Monday, November 28, 2011
JURIST Guest Columnist Ann Schunicht, Saint Louis University School of Law Class of 2012, is a member of the Health Law Moot Court Competition Team. She compares the recently abandoned CLASS Act to France's long-term health care system, arguing that the act's failure was a missed opportunity to explore the impact of this long-term home care scheme...
The CLASS Act provided that enrollees would participate on a voluntary basis in a fund that would function as a national insurance program. Working adults would have made voluntary premium contributions, paid directly to the fund, or deductions would have been taken from their paychecks. In order to receive benefits, the policyholder would have had to pay monthly premiums for at least five years and have been employed during three of those five years. Further, in order to receive benefits, the individual would have had to have suffered from multiple functional limitations or cognitive impairments. The impairment must have been expected to last for a continuous period of more than 90 days.
Premiums paid by enrollees and interest earned on the fund balance would have subsidized the CLASS Act fund. The premium rates would have varied; for example, younger enrollees would have paid less than older enrollees. In addition, individuals with income below the federal poverty level and employed full-time students would have paid lower premiums. The funds could have been used for home health care, adult day care, assistive technology, home modifications, personal assistance services, respite care, accessible transportation and homemaker services.
The CLASS Act was a hard political sell from the beginning. Projections showed a low enrollment rate, especially from the healthy population, and future costs outweighed future income. Originally, the Congressional Budget Office (CBO) estimated that in the first decade, the CLASS Act would reduce the federal deficit by $70 billion. The CBO also projected a reduction in Medicaid spending over a decade because fewer individuals would enter institutional living and would qualify for Medicaid. Despite the benefits, the CBO found that the CLASS Act would lose money after 10 to 20 years, when the costs of the benefits would have begun to exceed the premiums.
With the CLASS Act removed from the PPACA, Americans must solve the problem of how to finance elder and end-of-life care. The passage of the CLASS Act would have created a voluntary and public national insurance program that would have helped to alleviate the high cost of long-term care. It is estimated that two-thirds of Americans will need some type of long-term care later in life. Despite this high proportion of Americans, only half of current retirees have saved over $55,000 for long-term care. Additionally, only seven million Americans own long-term-care insurance policies.
Policies similar to the CLASS Act do exist in other countries, and they help aging populations to pay for long-term care. In 2002, France adopted a system called the Allocation Personnalisée d'Autonomie (APA), a long-term care insurance system funded by the general tax and administered at a regional level. The French government determines the enrollees of the insurance program based on income, and enrollees with lower incomes receive more benefits. On the other hand, individuals with higher incomes and lower public long-term care benefits, purchase private long-term care insurance to supplement their government benefits. France's public health insurance system provides its enrollees with health care in institutions and at home.
The CLASS Act and the APA have similarities and differences. In France, the APA provides funds for people 60 years of age and over, whereas the CLASS Act does not have an age requirement. Instead, CLASS Act enrollees would have been eligible after making five years of premium payments into the system. Like the CLASS Act, the APA does not provide benefits unless the patient has suffered a loss of autonomy, which is to say that an individual needs help with at least three daily living activities. The CLASS Act limited eligibility to individuals unable to perform two or more activities of daily living, or to those with a cognitive disability that required supervision or assistance in performing these activities. Similar to the CLASS Act, the APA allows beneficiaries to spend the monthly cash allowance on a variety of long-term care purposes, including hiring caregivers, paying family members to function as caregivers or even renovating homes in order to improve mobility.
The enactment of the CLASS Act would have moved the US towards a public, national insurance plan focused on alleviating the cost of long-term care. The system would have functioned very similarly to France's APA, providing a monthly credit for any necessary form of long-term care. If the CLASS Act had followed in the footsteps of France's APA, it may have cost more than anticipated. The expected first year cost of the APA was $3.6 billion, but actual costs totaled $4.9 billion. With current low private enrollment rates in long-term care policies in the US, enrollment rates in the CLASS Act may have remained low or individuals may have taken advantage of the credit system and begun to pay the monthly premiums. It is difficult to say.
However, without the CLASS Act, the US remains with its current method of long-term care, which includes government-managed, long-term care insurance through tax incentives and increased Medicaid coverage. The PPACA is a significant piece of health care reform legislation that will benefit the nation, and Americans will never know if the CLASS Act would have continued this trend.
Ann Schunicht is a Staff Editor on the Saint Louis University Journal of Health Law & Policy. She received her undergraduate degree in Conflict Studies and Sociology from DePauw University.
Suggested citation: Ann Schunicht, The CLASS Act: A Missed Opportunity in Health Care Reform, JURIST - Dateline, Nov. 28, 2011, http://jurist.org/dateline/2011/11/ann-schunicht-health-care.php.
Sunday, November 27, 2011
JURIST Guest Columnist Leah White, University of California, Davis School of Law Class of 2013, is a Staff Editor for the school's Business Law Journal. She writes on the effectiveness of the Sarbanes-Oxley Act and encourages legislation to increase corporate social responsibility...
Corporations seek profits for shareholders. Over the course of time, business goals have evolved to include social considerations as well. These new goals have been manifested through changes in the directives guiding many boards of directors. Initially this consideration focused on other members of society. Now it has expanded to include environmental factors. This new triple bottom line has become a growing trend within the business world. Despite a board of director's ability to take these outside factors into account, a corporation's primary function continues to revolve around maximizing profits for shareholders in the company. When more consumers and investors push for corporations to maintain a triple bottom line, then corporations will consider not only their shareholders, but also society and the environment. This new bottom line focuses on the three P's of a twenty-first century business: profit, people and the planet. This dynamic shift in business considerations occurred in part because of the growing interest and expectations that corporations give back to their greater communities.
With the aim to maintain and grow their market shares, corporations preserve the hard-won reputations of their brands. As concern over the environmental effects of businesses grows, corporations are gradually pushed into acting as more than profit machines and forced to aim for the triple bottom line. In today's world, if a corporation wants to climb to the top of its industry, it must present itself as environmentally conscious and giving back to the community. Corporations use marketing and targeted displays of community outreach in order to show its socially responsible side. By marketing its image as a company that gives back to the community and invests in green technology, a corporation can bolster the public's belief in its commitment to a triple bottom line regardless of whether the corporation actually tries to reach it. The recent "organic" craze illustrates this concept and provides a parallel view of how marketing effects a consumer's perception.
In the late 1990s, consumers began to become concerned about the lasting health effects from consuming genetically altered food and food with chemicals from lingering pesticides. Consumers began to demand "natural" products and grocers began to supply these products on their shelves. Various food producers quickly began advertising their food as all natural, hormone and pesticide free, or locally grown. With all this different terminology, consumers often believed they were getting a less altered and chemically exposed product when compared to other options for the same product. Many companies' chose the correct marketing buzz words but failed to fulfill the consumer's expectation of the product. As consumers became aware of this inconsistent labeling, the Food and Drug Administration (FDA) created set guidelines for what constituted organic. As a newly certifiable term, organic quickly became recognized as applying only to the upper echelon of natural food products. The creation of this label certification provides consumers with a clearer guide to understanding exactly what they are receiving when they purchase an organic product. Despite this new certification, many products still advertise themselves as all natural or pesticide free. These producers want the image of wholesomeness achieved by their organic competitors without incurring the costs of an organic label. Despite the increased awareness of the FDA organic label, these non-organic, natural foods still sell.
The evolution of the organics labeling scheme provides an illustration of some of the issues that have arisen regarding corporate social responsibility and the degree to which companies truly pursue a triple bottom line. In both cases, public interest has pushed companies towards a particular behavior such as organic food or environmentally friendly practices. In response, corporations began shifting their image to reflect the public's desire. Similar to all the different buzz words initially used to describe organic food, corporations continue to attempt to sell themselves to consumers as caring corporations. While some companies are in fact genuine in their commitment to the triple bottom line, the spectrum runs all the way to corporations like Enron and Tyco, which focused solely on increasing profit to the detriment of others through fraudulent accounting practices. Ultimately, the public discovered Enron and Tyco's fraudulent behaviors and Congress responded through the Sarbanes-Oxley Act.
In 2002, Congress enacted the Sarbanes-Oxley Act. The act reformed corporations' accounting standards and required that the CFO or CEO sign all the quarterly account statements, seeking to make the heads of corporations personally liable for the accuracy of the signed statements. In order to protect themselves, executive officers heightened standards and increased the scrutiny of company practices. This ultimately created a trickle down effect, leading to entire corporations striving to meet more stringent standards. The implementation of higher standards following the Sarbanes-Oxley Act demonstrates how laws and legal culpability change corporate behavior.
The Sarbanes-Oxley Act represents a legal obligation under the triple bottom line and provides clear insight into the behavior of corporate America. Some corporations will always strive to do as little as possible for anyone but their shareholders; after all, a corporation's primary function is to generate profits. As a result, legislation is necessary to ensure that corporations act beyond their fiscal interests. Further legislative advancement of the triple bottom line can provide more expansive consideration and protection for society, and it will allow for progress to occur in a more widespread fashion. Only when high level officials face personal legal obligations requiring them to fully pursue the triple bottom line, will we begin to see other systematic changes within the corporate framework.
Leah White studied Business Administration with concentrations in Finance and International Business at Seattle University. At the University of California, Davis School of Law, she is a member of the Environmental Law Society and Moot Court. She has previously interned with the Department of Water Resources, Office of the Chief Counsel.
Suggested citation: Leah White, The Triple Bottom Line: The Need for Greater Corporate Accountability, JURIST - Dateline, Nov. 27, 2011, http://jurist.org/dateline/2011/11/leah-white-corporate-responsibility.php.
Friday, November 18, 2011
JURIST Guest Columnist Mark Guffanti, Benjamin N. Cardozo School of Law Class of 2013, is a Staff Editor for the Cardozo Arts & Entertainment Journal. He writes on the possible outcome of Yves Saint Laurent v. Louboutin, which is on appeal in the Second Circuit, and its potential impact on the fashion industry...
Trademark law ensures that consumers can identify a good's source. In order to qualify for registration, a mark must be distinctive and used in commerce. Under the Lanham Act, nearly anything capable of carrying meaning can qualify as a symbol or device, and thus as a mark. Marks are classified along a continuum as either generic, descriptive, suggestive, arbitrary or fanciful. Generic marks are the only class of marks not protected under trademark law. The red outsoles of the Louboutin shoes qualify as a descriptive mark, as descriptive marks may include shapes, sounds, smells and even colors. Descriptive marks are protectable, but only with proof of secondary meaning. The burden is on the owner of the mark to show that overtime consumers have come to associate a particular color with a particular brand, causing the color to identify the source of the product.
A product feature cannot be registered if the feature is functional. In Qualitex v. Jacobson, the US Supreme Court held that a product feature qualifies as functional if it is essential to the use or purpose of the article or if it impacts the cost or quality of the article. Prohibiting the trademark of functional product features encourages competition by keeping producers from controlling a useful product feature. The Court in Qualitex explained that if functional product features were trademarked, than competitors would be put at a significant non-reputational disadvantage.
The theory of aesthetic functionality states that consumers desire a specific feature that is not part of the use or purpose of the product itself. Aesthetic functionality was at issue in Jay Franco & Sons v. Franek, when the US Court of Appeals for the Seventh Circuit cancelled a federal trademark registration that claimed the circular beach towel. The court held that, "[g]ranting a producer the exclusive use of a basic element [such as color] impoverishes other designers' palettes." The court explained the more basic and general the element "the more likely it is that restricting its use will significantly impair competition."
The US Court of Appeals for the Second Circuit has adopted its own aesthetic functionality test. Under Wallace International Silversmiths v. Godinger Silver Art Co., aesthetic functionality hinges on whether "trademark protection would significantly hinder competition by limiting the range of adequate alternative designs, the aesthetic functionality doctrine denies such protection." The Second Circuit also eliminated a per se rule in Villeroy & Boch Keramische Werke v. THC Systems, which qualified china patterns as aesthetically functional.
Recently, Yves Saint Laurent (YSL) began selling a line of monochromatic shoes, including four styles of an all red shoe with a matching red bottom. As a result, Christian Louboutin filed suit against YSL for trademark infringement, false designation of origin and dilution. YSL counter-claimed for cancellation of Louboutin's federally registered trademark for "lacquered red sole on footwear." Louboutin moved for a preliminary injunction, but was denied by Judge Victor Marrero of the US District Court for the Southern District of New York. He noted that the court would likely find Louboutin's trademark not protectable and subject to cancellation. He held that, "the Court cannot conceive ... recognition of a trademark for the use of a single color for fashion items." The crux in Louboutin v. Yves Saint Laurent is whether or not Louboutin's lacquered red sole is a functional product feature. Judge Marrero opined that because in the fashion industry color serves ornamental and aesthetic purposes, which are vital to competition, it is unlikely that Louboutin will be able to prove that its red outsole is entitled to trademark protection.
It seems unlikely Louboutin will prevail on appeal, so long as no error in the application of law is found. The court will likely cancel Louboutin's broad registration because it poses significant trademark and policy issues. Furthermore, even with no finding of error, it is likely that the Second Circuit will dismiss Judge Marrero's finding that a trademark should never be granted for the use of a single color for fashion items, as a broad per se rule against color trademark in fashion conflicts with Qualitex and contradicts the Trademark Technical and Conforming Amendment Act. If the Second Circuit does find an error in the application of the law, it will still likely rule this case narrowly and require that Louboutin prove his trademark is not overly broad.
Though red-soled shoes almost instantly conjure up the name "Louboutin" for casual fashion consumers, a broad prohibition against red would be anti-competitive. Louboutin identified his signature color as Pantone No. 18-1663 TP or "Chinese Red." And while YSL allegedly has never used this particular color on its outsoles, without a narrow description of what the trademark protects, Louboutin, and more importantly the courts, cannot determine where the line of infringement ends and competition begins. Without a narrow construction, Louboutin would hold a monopoly on shoes with red outsoles. Louboutin incorrectly asserted on his trademark registration that only he uses red on the soles of shoes. However, as YSL pointed out, red has been used on shoe soles for centuries. Furthermore, both YSL and Valentino have used red for shoe soles in the past.
If the court establishes that Louboutin has a valid and protectable trademark, it will rely on the factors identified by the Second Circuit in Polaroid Corporation v. Polarad Electronics Corporation to determine whether YSL infringed the trademark. The Polaroid factors only apply in the Second Circuit, though other circuits have similar variations. The factors include:
In order to receive broad protection, Louboutin should have waited for an imitator to use a red-sole with a contrasting shoe color. By bringing the suit against YSL's monochromatic shoes, Louboutin forced the court to address aesthetic functionality as to whether or not other companies can fairly and effectively compete for prospective consumers without using red on their shoes. This forced the court to opine that in fashion a depletion of colors would be anti-competitive in nature, and thus impermissible. The manner in which Louboutin framed the issue by pursuing a monochromatic shoe may lead the court to afford a much narrower protection to Louboutin than an action against a closer imitation of a Louboutin shoe.
There may be some concern that Louboutin could endanger itself by becoming a generic mark. Both The New York Times and New York Post have published highly publicized articles on the emergence of cobblers painting their customers' shoes red and nail salons offering a "Louboutin" treatment by painting the underside of customers' nails red. The continuing reference to anything with red on the underside should be of significant concern to Louboutin.
The Louboutin case demonstrates both the best and worst of trademark law. On one hand, trademark law should have rewarded Louboutin for the effort expended in building his brand and achieving secondary meaning. The decision also reflects that trademark law has been contextual. Though people can cite the various single color trademarks, including brown for UPS trucks and Tiffany's blue product packaging, fashion presents a position where courts should consider the depletion theory.
The Second Circuit should provide a narrow protection for Louboutin. He did not exert significant effort in attempting to create a recognizable trademark; rather he was attempting to create something aesthetically pleasing. It would be detrimental for fashion if designers could not create monochromatically red shoes or red-soled shoes without the fear of litigation. Ultimately, the court must determine whether the competitive disadvantages of enforcing this trademark will outweigh the advantage of reinforcing both Louboutin's registered mark and the effort exerted by Louboutin in achieving secondary meaning.
Mark Guffanti attended Fordham University where he studied political science. He also studied international and comparative law at the Université Paris I Panthéon-Sorbonne Summer Institute.
Suggested citation: Mark Guffanti, Balancing Competition and Trademark Infringement, JURIST - Dateline, Nov. 18, 2011, http://jurist.org/dateline/2011/11/mark-guffanti-trademark-law.php.
Monday, November 14, 2011
JURIST Guest Columnist William Stanger, University of California, Davis School of Law Class of 2014, is a Staff Editor for the school's Business Law Journal. Stanger writes about the shortcomings of corporate social responsibility and how government should play a larger role in regulating corporate efforts...
The complaint [PDF] in Blanchard v. BP America Production Company states that BP entered into a contract in May 2010 with plaintiff, a restaurant and catering operation in St. Bernard Parish, Louisiana. The restaurant was to provide meals and catering services for BP cleanup crews operating in the area. However, BP allegedly breached the contract, refused to pay for services provided and hired a competing catering operation. The plaintiff seeks actual damages around $20,000, services and legal fees around $200,000 and nearly $2,000,000 in lost future business under the contract. While the case is ongoing, the implications of the suit as they relate to corporate social responsibility present a variety of issues. In addition to the damage BP has already caused on the Gulf Coast, it has now allegedly breached contracts with local small businesses, causing further economic harm.
BP has experienced its ups and downs in the public eye. In 2000, BP and legendary advertising firm Ogilvy & Mather launched the ongoing "Beyond Petroleum" campaign to spruce up its corporate image and tout its dedication to green energy investment. In 2005 and 2007, BP placed in Multinational Monitor's top ten worst companies of the year. At the same time, CNN Money reported that Fortune Magazine, in partnership with AccountAbility and CSRNetwork, declared BP the top "most accountable" company in 2007 and the second "most accountable" in 2006. Adweek, a prominent marketing and advertising industry publication, and Mother Jones Magazine, one of the largest paid circulation liberal publications, both blasted BP for long engaging in a questionable practice known as "greenwashing."
Greenwashing is one of the best examples of how the tenets of corporate social responsibility are self-contradictory. In this practice, a company focuses some resources on popular socially beneficial goals, focuses more resources on advertising its new socially responsible efforts and continues ignoring less popular but equally socially valuable goals, such as worker safety and disaster prevention. The practice illustrates the innate opposition of profit motive and social responsibility. By allowing and encouraging self-regulation and voluntary measures, we leave society defenseless against manipulation and unprotected from large informational disparities. Corporations are founded for the purpose of seeking and making profits, and they should be left to it, while the government should be charged with regulating corporate behavior.
The government is most aptly situated to protect society from unscrupulous practices perpetrated by corporations. The government enforces contracts, provides remedies for their breach, ensures that workers are paid wages and not treated too harshly and protects our natural resources from contamination and depletion. Unfortunately, the government reacts slowly to particular situations. For example, the government took 25 years to implement and enforce fair, logical intellectual property rights for computer programs. Unfortunately, the gap between invention and regulation is frequently filled with degrees of human suffering. For a modern example that bridges the gaps between cultures, look to economies that were or are shifting from agriculture to industry: 1800s England or modern day China. The socioeconomic upheaval inspires a variety of social and political perspectives. For some, it is a story of hardship, hazardous working conditions, subsistence wages and abuse of the working class. For others, factory life is a relief from the abuse of the landed gentry and fickle weather, a small measure of mobility and a glimmer of hope for advancement. Regardless of perspective, the government must intervene in order to ensure a fair deal between labor and management, to curtail the worst offenses to decency and to legislate a modicum of morality.
Corporations would have us believe that "corporate social responsibility" can replace government intervention. Corporate social responsibility refers to the idea that a company should self-regulate its behavior and engage in socially beneficial activities at its own expense. In reality, it is a label like "green" or "organic," which means different things to different corporations, and with no standard definition or enforcement, it becomes just another marketing ploy. It convinces you to shop at one store instead of another. It makes you feel good about spending money on something unnecessary made overseas. It is a reason you should have warm and fuzzy feelings for the chemical conglomerate that poisoned your lake a few years ago or the oil company responsible for the latest spill. Looked at in the most base and crass light, it may not even be marketing so much as tainting the jury pool.
Turning a skeptical eye to the corporate social responsibility apparatus may be equally illuminating. We must consider who controls the policies and how and why they were developed. We further need to determine if companies take proactive steps to improve these policies once already in place. When companies take the proper steps, it is possible for them to effectively practice corporate social responsibility. However, all too often programs are designed through market research, as a response to negative press, or a lawsuit, or a function performed by the public relations staff to protect the integrity of the corporate brand. In these cases, the social good of the programs may be material, but they do not actually promote the cause of corporate social responsibility.
Extrapolating further, we can deduce that many of these programs may merely be cases of greenwashing, little more than public relations insurance policies against the next disaster. These programs promote corporate negligence. A few percentage points of profits given away buy as much good will as a more expensive investment in worker safety or environmental remediation. Further, a company may simply wash its hands of a questionable business practice by outsourcing it to a less scrupulous subcontractor and claiming ignorance if allegations of wrongdoing arise, as appears to have occurred with the Deepwater Horizon disaster.
It is axiomatic that there is no such thing as charity in business. Basic accounting principles state that for every liability there must be an equal and opposite asset. In this case, cash given to charity is offset on the balance sheet by increases in goodwill and tax savings. We must consider where a company gets the money it uses for corporate social responsibility. Naively, we may be told that the company pays for its policies through its own profits. However, the profits do not belong to the company; they belong to its owners. In a private company, this hardly matters, as the owners are the company and they can give as they choose.
For a public company, it is customers, and not the shareholders, who pay for the programs. Nobel Prizes in Economics have hinged on the notion that investors are good at making self-serving decisions and dislike when their investments make their decisions. In most instances the company passes the cost of charity on to the consumer through increased prices. Make no mistake; the 5 percent of pre-tax profits being charitably donated by certain big box discount stores raises prices accordingly. Effectively, this unilaterally pledges the consumer's support to the charity on the company's terms, and it does so in lieu of causes the consumer might prefer to support, if they were aware and motivated to do so on their own. Finally, the programs suffer from a lack of transparency, as consumers are generally disconnected from the process of determining which charities to support, and, if it occurs, have no oversight to scrutinize how the funds were spent once disbursed. The company asks the customer to take it on faith that their activities actually happen, and actually have a social benefit, leaving the door open for more greenwashing.
Corporations should be charged with doing what is in their natureproviding goods and services that people want, at a cost the market will bear, while the government should be charged with regulation. Despite the electronic communication and organization tools available today, the free market is too mindful of popular causes to adequately deter evildoers. Laws already exist to protect us from gross corporate fraud and negligence. For industries that operate behind veils of secrecy, we can only keep pressuring the government to adapt. Ultimately, it is the government, in response to society's needs, which must continue to set the standards for corporate behavior, to create a common definition of corporate social responsibility and to oversee enforcement. Encouraging dubious corporate self-regulation of social behavior leaves us worse off, because we, as the consumers, are ultimately paying for it. Furthermore, self-regulation of social behavior has the unfortunate side effect of lulling everyone into a false sense of security.
William Stanger studied Economics and Computer Science at the University of Pennsylvania. He has held a variety of positions at Pennsylvania Real Estate Investment Trust, including Associate Asset Manager, Lease Coordinator and Associate Development Director. In addition, he was self-employed at Ventuity LLC, where he designed real estate development software and consulted with investors on real estate development opportunities.
Suggested citation: William Stanger, Dubious Self-Regulation and Greenwashing Corporate Negligence, JURIST - Dateline, Nov. 14, 2011, http://jurist.org/dateline/2011/11/william-stanger-corporate-responsibility.php.
Saturday, November 12, 2011
JURIST Guest Columnist Hua Wang, Northwestern University School of Law Class of 2012, writes on the need for policies that combine market incentives with outright prohibitions to achieve enforcement and compliance with international environmental regimes...
Engaging states and relevant actors from the beginning and keeping them engaged strengthens national compliance with international environmental regimes. Effective implementation will occur if countries or industries see compliance as serving their interests. Germany, for instance, supported the Convention on Long-range Transboundary Air Pollution [PDF] when its Black Forest was threatened with acid rain. Russia and Norway complied with the Convention on the Law of the Sea to ease political tension in the Barents Sea. Various nations were motivated to become signatories of the Fur Seal Treaty [PDF] upon realizing that the industry would not survive without international protection. As nations become parties to treaties, they take important steps to implement and comply with them. Affected actors participating in the decision making process increase the efficiency and equity of the solution and ensure the responsiveness of negotiations to all relevant parties.
Coercive measures, including sanctions, penalties and withdrawal of privileges under the convention, are sometimes effective in eliciting compliance. The World Heritage Convention downgrades sites that are not conserved and the Montreal Protocol [PDF] removes fund eligibility for countries that do not provide baseline data. Coercive measures create a latent threat against noncompliance and counteract the significant rewards of free riding. Transparency and punishment alter actor incentives by making it costly to defect and advantageous to cooperate and receive political credit for environmental responsibility.
In some cases, environmental regulations can have negative effects on environmental quality. Incentives often exist to circumvent agreements by making performance look attractive. The former Soviet Union, for example, systematically exceeded international quotas and deliberately misreported kills to the International Whaling Commission. Although it is often collectively desirable to reduce environmental degradation, the temptation to free ride leads states to define their interests unilaterally and avoid international cooperation.
Countries that have long land borders have great difficulty controlling smuggling and black markets. The large number of actors and coastal zones in the marine pollution regime and the large number of potential violators of the Convention on International Trade in Endangered Species of Flora and Fauna (CITES) make it difficult to enforce the treaties. The incentive to engage in black markets, coupled with enforcement difficulties, greatly reduces the effectiveness of a trade ban.
While CITES has decreased poaching in areas where law enforcement was heavily augmented by external funds, these funds are drying up and black markets are flourishing. The economic rewards of hunting endangered elephants for their ivory have skyrocketed. Ivory has gone from $200 to $2,000 a kilogram. Without sufficient funds and control mechanisms, CITES can better curb international trade in endangered species through a combination of punishment and incentives. The trade ban creates an undesirable situation where species hover at the brink of extinction and people are forced to absorb the large costs of policing an ineffective ban.
Flexible market schemes provide incentives for real progress in minimizing environmental degradation. Cost advantages arise when those who can achieve reductions in pollution most cheaply make the greatest adjustments. Pollution taxes and user fees discourage environmental degradation by strengthening incentives for waste and pollution reductions and generating revenue for public environmental protection. In climate change, the complexity of multiple pollutants and millions of emitters involved in controlling CO2 substances illustrate a need for market incentives. To finance the costs of sustainable forest management, taxes can be charged on logging and the revenue uses to fund reforestation. Certification and environmental labeling increase the demand for sustainable goods and allow consumers to encourage responsible fisheries management.
Economic instruments provide the means for internalization of environmental degradation and resource depletion costs in a flexible and efficient way. Market incentives can result in sharply reduced compliance costs and ensure that all parties to a convention have both a strong intention and a strong capacity to comply. In cases where a country may intend to comply but place a low value on environmental priorities, market incentives can build capacity and positively change the country's views on compliance. Incentive-based systems are often more effective in securing compliance from developing countries that lack the financial resources and the institutional capacity needed to undertake the improvement of far-reaching environmental problems. Without the political and economic infrastructure needed to enforce regulations or check the accuracy of required documents, less wealthy countries need to more fully develop property rights in order to create incentives for sustainable management.
By providing incentives for early action, wealthy countries can achieve targets with minimal economic costs. Market-based mechanisms often smooth the transition to national targets and enhance a wealthy nation's capacity to meet the target during the compliance period. The market mechanisms in climate change provide the needed flexibility for developed countries to comply with treaty commitments, and to facilitate interaction between the public and private sectors. The relatively low-cost reductions of private investments to developing countries are a feasible substitute for the more expensive domestic reductions in industrialized countries.
Many developing countries lack the infrastructure needed to achieve local environmental objectives, and to contribute to the resolution of global environmental concerns. By making available technical assistance and capacity-building programs at the local and national levels, less wealthy countries could more readily comply with their obligations and contribute to the perceived equity of the treaties. Furthermore, countries with insufficient expertise and capital would have the support needed for domestic efforts to reduce environmentally damaging behavior.
Advanced technologies from multinational companies allow developing nations to become regional market leaders in sustainable energy methods, and to achieve development goals in a less environmentally-damaging fashion. In climate change, because private investments in poor countries are cheaper than domestic reductions in rich countries, the cost-effectiveness of environmental aid and the ability of industrialized countries to finance the effort further enhance the probability that the transfers will live up to expectations. Transboundary pollution requires an effective regulatory system that combines restrictive rules and penalties with positive incentives. The combination of market-based instruments with administrative regulations creates flexibility in pollution control investments and is often more successful than outright prohibitions alone. Tradable permits are ideal for transboundary pollution problems with many small polluters and only a few large lawbreakers. Pollution trading and individual transferable quotas achieve conservation at a cheaper cost than absolute mandates and promote efficient use of the scarce resource.
Total allowable catches in international fisheries presented too many loopholes, such as misreporting, and the practice is largely discredited by the fishing industry. The lack of individual ownership created cost externalities and individual incentives to take more fish than is collectively rational. The conventional regulatory approaches, including limited seasons and net size, cause fishermen to put out more boats or buy more costly equipment, but do not ease the pressure on fish stocks. Tradable fishing rights, on the other hand, create a mutually beneficial quota exchange by cushioning the transition to the new international fishing regime, restoring stocks to sustainable levels and increasing fishermen's profits. The cap-and-trade approach to over-fishing creates sustainable harvests by distributing individual fishing permits on the basis of historical participation in the fishery, and allowing individuals to buy or sell shares. This mechanism works because fishermen are able to reduce fishing costs and minimize ecological damages caused by too many boats chasing too few fish.
Enticing economic incentives provide many communities with a stake in local conservation. Clear and enforceable property rights prevent environmental degradation by providing strong incentives for preservation. In CITES, many members are shifting away from trade prohibitions to create positive incentives for environmental protection. Zimbabwe's Community Areas Management Programme for Indigenous Resources has achieved double the reduction in elephant poaching necessary for sustainable management. It generates revenues from legal elephant hunts and returns some of the money to villages and individual households as incentives for sustainable management. Recognizing the value of their wildlife, local villagers have established anti-poaching squads to protect elephants for the future. The assignment of property rights to local communities can provide resource-owners with an incentive to protect endangered species and reduce enforcement costs.
Opponents of market incentives oppose the idea of creating "rights" to pollute and to allowing rich countries to buy their way out of domestic reductions. Some developing countries distrust market principles because of their negative implications for national sovereignty. They fear that investors' economic motivations conflict with social and environmental development. In trying to maximize profits, developed countries might dictate the direction of projects, overlook the benefits of existing technology in developing nations and focus on large-scale, centralized projects that do not serve the rural poor. The gap between the seller's goal of monetary gain and the beneficiary's goal of development create conflicting objectives and tension.
Improperly constructed and executed mechanisms may be ineffective and will underachieve either through outright internal collapse or the inability to approach the cost savings that such mechanisms promise. Because developing countries vary in their industries, ownership and culture, the design and enforceability of economic instruments must incorporate local conditions and not borrow standards from other countries that have more capacity or capital at their disposal. The likelihood of agreement between the global North and South depends on improving commercial incentives for private investors that bear all the costs and commercial risks of technology transfers.
Market-based mechanisms present large uncertainties in the potential costs and approaches to achieving reductions, while transboundary environmental problems pose special challenges to the internalization of externalities. The Clean Development Mechanism, defined in the Kyoto Protocol, has run into problems in measuring emissions, establishing baselines for taxes and building agreement about allocation of taxes. In the ozone regime, emission permits did not work efficiently when the cost of finding buyers and sellers was high, or when a market leader used its market power to engage in monopolistic behavior.
Although it is very difficult to improve the design of market mechanisms, there are several conditions that contribute to its success. Equity must be incorporated into the design of any market system, if the system is to meet its promise of delivering a successful, market-based strategy for meeting environmental obligations. Instead of a one-time "parachute drop" of new equipment, industrial countries need to provide the necessary infrastructure for the long-term success of development projects. Multinational companies must assess local socioeconomic conditions to determine whether there is sufficient market demand and local support for successful adoption.
To achieve environmental aims, there needs to be clear and verifiable guidelines on reporting and accountability mechanisms for international taxes and emissions trading. Without these protocols, market schemes will suffer from a lack of confidence in its fairness and accuracy. A legal framework and executive body of North and South representatives must be established to monitor the effectiveness of new investment, quantify progress and assign liability for failed projects.
Traditional regulations allow relatively little flexibility in the means of achieving environmental goals and rely too heavily on monitoring, enforcement and a complex administrative system. While this has protected the environment, it has resulted in a policy framework that is rigid and costly and its effectiveness in further improving the environment may be diminishing. International environmental problems that involve a huge number of small and diverse sources of pollution do not easily lend themselves to command-and-control regulation. In these cases, a combination of markets and mandates are needed to create sustained efforts at environmental protection.
A proven pathway to environmental protection lies through ensuring that environmental policies are compatible with economic incentives. The performance of market-based instruments for environmental protection provides evidence that these approaches can achieve major cost savings while accomplishing their environmental objectives. Both regulators and the regulated community must move beyond simple pollution control to focus on preventing pollution at its source.
Although the threat of punishment forces many countries to comply with strict regulations, the integration of regulatory control and market-based mechanisms often create more efficient and cost-effective results. Long-term environmental progress requires a flexible, results-oriented approach that gives people the ability to act as private stewards of the environment. A hybrid system of flexible economic instruments and command-and-control regulations can correct market imperfections and avoid rigid and bureaucratic rules.
Hua Wang completed her undergraduate studies at Duke University. Upon graduating, Wang worked as an investment banking analyst at Lehman Brothers. She later joined Accenture, and focused on health care consulting and business development for outsourcing. Hua has worked on global projects and helped guide large companies and organizations through difficult market corrections while advising them on growth strategies and acquisitions. She will be joining Proskauer in the fall.
Suggested citation: Hua Wang, Markets and Mandates in International Environmental Regimes, JURIST - Dateline, Nov. 12, 2011, http://jurist.org/dateline/2011/11/hua-wang-environment-regulation.php.
Thursday, November 03, 2011
JURIST Senior Editor Sarah Paulsworth, University of Pittsburgh School of Law Class of 2013, is a Boren Fellow and has lived and worked in Azerbaijan. She writes about the impermissible pressure Azerbaijan's Lawyers' Collegium exerts on independent lawyers who defend dissidents, human rights activists and journalists...
Azerbaijan's Bar Association, also known as the Lawyers' Collegium, is one of the major mechanisms through which Azerbaijan's independent lawyers are harassed. As in most republics of the former Soviet Union, criminal defense in Azerbaijan is monopolized by the Collegium. Pursuant to Article IV, § 1 of Azerbaijan's Law on Lawyers and Lawyerly Activities, only members of the Collegium can participate in "lawyerly activities." These activities are defined in Article IV, § 2 as "defending people accused or convicted of committing a crime, representing people who have filed cassation complaints related to civil cases with the Republic of Azerbaijan's Supreme Court, and representing complainants in cases of alleged rights and freedoms violations before that Republic of Azerbaijan's Constitutional Court." Therefore, lawyers that are the subject of disciplinary action, which results in the temporary or permanent suspension of their Collegium membership, are severely restricted in the scope of their work and completely excluded from filing the appeals typically required to take a case before the ECHR under Article 35, § 1 of the Convention for the Protection of Human Rights and Fundamental Freedoms [PDF].
If the Lawyers' Collegium were an independent entity that issued objective decisions on disciplinary issues, this would not be problematic. However, the Collegium is closely linked to the will of Azerbaijan's ruling regime. The International League for Human Rights stated in a report published in 1999 that:
Although the Ministry of Justice does not micromanage the day-to-day operations, the Collegium leadership knows what is politically acceptable to the Presidential Administration and the Ministry of Justice. The leadership toes the line and ensures that the lawyers it controls stay in line as well. When it does not, a phone call from above can quickly energize the Collegium leadership into action.While the report may appear outdated, it was, however, cited by both the Organization for Security and Cooperation in Europe and the American Bar Association Rule of Law Initiative in reports published in 2005. Furthermore, the US Department of State (DOS) characterized the Collegium as "government-controlled" in its 2010 Human Rights report on Azerbaijan.
On September 16, 2011, Azerbaijan's Lawyers' Collegium adopted a decision to expel lawyer Elchin Namazov. According to the decision issued by the Collegium's Disciplinary Commission, Namazov violated ethical standards in an August 27 hearing in which he acted as defense counsel for several activists, who were arrested earlier in the year during highly contentious protests. During the hearing, Namazov introduced a petition to have the pre-trial detention of his client, Rufat Hajibeyli, replaced with house arrest. After the court refused the request, Namazov introduced a formal protest, claiming that the court was acting in an unjust manner. The court subsequently rejected the protest and an argument broke out in the courtroom. According to Namazov, the court's refusal to even consider the protest contravenes Azeri law. Nonetheless, due to the argument, the judges announced a recess and, upon returning, they declared that a criminal case would be launched against Namazov pursuant to Article 289 of the Criminal Code for "disrespecting the court." Additionally, the court removed Namazov from the case and initiated proceedings to expel him from the Collegium. Namazov also defended many other high-profile clients, including imprisoned youth activist Bakhtiyar Hajiyev, Islamic Party member Haji Zulfigar Mikayilov, who is accused of plotting a coup, and Azer Jabiyev, another religious figure who was convicted of hooliganism involving the use of weapons. Namazov has filed a complaint in court challenging his expulsion.
The Collegium is also currently reviewing a complaint against Aslan Ismayilov, which stems from an incident in which Ismayilov allegedly behaved rudely towards a client at his law firm. On September 16, the Collegium's Presidium decided to return the complaint to the Collegium's Disciplinary Commission for further investigation. Ismayilov holds that the complaint is the result of political pressure. The complaint against Ismayilov appeared after he filed a lawsuit against several high-ranking government officials, including presidential administration chief Ramiz Mehtiyev and Chief Prosecutor Zakir Garalov, for the confiscation of factories belonging to the Zulfigar brothers, religious figures that are currently imprisoned on charges of planning a violent coup.
In mid-September, lawyer Elchin Sadigov reported being contacted by Deputy Chair of the Collegium, Farhad Najafov, who informed him that an individual named Bayram Aliyev had filed a complaint with the Collegium against him. Although Sadigov does not know, and has never met, anyone by the name Bayram Aliyev, Sadigov was required to provide the Collegium with records documenting his work over the past year, and continues to be the subject of an ongoing investigation. Sadigov has characterized the investigation as part of a recent campaign of pressure against lawyers that take on issues and clients deemed to be subversive. In the past, Sadigov has litigated cases on behalf of Azadliq Newspaper Editor-in-Chief Ganimat Zahid, wrongfully imprisoned newspaper editor Eynulla Fatullayev, journalist Agil Khalilov, who was forced to leave Azerbaijan after witnessing and reporting on the illegal acts of a National Security Ministry official, and defendants in several other high-profile cases.
On August 24, 2011, Azerbaijan's Lawyers Collegium issued a decision prohibiting Khalid Bagirov from carrying out "lawyerly activities" for one year. The decision was based on a complaint filed by Baku City Police Chief Rafig Abbasov which accused Bagirov of violating Azerbaijan's law governing the conduct of lawyers. Prior to his year-long expulsion, Bagirov was involved in a number of contentious cases, including that of Elvin Askerov, who died while in police custody of severe head injuries reportedly inflicted by the police, and imprisoned human rights activist, Vivadi Iskanderov.
In February 2011, the Collegium issued a decision to expel Osman Kazimov. The decision was based on a complaint filed by Rustam Usubov, first deputy to Azerbaijan's Chief Prosecutor. The case stems from an incident in which Kazimov refused to sign the protocol of a questioning session because the investigator misrepresented his client's statements. The Chief Prosecutor's Office interpreted the refusal as a failure to provide representation to the accused, a violation of Azerbaijan's law governing the conduct of lawyers and the nation's criminal procedure code, filed a complaint with the Collegium, which resulted in Kazimov's expulsion and a lawsuit. In July, the decision to expel Kazimov from the Collegium was abolished in a settlement agreement reached in Baku's Binegedi Court. Kazimov has represented Ganimat Zahid, who was a victim of wrongful imprisonment and the subject of countless lawsuits, numerous activists and officers from the Musavat opposition party and many other dissidents and victims of human rights violations.
The repression of independent lawyers in Azerbaijan has caused an international outcry. The trend represents a serious barrier to justice, and a particularly significant one in the area of human rights. According to the DOS's 2010 Human Rights Report, there was, at the time of publication, only 768 collegium members, and only an estimated 415 members were actually practicing. Access to licensed legal representation was particularly restricted outside the capital, Baku. In 2010, the Council of Europe also produced a report on European judicial systems that indicated there were only nine lawyers per 100,000 inhabitants of Azerbaijan, giving Azerbaijan the lowest lawyer to inhabitant ratio in the entire Council of Europe (although Scotland's statistic appears lower, at four lawyers per 100,000 people, the country also utilizes legal advisors, unlike Azerbaijan. Scotland has 203.6 legal advisors and lawyers per 100,000 inhabitants). Beyond Azerbaijan's low lawyer to citizen ratio, many lawyers are reluctant to take on difficult or highly political cases due to fear of exactly the type of retribution Namazov, Kazimov, Ismayilov and Sadigov face.
The recent harassment of Azerbaijan's independent lawyers and the country's failure to maintain an independent body to regulate the legal profession contravenes obligations Azerbaijan has undertaken before the international community, including the UN and the Council of Europe. The UN's Basic Principles on the Role of Lawyers holds that governments must ensure an environment in which lawyers are able to perform all of their professional functions without intimidation, hindrance, harassment or improper interference. Furthermore, lawyers are not to suffer or be threatened with prosecution for any actions taken in accordance with the profession's recognized duties, standards and ethics. On the same note, the Council of Europe issued a recommendation [PDF] pursuant to which the regulation of the legal profession should be entrusted to an independent body and, at the very least, its decisions should be subject to review by an independent, impartial judicial authority. While this is only a recommendation, it has been incorporated by resolution into the mandate of the Council of Europe's European Commission for the Efficiency of Justice, of which Azerbaijan is a member. Accordingly, Azerbaijan should strive to achieve the standards set forth in the recommendation.
In conclusion, Azerbaijan needs to take steps toward reforming its Lawyers' Collegium, so that the entity can issue independent, impartial decisions on disciplinary matters. One way to achieve this might be reforming the Presidium. According to Khalid Bagirov, Presdium members serve for five years. Nonetheless, its current members' terms expired in 2009 and they are yet to be replaced. In addition, the Collegium needs to work to include a greater number of lawyers within the organization. Law is a very popular major in Azerbaijani universities, however very few of these students actually manage to successfully join the Collegium. This could be ameliorated by holding entrance exams more frequently and by ensuring that the second-level of the exam, which involves an interview, is not used to weed out aspiring lawyers that seek to serve dissidents, journalists and human rights activists. The country's leadership and its activists could also consider creating a new lawyers collegium that would replace or coexist with the current Collegium. However, until such an organization's members would be authorized to conduct "lawyerly activity" within the framework of Azerbaijan's Law on Lawyers and Lawyerly Activities, it and its members would not be able to exercise any amount of significant power. Although talks were previously held on this matter in 2005 and 2006, little progress was made and the government was reluctant to authorize a new or concurrent collegium. Finally, Azerbaijan should bear in mind that creating obstacles that prevent people from lawfully pursuing the profession of their choice, such as through the arbitrary expulsion of lawyers from the Collegium, can in and of itself be viewed as a human rights violation.
Sarah Paulsworth is a senior editor for JURIST's Paper Chase service. She is currently on sabbatical while studying and conducting research in Kazakhstan as a Boren Fellow studying Kazakh. She holds a bachelor's degree in journalism from the University of New Hampshire. Prior to attending law school she lived and worked in Azerbaijan for six years, first as a Peace Corps volunteer, and then with the local media and as an intern for the American Bar Association Rule of Law Initiative. Her views do not necessarily reflect those of JURIST.
Suggested citation: Sarah Paulsworth, A Call for Reform: Azerbaijan's Repression of Controversial Lawyers, JURIST - Dateline, Nov. 3, 2011, http://jurist.org/dateline/2011/11/sarah-paulsworth-azerbaijan-bar.php.
Wednesday, November 02, 2011
JURIST Guest Columnist Erick Posser, Villanova University School of Law Class of 2013, is a staff writer for the Villanova Sports and Entertainment Law Journal and an Executive Board member of the Villanova Sports and Entertainment Law Society. He writes on the implications of the Eight Circuit's decision in Brady v. NFL...
On March 11, 2011, as the deadline approached for negotiating a new collective bargaining agreement and stipulation and settlement agreement, the National Football League Players Association (NFLPA) notified the NFL that it would decertify as a union, effectively disclaiming its interest as the players' collective bargaining representative. The NFL responded by filing an amended unfair labor practice claim with the National Labor Relations Board (NLRB), asserting that the NFLPA's decertification was a "sham" and that the decertification coupled with subsequent litigation was an unlawful subversion of the collective bargaining process.
Responding directly to the NLRB claim, the players commenced the instant action in the US District Court for the District of Minnesota, asserting multiple claims against the NFL. First, they argued that the non-statutory labor exemption does not apply to the instant case because the players were no longer represented by the NFLPA and, accordingly, no longer had a collective bargaining relationship with the NFL. Second, they claimed that the NFL's planned lockout was an illegal boycott and price-fixing arrangement that violated § 1 of the Sherman Act." [PDF] Third, they purported that the planned lockout violated state contract and tort laws. Finally, they alleged that the NFL planned to continue or institute anticompetitive practices in violation of the Sherman Act.
Hearing the case on appeal, the opinion of the US Court of Appeals for the Eighth Circuit began by considering whether the National Labor Relations Act (NLRA) deprived the district court of jurisdiction to enjoin the NFL lockout. The court indicated that Congress was intent upon largely taking the federal courts out of the labor injunction business with the exception of a few circumstances spelled out in the NLRA. Although the impetus for the NLRA was dissatisfaction with injunctions entered against workers in labor disputes, the statute also requires that injunctions against an employer participating in a labor dispute conform to the NLRA. Thus, the first issue to be decided was whether the NLRA provided jurisdiction for the district court's injunction, or whether the matter was to be decided by the NLRB.
The district court previously held that federal jurisdiction was proper and enjoined the NFL from locking out the players. Ultimately, the court found that the NLRB did not deprive the federal courts of jurisdiction because Brady did not involve or grow out of a "labor dispute." The Eighth Circuit, however, found that pursuant to the definition of labor dispute provided in § 13(c) of the act, the case did involve or grow out of a labor dispute. Furthermore, the Supreme Court has observed the statutory definition of labor dispute to be extremely broad and congressional intent suggests that the NLRA's scope was to be far-reaching. As such, the Eighth Circuit held that this was a controversy concerning terms of employment, and that the players sought broad relief that would impact the terms or conditions of employment for the entire industry of professional football. In particular, the Eighth Circuit disagreed with the district court's conclusion that this was a dispute over commodities rather than a controversy over terms and conditions of employment.
The Eighth Circuit further held that while § 13(a) does not provide the operative definition of labor dispute; its requirements were, nevertheless, fulfilled, as the dispute involved persons engaged in the same industry. Accordingly, it found that the district court improperly departed from the text of § 13(a) when it found the provision to require that employees be unionized. The Eighth Circuit refused to add such a requirement of unionization, holding that employees may engage in activities for the purpose of mutual aid or protection without the existence of a union, and that lawsuits resulting from such activities can be deemed to involve or grow out of labor disputes. Therefore, the fact that the player's union decertified in order to pursue antitrust litigation did not impact the finding of a pre-existing, or ongoing, labor dispute for purposes of the NLRA.
The Eighth Circuit's conclusion that the preliminary injunction did not conform to the provisions set forth in the NLRA was a limited holding that highlighted the importance of collective bargaining between the NFL and the players. Seemingly, the Eighth Circuit decided Brady through a narrow, textual-based determination of the applicability of the NLRA to the facts of the instant case. Despite the court's strict, textual analysis, the opinion does contain some weaknesses.
In its decision, while the Eighth Circuit analyzed the intent of Congress in creating the NLRA, it failed to fully analyze the legislative history. As the dissent points out, the legislative history reveals House of Representatives committee reports that discuss goals of protecting labor rights and defeating attempts at employer protection. This is essentially the crux of the players' argument that the act only extends protection to employees, not employers. This case did pose potentially severe implications for the NFL. If the court affirmed the injunction, the NFL owners would have been forced to operate their organizations and honor players' contracts with no collective bargaining agreement in place. Thus, it is possible that the repercussions of finding the federal courts to have jurisdiction weighed into the court's decision and drove the strict, textual analysis.
Moreover, the Eighth Circuit expressed no view on the scope of the non-statutory labor exemption that posed a potential obstacle to the success of the players' antitrust claim. Unfortunately, the court only spoke to the narrow issue on appeal, regarding the scope of the NLRA. This left the issue of whether the players' antitrust lawsuit would have withheld the protection offered by the labor exemption unanswered.
Nevertheless, the Eighth Circuit's textual analysis of the NLRA was correct and its conclusions justified within the text of the statute. First, the facts in Brady reasonably lead to the conclusion that the two parties were involved in a case growing out of or involving a labor dispute. The lawsuit and the collective bargaining prior to the filing of the lawsuit concerned the terms and conditions of the players' employment. It was also reasonable to conclude from the text and precedent that there is no requirement that employees be unionized in order for a labor dispute to occur. Given that both parties have been under a collective bargaining relationship for the past 18 years, the fact that the players chose to pursue antitrust laws over collective bargaining did not erase their labor relationship with the league.
In general, the Eighth Circuit came to the correct conclusion by vacating the district court's decision to enjoin the NFL lockout. Seemingly, the court erred in ignoring the legislative history of the NLRA, which provided some interesting insight and difficult obstacles for the court to overcome. Yet the decision to stand by the express language of the NLRA and analyze the scope of the statute under a strict, textual interpretation led to the most reasonable resolution in Brady. There were many implications posed by this labor dispute that would have impacted each individual member and organization of the NFL. By vacating the injunction and upholding the lockout, it is fair to assume that the court decided the proper forum for curing these issues was the negotiation table, not the federal courtroom.
The Eighth Circuit's decision in Brady is a significant development in the law surrounding professional sports. The decision is especially important because it stands to impact all future labor disputes between professional sports leagues and players' unions, including the current lockout taking place in the National Basketball Association. Although there is criticism that the Eighth Circuit's opinion is too narrow, the decision comes as no surprise to the legal community. Furthermore, Brady can even be viewed as a positive holding for both parties involved.
For the NFL, Brady was a major victory and validation of its legal strategy. First, Brady upheld the use of lockouts for employers as a means of pressuring employees into accepting terms in collective bargaining. Going forward, every professional sports league will likely rely on Brady when locking out their players during a collective bargaining impasse. Second, the NFL successfully eliminated the injunction, the players' biggest weapon and collective bargaining chip. As a result, the players were left to decide between either continuing to pursue the merits of their antitrust claim or caving into various demands from the owners and settling on a new collective bargaining agreement. Ultimately, this decision was an easy one for the players because an antitrust trial would have resulted in years of costly litigation. This would have been unfavorable as the players would have lost significant compensation, suffered from diminishing skills and come up against the Eight Circuit a second time.
Nevertheless, Brady does offer some benefits for the players in future labor disputes. Primarily, the Eighth Circuit does not speak on the merits of the players' antitrust claims, leaving the option open going forward. Furthermore, the Eighth Circuit suggested in oral arguments that the non-statutory labor exemption ends within six months to a year. Thus, the players were able to pressure the owners with the prospect of an antitrust suit, gaining some collective bargaining leverage that allowed for a quick settlement and more favorable terms in the new collective bargaining agreement.
In conclusion, Brady brought a return to football and potentially an end to some professional sports related litigation. Neutral arbitrators, not judicial oversight, will resolve future labor disputes between the NFL and the NFLPA. Although Brady seems to be a narrow opinion on its face, the Eighth Circuit essentially saved the 2011 NFL season and allowed for both parties to resolve their differences around the negotiation table.
Erick Posser studied Sports Management at Syracuse University. He interned at Q2 Sports and Entertainment and Evolution Group Media Talent LLC in New York and at Sports Professional Management in New Jersey.
Suggested citation: Erick Posser, Eighth Circuit Upholds Negotiations as Primary Labor Dispute Forum, JURIST - Dateline, Nov. 2, 2011, http://jurist.org/dateline/2011/11/erick-posser-labor-dispute.php.
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