Georgia’s HB 757 – Free Exercise Protection Act

The Georgia Legislature recently passed the “Free Exercise Protection Act.”  This bill, which combined several pending bills, addresses (1) the obligations of religious entities to provide employment and services they find objectionable, (2) the power of the state to restrict or punish persons acting according to their religious beliefs, and (3) what happens when a public official’s duty conflicts with her faith.  The Act, which awaits Gov. Deal’s signature, has been condemned by a number of business and LGBTQ advocacy groups as potentially encouraging discrimination.

Click here for my recent interview with Georgia Public Broadcasting on HB 757 and its legal implications.

 

 

Supreme Court Review: A Preview

Each fall, during Georgia College’s Constitution Week, I host a panel on recent U.S. Supreme Court decisions.  On September 17, from 6-8pm, a group of lawyers and law professors will join me in Milledgeville, GA to talk about same-sex marriage, ACA subsidies, and other major decisions of the 2014-15 Roberts Court.  The event is free and open to the public.

WRGC 88.3 radio host Daniel McDonald and I met to discuss the Court and its recent rulings.

 

Oh Say Can U.A.V.?

Today, I heard a research presentation on the economics of drone warfare and it reminded me to follow up on my Drone Home post.  Congress gave the FAA until 2015 to integrate drones (or Unmanned Aerial Vehicles to you sophisticates) into U.S. commercial airspace. The New Year is upon us, and so is the question – Dude, where’s my TacoCopter?

To be fair, Congress gave the FAA until September.  But why wait?  Just file for an exemption, and you can join the lucky UA-VIPs who already fly the red, white, and blue skies.

Academic community -- Attend my open house or be destroyed.

Academic community: attend my open house or be destroyed.

Lest you think the FAA hands out drone licenses like TicTacs, you’ll still have to wait in a pretty long line. The FAA currently is considering exemption requests from hundreds of companies and individuals.  I hoped to find a few really strange proposals, but most of them appear reasonable – agriculture surveys, aerial photography, search and rescue, and, of course, training people how to operate drones. Some of the more entrepreneurial applicants requested exemptions for every use that the FAA has approved for other companies.  After all, once you get permission for commercial drone use, why limit yourself?

Sadly, taco delivery is not yet on the horizon.

Greed is (an Environmental) Good

In March, the U.S. Trade Representative announced its intent to negotiate a WTO agreement “aimed at eliminating tariffs on a wide range of environmental goods.”  How wide a range of products falls under USTR’s aim? That depends on what you consider to be an “environmental good.”  USTR requested public comment on WTO negotiating objectives, including products.  The public responded, with many companies scrambling to get their products into USTR’s sights, and a few scrambling to get theirs out.

Gary Larson Bear
Is a ceiling fan an environmental good?  Yes, according to the Hunter Fan Company.

 

“Ceiling fans are able to work so efficiently because they cool people, not air. Using very little energy, fans produce an airflow that generates a wind chill, providing a cooling effect on those in the room. Because a person must be present to feel these effects, ceiling fans can and should be powered off when a room is empty, saving even more energy. On the contrary, air conditioners are often run continuously in an empty room to maintain a comfortable temperature for when people re-enter.”

Of course, fans are less environmentally friendly than, say, sweating.  As WTO negotiations proceed, except this to be a major sticking point.  Is a product an “environmental good” just because it is better for the environment than an alternative?  Is a blanket an environmental good if it helps you use less heat?  How about clothing in general?

Coca-Cola wants to include the plant-based plastics used in its PlantBottles.  These PET plastic bottles are made from 30% plant material (sugarcane ethanol).  That’s better then, well, the bottles Coke was using before.  When a company improves its own environmentally unfriendly product, does that make the improved product an environmental good?  What if another company invents a 50% plant-based bottle?  Should Coke’s 30% bottle be delisted?  How often must we make updates as the products on the list fall behind emerging technologies?  WTO negotiations aren’t known for their speed.  By the time an agreement is reached, will today’s “green” technologies have turned “brown”?

brown banana

It’s still good, right?

Who else wants in?  The International Wood Products Association would like USTR to include wood products from “sustainably managed forests.”  However, there’s always debate over what makes a forest “sustainably managed,” even among third-party certifiers like the Sustainable Forestry Initiative and the Forest Stewardship Council.

The National Association of Manufacturers has a laundry list of items for USTR, including laundry – well, “personal protective equipment,” such as gloves.  Liquified Natural Gas? Sure!  Why not throw in the kitchen sink?  Wait, there it is.

And yet this potential trade agreement doesn’t have every company seeing green.  Some companies benefit from existing tariffs on their products.  For example, a U.S. producer of a product that has low foreign tariffs and high U.S. tariffs might enjoy that it has foreign market access and limited competition for its U.S. sales.

Timken wrote to tell USTR that certain of its products (ball and roller bearings) emphatically were not environmental goods.

“While bearings may be incorporated in such environmental goods, they are also incorporated in a wide variety of other goods. Indeed, bearings are used in virtually everything that moves or turns. Thus, bearings, in and of themselves, are not environmental goods even if these products can in various circumstances help in the reduction of energy use.” (emphasis in original)

Seriously, we don’t even turn the lights out when we go home for the night.  Please stop accusing us of helping the planet.  (Just kidding, Timkin.  Love those HTS 8482’s – keep ’em coming.)

Clearly, the biggest issue facing this WTO negotiation is how to define an “environmental good.”  Expect lots of wrangling and horse-trading (wait a minute . . . is a horse an environmental good?  How about a horse-drawn carriage?  A butter churn?  Are we headed toward an Amish export boom?) before this agreement gets the green light.

Pass the Molybdenum, Please

While trade nerds wait with bated breath, copies of 19 CFR clenched in their fists, for the conclusion of the TPP and TTIP* negotiations, the WTO issued its ruling on Chinese rare earths.  The three complainants, the U.S., E.U., and Japan, are each involved in TPP / TTIP, and this ruling may affect the language in those final agreements. On March 26, 2014, the WTO Dispute Settlement Body (DSB) issued its Report, which addressed the limits of a state’s power to restrict the export of exhaustible natural resources.  In this case, the state is China and the resources are 19 “rare earth” elements critical for personal electronics, high-tech weapons, and green energy production.  (One of the elements, neodymium, gives magnetballs their (in?)famous powers.)

The case is DS431.

Why “rare earths?”

They’re called “rare earths” because it’s rare to find them in concentrations worth mining, and extraction can be difficult and dangerous.  Rare earths often are found alongside radioactive elements, and the mining, refining, and recycling of rare earths can release deadly toxins.

Sounds interesting.  Where can I get some?

Currently, almost all of the world’s rare earth extraction happens in China, and that’s also where almost all of the rare earths are processed.  China restricts rare earth exports, which helps keep the processing “in-house.”  This means that Chinese rare earth extractors might get less for the elements than they would on the open market, but Chinese producers of downstream products have an edge over their foreign rivals.  China says it needs export controls to protect an exhaustible resource from overexploitation and to guard against negative environmental effects.  The U.S., E.U., and Japan say sustainability concerns are just a pretext for domestic protectionism, so — don’t bogart that erbium, my friend.

Tough call.  Who’s right?

The mother of all international trade agreements is called the General Agreement on Tariffs and Trade (GATT), and it was the precursor to the WTO.  Before joining the WTO and agreeing to GATT, China could do what it pleased with its rare earth supply.  However, one of GATT’s purposes was trade liberalization, and export restrictions are disfavored.  GATT Article XX(g) provides an exception, but only for measures “relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption.”

China tried to convince the DSB to apply an Article XX(g) exception (an uphill battle — historically, few states have raised any Art. XX clause successfully).  While the DSB recognized that states can develop sustainability plans for natural resources that might meet Art. XX(g), the DSB found that China’s restrictions were for economic gain, not environmental protection.  The DSB also found that China had not made equivalent restrictions on domestic use of rare earths.  This was a pretty clear victory for the U.S., E.U., and Japan — the DSB agreed that China’s environmental concerns were a pretext.

What’s next?

The U.S. and China each noticed an appeal, with the U.S. complaining about how the DSB rejected some of its exhibits, and China complaining about everything else.  I predict China will have a tough time before the Appellate Body, but the more interesting question is how might this ruling affect the ongoing trade relationships of the victors, each of whom is involved in TPP, TTIP, or both?  Will TPP and TTIP rely on GATT’s language when it comes to export restrictions for natural resources?  Or will they attempt a “WTO-plus” model that narrows the language and perhaps makes the outcome of raising a conservation defense more predictable?  By finding China’s conservation goal was a pretext, the DSB avoided drawing a line in the sand as to when a legitimate environmental concern might satisfy Art. XX(g).  However, with rising global interest in sustainability, I predict more and more of these cases will come before the WTO (or arbitration panels that might consider WTO rulings as persuasive authority).

Why should we care?

GATT has lowered tariffs to the point where many free trade agreements are being negotiated at the margins, and are more likely to involve the lowering of non-tariff barriers, such as sanitary/phytosanitary measures, technical barriers to trade, and export controls.  U.S. lumber companies have been grumbling for a long time over allegedly unfair Canadian log export restrictions.  The U.S. has its own restrictions on the export of crude oil and liquified natural gas.  Are these restrictions justified by conservation efforts?  Or is that merely a pretext to give domestic consumers an edge?  And if the answer’s somewhere in the middle, which way would a WTO panel jump?

*Or is it T-TIP?

Buckyballs Bails Out of Magnet Litigation, leaves Zen Magnets Holding the Bag

zen bagIn my Toys for Torts post, I covered the Consumer Product Safety Commission’s fight to force a recall of magnetballs.  These toys (or should I say “science kits?”) have become the modern lawn dart.  Federal regulators say the product poses an inherent danger to children and animals.  Magnetball sellers say the dangers are exaggerated and warning labels should suffice.

Two of the largest magnetball companies were named Buckyballs and Zen Magnets.  Each sold millions of magnetballs into the U.S. market, starting around 2009.  The companies had some friction in 2011 when Buckyballs CEO threatened to sue Zen Magnets and got this YouTube video in return.  But regulatory enforcement makes strange bedfellows, and the intra-industry tiff took a back seat in 2012 when the CPSC sued both companies, trying to force a recall.

The companies had different reactions to the lawsuit.  Buckyballs CEO Craig Zucker fought the lawsuit in the press and with lobbying efforts in Washington, but eventually shut down the LLC that was selling the product.  The CPSC responded by amending its lawsuit to add Zucker as an individual defendant.  Zen Magnets, on the other hand, continued business as usual.  It still offers magnetballs for sale through its website.

Just last month, Zucker and the CPSC signed a consent order.  Zucker, with no admission of wrongdoing, pledged $375,000 toward a recall of Buckyballs.  Here is the consent order.  It looks like Zucker will need to put up $100k towards publication of a website, to last five years, and administration of a six-month recall, with the rest of the money put in escrow to pay claims.  However, if there are any unclaimed funds left in the escrow after one year, Zucker gets the money back.  (It’s not clear to me what would happen if there were more recalls in one year than could be supported by the escrow account.  Do the U.S. taxpayers foot the bill?)

Both sides claimed victory – Zucker (or an anonymous supporter) through a WSJ opinion piece, and the CPSC Commissioners through their website.  However, each Commissioner had a different reaction.  Robinson’s press release crows almost as loudly as Zucker’s.  Buerkle supports the settlement, but takes offense at the fact that Zucker was added as a defendant by unilateral action of the Presiding Officer, and not by a vote of the Commission.  Only Adler, who dissented from the settlement, says it didn’t go far enough.  He makes two points that were in my mind upon reading the consent order – why pay to maintain a recall website for five years if customers only have six months to respond?  And is $375k enough?

The second point is significant in deciding who really won this battle.  Did Zucker beat City Hall?  Or did he end up doing basically what the CPSC wanted in the first place?  Let’s do a little back-of-the-napkin math.  In its Complaint, the CPSC estimated 2.5 million Buckyballs (or variants) were sold.  A set of 10 cost $3.50.  250k sets at $3.50 each gives us $875k.  Now, Zucker himself has been quoted as saying he made millions off Buckyballs, so we might assume the $875k number is low.  But how many purchasers are likely to actually return their Buckyballs?  Presumably anyone who finds the product dangerous already got rid of it.  The $275k in escrow covers the return of about 78,000 sets.  Of course there is postage, etc., but I have a hard time believing Zucker would have experienced this level of returns even if he agreed to a recall at the outset (and he might have saved some hefty litigation fees).

What effect will this consent order have on future market behavior?  Does a penalty of this size have a deterrent effect?  I doubt it, but the CPSC’s willingness to hold LLC members personally liable might.  Or the maneuver may simply have made Zucker a hero to small gov advocates, with a strong base of support for his future projects.

And what now for Zen Magnets?  They are still in the fight and beginning the discovery phase of litigation.  Zucker is out of the CPSC’s sights but might still be on its deposition list.  Will Zucker take the chance to sink his former rivals?  I think Zucker wants to preserve his anti-establishment image, and he still might be on the hook for tort liability.  So, for now, I expect these magnetball magnates to stick together.

LawTunes*

I started playing music just before class.  It fills the awkward few minutes when most of the students are already in their seats, and when the song ends, it’s a signal for them to put away their cellphones.  It’s also a subliminal business law lesson!  I pick a song to match each day’s topic.  Help me find more!

Introduction / Role of Attorneys in Business – “One Million Lawyers,” Tom Paxton (1985)

Civil Procedure – “Good Morning, Judge,”  Wynonie Harris (1950)

Civil Procedure – “So Sue Us,”  Dance Hall Crashers (1995)

Constitutional Law – “God and Guns,” Lynyrd Skynyrd (2009)

Privacy Rights – “Private Eyes,” Hall and Oates (1981) 

Civil Rights Act of 1964 – “The Way It Is,” Bruce Horsby and the Range (1986)

Crimes – “I Fought the Law,” The Bobby Fuller Four (1965) (I play this along with a slideshow of famous white-collar criminals.)

Offer and Acceptance – “My Only Offer,” Mates of State (2008)

Contractual Capacity (Minors) – “I’m Eighteen,” Alice Cooper (1971)

Consideration – “No Consideration,” Jimmy Burns (1999)

Promissory Estoppel – “Promises, Promises,” The Naked Eyes (1983)

Breach and Remedies – “The Remedy,”  Jason Mraz (2002)

Partnerships – “Do You Wanna Partner,” from the Bollywood romantic comedy, “Partner” (2007)

Partnerships – “It Takes Two,” Rob Base & DJ EZ Rock (1988)

Business Ethics – “Why Don’t You Do Right,” Peggy Lee (1950)

 

* After using the term “LawTunes” to describe these songs all semester, I learned that there is an actual band with this name.  They specialize in Xmas tunes for overworked JDs – such as “Another Billable Christmas,” “Yule Hear From Our Lawyers,”  and “I Got A Footnote in My Stocking.”  Rock on, fellas.  Just make sure you get that filing done first.