EB Attorney Michael Rolland Presenting at Desert Blockchain Citizen Workshops Event

Today, October 20th, Engelman Berger attorney Michael Rolland will be presenting at the Desert Blockchain Citizen Workshops Event at the University of Advancing Technology in Tempe. Desert Blockchain is a community group devoted to connecting blockchain innovators and developers and providing valuable industry specific information. Michael will be presenting on the topic of “Arizona FinTech Sandbox” and covering the subtopics of how to apply to the Arizona FinTech Sandbox, update on the progress of the sandbox initiative, and why you can benefit from starting your project in the sandbox.

To spread the word about Arizona’s FinTech sandbox, Michael has been a continuous contributor to Engelman Berger’s blog with his five-part series titled “How to Play in Arizona’s FinTech Sandbox” where he informs the public about who is eligible to participate, how to apply and complete your application, what the benefits are, and how to comply with the sandbox’s regulations. Read part one through five here:

Part I: https://www.eblawyers.com/blog/how-to-play-in-arizonas-fintech-sandbox/

Part II: https://www.eblawyers.com/blog/how-to-play-in-arizonas-fintech-sandbox-part-ii/

Part III: https://www.eblawyers.com/blog/how-to-play-in-arizonas-fintech-sandbox-part-iii/

Part IV: https://www.eblawyers.com/blog/how-to-play-in-arizonas-fintech-sandbox-part-iv/

Part V: https://www.eblawyers.com/blog/how-to-play-in-arizonas-fintech-sandbox-part-v/

Engelman Berger to Sponsor TCH Monster Mash & Prom Event

Engelman Berger is proud to support The Centers for Habilitation (TCH), Arizona’s largest non-profit supporting and empowering adults with intellectual, developmental and physical disabilities. TCH’s employment, day programs, and in-home care program services work to improve the quality of life, alleviate barriers to independence, and help Arizonans of all ages reach their full potential. We hope you can join us this Saturday, October 13, 2018, as Engelman Berger sponsors TCH’s annual Monster Mash Fundraiser / 80’s PROM night! The event will be at the TCH Building (215 West Lodge Drive, Tempe 85283) at 6:30PM. Visit www.tchmash.com/ for tickets. We hope to see you there!


The Arizona legislature recently signed into law the nation’s first fintech regulatory sandbox, which started accepting applications on August 3, 2018. Participants in the sandbox will enjoy a reprieve from many of the licensing and regulatory burdens of companies in the financial sector, so the program offers a great incentive for financial technology (aka, “fintech”) companies to settle and operate in Arizona. This is the last of a five part series on how to apply and participate in the sandbox. If you are new to the series, go back and read the first four parts, which discuss the history of sandbox programs, the benefits of participation in the Arizona sandbox, eligibility requirements, and the application process. This part five will explain the rules you will be subject to once in the sandbox. The official website for the fintech sandbox was recently launched and can be viewed HERE, and the full text of the law can be viewed HERE.


Operating restrictions: Sandbox participants are only permitted to test their innovation for a period of 24 months, and only on 10,000 Arizona consumers. If the participant demonstrates “adequate financial capitalization, risk management process and management oversight,” then the AG’s office may agree to expand the size of the participant’s test market to 17,500 consumers. Consumer lenders are permitted to issue consumer loans up to $15,000 (except loans to a single consumer may not exceed $50,000), and money transmitters may engage in transactions up to $2,500 (aggregate of $25,000). Money transmitters that satisfy the capitalization and management requirements to increase the market size to 17,500 may also be eligible to increase their transaction limits to $15,000 (aggregate of $50,000).

Statutory Compliance: As was discussed at greater length in part two, the primary benefit of the sandbox is exemption from all state licensing and regulatory obligations except for the ones specifically identified by the sandbox program. I will not attempt to itemize the specific statutory requirements that continue to apply in the sandbox or their implications for each industry, but suffice to say, participants must take special care that they do not violate the rules they are still subject to. Critically, the sandbox does not exempt participants from federal statutes and regulations.

Document retention and reporting requirements: The recordkeeping requirements normally applicable to companies in the financial sector are replaced by the sandbox’s simpler requirement: participants must retain records, documents and data produced in the ordinary course of business. The sandbox does not currently have a period reporting requirement, but sandbox participants must be ready to disclose records, documents, and data to the AZ AG upon request at any time. The AZ AG will also have the authority to establish a periodic reporting requirement in the future as it sees fit. These records will be used by the AG’s office in connection with their oversight role, and will not be considered public records generally available to the public. However, the records may be disclosed to other state, federal, and even foreign authorities.

Consumer Protection: Sandbox participants will still be required to take certain steps to ensure that their products and services do not harm consumers. For example, if the innovation fails before the end of the testing period, participants are obligated to promptly notify the AG’s office and report on the steps it took to protect its consumers. If the participant becomes aware of a data breach compromising sensitive data, the participant is still subject to the requirements of A.R.S. § 18-545, which requires prompt notice to affected consumers.

Finally, before providing a product or service, participants will need to make a clear and conspicuous disclosure in English and Spanish, and for online transactions the consumer must acknowledge receipt. The disclosure must include five statements: (1) the name, registration number, and contact information for the participant, (2) that the participant does not have an Arizona license but is authorized under the sandbox program, (3) that the state of Arizona does not endorse the innovation, (4) that the product is in a test phase that may terminate upon a specified date, and (5) that consumers can contact the Arizona AG’s office to complain.

Don’t Be A Fraudster: All sandbox participants are still subject to the Arizona Consumer Fraud statute (A.R.S. § 44-1521 et seq.), which generally prohibits false, deceptive, or misleading statements in connection with an advertisement or sale. Violators are subject to civil penalties and may get booted from the program. Unsurprisingly, participants will also get booted from the program for violation of state or federal criminal laws.


Arizona’s fintech sandbox program is a tremendous opportunity for startups as well as established financial services companies that are developing new innovative products. Not only does it provide a safe and less costly way to test your innovation in the marketplace prior to a full launch, but it also puts you in a good position to immediately take advantage of any similar sandbox program launched by the CFPB in the coming years.

About the Author: Michael Rolland is a member of the civil litigation and commercial transactions practice groups with the law firm of Engelman Berger, P.C. Michael has a special interest in the intersection of technology and the law, and writes on tech law issues.


Disclaimer: This blog is not legal advice and is only for general, non-specific informational purposes. It is not intended to cover all the issues related to the topic discussed. If you have a legal matter, the specific facts that apply to you may require legal knowledge not addressed by this blog. If you need legal advice, consult with a lawyer.

Engelman Berger to Sponsor 2018 Arizona Biz Bash Event

Come join Engelman Berger at the 2018 Arizona Biz Bash event on October 4, 2018. The event will be held at the Van Buren in Phoenix, Arizona and doors open at 6:30PM. Engelman Berger is looking forward to sponsoring this fun, beneficial, community oriented, and entertaining event.

Biz Bash is an exclusive client event whose goal is to bring together members of the community to support two Arizona nonprofit organizations supporting children and families in need: Feeding Matters and New Pathways for Youth. Since Biz Bash was launched in 2001 in Colorado, this wonderful event has distributed over $5.7 million to non-profit organizations in both Arizona and Colorado. Biz Bash is host to a wonderful experience that includes live music by “The Groove Merchants,” dancing, multiple unique food stations, a hosted bar, and short speeches. Biz Bash also gives participants the opportunity to bid on items in a high-end silent auction.

Engelman Berger prides itself on giving back to the community and we are looking forward to being part of this fun and beneficial event. We look forward to seeing you there!

Case Alert – Ruffino v. Lokosky In The Age Of Email, Service By Publication Is On The Way Out

In Ruffino v. Lokosky, No. 1 CA-CV 17-0353, 2018 WL 3384998 (Ariz. Ct. App. July 12, 2018), the Arizona Court of Appeals held that, under some circumstances, alternative service by email, or even social media, may be a more appropriate means of providing notice of a lawsuit than service by publication.

Judge Paul J. McMurdie delivered the opinion of the Court, in which Presiding Judge Diane M. Johnsen and Judge David D. Weinzweig joined.

Ruffino filed suit against Lokosky for defamation and other related torts for a series of statements by Lokosky on her website. After several failed attempts to serve Lokosky at three addresses identified through skip tracing, Ruffino proceeded with service by publication. Lokosky failed to appear, and the superior court entered a default judgment awarding Ruffino $264,062.50 in damages and injunctive relief. The default judgment was later amended to permit Ruffino to take control of Lokosky’s website, and it was at this point that Lokosky first appeared in the action. Lokosky sought a temporary restraining order and also asked the court to set aside or vacate the default judgment under Arizona Rules of Civil Procedure (“Rule”) 55(c) and 60(b).

After an evidentiary hearing on the issue of service, the superior court made a factual finding that “Ruffino could have communicated with Lokosky about service through several online channels,” which the court later clarified included Lokosky’s email address, phone number, and social media that Ruffino had previously used to communicate with her.  Id. at ¶ 6.

Under Rule 4.1(l)(1), service by publication may be made only if “the serving party, despite reasonably diligent efforts, has been unable to ascertain the person’s current address;” or “the person to be served has intentionally avoided service of process;” and  “service by publication is the best means practicable in the circumstances for providing the person with notice.”

The court held that Ruffino had failed to satisfy the requirement of Rule 4.1(l)(1)(A)(i) that he make “reasonably diligent efforts” to ascertain Lokosky’s current address prior to effecting service by publication, because he did not attempt to contact the defendant via available online channels. Id. at ¶ 14 (“A reasonably diligent effort by Ruffino would have included reaching out to Lokosky via telephone, email, or even social media to verify her correct address.”).

The court further held that, even if the plaintiff had made such reasonably diligent efforts, service by publication would still not be available because under the circumstances it was not the best means practicable to provide notice, as required by Rule 4.1(l)(1)(B). The court stated that “[g]iven our present society, we agree with the superior court that modern methods of communication, especially email, were more likely to give Lokosky notice of a suit than publication in a newspaper distributed in a rural area 70 miles from Lokosky’s Scottsdale home.” Id. at ¶ 16 (emphasis added).

Civil litigators should all sit up and take notice of the court’s opinion in Ruffino. In most civil disputes between parties that already know each other—which includes the vast majority of business disputes—the parties will have already communicated by email, phone number, or social media. Ruffino effectively eliminates the availability of service by publication in these cases. However, Ruffino also sends a strong message to lower courts that service by email, and even social media, should be taken seriously as viable methods of satisfying due process. In theory, our courts have always had the procedural authority under Rule 4.1(k) to approve these methods of service (and Rule 5(c)(2)(D) contemplates service after appearance by electronic means), but there has never been clear precedent from our court of appeals blessing these methods as not only valid, but also superior to service by publication.

Going forward, if the current address of the defendant is not known and cannot be discovered through conventional means, litigators should always ask their clients whether they are able to contact the defendant via email or social media. If so, use those channels to ask the defendant for a current address and, if possible, to send a copy of the service package. Be sure to document your efforts. If the defendant does not cooperatively provide you with a current address, Ruffino provides a strong basis to move for alternative service using the online channel available to you.

This is a sensible and very welcome decision by the court. Despite historical acceptance of service by publication, the idea that publication of a summons in the back pages of some obscure physical newspaper is an effective way to give notice in our modern age borders on absurdity.

Engelman Berger Sponsor of Phoenix Rising FC Charities Golf Tournament

This Friday, September 28, 2018, Phoenix Rising FC Charities is hosting a golf tournament at the McCormick Ranch Golf Club. Engelman Berger is proud to be a sponsor of this event. Attending on behalf of EB will be EB attorney, Tamalyn Lewis. In her law practice, Tami represents financial institutions, landlords, creditors, and individuals in commercial bankruptcies, foreclosures, loan workouts, agricultural matters, and real estate matters. The golf tournament will begin with a shotgun start at 1PM and finish with an awards dinner at 6PM.

All proceeds from the tournament will go directly to the Phoenix Rising FC Youth Soccer Club, formerly known as Scottsdale Soccer and the Blackhawks. The Club Phoenix Rising FC Youth Soccer Club provides child soccer players with a chance to enjoy the benefits of being part of a team while developing soccer skills in a fun and rewarding environment. The Club also helps children build self-confidence and develop positive character traits through soccer. Individuals and companies interested in being a sponsor of the golf tournament, or playing, or both can find more information at http://www.blackhawksgolftournament.com/.

Engelman Berger’s Julie Arvo MacKenzie and Brigitte Finley Green to Attend 43rd Annual Bond Lawyers Workshop in Chicago

The National Association of Bond Lawyers will host its 43rd annual workshop in Chicago on September 26-28, 2018 at the Fairmont Chicago. Engelman Berger’s Julie Arvo MacKenzie and Brigitte Finley Green will be attending.

The event will host 31 different panel presentations on topics covering virtually every area of public finance. The workshop will provide attendees opportunities to strengthen their technical knowledge, learn the best practices for dealing with legal liability, earn ethics credits, learn about current trends and developments in tax and securities law, and hear from leading practitioners and industry experts.

Engelman Berger is looking forward to hearing about the latest in bond finance from Julie and Brigitte.

The National Association of Bond Lawyers (NABL) was established in 1979 to promote the integrity of the municipal market by educating its members in the laws that affect state and municipal bonds. NABL provides its members with a forum where they can exchange ideas regarding law and practice and access tools to helps them excel in their practice. NABL also provides commentary and recommendations at the federal, state, and local levels on legislation, regulations, and rulings affecting bonds. #2018NABLBAW

When Litigation is on the Horizon, Understand Your Duty to Preserve Electronically Stored Information

Every business strives to avoid a trip to court house, but at times litigation cannot be avoided.  Businesses (and individuals) are wise to have legal counsel already in place before litigation ensues.  Having an established relationship with legal counsel before facing litigation allows your business to be prepared to protect and advance its legal rights from the very beginning of the dispute.  One critical reason to have legal counsel in place is to ensure your business understands it obligations to preserve all evidence – both electronic and physical – that is relevant to the potential dispute.  In today’s electronic business environment where the great majority of data is created and stored electronically, it is critical that businesses understand their obligations to preserve their electronic data.  By properly preserving data, a business can ensure the critical evidence in support of its case can be disclosed during the litigation and ultimately presented to the finder of fact.

The Arizona Rules of Civil Procedure (ARCP) set forth the requirements of all parties to the case to preserve and disclose “electronically stored information” (ESI).  Rule 26.1(a)(9) requires all parties to any civil litigation to disclose their relevant ESI to all other parties to the litigation.  In layman’s terms, this rule requires a party to preserve and then provide the opposing party with access to all relevant ESI, such as emails, text messages, excel spreadsheets (this is by no means an exhaustive list) that are not protected from disclosure by a privilege (such as the attorney-client privilege).  A failure to preserve relevant ESI exposes the offending party to powerful sanctions.

These sanctions for failure to preserve ESI are set forth in Rule 37(g).  If ESI is lost because a party failed to take reasonable steps to preserve the data, under Rule 37(g)(2), the Court must then determine whether the party that failed to preserve the information “acted to deprive another party of the information’s use in the litigation.”  In other words, the Court must determine if the party intentionally destroyed its ESI to avoid disclosing that ESI to the other parties in the case.  If the Court determines a party did act to deprive another party of relevant ESI, the Court may impose sanctions under Rule 37(g)(2)(B) including: (1) presuming the lost ESI was unfavorable to the party that failed to preserve the data; (2) instructing the jury that it must presume the lost ESI was unfavorable to that party; or (3) dismissing the lawsuit (if the Plaintiff destroyed the ESI) or entering a default judgment (if the Defendant that destroyed the ESI).  These sanctions will inevitably lead to a poor result in the litigation for the party that failed to preserve its ESI, and likely expose that offending party to an award of attorneys’ fees in favor of the opposition.

Alternatively, if the failure to preserve data was not intentional, Rule 37(g)(2)(A) nevertheless authorizes the Court to make such orders that cure the harm caused by the loss of the ESI. While not as damaging as the sanctions for intentional destruction of ESI, no litigant wants to be in a position where a Court must make an order with the explicit purpose of helping the opposition recover from the inadvertent destruction of ESI.

In order to avoid these potential sanctions for the destruction of ESI, businesses must know when their obligations to preserve ESI begin.  Here, Rule 37 again provides guidance.  Rule 37(g)(1)(A) states that a party “has a duty to take reasonable steps to preserve ESI relevant to an action once it commences the action, once it learns that it is a party to the action, or once it reasonably anticipates the action’s commencement, whichever occurs first.  Rule 37(g)(1)(B)(i-ii) then proceeds to define “reasonable anticipation” to mean when a person “knows or reasonably should know that it will likely be a defendant in a specific action” or “seriously contemplates commencing an action or takes specific steps to do so.”  The duties to preserve evidence and the sanctions set forth in Rule 37 for the failure to preserve ESI are consistent with Arizona case law regarding the destruction of physical evidence.  See Souza v. Fred Carries Contracts, 191 Ariz. 247, 251, 955 P.2d 3 (App. 1997) (“[L]itigants have a duty to preserve evidence which they know, or reasonably should know is relevant in the action, is reasonably calculated to lead to the discovery of admissible evidence, is reasonably likely to be requested during discovery and/or is the subject of a pending discovery request.”).

Based upon the parameters set forth in Rule 37, a business’s duty to preserve ESI may arise much earlier than its leadership may realize.  As an example, a lender has a borrower that defaults on a loan payment.  The lender sends a notice of default letter to its borrower reserving all of its rights under the loan documents.  Pursuant to Rule 37, the lender’s duty to preserve ESI began at the time the decision was made to send the notice of default.  The lender has a duty to preserve all relevant ESI (such as all emails between the borrower and lender representatives). As another example, a company hires a new employee that the company did not know was subject to a non-compete provision from the employee’s previous employer.  The previous employer sends the company a letter informing the company that it has hired the employee in violation of a covenant not to compete and threatens legal action.  At that point in time, the company (and the previous employer) has a duty to preserve all relevant ESI related to that employee, including email correspondence, on-line employment applications, etc.

Experienced litigation counsel can guide their clients through ESI preservation obligations as well as the production of ESI.  Once you have retained counsel, the duty to preserve evidence – in your possession and in your opposition’s possession – is an important issue to discuss. Your legal counsel should provide you, the client, written guidance as to what relevant ESI needs to be preserved.  Additionally, your legal counsel may send a “litigation hold” letter to all opposing parties and/or their counsel advising them of their ESI preservation duties under Rules 26.1 and 37. Through a litigation hold letter, your counsel places the opposition on notice of its obligations to preserve all relevant evidence in their possession, including ESI.  This will prevent the opposition from later claiming it was unaware of its preservation obligations and insure your ability to obtain critical evidence in the opposition’s possession.

If you have any questions regarding your obligations to preserve evidence for purposes of civil litigation, contact your legal counsel to discuss and work through these issues.  These questions should be asked at the beginning of any potential dispute to ensure that all evidence – including ESI – is preserved.

About the Author: Damien Meyer is a shareholder with Engelman Berger and a member of the civil litigation practice group. Damien practices primarily in commercial litigation and business counsel. His focus is to assist businesses and individuals in resolving disputes on a proactive basis to achieve and protect their business objectives and interests.


Disclaimer: This blog is not legal advice and is only for general, non-specific informational purposes. It is not intended to cover all the issues related to the topic discussed. If you have a legal matter, the specific facts that apply to you may require legal knowledge not addressed by this blog. If you need legal advice, consult with a lawyer.

Engelman Berger Attorney Scott Cohen Presenting at ABA Annual Business Law Section Meeting

Scott Cohen, a shareholder of Engelman Berger, will be presenting at the American Bar Association Annual Business Law Section meeting in Austin, Texas. The event will be held at the Fairmont Austin Hotel from September 13-15, 2018, and will feature many great speakers.

Scott, a member of the ABA, will be presenting on the topic of “Successor Liability in Asset Acquisition Transactions, Mergers and Acquisitions and Business Bankruptcy Committees.” During his presentation, Scott will present a comprehensive approach to analyzing and minimizing successor liability risk in asset purchase transactions through specific structural steps, due diligence and insurance strategies.

This year’s ABA Annual Business Law Section meeting will feature over 80 CLE programs, presented by many leaders in all areas of business law. Those who attend will be able to connect with colleagues and learn at substantive sessions, as well as at hundreds of committee and subcommittee meetings. The meeting will provide a great opportunity for over 1,600 business law professionals from over 20 countries to network together.


The Arizona legislature recently signed into law the nation’s first fintech regulatory sandbox, which started accepting applications on August 3, 2018. Participants in the sandbox will enjoy a reprieve from many of the licensing and regulatory burdens of companies in the financial sector, so the program offers a great incentive for financial technology (aka, “fintech”) companies to settle and operate in Arizona. This is the fourth in a five part series on how to apply and participate in the sandbox. If you are new to the series, go back and read the first three parts, which discuss the history of sandbox programs, the benefits of participation in the Arizona sandbox, and eligibility requirements. This part four will explain the application process, and part five will address how to comply with the rules once you are in the sandbox. The official website for the fintech sandbox was recently launched and can be viewed HERE, and the full text of the law can be viewed HERE.


Applying for the sandbox is pretty straightforward: complete a separate application form for each innovation you plan to test, and pay a $500 application fee. The $500 fee will be deposited by the attorney general into the Consumer Protection-Consumer Fraud Revolving Fund, which is a fund used by the attorney general for operating expenses for consumer protection division.

Applications are reviewed by the attorney general’s office on a rolling basis, and decisions will be rendered within ninety days. Under A.R.S. §41-5603(J), the attorney general has absolute discretion to deny an application, and there is no process to appeal the denial. This means that your application better be polished from square one. However, there does not appear to be any restriction on re-applying following a denial, so in theory you can keep submitting new applications (paying a fresh $500 fee each time) until you are admitted.

The application form essentially has two parts: (1) describe your company and its employees, and (2) describe the innovation you will be testing. You are permitted, but not required, to supplement your application with “Supporting Documents.”

Description of Your Company

This section of the application generally requests basic identification and contact information, like the state of incorporation, addresses, federal tax ID, etc., most of which is simple enough for anyone to complete. However, there are a few sections that warrant scrutiny. First, you must designate a contact person for inquiries by the attorney general, and a contact person to handle consumer complaints. These roles can be filled by the same person, and in either case you should take the designation very seriously. Maintaining good standing in the sandbox will probably require quick and careful responses to all complaints and inquiries. These designated contacts will be on the front lines, and will be the first, and sometimes only, person to interact with the attorney general and/or consumers about any problems with your innovation. Make sure the person you appoint has the time to address inquiries quickly, the regulatory knowledge to respond to them accurately, and authority within the company to mandate any necessary internal changes.

Second, you must identify and describe the duties of all “Active Managers,” who are defined as:

any individual or entity, paid or unpaid, that: (i) is primarily responsible for Testing the Product or Service; (ii) has direct supervisory authority over the staff Testing the Product or Service; or (iii) serves as an officer or director of the business or business unit that is Testing the Product or Service.

You must similarly identify “Key Personnel,” who are defined to include Active Managers and any person that owns 15% or more of the company. Before submitting your application, you should ensure that none of your Key Personnel have any black marks on their record. The application specifically requires you to disclose whether any Key Personnel have a felony conviction, have had a civil judgment, order, sentence or even settlement agreement relating to “fraud, money laundering, or a breach of fiduciary duty or trust,” or have been the target of government investigations or regulatory actions relating to financial goods and services. If at all possible, you should take steps to ensure that the people responsible for implementing and overseeing the innovation do not have this type of checkered history. If that is unavoidable, then you should supplement your application with Supporting Documents that demonstrate why the Key Personnel’s history will not undermine the attorney general’s mandate to ensure that consumers are protected.

Third, you must disclose whether you are already licensed to provide a similar service in another state. The attorney general will probably use this information to contact the governing regulatory authority in that state to discover whether you have ever been subject to negative agency action. If you are a larger institution, it is entirely possible you have been the recipient of numerous consumer complaints and/or regulatory censures. We do not yet have any guidance from the attorney general’s office on how they will evaluate this type of history, but I would imagine that they will focus not only on the volume and nature of complaints/censures, but also on how you responded to regulatory issues in the past. Do you respond to complaints quickly? Did you timely comply with all regulatory orders? If this is a concern, you should coordinate with your regulatory department or compliance officer to prepare documentation to explain negative regulatory events.

Fourth, you also need to disclose whether you will be working with, or licensing any technology from, third parties as part of the innovation. These should also be closely scrutinized. Do any of your commercial partners have a history of negative regulatory action or been repeated targets of government investigations? This information will surely be discovered during the attorney general’s review of your application, so be prepared in advance to answer any tough questions that may arise from your choice of commercial partner.

Description of Your Innovation

This section is the real meat of the application, and will probably require the help of an attorney or someone well versed in the regulatory regime normally applicable to your innovation. There are seven subparts:

  1. About Your Product or Service
  2. Explain How Your Product or Service is Eligible for the Sandbox
  3. About Your Testing Plan
  4. Describe the timeline of the proposed Testing plan and key milestones for the Product or Service given the two-year Testing period and any possible extensions.
  5. What is Your Consumer Protection Plan?
  6. What is Your Exit Plan?
  7. What records and data will You keep in the ordinary course of business?

In this portion of the application you should keep in mind that, underlying all of the specific requests, the attorney general’s office is broadly evaluating whether your innovation offers real benefits to consumers, and whether it is likely to satisfy licensing requirements after completing the sandbox. Therefore, you should tailor your application to clearly demonstrate not only that your testing plan is designed to yield a completed product at the end of the two year testing period, but that you have safeguards in place to protect consumers if things do not proceed according to plan. You should probably also avoid unrealistic projections and overly effusive descriptions of your innovation. Rather, it is better to acknowledge the risks and challenges facing your innovation, because doing so will help demonstrate that you are adequately equipped to address them.

I should also note that your application and any other records submitted to the attorney general will not be considered “public records” generally open to inspection by the public. Therefore, you should feel relatively free to be forthcoming in your application, without fear that some unfavorable piece of information will immediately show up in media headlines. Be aware, however, that these records can be disclosed to state and federal agencies, appropriate agencies of foreign governments, state auditors, and in response to a subpoena.

Getting into the sandbox can be a challenge. You may need to solicit the help of an attorney to ensure your application is completed correctly, particularly if you are a startup or early stage company without experience navigating applicable the regulatory regime. If you do get admitted, then you need to put procedures in place to ensure that you comply with the sandbox’s requirements. More on that will be coming soon in the fifth and final installment of this series.

About the Author: Michael Rolland is a member of the civil litigation and commercial transactions practice groups with the law firm of Engelman Berger, P.C. Michael has a special interest in the intersection of technology and the law, and writes on tech law issues.



Disclaimer: This blog is not legal advice and is only for general, non-specific informational purposes. It is not intended to cover all the issues related to the topic discussed. If you have a legal matter, the specific facts that apply to you may require legal knowledge not addressed by this blog. If you need legal advice, consult with a lawyer.