save ten to twenty-five percent of their costs if they put their operation processes, such as underwriting, claims processing, and client ID on the blockchain.11 In addition, decentralized ledger technology can bring insurance and other financial services to poor and underserved areas. Etherisc, an insurtech startup, joined with Aon and Oxfam to provide parametric insurance, where a set amount is paid on occurrence of an objective event. Etherisc provided its first payout this November in its first season of blockchain-based delivery of microinsurance to smallholder paddy field farmers in Sri Lanka.12 Etherisc allows anyone with a smartphone or computer to access insurance services. Shipping giant Maersk is implementing a platform called TradeLens on IBM’s Hyperledger DLT to increase efficiency, reduce administrative time, and remove redundancy in global shipping. TradeLens will have 94 participants and a network of twenty port and terminal operators, spanning 234 maritime gateways. https://www.tradelens.com/ As part of Cargosmart, nine major ocean carriers and terminal operators are developing the Global Shipping Business Network, a blockchain platform that has recently finished testing an interoperability platform linked with a Hong Kong bank. Cryptocurrencies Cryptocurrencies are probably the most visible areas of interest, in part, because they have the potential to attract retail markets.13 The top one hundred cryptocurrencies in the world have a market capitalization of over $250 billion as of November 6, 2019. But a lot of the use cases that are making headlines are private blockchains. JP Morgan has issued a token, JPM Coin, for a private blockchain. The JPM Coin is expected to be used on a portion of the $6 trillion JP Morgan moves around the world
every day for corporations in its wholesale payments business.14 One of the most globally disruptive developments has been Facebook’s anticipated launch of its Libra token. Libra has caused regulators around the world to break out in hives and forced a number of jurisdictions to take regulatory action. Libra is a private digital currency, rather than a true public cryptocurrency, in that it uses a few trusted entities to keep track of the ledger, eliminates a government’s central bank, and instead relies on 28 large corporations in the Libra Association. To stabilize its value, it is pegged to a group of low-volatility assets that act as a floor for i the value of the Libra coin.15 The Libra Association is seeking to register as a payment system in Switzerland. France and Germany, however, have vowed to block Libra. China is quickly pushing ahead on its People’s Bank of China digital currency in response to the threat of Libra to national currencies. Stay tuned. Supply Chain Blockchain’s transparency and tracking feature make it perfect for supply chain tracking and controls. One example is IBM’s Food Trust network which enables food traceability from farm to retailer and beyond. In the event of a tainted food crisis, the origin can quickly be determined. Walmart and French supermarket giant Carrefour are among the users.16 Blockchain is also used to track diamonds to ensure origin and authenticity. DeBeers and Clara Diamond Solutions and Trustchain have blockchain solutions. Volkswagen and Ford are looking to track needed minerals for auto production on a blockchain. Blockchain has the potential to streamline and improve tracking in any industry with a supply chain, monitoring, authenticity, or origin concerns. Cybersecurity Many United States governmental agencies are also interested in the benefits of blockchain technology, in particular, the Department of Defense (DoD).
Cybersecurity is primary for DoD’s supply chain, data integrity, messaging, hardware systems communication, and military logistics applications. The recently proposed bill for National Defense Authorization Act for Fiscal Year 2020 (H.R. 2500) mandates that the DoD perform a comprehensive study of blockchain and deliver it to Congress within six months. The DoD must report on how DLT may be used by the DoD to, among other things, “improve cybersecurity…, and improve the efficiency of defense logistics and supply chain operations.” Identity A use case that could be applicable across many industries is the establishment of digital identity.17 The current systems of checking identification are inefficient, with costs for human error and delay. Blockchain can enable the creation of a truly “self-sovereign ID” wherein an individual controls his or her verified identification rather than a centralized organization or government. A secure, immutable, private ID would not only increase business and consumer interaction efficiency but be of enormous value to those in vulnerable straits such as the homeless and refugees. Using this identity technology, MIT has provided graduates a digital diploma that is stored on a blockchain on a Blockcert Wallet mobile app, so that graduates can prove diploma verification without relying on MIT’s administration.18 REGULATIONS Blockchain is restructuring the way money is moved and controlled, how back and middle offices are run, and supply chains are improved, but the fact is that it is a new technology that is still rapidly evolving, creating social, economic and legal uncertainties. Blockchain has changed the world so quickly that governments and their agencies are often unable to keep pace with a clear, unified approach. Below are legal highlights of key federal agencies and some of the more innovative approaches that the states and
other countries have taken, providing a snapshot in time in a shifting legal landscape that changes on an almost weekly basis. Federal regulations in the United States With an enormous market capitalization and extreme volatility, the cryptocurrencies markets create significant legal concerns for regulators. A big question is how the federal government and other nations will regulate tokens on the blockchain. SEC The Securities and Exchange Commission (“SEC”) has been slow to provide clear guidance and has appeared to reverse course over time, adding more uncertainty to the problem. As a leading securities regulator in the world, its confusion and misguidance has driven blockchain development away from the
United States at a critical juncture. William Hinman, director of Division of Corporation Finance of the SEC, stated in a speech at the Yahoo All Markets Summit: Crypto in 2018 that Bitcoin, and currently Ethereum’s Ethers, are no longer securities because of the extent that they are decentralized. But earlier in the same year, the SEC had indicated that just about every token was a security.19 So was Hinman’s statement inconsistent with the formal SEC statement? The SEC offered no clear guidance other than to say that a laundromat token is not a security and then to point to the “Howey test,” referring to the holding in Securities Exchange Commission v. W. J. Howey Co., 328 U.S. 293 (1946). In Howey, the Supreme Court stated that a transaction is a security if it is an investment of money in a common enterprise with the expectation of profit solely through the efforts of the promoter or manager. This formal definition alone, however, did little to help clarify how
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some characteristics of tokens should be interpreted under the Howey test. For example, at what point would a token like the Ether stop being a security? Where along the path does a centralized promoter become decentralized? While waiting for the SEC to respond, a number of developers began to ringfence the United States, not allowing sale of their tokens to United States citizens. For example, Poloniex, an exchange, geofenced nine tokens, meaning Poloniex no longer allowed exchange of these tokens by United States citizens, due to the uncertainty of the SEC’s stance on tokens as securities.20 In April 2019, the SEC finally announced a Framework for “Investment Analysis” of Digital Assets in Public Statement 4/3/2019.21 It seems, however, this guidance may be too little too late. The SEC’s delay in issuing guidance has created the kind of uncertainty that simultaneously encouraged unscrupulous actors to take advantage of ambiguous regulations and issue questionable tokens in the United States, while driving away conscientious developers and entrepreneurs, to other jurisdictions where the laws are more well-developed. Unfortunately, this could leave the United States behind in a field that has been hailed as the “future of business.” It is yet to be seen if the SEC can improve its response time in issuing clear guidance on future matters to reverse the effect it created. FinCEN The Financial Crimes Enforcement Network (“FinCEN”) recently released FinCEN Guidance, FIN-2019-G001, Application of FinCEN’s Regulations to Certain Business Models involving Convertible Virtual Currencies. The FinCEN Guidance explains who may be considered a money transmitter in the blockchain ecosystem. A money transmitter must register with FinCEN and comply with FinCEN regulations including Know Your Client (“KYC”) and Anti Money Laundering (“AML”) regulations under what is known as the “travel rule.” The director of FinCEN
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has recently stated that FinCEN expects full compliance by convertible virtual currency exchanges. CFTC The Commodities and Futures Trading Commission (“CFTC”) has been somewhat friendlier to virtual currencies than other agencies. The Chicago Mercantile Exchange and CBOE Global Markets Inc., who can self-certify products under the Commodity Exchange Act, selfcertified Bitcoin futures contracts. The CFTC did nothing in response, noting its limited ability to deny self-certification, but in an attempt to show some teeth, it did say that these future contracts would receive heightened review.22 Despite this “friendliness,” the CFTC has also exerted jurisdiction over all virtual currencies. The CFTC has argued that because virtual currencies can have futures, a spot exchange (or basically any sale and purchase) is an exchange of a commodity for purposes of its jurisdiction. It can then enforce anti-fraud authority over all interstate sales. The courts have agreed with the CFTC so far, but this holding may not stand up on appeal in the future.23 OFAC In 2018, the United States Treasury Department’s Office of Foreign Assets Control (“OFAC”) released guidance, issued in the form of Frequently Asked Questions (“FAQs”), stating that transactions involving cryptocurrencies will be treated the same as other transactions. American individuals will have the same sanctions and compliance obligations regardless of whether a transaction is denominated in digital currency or fiat currency. 24 IRS In 2014, the Internal Revenue Service (“IRS”) issued IRS Notice 2014-21 stating that it treats virtual currency as property for tax purposes. A sale or exchange of virtual currency for fiat or other property requires a calculation of the basis and gain or loss similar to other property
that is a capital asset. Virtual currency paid as wages requires withholding and reporting on a W2. A payment or over $600 to an independent contractor requires a Form 1099-MISC. These reporting requirements create a significant burden for transactions involving small amounts of virtual currency, for instance, for purchase of low-priced everyday retail items or regular trading consisting of numerous small transactions. The IRS believes many, if not most, virtual currency transactions are not being reported. In 2017, the IRS took Coinbase, one of the largest virtual currency exchanges, to court asking it to order Coinbase to turn over personal information on its 5.9 million customers. The IRS eventually narrowed its request to 14,000 customers. The court agreed with the IRS, but further narrowed the information that it ordered Coinbase to produce. 25 United States agencies commonly take disparate positions in their efforts to fulfill their different federal mandates, but in this case, with every major agency taking a different regulatory position, the regulatory whiplash strongly suggests that the regulators do not have a handle on the big picture or any semblance of a coordinated approach. The uncertainty has played a role in driving blockchain projects with cryptocurrency features away from the United States. Laws in Other Countries Where are blockchain projects going when they leave or avoid the United States? Below are legal developments in some of the more active jurisdictions attracting and trying to attract blockchain developers and their projects around the world. European Union and GDPR One of the biggest challenges in regulation of blockchain technology in European Union (“EU”) countries is the General Data Protection Regulation (“GDPR”), enacted by the EU on May 25, 2018.26 The regulation is meant to protect
the personal information and privacy of consumers when their data is collected by businesses. How privacy works with respect to blockchain technology was not a focus of GDPR and not surprisingly, the regulation has an imperfect fit with some of the key features of a public blockchain, including the fact that information on a public blockchain cannot be erased and is permanently transparent. The GDPR codified the “Right to be Forgotten” that creates a right for a consumer to demand that a company remove the consumer’s personal information from company records unless retention is required or necessitated by law or business. Companies are also responsible for proactively removing data that is inadequate, irrelevant, or no longer relevant. None of this removal is possible on a public blockchain. Public blockchains are immutable, meaning permanent and in fact, unchangeable in any way. This immutability is considered a feature to increase trust in the network but stands at odds with the GDPR. GDPR is also based on an underlying assumption of centralization: that in relation to each personal data point, there is a “data controller,” a contact point who is responsible for compliance and from whom consumers can demand redress and enforcement of their rights under the law. Public blockchains, however, are distributed databases that are decentralized. Accordingly, there is not and cannot be a central contact point. The European Parliamentary Research Service issued a paper discussing these challenges, but there are no clear solutions yet. 27
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Switzerland Switzerland has encouraged blockchain companies to make their home among the snowy peaks, alpenhorns, and Almatrieben (cow parades). Blockchain projects have flocked to Zug ever since Ethereum set up there, garnering the nickname Crypto Valley. In 2018, the Swiss Financial Market Supervisory Authority (FINMA) issued guidance classifying tokens in a three-tier system:
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1. Payment Tokens, that are used for payment and regulated as payment processers, not securities; 2. Utility Tokens, that are not securities if they are solely for use or to be exchanged for a service at time of the ICO; and 3. Asset Tokens, that are securities. In addition, tokens can be Hybrid Tokens, meaning they can be categorized as more than one of the tiers.28 FINMA requires payments on a blockchain to comply with anti-money laundering regulations (“AML”) by verifying customer’s identities, monitoring AML risks, and reporting suspicious activity to banking regulators. 29 Despite some uncertainty in interpreting the regulations in Switzerland, many crypto projects are still looking to domicile in Switzerland. In fact, Facebook plans to launch Libra through a Swiss foundation and is attempting to have Libra registered as a payment token. Malta In the hopes of establishing itself as a center for blockchain technology, Malta’s parliament passed three bills to establish a regulatory framework for addressing blockchain technology: the Virtual Financial Assets Act (“VFAA”), the Malta Digital Innovation Authority Act, and the Innovative Technology Arrangements and Services Act. Distributed Ledger Technology Assets are classified in four categories: (1) Electronic Money; (2) Financial Instruments intrinsic to DLT; (3) Virtual Tokens, that are a form of utility tokens; and (4) Virtual Financial Assets, that is a catchall for remaining digital assets. Malta has attracted several exchanges and related businesses, but it is unclear such a small jurisdiction with limited resources can maintain a blockchain industry through a handful of favorable local laws. ASIA Singapore Singapore is considered a cryptohaven due to its significant access to the
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Asian markets in combination with its welcoming and active regulatory environment. The Monetary Authority of Singapore (“MAS”) issued A Guide to Digital Token Offerings in November 2018.30 MAS has also set up a Fintech Regulatory Sandbox for which fintech developers apply to be accepted. If chosen, they work with regulators to test and to implement their new technology on a temporary, limited basis. This interaction educates the developers on applicable laws and the regulators on the new technology. Currently, cryptocurrencies are taxed under the Goods and Services tax (“GST”), but to increase its competitiveness as a haven, Singapore is planning to exempt cryptocurrencies that are intended to be a medium of exchange from the GST in 2020. Japan Japan is forward-thinking in blockchain development which it believes is an area promising economic growth. Japan is known for some of the most sophisticated and progressive, though stringent, cryptocurrency regulation in the world, instituted to produce an efficient market. In June 2019, Japan presented a manual of cryptocurrency regulation at the G20 Summit encouraging international cooperation in regulating blockchain and digital assets.31 On May 31, 2019, Japan amended its Payment Services Act and Financial Instruments and Exchange Act, clarifying and tightening regulations of “cryptographic assets,” the term chosen to replace “virtual currency.”32 South Korea South Korea has declared Busan, a “regulation free zone” for blockchain development, like a blockchain sandbox. Chosen businesses will be supported using a digital voucher, essentially a stable coin. President Moon Jae-In stated: “[w]hile regulatory innovation in the era of industrialization was a matter of
choice, it is now a question of survival as we are experiencing the fourth industrial revolution, characterized by fusions across industries and fields.”33 China China has restricted cryptocurrencies, banning financial institutions from handling Bitcoin transactions in 2013. In 2017, China declared all ICOs illegal. Trading in cryptocurrencies is also banned. But the hesitancy to embrace cryptocurrency markets in general may actually be part of the government’s efforts to set the stage for the launch of its own digital currency. The Peoples Bank of China (“PBOC”) has announced the coming launch of its digital currency to replace the physical Chinese yuan in circulation. Consumers and businesses would set up a mobile digital wallet and swap their yuan for the digital currency. Every transaction is expected be tracked by the government.34 The PBOC coin will be a centralized digital currency rather than a true cryptocurrency. In October 2019, China passed its first cryptography law, effective on January 1, 2020. The law is aimed to encourage and support cryptography businesses and to ensure the security of cyberspace and information. It appears to be another step toward supporting the launch of China’s own digital currency.35 U.S. STATE LAWS Not surprisingly, the states are trying a variety of different approaches regarding cryptocurrencies and blockchain. As has historically been true, the states have taken the lead in testing more innovative and experimental approaches than the federal government. New York state jumped in quickly with a “BitLicense” scheme on August 8, 2015 that has failed to gain traction with businesses because it is considered too onerous. At least ten companies stated they were stopping all business in New York due to the regulations.
https://web.archive.org/web/2017032821415 8/http://www.dfs.ny.gov/legal/regulations/ado ptions/dfsp200t.pdf. New York took about three years to approve a license; there are currently only sixteen licenses issued. There is a rumor that the state legislature may be putting together a task force to revisit the matter in the future. In 2017, Delaware passed a law allowing corporations to use blockchain for corporate records, including corporation stock ledgers. https://legiscan.com/DE/bill/SB69/2017. Arizona and Wyoming have sought to establish centers of blockchain innovation as a way to spur economic development. Arizona has set up a FinTech sandbox, https://www.azag.gov/fintech, and passed laws validating signatures and contracts on the blockchain. https://legiscan.com/AZ/bill/HB2417/2017 . Wyoming has passed thirteen blockchain laws in a two-year period. Wyoming has set up three classifications of digital assets: Digital Securities, Digital Consumer Assets, and Virtual Currencies. https://wyoleg.gov/Legislation/2019/sf0125. Wyoming also allows banks to be digital asset custodians. In addition, Wyoming authorized a FinTech Sandbox. https://wyoleg.gov/Legislation/2019/HB0057. Nevada and Colorado have also been pursuing friendly blockchain regulation. At least twenty-two states have enacted legislation related to virtual currency while at least eighteen states have no laws specifically dealing with blockchain or cryptocurrency. A number of states have validated smart contracts and/or are exploring the use of blockchain for particular governmental services. Under state laws, one particular concern for cryptocurrencies are the money transmitter laws. Money transmitter laws regulate the licensing and authorize enforcement against unlicensed money transmitters, a definition that can be as broad as anyone who transmits money for commercial purposes. The laws and their interpretations vary among the states, but usually may include licensing fees, extensive applications, ongoing compliance, a minimum net worth, and surety bonds
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and/or reserves. The problem for the cryptocurrency industry is whether cryptocurrencies are considered money and whether their transactions and other exchanges then fall within money transmitter laws. Cryptocurrency exchanges are critical to blockchain technology as they provide avenues of liquidity, allowing the exchange of tokens for other tokens or fiat currency like dollars or yen. Exchanges have been able to operate in forty-nine states in compliance with their money transmitter laws, all except for Hawaii. An interpretation of the money transmitter law in Hawaii, Hawaii Revised Statutes Chapter 489D, has chased away all exchanges. The interpretation requires an exchange to hold a fiat currency reserve in the same amount it already holds in digital currency, essentially doubling the amount it must hold. A bill was introduced in the 2018 Legislature to specifically address the problem by allowing a reserve to be in digital currency but the bill was not passed. In March 2020, DBEDT’s Hawaii Technology Development Corporation launched the Digital Currency Innovation Lab (DCIL), a sandbox that exempts lab participants from enforcement of the money transmitter laws. For everyone else, however, money transmitter laws in Hawaii continue to apply and restrict liquidity and development of blockchain projects. This regulatory restriction must be addressed, or Hawaii will be left behind as other jurisdictions make the quantum leap to understanding and working with this rapidly growing “future infrastructure of business.” CONCLUSION Although these are the early days of blockchain, it has already changed the way business is done. The full force of its impact is yet to come, but the sooner laws thoughtfully and clearly address the technology, the better prepared we will all be to guard against its challenges and harness its advantages. _________________
1
See, World Economic Forum, Fourth Industrial Revolution for the Earth Series; Building Block(chain)s for a Better Planet, Sept 2018. 2 International Monetary Fund, FINANCE & DEVELOPMENT, June 2018, Volume 55, Number 2. https://www.imf.org/external/pubs/ft/fandd/ 2018/06/pdf/fd0618.pdf. 3 https://www.worldbank.org/en/ news/press-release/ 2018/08/23/world-bank-prices-first-global-blockchainbond-raising-a110-million; https://www.worldbank.org/ en/news/press-release/2019/08/16/world-bank-issues-second-tranche-of-blockchain-bond-via-bond-i. 4 https://www.insurancejournal.com/research/app/uploads/2018/01/blockchain101.pdf. 5 https://www.mba.org/Documents/Member%20 White %20Papers/Accenture%20%20Mortgage%20and%20 Blockchain%202019.04.23.pdf. 6 This article is not intended to be financial or legal advice. For such advice for particular situations, contact a personal financial advisor or lawyer. 7 https://medium.com/singulardtv/how-video-gameshelped-pave-the-way-for-cryptocurrency-f930521eef55. 8 https://about.me/vitalik_buterin. 9 https://www.pwc.com/gx/en/issues/blockchain/ blockchain-in-business.html. 10 https://www.coindesk.com/blockchain-insurancegroup-b3i-launches-first-product-on-r3s-corda; https://www.insuranceerm.com/analysis/b3i-readiesblockchain-tech-for-year-end-reinsurance-renewals.html; https://www.insuranceerm.com/analysis/b3i-readiesblockchain-tech-for-year-end-reinsurance-renewals.html. 11 https://www.insurancejournal.com/research/app/ uploads/2018/01/blockchain101.pdf. 12 https://www.prnewswire.com/news-releases/oxfametherisc-and-aon-deliver-pay-outs-with-first-blockchainbased-agricultural-insurance-policies-for-smallholder-farme rs-in-sri-lanka-300949728.html. 13 The terms cryptocurrencies, virtual currencies, digital assets, tokens, and coins are often used interchangeably to mean essentially the same thing. There are some technical differences that are not important here. This article uses the term that is used in the associated resource referenced. 14 https://www.ledgerinsights.com/jp-morgan-jpm-coinblockchain-payments/. 15 https://libra.org/en-US/.; https://www.finma.ch/en/ news/2019/09/20190911-mm-stable-coins/; https://www.dw.com/en/france-germany-reject-facebooks-libra-cryptocurrency/a-50424810. https://www. bloomberg.com/news/articles/2019-08-12/china-spboc-says-its-own-cryptocurrency-is-close-torelease?srnd=next-china. 16 https://www.ibm.com/blockchain/solutions/foodtrust. 17 Antony Welfare, The Answer to Digital Identity Lies
in Blockchain Technology, Forbes, July 19, 2019. 18 https://registrar.mit.edu/transcripts-records/digitaldiplomas. 19 https://www.cnbc.com/2018/06/14/bitcoin-andethereum-are-not-securities-but-some-cryptocurrencies-maybe-sec-official-says.html. 20 https://blog.circle.com/2019/05/20/us-cryptopolicy-needs-to-change/. 21 https://www.sec.gov/corpfin/framework-investmentcontract-analysis-digital-assets. 22 CFTC Backgrounder on Oversight and Approach to Virtual Currency Futures Markets, January 4, 2018; https://www.cftc.gov/sites/default/files/ idc/groups/public/@customerprotection/documents/file/ backgrounder_virtualcurrency01.pdf. 23 https://www.cftc.gov/PressRoom/PressReleases/ 7820-18. 24 OFAC FAQs 559,560-564, 594, 646 & 647; https://www.treasury.gov/resource-center/faqs/sanctions/pages/faq_compliance.aspx. 25 United States v. Coinbase, Inc., 2017 WL 5890052, 120 A.F.T.R. 2d 2017-6671 (N.D. Cal. Nov. 28, 2017). 26 https://eugdpr.org/. 27 https://www.europarl.europa.eu/RegData/etudes/ST UD/2019/634445/EPRS_STU(2019)634445_E N. pdf. 28 https://www.finma.ch/en/news/2018/02/ 20180216-mm-ico-wegleitung/. 29 https://www.finma.ch/en/news/2019/08/ 20190826-mm-kryptogwg/. 30 https://www.mas.gov.sg/-/media/MAS/Regulationsand-Financial-Stability/Regulations-Guidance-and-Licensing/Securities-Futures-and-Fund-Management/Regul ations-Guidance-and-Licensing/Guidelines/Guide-to-Digital-Tokens-Offering-last-updated-on-5-April-2019.pdf. 31 https://www.iosco.org/library/pubdocs/pdf/IOSCOPD627.pdf. 32 https://www.fsa.go.jp/common/diet/index.html. 33 https://coinhubkorea.com/busan-blockchain-regulationfree-zone-will-be-a-testbed-for-token-economy/. 34 https://www.bloomberg.com/news/articles/2019-0812/china-s-pboc-says-its-own-cryptocurrency-is-close-torelease?srnd=next-china. 35 https://www.reuters.com/article/us-china-lawmaking/china-passes-cryptography-law-as-gears-up-for-digital-currency-idUSKBN1X600Z
J.P. Schmidt is Principal of Abaris Global, former Hawaii State Insurance Commissioner, and Ethereum Foundation Advisor. He completed the MIT Sloan Certificate for Blockchain Technologies: Business Innovation and Application program. Tung Chan is a former General Counsel of Ethereum Foundation, former Securities regulator, and advisor to blockchain start-ups.
Notice of Discipline On January 30, 2020, the Hawaii Supreme Court ordered Wailuku attorney Stuart Eric Ragan suspended from the practice of law in Hawaii for the period of one year and one day and ordered that he pay $30,445.00 in restitution to his clients. Ragan was charged by the Office of Disciplinary Counsel with various violations of the Hawaii Rules of Professional Conduct (“HRPC”) in December 2016. After the breakdown of mediation efforts, the charges proceeded to a formal hearing. In May 2018, the hearing officer entered his report, finding that Ragan (1) improperly created a contractual lien against all his client’s property; (2) filed frivolous complaints and oppositions to motions, despite previous warnings from the courts; (3) filed a defective bankruptcy case resulting in its summary dismissal for procedural non-compliance; (4) arranged for surrogate lawyers to appear at hearings without the knowledge or consent of his clients; (5) charged his clients excessive legal fees at exorbitant hourly rates for unauthorized, useless, ineffective, duplicative and frivolous legal work; (6) failed to account to his clients; (7) failed to maintain client trust accounting records; (8) improperly used counter deposit slips to deposit funds into trust; and (9) had a prior history of trust account violations. The hearing officer concluded that Ragan’s violations were knowing and intentional, and he recommended disbarment. On review and in consideration of the briefs and oral arguments of the parties, the Disciplinary Board of the Hawaii Supreme Court adopted, in part, the hearing officer’s findings and found the charging of excessive fees for incompetent work the most egregious misconduct. The Board concluded that Mr. Ragan violated the rules of competence (HRPC Rule 1.1), diligence (HRPC Rule 1.3), communications (HRPC Rule 1.4), fees (HRPC Rule 1.5), conflicts of interest (HRPC Rule 1.8), unmeritorious claims and contentions (HRPC Rule
3.1), and misconduct by failing to cooperate in the course of a disciplinary proceeding (HRPC Rule 8.4). The Disciplinary Board, after weighing the mitigating and aggravating factors present, recommended that Ragan be suspended for one year and one day, he pays his clients restitution, and he bear the costs of the disciplinary proceeding. By the January 30, 2020 Order of Suspension, the Hawaii Supreme Court adopted the recommendations of the Disciplinary Board and ordered Ragan pay the $30,445.00 in client restitution by February 19, 2020. Upon entry of the January 30, 2020 suspension order, Ragan shall not accept any new retainer or engage as attorney for another in any new case or legal matter of any nature. However, between January 30, 2020 and February 29, 2020, he may wind up and complete, on behalf of any client, all matters that were pending on January 30, 2020. During that time, he is required to promptly notify all of his clients and any attorneys for any adverse party in any pending litigation, of his suspension and consequent inability to act as an attorney. By February 29, 2020, Ragan shall surrender to all clients all papers and property to which the clients are entitled and any advance payments of fees that have not been earned. Under the rules of the Hawaii Supreme Court, attorneys suspended for more than one year, cannot be reinstated until they “can show proof . . . by clear and convincing evidence [of their]: rehabilitation, fitness to practice law, competence and compliance with all applicable disciplinary or disability orders and rules, and compliance with any other requirements imposed by the [Hawaii] supreme court.” Ragan, age 60, was admitted to the Hawaii bar in 1995 and is a graduate of Washburn University School of Law in Topeka, Kansas. Case information: ODC v. Stuart Eric Ragan, SCAD-19-0000656.
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H SBA HAP PE NIN GS Be a Candidate for the 2021 HSBA Board
additional $1 per ticket and require showing your HSBA bar card.
We are looking for enthusiastic attorneys who care about improving the legal profession and making a difference to serve on the HSBA Board as an officer (one-year term) or director (two-year term). The following officer positions will be available beginning January 2021: Vice President, Treasurer, and Secretary. The following director positions will be available beginning January 2021: six for Oahu, one for Maui, and one for East Hawaii. Board members from Kauai and West Hawaii are currently serving a two-year term set to expire in December 2021. If you are interested, email a cover letter and resume to the HSBA Nominating Committee (nominations@hsba.org) by April 17. The Committee will have a slate ready by the end of May and discourages any campaigning before that time.
RightSignature RightSignature streamlines your practice with elegant and intuitive online electronic signature software. Simply upload any document, specify signing parties, and click send. Parties to the document are able to sign online, including through their mobile devices. RightSignature’s software complies with the requirements of the ESIGN Act and the Uniform Electronic Transactions Act, and is ideal for engagement letters, new client forms, and more. Members of the HSBA receive a 23% lifetime discount on their annual RightSignature subscription. Start your free trial or sign up for the subscription by visiting https://rightsignature.com.
Member Benefits Spotlight Hawaii State Federal Credit Union HSBA members are eligible for membership with Hawaii State Federal Credit Union. Hawaii State FCU offers low rates on business loans and lines of credit, mortgages, home equity lines of credit, auto loans, and personal loans. Additional services include free E-Checking accounts, surcharge-free access to over 400 ATMs statewide, free online and mobile banking, and much more. For more information, call 808-587-2700 or 888-586-1056 (toll free). Hawaii Symphony Orchestra The Spring Season tickets are now available. HSBA members receive a 10% discount on single tickets. For group sales, please call 808-380-7724. Purchase your tickets online and enter promo code “BAR2018.” Additional fees are applied when you order online. Tickets purchased at Blaisdell Box Office will be an
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SoFi Student Loan Refinancing HSBA members, family, and friends can refinance their student loan debt with SoFi and receive a $300 welcome bonus upon refinancing through SoFi’s website. SoFi is the leading provider of Student Loan Refinancing and has originated over $30 billion to more than 500,000 members across the country. SoFi can consolidate and refinance both federal and private student loans into one loan with one monthly payment. Benefits include: • Fixed rates as low as 3.99% and variable rates as low as 2.48% with auto pay. • 5-, 7-, 10-, 15- and 20-year repayment options • No origination or application fees and no prepayment penalties • Autopay discount of 0.25% • $300 bonus by refinancing with SoFi (Payment of this bonus will be issued electronically once you become a SoFi borrower, you have submitted a completed application with documents and your loan has been disbursed. This offer is available to new customers only.)
For more information on SoFi, feel free to visit their website (https://www.sofi.com/sofi-legal-professionals300/?refer=179-190806) or contact SoFi at 855-456-7634. Be sure to mention you are part of the HSBA partnership program. Cafe Julia at the YWCA HSBA members receive a 10% food discount for breakfast, lunch, and pau hana menu items upon presenting your bar card. Taco Del Mar - Hawaii Kai Taco Del Mar – Hawaii Kai is a counter-serve Mexican chain featuring Baja-style burritos and fish tacos in a festive setting. Located in Hawaii Kai Towne Center at 333 Keahole Street #2B1 (next to Costco Tires), HSBA members receive 10% off their order upon presenting your bar card. Avis Car Rental Call 800-962-1434 or visit your HSBA-custom website (https://www.avis.com /en/association/H209337) for discounts, reservations, and Avis Preferred Program enrollments (AWD# H209337). Mercer - Lawyers Professional Liability Insurance Swiss Re Corporate Solutions Mercer Life Insurance Program offers HSBA members group rates on Group Term Life, Group Level Term Life, Personal Accident, and Senior Term Life Insurance. Underwritten by ING/Reliastar Insurance Company and Administered by Mercer. For more information, call 866-810-9451 or visit their website (https://www.hsbainsurance.com/). Visit https://hsba.org/memberbenefits to get more information on the more than 70 member benefits available.
C O URT BR IEF S Kawano Sworn in as Second Circuit Court Judge
Kelsey T. Kawano was sworn in as Judge of the Circuit Court of the Second Circuit on January 27, 2020. Chief Justice Mark E. Recktenwald presided over the ceremony, which was attended by a courtroom full of proud family and friends. His term is for 10 years. Sitting with the Chief Justice were Second Circuit Chief Judge Richard T. Bissen, Jr., and Judges Rhonda I.L. Loo, Peter T. Cahill, and Blaine J. Kobayashi.
Third Circuit (Hawaii island) Seeking Applicants for Independent Grand Jury Counsel The Circuit Court of the Third Circuit (Hawaii island) is seeking applications for independent grand jury counsel for Hilo and Kona. The compensation shall be as provided by law. In accordance with Haw. Rev. Stat. §612-51 to §61257, the Chief Justice of the Hawaii Supreme Court appoints grand jury counsel for the four judicial circuits of the state, selecting from among those individuals licensed to practice law in Hawaii who are not public employees. If you are interested in being considered for a one-year appointment for either Hilo or Kona, please submit a letter indicating your interest and a resume by April 15, 2020 to: Interim Chief Judge Melvin H. Fujino Keahuolu Courthouse 74-5451 Kamakaeha Avenue Kailua-Kona, Hawaii 96740 Also, please fax a copy to: Lester Oshiro Chief Court Administrator Fax: (808) 961-7577 2020 Suspensions On March 1, 2020 the listed attorneys were administratively suspended for failure to complete the 2020 attorney licensing registration process required by the Hawaii Supreme Court, which includes payment of dues and fees for the Disciplinary Board, the Lawyers’ Fund for Client Protection and the Attorney & Judges Assistance Program.
Guest speakers were Governor David Y. Ige, Maui County Bar Association President Damir A. Kouliev, Hawaii State Bar Association President P. Gregory Frey, Hawaii State Trial Judges Association Secretary Judge Kirstin M. Hamman, and Judicial Selection Committee member Paul M. Ueoka.
Per Diem Judge Announcements Robert John Crudele was recently reappointed per diem judge of the District Court of the Third Circuit and designated per diem District Family Judge. His term is from February 1, 2020 to February 4, 2022. Lynne T.T. Toyofuku was recently appointed as per diem judge of the District Court of the First Circuit and is designated to preside as per diem District Family Judge. Her term is from March 2, 2020 to March 1, 2021.
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CAS E NOTES Hawaii Supreme Court Criminal State v. Domut, No. SCWC-160000402, January 31, 2020, (McKenna, J. with Recktenwald, C.J., concurring in part and dissenting in part with whom Nakayama, J., joins). On April 20, 2016, Vicente Domut (“Domut”) was convicted at a bench trial in district court of Driving Without a License in violation of Hawaii Revised Statutes (“HRS”) § 286102(a) (Supp. 2015) and of No Motor Vehicle Insurance in violation of Haw. Rev. Stat. § 431:10C-104(a) (2005) and Haw. Rev. Stat. § 431:10C117(a)(2),(3),(5). Despite requesting a continuance for sentencing, Domut was immediately sentenced to (1) a jail term of 180 days for Driving Without a License as a repeat offender; (2) a fine of $1,500 and $37 in fees for No Motor Vehicle Insurance; and (3) suspension of any driver’s license for one year. Domut appealed the district court’s April 20, 2016 judgment to the ICA, which in a summary disposition order, State v. Domut, CAAP-16-0000402, at 1 (App. July 30, 2018) (SDO), affirmed the district court’s judgment. Domut raised two questions on certiorari. First, he contended the ICA erred because the State failed to prove beyond a reasonable doubt that Domut was not in constructive possession of a license from Mexico or Canada, which would have exempted him from licensing requirements pursuant to Haw. Rev. Stat. § 286-105 (2007). The Hawaii Supreme Court addressed this issue in State v. Castillon, 144 Hawaii 406, 443 P.3d 98 (2019). There, the Hawaii Supreme Court held that a defendant bears the initial burden to produce evidence to support a Hawaii driver’s license exemption based on possession of a valid license from Canada or Mexico. Domut did not produce any evidence of the applicability of the exemp-
Appeal Pointer When moving to supplement the record pursuant to HRAP Rule 10(e)(2) with transcripts that had been accidentally omitted, the motion or the declaration of counsel appended to the motion should indicate the estimated completion date for the transcripts. tion to him. Therefore, his first question on certiorari was without merit. In his second question on certiorari, Domut contended the ICA erred in concluding that he failed to meet his burden of production to raise evidence of a “good faith lack of knowledge” defense under Haw. Rev. Stat. § 431:10C-117(a)(4)(C), and that the burden had shifted to the State to disprove the defense beyond a reasonable doubt, citing to State v. Bolosan, 78 Hawaii 86, 890 P.2d 673 (1995). In that case, the Hawaii Supreme Court held that “if a driver borrows an uninsured vehicle, the State must prove beyond a reasonable doubt that the driver actually knew that the vehicle was uninsured at the time [the driver] was operating it.” Bolosan, 78 Hawaii at 90-91, 890 P.2d at 677-78. As indicated by the ICA, the Hawaii Supreme Court held in State v. Lee, 90 Hawaii 130, 976 P.2d 444 (1999), that the defendant bears the burden of production that they had borrowed a vehicle owned by another. Lee, 90 Hawaii at 140, 976 P.2d at 454. Although evidence of facts establishing a defense may also be supplied by the prosecution, State v. Locquiao, 100 Hawaii 195, 206, 58 P.3d 1242, 1253 (2002), Domut did not meet his burden of producing evidence that he had borrowed a vehicle owned by another. Therefore, the Hawaii Supreme Court rejected his argument. But in his second question on certiorari, Domut also alleged the ICA erred by requiring
him to present evidence of a “borrower/lender relationship” with the registered owner of the vehicle to assert the “good faith lack of knowledge” defense. In this regard, the Hawaii Supreme Court agreed that the ICA erred. Haw. Rev. Stat. § 431:10C-117(a)(4)(C) allows the “good faith lack of knowledge” defense when an operator reasonably believes a “borrowed motor vehicle” is insured. An operator could have such a belief without “borrowing” the motor vehicle from the registered owner. This error did not, however, require vacating Domut’s No Motor Vehicle Insurance conviction, as there was no evidence of “borrowing” that would have shifted the burden to the State to disprove the defense. The Hawaii Supreme Court noticed plain error affecting substantial rights, however, that required vacating Domut’s convictions for Driving Without a License and No Motor Vehicle Insurance. Domut was entitled to a jury trial on the Driving Without a License charge. During the jury trial waiver colloquy, the district court advised Domut that he had a right to jury trial on only one of the charges, and it did not inform him that he was entitled to a jury trial on the Driving Without a License charge. For this reason alone, there was no valid waiver of his right to jury trial on this charge. The district court’s advisement during the jury trial colloquy was also erroneous and confusing for other reasons. Thus, the record does not reflect a knowing and intelligent waiver of Domut’s right to a jury trial. State v. Gomez-Lobato, 130 Hawaii 465, 469, 312 P.3d 897, 901 (2013). Recktenwald, C.J., joined by Nakayama, J., concurred in part and dissented in part. Recktenwald, C.J. opined that the Majority vacated Domut’s convictions based on plain error for a purportedly insufficient jury trial waiver colloquy. The Majority
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asserted that because the district court did not specify which of the two charges carried a right to a jury trial, it “did not inform [Domut] that he was entitled to a jury trial on the [driving without a license (DWOL)] charge.” This logic equated a failure to say the name of the charge that is subject to a jury trial with a failure to inform the defendant of the right to a jury trial at all – a contention for which the Majority cited no authority. The Majority also found it problematic that the district court’s statement incorrectly implied that Domut would have a jury trial on only one of the charges. Recktenwald, C.J., agreed that Domut failed to raise the good-faith borrower defense to the no motor vehicle insurance (NMVI) charge, and therefore joined the Majority as to that part. The Majority’s argument was based on an incorrect premise: that there can only be one finder of fact in a trial. Domut could have had a single trial with two different factfinders if he had declined to waive his jury trial right. Many state courts have approved of the practice of having a simultaneous bench and jury trial in a case like Domut’s. E.g., State v. Knight, 835 A.2d 47, 52-53 (Conn. 2003) (affirming guilty verdict of the court and not-guilty verdict of the jury on separate counts after joint bench and jury trial); Copening v. United States, 353 A.2d 305, 310 (D.C. Ct. App. 1976) (same); Commonwealth v. States, 938 A.2d 1016, 102425 (Pa. 2007) (approving of the practice of simultaneous bench and jury trials, noting, “[w]hile we have not had occasion to consider this unusual trial procedure, it may not be as unusual as we think”); cf. People v. Almeter, 912 N.E.2d 41, 43 (N.Y. 2009) (finding that trial court should have timely informed defendant that he would have a simultaneous jury and bench trial on separate charges). Indeed, the Hawaii Rules of Penal Procedure and caselaw did not appear to foreclose the possibility of having a simultaneous bench and jury trial in a case like Domut’s. Thus, Domut could have had a single trial with the verdict
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Mediator, Arbitrator, on the DWOL charge rendered by the jury and the NMVI charge by the judge. In this scenario, what the Majority called the district court’s implication - that Domut would have a jury trial on only one of the charges - would be correct. Moreover, Haw. Rev. Stat. § 701-109(3) states that, upon “application of the prosecuting attorney or the defendant,” the court may order separate trials if justice so requires. Thus, if Domut did not waive a jury trial and the court declined to utilize the joint bench and jury trial procedure outlined in the preceding paragraphs, it is also possible that the court would have ordered separate trials. Under this alternative scenario, the implication that Domut would have had a jury trial on only one of the charges would also have been correct. Thus, the trial court’s statement that Domut had the right to a trial by jury on “one of the charges” was absolutely correct. Domut could not have invoked a right to a trial by jury for the NMVI charge. Regardless of whether he had one trial or two, Domut’s jury trial right inured to only one of the two offenses with which he was charged. The Majority contended that this case was similar to facts he felt should affect the sentence imposed. Id. at *8 (“Since Carlton did not know the offense he was to be sentenced on, he did not know which of his actions he needed to address and possibly provide explanation, mitigation, or take responsibility for.”). Conversely, in Domut’s case, the specific charge that entitled him to a jury trial was not plausibly relevant to his decision-making process about whether to waive his jury trial right. Carlton is therefore inapplicable. Ultimately, the Majority’s plain-error reversal of Domut’s conviction is inconsistent with the underlying purpose of a jury trial waiver colloquy jurisprudence.
Receiver, and Special Master Services, Employment Investigations
Jerry M. Hiatt • Creative and highly focused mediations in all areas through persistent follow up with all parties. Successful in mediations for clients of most of Hawaii’s major law firms. • 41 years of practice in complex civil litigation. Listed in Best Lawyers in 8 areas, including Mediation and Arbitration. Hawaii Lawyer of the Year for Mediation, 2014, Employment Law-Individuals, 2017, and Arbitration, 2018. • Mr. Hiatt has also performed detailed neutral employment investigations and fact finding for some of Hawaii’s largest companies. • Mr. Hiatt has also served as a court appointed Receiver For ADR work, please contact
Dispute Prevention & Resolution (808) 523-1234; dprhawaii.com For employment investigations, please contact jh@hiattlaw.com or at (808) 885-3400. Resume and references at www.hiattlaw.com.
Education Quel v. Board of Tr., Emp.’ Retirement Sys., St. of Haw., No. SCWC-160000355, February 6, 2020, (McKenna, J.). In 2008, Debbie Quel (“Quel”), an
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eighteen-year cafeteria helper for the State of Hawaii Department of Education (“DOE”), applied for “service-connected disability retirement” benefits pursuant to Haw. Rev. Stat. § 88-79(a) (Supp. 2007), which provides in relevant part that “any member who has been permanently incapacitated for duty . . . as the cumulative result of some occupational hazard . . . may be retired by the board for service-connected disability[.]” There was no dispute that Quel was a “member” “permanently incapacitated for duty” “as the cumulative result of ” her working conditions. Quel’s application for “service-connected disability retirement” benefits was, however, denied by the Board of Trustees of the Employees’ Retirement System of the State of Hawaii (“ERS Board”) on the grounds that the working conditions that caused Quel’s permanent incapacity did not constitute an “occupational hazard” as defined by Hawaii law. The circuit court and the ICA affirmed. The ERS Board concluded that although Quel’s permanent incapacity was due to the cumulative effects of work-related activities, she failed to meet her burden of establishing that her incapacity resulted from an “occupational hazard.” The ERS Board based its decision on Quel’s failure to introduce evidence that the “lifting requirements” of her job were “different in character from those in the general run of occupations” testified to by the ERS Medical Board’s (“Medical Board”) physician chair and “that her work related problems were limited to a relatively few number of occupations.” On certiorari, Quel contended the ICA, circuit court, and ERS Board erred in adopting the definition of “occupational hazard” contained in Hawaii Administrative Rules § 6-22-2 (effective 1989-2009), which defined the term as “a danger or risk which is inherent in, and concomitant to, a particular occupation or particular job, if [it is] not a risk common to employment in general.” Quel contended Haw. Admin. R.
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§ 6-22-2 contravened Haw. Rev. Stat. § 88-79(a), as Haw. Rev. Stat. § 88-79(a) affords service-connected disability retirement to members for permanent incapacity due to “some occupational hazard.” Quel also asserted error in the ICA and circuit court’s affirmance of the ERS Board’s conclusion that her permanent incapacity did not result from an “occupational hazard.” The Hawaii Supreme Court held that Haw. Admin. R. § 6-22-2 correctly defined an “occupational hazard” as “a danger or risk which is inherent in, and concomitant to, a particular occupation or particular job, if [it is] not a risk common to employment in general[,]” as the definition is based on decisions in Lopez v. Board of Tr., Emp.’ Retirement Sys., 66 Haw. 127, 129, 657 P.2d 1040, 1042 (1983), and Komatsu v. Board of Tr., Emp.’ Retirement Sys., 67 Haw. 485, 494, 693 P.2d 405, 411 (1984). The Hawaii Supreme Court further held that the definition of “occupational hazard” for purposes of service-connected disability retirement benefits did not include a requirement that permanent incapacity resulting from the cumulative effects of work-related activities be “limited to a relatively few number of occupations.” Finally, the Hawaii Supreme Court also held that the ERS Board clearly erred in finding and concluding that Quel’s permanent capacity did not result from “a danger or risk which is inherent in, and concomitant to,” her “particular occupation or particular job,” which was “not a risk common to employment in general.”
Intermediate Court of Appeals Foreclosure Delapina v. Nationstar Mortgage LLC, No. CAAP-17-0000387, February 12, 2020, (Chan, J.). In this appeal, Plaintiffs challenged the several final orders of the circuit court. The ICA concluded that the circuit court erred in dismissing
Plaintiffs’ claims against Nationstar, Fannie Mae, Cole, and ASB but did not err in dismissing the claim against MERS. As to Nationstar and Fannie Mae, the ICA concluded that Plaintiffs’ wrongful foreclosure claim based on deprivation of ownership was subject to, and properly brought within, the six-year statute of limitations under Haw. Rev. Stat. § 657-1 (2016) and the circuit court erred in concluding that the claim was time-barred. As to MERS, the ICA concluded that dismissal was proper where Plaintiffs failed to allege that they tendered or were able to tender the amount of their indebtedness to Nationstar under the mortgage pursuant to the tender rule. As to Cole and ASB, the ICA concluded that Plaintiffs pleaded sufficient factual allegations for their quiet title and ejectment claims to survive dismissal under the notice pleading standard.
Labor Porter v. The Queen’s Med. Ctr., CAAP16-0000602, February 21, 2020, (Chan, J.). Appellant, self-represented, appealed from the Decision and Order entered by the Labor and Industrial Relations Appeals Board (LIRAB) that addressed whether Appellant’s requests to reopen her workers’ compensation case for alleged Multiple Chemical Sensitivity related injuries occurring in 2002 and 2003 met the requirements set forth in Haw. Rev. Stat. § 368-89(c). The ICA concluded that Appellant waived her fraud claims in her previous case, Porter I, including her claim to reopen a workers’ compensation claim related to an alleged May 13, 2003 injury. The ICA also held that the LIRAB did not err in determining that Appellant failed to make the requisite showing of substantial evidence required by Haw. Rev. Stat. § 386-89(c) to obtain the relief sought in her workers’ compensation claims.
ATTORNEY WANTED DEPUTY PROSECUTING ATTORNEY The County of Maui Department of the Prosecuting Attorney, seeks to fill position(s) at the entry to high experience level(s) as a Deputy Prosecuting Attorney. Applicants must have an active Hawaii State Bar license, be in good standing and experience in criminal law. Competitive salary commensurate with years of experience ranging from $66,000 to $130,000. Please send letter of interest, resume, writing sample, and three references to: Don S. Guzman, Prosecuting Attorney, 150 South High Street Wailuku, Maui, Hawaii 96793 E-mail: Prosecuting.Attorney@co.maui.hi.us F U K U N AG A M ATAYO S H I C H I N G & KON-H ER R ER A is looking to hire an associate attorney with three to five years of civil litigation experience. The firm handles a variety of cases in numerous practice areas including products liability, construction, professional liability, personal injury, and insurance law. Must be licensed in Hawaii with experience in both state and federal courts. Qualified candidates must have exceptional research, writing, and analytical skills; ability to manage multiple cases and assignments; excellent verbal and written communication skills; and a desire to learn. The firm offers a competitive salary and benefits package Interested applicants should email their resume and letter of interest to eol@fmhc-law.com KESSNER UMEBAYASHI BAIN & MATSUNAGA is seeking an associate attorney to join its team. Qualified candidates must be licensed to practice law in Hawaii and must also demonstrate effective communication skills and strong research and writing skills. Two years of experience is preferable. Competitive benefits offered, including 401(k), medical, dental and vision coverage, vacation and sick leave and parking. Salary commensurate with experience and qualifications. Interested applicants should submit a cover letter, resume and writing sample to lawyers@kdubm.com. LITIGATION DEPARTMENT of Honolulu boutique law firm that has served Hawaii for more than 25 years seeks a talented, conscientious associate. Practice areas include maritime defense and insurance, insurance coverage, commercial, products liability, and insurance defense litigation. Candidate must have strong academic credentials and welldeveloped research and writing skills. Will have direct client contact, so strong verbal and written communication skills are a must. Experience with Microsoft Office, including Word, Excel, and Outlook a plus. Expected to work independently, but in a team-based
environment. Candidates must already be licensed to practice in the State of Hawaii at time of application. Competitive salary commensurate with experience and excellent benefits that include: Medical/Dental/Vision insurance, parking, vacation and sick leave, 12 holidays per year, and enrollment in company retirement/401(k) plan after one year. Please reply to this ad by sending your cover letter, resume, and writing sample to info@ macdonaldrudy.com. No phone calls please. All submissions will be held in s tr ict confidence. LYONS, BRANDT, COOK & HIRAMATSU seeks civil litigation attorney to join and grow our team of lawyers. Responsibilities include all aspects of case investigation and discovery, legal research and writing, court appearances and oral arguments, trial preparation and participation, and appellate briefing and arguments. Preferred applicants have litigation experience, excellent verbal and written communication and advocacy skills, are highly detail oriented and organized, have solid judgment and strong integrity, and are able to work independently and as part of a team. Applicants must be licensed to practice law in Hawaii and in good standing. Salary commensurate with experience. Benefits offered. Please send letter of interest and resume to hr@lbchlaw.com.
EXPERT WITNESS AQUATIC SAFETY EXPERT 28 years aquatic Experience. Qualified as an expert in state and federal courts. See our ad on page 56 of the HSBA Directory. Aquatics consulting Service 808-960-9348 www.aquaticsconsulting.com CONSTRUCTION DEFECTS, contractor issues, premises liability, real estate disclosure. National Building Expert. Best Selling Author. www.lanceluke.com 808-422-2132 PPREMISES SECURITY EXPERT Case Evaluation • Expert Witness • 45 Expert Retentions • Court-Qualified in Hawaii 1st, 2nd & 5th Circuits • Consulting (surveys, documents, procedures, design) Albert B. “Spike” Denis, CPP, CFE. Pacific Security Group LLC. 1050 Bishop Street, Suite 303, Hono, HI 96813. Spikedenis@hawaii.rr.com Tel:808.224.4559 REAL ESTATE: Over 45-years as a Developer, Broker, Builder and Realty Advisor. HI Broker’s License, MBA/USC, extensive development and brokerage background. Seasoned real estate veteran with substantial “Real-World” experience and proven Trial testimony. Web: www.castlelyonshawaii.net. Watch 2-minute video. Call Michael K. Ryan, President, CastleLyons Corp. -- 808.282.4059.
REAL ESTATE/PROPERTY MGMT/AOAO expert. See www.jurispro.com. Search for “Griswold”. Robert S. Griswold, CRE, CPM, CCIM, PCAM, CCAM, GRI, ARM. www.griswoldremgmt.com (858) 597-6100
LEGAL ADMINISTRATION ONE ON ONE litigation legal/administrative assistant wanted for name partner in high volume civil trial practice. Must be a selfstarter with strong communication skills, able and willing to deal directly with clients, and work well with others. 5-7 years experience in civil litigation practice a must, including knowledge of state/federal court rules, along with working knowledge of Microsoft Word. Experience with Juris preferred. Competitive benefits offered; salary commensurate with experience. All interested applicants should email their current resume and cover letter to hr@lbchlaw.com
LEGAL CONSULTING LEGAL NURSE CONSULTING Assistance in managing the medical aspects of your case. Legal Nurse Consulting, Life Care Planning, & Workers’ Compensation Nurse Case Management. Cynthia L. Fricke, RN, BSN, CCM, CLCP. (808) 253-0232. www.islandlegalnurse.com frickec001@hawaii.rr.com
LEGAL WRITING /RESEARCH EXPERIENCED ATTORNEY will provide legal writing services. Motions, memos, complaints, appellate briefs, and other writing assignments. Reasonable rates. Writing samples, and references provided on request. Call (808) 7358701 or (808) 227-2141.
OFFICE SPACE AVAILABLE - March 1, 2020. Interior office in a shared class A law office suite downtown. $400 per month. Includes kitchen and referral work opportunities. marc@attorneysforfreedom.com. AVAILABLE - Two window offices (1 or both), in a friendly, shared law office suite, located downtown, with beautiful 28th floor views. Includes conference room, kitchen, room for support staff, if necessary. Available June 1, 2020. If interested, call Bob at 524-7331.
RECRUITING / TEMP STAFFING HiEmployment is Hawaii's best choice for finding top legal talent. Professional recruiting and temp staffing services available. 695-3974. email: info@hi-employment.com
April 2020
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