Overlawyered: Chronicling The High Cost Of Our Legal System

Posts Tagged ‘extraterritoriality’

A traveling Chinese executive is arrested

Urged by the U.S., Canada recently arrested Huawei Chief Financial Officer Meng Wanzhou. “Meng was traveling in Canada, switching planes using a Chinese passport, when she was taken into custody.” For Tyler Cowen, the “procedural normality of the arrest is precisely what scares me. There are so many international laws, and so many are complex or poorly defined, and there are a couple hundred countries in the world. Arguably most multinational corporations are breaking some law in some manner or another, and thus their senior executives are liable to arrest. If I were a top U.S. tech company executive, I would be reluctant to travel to China right now, for fear of retaliation.” [Bloomberg] See also the FIFA (soccer) controversy, 2015, and related: our series of 2006 posts about the arrest of traveling British executives on charges of remotely violating U.S. online gambling laws.

For more on the scope of white-collar crime laws, see my chapter on white-collar prosecution in last year’s Cato Handbook for Policymakers 8th Edition.

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Andrew Grossman on municipal climate suits

 

In a recent Cato Daily Podcast with Caleb Brown, Cato adjunct scholar Andrew Grossman of Baker & Hostetler discusses the “legally aggressive” new round of climate change litigation, in which municipalities in California and Colorado, as well as New York City, have sued energy producers and distributors seeking to recover damages over the release of carbon dioxide into the atmosphere.

As Grossman notes, the idea of suing over the role of carbon emissions in climate change has by this point been tried many times. The most obvious approach would be to sue large industrial emitters of carbon, which is what some state governments did in one of the most prominent cases, filed against electric utilities. In its 2011 AEP v. Connecticut decision, however, the Supreme Court ruled that such outputs were regulated comprehensively and exclusively at the federal level through enactments like the Clean Air Act, and were not subject to an additional level of state regulation through public nuisance claims. Suits on other theories, such as Comer v. Murphy Oilfrom the Fifth Circuit and the Kivalina case in the Northern District of California, have been launched “to enormous bombast and press attention and they have all bombed out…. Those cases were the low-hanging fruit. Those were the more obvious legal theories if you were going to try to bring this kind of case,” he says.

Now the question is whether litigants can accomplish an end run by instead attacking upstream, pre-emissions activity, specifically the extraction and distribution of fossil fuels destined to be burned. Ambitiously, some of the new suits attempt to apply state common law to activities occurring around the world – to the doings of worldwide corporations such as Royal Dutch-Shell, for example, and to oil production from places like the coast of Norway and its subsequent use by European motorists. Needless to say, many of these processes are comprehensively regulated by the laws of the European Union and its member countries. Doctrinally, then, the new efforts get into even deeper water (so to speak) than strictly domestic claims. From the podcast:

If a court in California is going to go around telling Norway what to do, well, gosh, Norway may not really like that. And what do you do in that instance? It’s not apparent to me how this works. How does the court figure out what Norway’s regulations are and what Norway is doing about this? Who’s going to tell them? I don’t know. What if Norway disagrees with whatever it is that the court decides needs to be done in this case? Does Norway complain to the court? Do they send an ambassador to file a brief or something? I don’t know. This has never happened before. And what if Norway decides that they don’t like whatever it is the court is doing and they’re going to impose, say, reciprocal trade tariffs, or something like that, against the United States on the basis of one of these rulings? Does the court hold them in contempt?

Listen to the whole thing here (cross-posted from Cato at Liberty).

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FATCA may soon vex the British royal family

FATCA, the expatriate financial reporting law, has been a compliance nightmare for many ordinary Americans abroad, and soon it may vex the British royal family. Depending on how and whether Prince Harry mingles his finances with those of American-born fiancee Meghan Markle, various aspects of Crown finances might have to be reported to American authorities. “The United States and Eritrea are the only countries in the world that tax based on citizenship, rather than residency.” [Suzanne Lucas, Evil HR Lady/Inc.; Amy Alkon] More: Andreas Kluth, Bloomberg.

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Banking and finance roundup

  • “The Rise of Financial Regulation by Settlement” [Matthew C. Turk, Columbia Law School Blue Sky Blog]
  • Before buying into the idea that fractional reserve banking has some sort of fraudulent roots, consider the common law concepts of detinue, bailment, and debt [George Selgin, Cato]
  • Cato files brief urging Supreme Court to clarify constitutional status of SEC’s use of in-house administrative law judges [Thaya Brook Knight on Lucia v. SEC]
  • Between FATCA and the Patriot Act, American extraterritorial banking rules keep wreaking havoc on other countries [Ernesto Londoño, New York Times on Uruguay legal marijuana businesses]
  • “Congress Can Rescind the CFPB’s Gift to Trial Lawyers” [Ted Frank, WSJ]
  • “Absent Reform, Little Relief in Sight from Chronic “Merger Tax” Class-Action Litigation” [Anthony Rickey, WLF]

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Liability for abetting workplace bias

“Like the non-discrimination laws in a number of other states, including California, New Jersey, and Illinois, New York State’s Human Rights Law (‘NYSHRL’) contains a provision extending liability to those who aid and abet discrimination or retaliation.” The kicker is that New York’s law can impose extraterritorial liability on actors outside the state — such as a national moving and relocation firm that required by contract that its local contractor exclude from employment persons with certain categories of criminal convictions, and is now facing ban-the-box-related liability over that to New York plaintiffs that it did not itself employ. [Jodi Frankel, DLA Piper Labor Dish]

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Obama administration swats inversions, Pfizer deal collapses

After relatively cautious regulatory tightening on corporate inversions failed to deter a plan by Pfizer to embrace foreign domicile, the Obama administration came out with drastic new guidance that will keep accountants and lawyers busy for years with new disputes and uncertainties. Tax law is supposed to be relatively stable, predictable, and reliable for purposes of letting enterprises plan rationally, but that’s when political considerations don’t come first [Paul Caron, TaxProf citing Victor Fleischer, NYT and other links; earlier on inversions including Burger King episode] The underlying arrogance of U.S. overseas corporate tax policy: “We are unique among advanced nations in claiming taxes on global profits” [Hodak Value] Why corporate inversion makes moral sense and promotes healthy tax competition between jurisdictions [Daniel Mitchell, Cato and in January at Fortune]

Related: voters who believe in rule by executive fiat have so many choices this year, Bernie Sanders high among them [@joshgreenman on Twitter]

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Supreme Court and constitutional law roundup

  • Supreme Court has blocked for now “an election with racial qualifications that could eventually establish a new government for so-called ‘native Hawaiians.'” [Ilya Shapiro/Cato, earlier on Hawaiian tribalization here, here, etc.]
  • Some scholars seem a bit evasive about historic British use of gun control to disarm minority religionists [David Kopel]
  • Occupational licensure and Connecticut teeth-whitening case: does mere protection of incumbents against competition count as “rational basis” for government action? [Timothy Sandefur, Cato]
  • Class actions: some predict Court not likely to do much more than tinker [Alison Frankel, Paul Karlsgodt]
  • Update: “California woman who bought Eurail pass in US can’t sue here for Austrian accident, SCOTUS says” [ABA Journal, earlier]
  • Supreme Court should defend interstate commerce against extraterritorial Colorado law providing that electric power entering state must have been generated in certain ways [Ilya Shapiro and Randal John Meyer]
  • “Old, cryptic, or vague” 14th Amendment: Judge Posner can’t have his Constitution and eat it too, thinks Josh Blackman.

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FIFA: “Use of an American bank”

The federal government is bringing charges against the leadership of FIFA, the international soccer association, and Switzerland has arrested them in accord with American wishes. But are the jurisdiction of U.S. courts and U.S. criminal law really proper for this alleged international wrongdoing? David Post:

…ask yourself: if you think that the “use of an American bank” is a sufficient basis for the exercise of US jurisdiction over foreign nationals residing and conducting business abroad, then presumably you’re OK with being hauled into court in Singapore because you have used, say, a Singaporean bank, or into a Mexican court because your money found its way to a Mexican mortgage broker, or into a Danish court because you have at times used a Danish Internet Service Provider. Yes? When you look at it that way it becomes a little more difficult to applaud wholeheartedly – shouldn’t we have been able to count on the Swiss, within whose jurisdiction FIFA undoubtedly lies, to do something?

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Eleventh Circuit slaps down overly broad EEOC subpoena

After receiving a complaint of health-status discrimination from a Royal Caribbean Cruise Lines employee, followed by a response from the company saying that the employee was a foreign national working on a foreign-flagged ship and therefore not subject to EEOC authority, the agency launched a massive fishing expedition:

(1) List all employees who were discharged or whose contracts were not renewed [from August 25, 2009, through the present] due to a medical reason.
(2) For each employee listed in response to request number 1, include the employee’s name, citizenship, employment contract, position title, reason for and date of discharge, a copy of the separation notice and the last known contact information for each individual.
(3) For each employee listed in response to request number 1, include their employment application and related correspondence, any interview notes, the identity of the person who hired the employee, how the employee obtained the position (i.e., online, in person, recruiter), the location where the employee was interviewed, and the identity and location of the person who made the final hiring decision.
(4) List all the persons who applied for a position but were not hired within the relevant period due to a medical reason
(5) For each person listed in response to request number 4, include their citizenship, employment application and related correspondence, any interview notes, the identity of the person [who] hired the employee, how the employee learned of the position (i.e., online, in person, recruiter), the location where the employee was interviewed, and the identity and location of the person who made the final hiring decision.

The cruise line complied in (massive) part, but not fully, “providing records for employees and applicants who were United States citizens” but not others. The agency took the dispute to court and proceeded to lose at every stage, the Eleventh Circuit being the latest to find its information demands burdensome and irrelevant: “The relevance necessary to support a subpoena for the investigation of an individual charge is relevance to the contested issues that must be decided to resolve the charge, not relevance to issues that may be contested when and if future charges are brought by others.” [Hunton and Williams; Phelps Dunbar]

Meanwhile, the commission has issued its fiscal 2014 performance report; in explaining a drop in resolved complaints, its public statement cites the “lingering effects of sequestration and the government shutdown” but not the marked skepticism that judges repeatedly showed toward EEOC positions through the year.

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Tax flight: King seeks protection of Queen

CanadaQueenStampRemember when Canada was regarded as the high-tax, big-government country, and we weren’t? How times have changed. Burger King is considering becoming Canadian through a tax inversion deal with donut chain Tim Horton’s, aware that north of the border “corporate tax rates are as much as 15 percentage points lower than in the United States,” in the words of Daniel Ikenson at Cato, who writes: “If the acquisition comes to fruition and ultimately involves a corporate ‘inversion,’ consider it not a problem, but a symptom of a problem. The real problem is that U.S. policymakers inadequately grasp BurgerStamp that we live in a globalized economy, where capital is mobile and products and services can be produced and delivered almost anywhere in the world, and where value is created by efficiently combining inputs and processes from multiple countries. Globalization means that public policies are on trial and that policymakers have to get off their duffs and compete with most every other country in the world to attract investment, which flows to the jurisdictions where it is most productive and, crucially, most welcome to be put to productive use.” And the fact is that the United States, once the domicile of choice for international business, has slipped badly down the ratings of how difficult it is to do business in various countries. Policymakers “should repair the incentives that drive capital away from the United States.” Full post here. More: Stephen Bainbridge.

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