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Monday, April 27, 2015

Boycotts: Effective...And Legal

The economic weapon of the boycott has perhaps never, ever been as used nor as feared as it is today. Yet the boycott may remain a largely undiscovered, and definitely underutilized, cost-effective tool for social justice and economic warfare. Why more people don't engage in boycotts, either on their own or with groups, is puzzling.

Boycotts are effective tools to amass and deploy collective economic purchasing power to make statements and change corporate behavior. Best of all, boycotts are cheap: it costs virtually nothing to do a boycott!

Boycotts are similar in philosophy to another collective action, the use of group affinity -- ethnic, geographic, ideological -- to attract, retain and reward customers and the merchants who serve them. The major difference is that boycotts use coordinated group action, not to reward, but to punish merchants.

The philosophy of "bite the hand that hits you" was best executed, covertly and with devastating consequences, by a major insurance company about 20 years ago. The insurer gave millions in annual business to a particular New York law firm, and was hurt by new state legislation just enacted. But when that firm turned around and hired the very Governor who refused to veto that very same legislation, the insurer decided to take its very large book of business elsewhere. 

The law firm, the once-venerable Mudge Rose, closed shop soon afterwards. Later on, one of the partners of the dissolved firm tried to sue the client. Amazing. (Source: Wall Street Journal archives, http://www.wsj.com/articles/SB86313633544372500). 

Boycotts can also spur counter-measures, and sometimes the counter-reaction can be even more effective than the original boycott. The 2012 controversy over support by the family founders of the Chick-fil-A chicken sandwich chain restaurant for a nonprofit supporting traditional marriage spurred a boycott by same-sex-marriage activists, followed by a counter-boycott in which customers and certain groups apparently ramped up their patronage of the chain. It was reported that the chain's sales grew 12% in the year of the controversy, despite -- or is it because of -- the boycott. (Source: Huffington Post Online, available at http://www.huffingtonpost.com/2013/01/31/chick-fil-a-sales-2012_n_2590612.html)

Both examples show the potency of domestic, individual, granular citizen action as well as the consequences for businesses which offend or attack their clients and customers. So in a society where the "e-mob" can threaten more and more reputational (if not purely economic) terror proportionately with the greater and greater size of its target, why don't we see even more boycotts, as well as affinity counter-responses?

One possible explanation is that the term 'boycott' has negative connotations because its use by industry participants to act in concert, to collude or conspire to punish or exclude others in an industry is considered anti-competitive and illegal. Such practices are considered actions "in restraint of trade" and violate federal antitrust law (Sherman Act). They may even violate state antitrust laws and both federal and state civil rights laws. 

But did you know that boycotts by individuals are actually quite legal?  In fact, the federal government approves and encourages the boycott as an activist weapon of choice.

Skeptical? Just read the transcript of remarks at the May 6, 2014 State Department Daily Press Briefing by spokeswoman Jen Psaki, which includes the following passage:
QUESTION: The second question was whether State officials stay at hotels owned by the sultan of Brunei or other Brunei entities when they travel, and what your, I guess, broader take would be on the boycotts that have been happening of such hotels in Los Angeles.

MS. PSAKI: Well, a boycott is an acceptable way, of course, for private citizens to express themselves. We don’t take a position on this specific effort. It’s our understanding that the boycott specifically targets the Dorchester Collection of hotels, which has issued a statement that it does not tolerate any forms of discrimination of any kind. As such, the State Department has no specific restrictions prohibiting an employee from staying in a Dorchester hotel.
(Emphasis added.)(Full transcript available at http://www.state.gov/r/pa/prs/dpb/2014/05/225687.htm#BRUNEI)

The Federal Trade Commission also clearly states that individual businesses can engage in boycotts as well. The following passage comes right from the FTC's own website:

Any company may, on its own, refuse to do business with another firm, but an agreement among competitors not to do business with targeted individuals or businesses may be an illegal boycott, especially if the group of competitors working together has market power.


The FTC further clarified:

A business can always unilaterally choose its business partners.


It should be clear: People have the right to take their business away from -- in short, to punish --  merchants with whom they may disagree, and reward other merchants with whom they have an affinity (e.g., ideological, religious, ethnic). By extension, so do individual businesses acting alone in choosing with whom to transact. Individual choices are not the same as group action among businesses in refusing to transact with other targeted merchants unless certain actions or conditions are met, or at all, which actions are likely to attract the scrutiny of regulators and prosecutors looking for violations of either the Sherman Antitrust Act or any of a variety of civil rights and anti-discrimination laws.  Furthermore, any individual business should be aware as a practical matter that the greater its market power, the greater the likelihood that its behavior may be challenged legally by other market players or regulators. 

Nevertheless, choice in trade by customers is clearly a form of expressive speech, political speech even, and falls under the protections of the First Amendment. These actions should not be confused with the anti-competitive objectives of collusion among businesses to exclude competitors or attempted new entrants to a market. Individual economic choice should be seen as nothing less than Constitutionally-protected free speech.

Thursday, April 9, 2015

Overcriminalization, Not Overinvestigation

There is a good column on "overcriminalization" by the noted syndicated columnist George Will this morning. But Will misses the mark on some very relevant points.

He points out -- so does Harvey Silverglate whose seminal 2008 book "Three Felonies A Day" is cited -- that prosecutors often overcharge as a strategy to win cases (and induce defendants to take plea deals often requiring them to agree to a prosecutor's recommendation for a prison sentence of some sort) through what I will term a war of attrition.

However, Will totally ignores some major points. First, the problem with abusive prosecutorial over-zealotry is that it threatens to ruin its victims. A defendant who successfully argues his or her innocence likely does so at the cost of financial ruin, never mind emotional ruin.

Secondly, it seems that the zeal to prosecute is not the same as, and does not involve, the zeal to actually investigate. It would be good to see this investigative determination when it comes to complex financial and terrorism cases, wouldn't it?

Finally, no analysis of legal and prosecutorial behavior is complete without recognizing the much tighter legal labor market at all levels. The oversupply of lawyers from years and years of too many law schools with little to no distinction and equally undistinguished law graduates entering the legal job market 400 to 500 per year per school, each year, finally had its predictable consequence when the 2008-09 recession hit. Demand by paying clients for legal services has been flat by many accounts since then, leading to some amazing downward pressure on salaries from a gross oversupply of lawyers (although arguably, top legal talent is still hard to find - or harder to motivate) in the face of flat (at best) customer demand.

How does this impact overcriminalization? One result of this is that government lawyers -- and particularly prosecutors at all levels -- have to have become increasingly worried about their ability to get and keep private sector jobs. It is foreseeable that prosecutors would seek to become increasingly marketable, and to win the prosecutor-recruiting beauty contests by firms. In other words, prosecutorial decisions may have become increasingly driven not by justice, but by prosecutors' zeal to compete for private sector (i.e., defense lawyer) job openings.

In such a market, justice, never mind diligence in making charging decisions, is unlikely to get much consideration at all.



Wednesday, April 8, 2015

Law Firm Name Changes: Bad News Ahead

A law firm founder recently announced his retirement after decades running and growing the firm.

The biggest law firms in the world took and retained the surnames of their founders, years and sometimes decades after their retirement and then after their passing.

These law firms, and to a lesser degree other businesses like accounting and engineering firms, realized that the founders carried a brand name with their last names.

So why would a successful law firm change its name when its founder "retired"?

That's the question with the New Jersey law firm Wolff Samson, which has done just that.

The Samson there, firm founder David Samson, is reportedly under federal criminal investigation for matters pertaining to Bridgegate or the Port Authority of New York and New Jersey, or something else.

It is rumored -- just speculation -- that Samson could be indicted. (More likely, and my educated guess: A name change means the target knows what is coming, so retirement is a prelude to the revelation of a plea agreement, which will precede an eventual guilty plea to something or other.)

If any of that is likely, that would be the sort of bad news that might precipitate a law firm name change.

But Samson isn't just any partner.

He is a former New Jersey Attorney General, the highest law enforcement official in the state.

Removing his name has major significance. The type of significance that the Stalinist Soviets used to address, by erasing all historical evidence of disgraced or apostate former leaders.

And there is historical precedent in the clubby law firm arena. In the last decade, the securities class action law firm Milberg LLP used to be called Milberg Weiss Bershad Hynes & Lerach. That's until three of the name partners went to federal prison for racketeering conspiracy. And Milberg was no small firm; it was THE king of the hill in the securities class action lawsuit field.

So when a prestigious law firm dumps the names of its founders, you would not be wrong to at least suspect that bad news is waiting in the wings.