Protests, Tariffs, and the First Amendment: The Ripple Effects of Policy Changes - Ep. 63 - Litigation Nation

Episode Transcript
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Jack Sanker (00:05):
Welcome to Litigation Nation. I'm your
host, Jack Sanker, along with mycohost, Danessa Watkins. This is
the show where we talk aboutsome of the most important and
interesting legal news of thepast couple of weeks. Danessa,
what do we have today?

Danessa Watkins (00:17):
Today, I'm gonna cover the first amendment
issues that were or are raisedby president Trump's recent
announcement that he's going topull federal funding for any
school or university that allowsfor illegal protests.

And I'm gonna be returning to the tariffs issue
and how that's impacting myindustry, is construction up and
down the supply chain, how folksare working to protect
themselves from the expectedprice hikes. All of that and
more, here's what you need toknow.

On March fourth of twenty twenty five, so just
two days prior to thisrecording, President Donald
Trump took to Truth Social witha post that has now gone viral
stating the following, quote,all federal funding will stop
for any college, school, oruniversity that allows illegal
protests. Agitators will beimprisoned or permanently sent

(01:12):
back to the country from whichthey came. American students
will be permanently expelled or,depending on the crime,
arrested. And then in all caps,no masks, exclamation point, end
quote. This post comes right asthe Trump administration has
launched a review of ColumbiaUniversity's federal contracts

(01:34):
conducted by the Department ofHealth and Human Services,
Department of Education, and USGeneral Services Administration
for potential violations ofTitle VI of the Civil Rights
Act.
In April of twenty twenty four,Columbia University became a
focal point of news for theirstudent activism when pro

(01:56):
Palestinian demonstratorsestablished an encampment on
campus and called for theuniversity to divest from
Israel. The protest, whichbecame known as the Gaza
Solidarity Encampment, itescalated after university
officials called in NYPD toclear the area, which ended up
resulting in over 100 arrests.So the US Department of Health

(02:19):
and Human Services just put outa press release talking about
the investigation that they'regoing to do into the school. The
release says, Americans havewatched in horror for more than
a year now as Jewish studentshave been assaulted and harassed
on elite university campuses.Unlawful encampments and
demonstrations have completelyparalyzed day to day campus

(02:40):
operations, depriving Jewishstudents of learning
opportunities to which they areentitled, said Secretary of
Education Linda McMahon.
Institutions that receivefederal funds have a
responsibility to protect allstudents from discrimination.
Columbia's apparent failure touphold their end of this basic
agreement raises very seriousquestions about the
institution's fitness tocontinue doing business with the

(03:03):
United States government. Nowwhile I don't see any issues
with this investigation, I thinkit's certainly warranted, the
concern about this post byPresident Trump is that, it it
starts to infringe on FirstAmendment rights on many levels

(03:26):
and has certainly raised redflags with universities as far
as what they can do within thelimits of the constitution to
make sure that they don't losefederal funding. The Foundation
for Individual Rights andExpression, which is a nonprofit
group, recently released astatement saying, point blank,
quote, the president can't forceinstitutions to expel students,

(03:49):
period, end quote, which I thinkseems accurate. But Trump has
also told the secretary of stateMarco Rubio that he wants
noncitizen protesters that areadmitted to The US on student
visas to be deported.
Now the only way that that couldprobably be carried out is if
those protesters are arrestedand then processed, but that

(04:11):
raises obvious concernsregarding free speech and
protest rights. So if we haveauthorities subjectively
plucking otherwise peacefulstudents out of an assembly
because they look a certain wayor have a certain accent and
then unlawfully detain them justto determine if they're US
citizens, you can see theescalation of issues here, not

(04:35):
the least of which is chillingspeech by causing people to stay
home rather than come out andvoice their opinions. So I wanna
break this down a little bit.The biggest question that's come
out of this recent post bypresident Trump is when does a
protest become illegal? Now weunderstand the the first
amendment right includes theright of the people peacefully

(04:58):
to assemble and to petition thegovernment for a redress of
grievances.
So alright. We know what theconstitution says, but what does
peaceably assemble actuallymean, and what are the bounds of
this core right? So first, justgenerally speaking, this right
allows for protests in publicspaces. So streets, sidewalks,

(05:19):
parks, the government designatescertain areas that are where
people are allowed to assemble.And obviously, there's just no
blanket right to assemble onyour neighbor's back porch, for
example.
But there are certain actionseven within a public space that
can render a protest unlawful.So again, just a basic overview.

(05:40):
You can't block access tosidewalks or buildings. And this
has come up in cases where, forexample, protests were held
outside of abortion clinics. Soif the protesters are physically
preventing access to a building,denying people healthcare,
denying doctors the ability togo in, they're obviously gonna
be subject to arrest or removal.

(06:05):
Disruptive counter protests, youcannot physically interfere with
an assembly that you oppose.This has come up at times where
maybe one group puts outpublicly that they're gonna be
at a certain place at a certaintime and an anti group shows up
and tries to disrupt that, thepolice can step in in those

(06:28):
situations. And then there arelimitations on the type of
speech that would be protectedeven if you are peacefully
assembling. So just to be clear,you can be sued for defamation
if you make statements at apublic rally that are false and
harmful to someone's reputation.So in other words, simply

(06:49):
because you're chanting alongwith two twenty or 200 people
that Pete Diddy engaged in taxevasion, among other If you know
that statement is false or youare reckless in making it, you
could be liable.
Although I think Diddy, at thispoint, probably has plenty of
other issues he's worryingabout. Other speech that's not

(07:11):
protected is speech that'sobscene. So that's generally
been defined as sexuallyexplicit expression that is
patently offensive and has noserious literary, artistic,
political, or scientific value.And then you cannot express
yourself in a manner thatincites immediate violence or
dangerous disturbances. Now thisis probably one of the more

(07:34):
highly litigated issues withregards to protests and public
assemblies.
In 1969, the Supreme Court'sdecision, which is usually cited
as the landmark decision,Brandenburg versus Ohio, came
out. The plaintiff there,Clarence Brandenburg, he was a
Ku Klux Klan leader in ruralOhio in the mid nineteen

(07:58):
sixties, and he was charged withadvocating violence under an
Ohio state statute thatprohibited advocating crime,
sabotage violence, or unlawfulmethods of terrorism as a means
of accomplishing industrial orpolitical reform. Now he sued
claiming that this violated hisfirst amendment right to free

(08:20):
speech, and the Supreme Courtunanimously agreed with him that
that Ohio statute did infringeon his rights. However, it set
some precedent that there aregoing to be instances where
inciting speech might go beyondFirst Amendment protection. So
they came up with this test thatwe now refer to as the
Brandenburg test which sets athreshold.

(08:43):
So one, if the speaker intendsto incite imminent lawless
action, so that's a subjectiveanalysis, And two, is likely to
incite or produce such action.So that's So it's an and, not a
or. Right? Yes. Okay.
If those two categories can bemet, then there is no protection

(09:04):
under the first amendment forthat speech. Now this obviously
was highly debated followingJanuary 6, and legal scholars
came down on both sides aboutwhether Trump could be held
liable for inciting violencewith his speech. I'm sure you
saw a lot on that.

Have you heard about this first?

Yeah. And just kind of taking the most basic
view of this, the obvious issuesthat come up is that you have to
be able to prove that heintended to incite that lawless
action. But then there's alsothis issue of imminence. So
protesters had to march morethan a mile to get to the
capital before they engaged inunlawful actions. And by that

(09:46):
time, substantial time hadpassed.
So, you know, was it reallyTrump's words that caused that
violence?

And Americans walking a mile, I mean, that's
an hour and a half. Yes.

Oh, it depends on which app you're using.
Google Maps

or whatever.

Okay. You know, but the the challenge here is
obviously the real timeenforcement. So going back to
these pro Palestinian marches,the government obviously cannot
restrict a group from protestingsimply because they don't agree
with their messaging or theirbeliefs. So put another way, if

(10:23):
a pro Palestinian student groupapplied for a permit to hold a
rally on a university square,they couldn't be denied that
permit just because this is ahighly contested issue that
could result in unlawfulbehavior.

I mean the famous Illinois Nazis in the 1970s.
Right.

Yep, absolutely. So that case
essentially said just becauseit's the KKK that's requesting
the right to protest and giventhe history of violence
associated with that group, youstill cannot restrict them from
their right to peacefullyassemble.

Right.

Now I wanna just pivot for a moment to
another important part of ofTrump's recent post that may
have not been obvious toeveryone or maybe it was
misinterpreted. So at the end ofhis statement, again, puts in
all caps, no masks. And I cantell you with 99% certainty that

(11:22):
he's not waging a war on Doctor.Fauci or claiming that masks
aren't important in COVID. Whathe's referring to here is that
protesters sometimes use masksto conceal their identities so
they can evade arrest.
So he's saying if these protestshappen on campus there

(11:45):
absolutely can be no masks worn,no efforts to hide your
identity. And I think theimplication is that that is
illegal and those people can bepulled regardless of whether
they're engaging in unlawfulactivity, regardless of the type
of speech or expression but justsimply being present wearing a
mask is going to be consideredillegal. This raises two obvious

(12:11):
concerns under the FirstAmendment. One is the right to
freedom of expression, and theother is the right to anonymous
speech.

So And is the the act of wearing a mask also
considered speech in certaininstances?

Yes. So it's well, it's expression. Right.
Sorry. Yeah.
Which is protected under theFirst Amendment. But it's been
highly litigated, as you canimagine. There have been cases
where well, actually, let's jumpright to the the one with,
again, the KKK that came out in02/2004. Church of the American

(12:54):
Knights of the Ku Klux Klanversus Carrick. And this came
down in the second circuit ofappeals.
So it was a original originallya New York case. So the American
Knights applied to the NYPD fora parade permit. Let's see. They

(13:16):
were gonna be holding an eventon a Saturday on the steps of
the New York County Courthouse.So court's not in session.
There's no issues with themdisrupting government. But the
police department notified themthat their plan to wear masks
would be in violation of a localpenal law, which was

(13:37):
specifically about loitering. Sobeing masked or in any manner
disguising by unusual orunnatural attire or facial
alteration. If you loiter,remain, or congregate in a
public place with other personsso masked or disguised, you're
gonna be guilty of loitering.Now the group obviously filed a

(14:04):
lawsuit in connection with this.
They did end up holding theevent without people showing up
in their hoods, but I think theattendance was way less than it
would have been otherwise.

At

the district court level, so at the trial
court level, actually sided withthe KKK and said, Yes,
absolutely, this is arestriction on your right to
expression. But this went allthe way up to the Supreme Court
and ended up getting overturned.So specific to the expressive
conduct, the court didacknowledge that sometimes

(14:39):
wearing certain things can be anexpression and can be something
that's protected. It noted thathooded masks are an integral
part of the message that linksthe American Knights to the KKK
and its horrific ideology, whichis actually what they're trying
to achieve.

So

clearly the masks have some protected
expression to them. However, thecourt found that when you take
the totality of the circumstancehere, so the fact that the
American knights were showing upin robes, in masks, in hoods,
and they had all these differentitems that were expressive.

(15:22):
Taking away the right to one ofthose items didn't unfairly
infringe on their rights toexpression. So they could
essentially make theirconnection to the KKK by
wearing, you know, their theirother things that didn't hide
their identity. They're stillable to convey their message.

(15:43):
And the court actually said theexpressive force of the mask is
redundant. So interesting, Iguess. Depends on I don't know.
It's a case by case analysis.

Well, the hood is like the white hood is like I
don't wanna say iconic. That'snot the word. But it's a it it
speaks for itself in somedegree, whereas, like, a ski
mask, which is, like, be wornin, you know, a college protest,
probably doesn't. Mhmm. Those Imean, that's one distinction.

Yeah. Yeah. Yeah. I mean, I was kind of
surprised that that the courtbroke it down that way, I guess,
because I could just think of,like, cultural outfits where,
you know, every piece matters orevery piece has a certain level
of symbolism. And not that, youknow, I agree with the KKK's

(16:32):
messaging, but I'm sure thatthat was their argument is that
it's the entire, you know, it'sthe entire outfit.
Like that's a whole part of it.Right. But ultimately, the the
court disagreed. Now this otherthe court actually took up this
other issue, is the right toanonymous speech. And to be

(16:52):
clear, this has for decades beendecided to be a core right under
the First Amendment, so theability to speak anonymously.
And just to go back for a minuteas to some of the early
decisions on that, Talley versusCalifornia from the nineteen
sixties was one of theoriginals. And the court stated

(17:15):
that quote, persecuted groupsand sex from time to time
throughout history have beenable to criticize oppressive
practices and laws eitheranonymously or not at all. And
the court noted that even theFederalist Papers, for example,
were published under fictitiousnames. So that anonymity

(17:35):
provides a way for a writer whoeither for safety reasons wants
to hide their identity or maybethey are just unpopular in and
of themselves. And the only waythat they can get their message
across without readersprejudging the message is to do
it anonymously.

(17:56):
So again back to this KKK versusCarrot case. On this issue the
obvious argument was thathistorically speaking KKK
members have wanted to hidetheir identities. Know they want
to be part of this group butwhen it comes to public
perception of them obviouslythey fear for their safety,

(18:20):
their jobs, their you knowstatus in the community if they
if they express that these aretheir beliefs. So, that was one
of the arguments they made aboutthat New York anti mask statute
being unconstitutional on itsface. And the court declined to
extend anonymous speech to thatsort of behavior that was at

(18:43):
issue here, holding that theconcealment of one's face while
demonstrating may beconstitutionally protected, but
there are gonna be situationswhere government concerns are
gonna outweigh that right.
So essentially they held thateven though we have this right,

(19:06):
there is not gonna be aguarantee of ideal conditions
for spreading your speechanonymously. So in this case, I
guess there had been, I think,some history of violence
breaking out and people wearingmasks for the purpose of evading

(19:29):
police capture. And so the courtsaid, you know what? The New
York had a solid basis forputting this role into place.
They did it in a content neutralmanner, meaning it's not like
they were only invoking this forOnly in the one beat,

two point. Yeah.

Right. So, yeah, it it upheld it and said
there was nothingunconstitutional on its face
about that statue.

Which is interesting because, you know,
the problem that people havewith with protests generally are
usually when they're repeatedprotests. So it kind of when
it's like the same cause overand over again, like if if
people just show up one time,protest one thing, kind of comes
and goes. Mhmm. When peoplereally start to get upset about
it is when it's sustained orregular, at which point it seems

(20:16):
like, they could availthemselves to the reasoning of
the court here more easily.

Yeah. I mean, we see it all the time here in
Chicago where protesters shutdown Lakeshore Drive or we're
right on an intersection, a verybusy intersection where a lot of
times people congregate and itdoes, it stops stuff. I mean,
that's the point, I guess, is todisrupt life to an extent that
you have to pay attention to themessaging. But that's where the

(20:47):
limitations on on the right toassemble and the right to to
speak come into play,

which And stretching the the the bounds
of, like, you know, what isdisruptive and peaceful versus,
you know, what's allowed. Ithink that the peaceful angle in
particular is always, like,heavily contested.

For sure. Because there's a lot of gray
area of what is peaceful. Justbecause people get upset, does
that mean it's not? Just becausepeople raise their voice, just
because people amass in a groupthat causes traffic to slow
down. There's all thesedifferent factors.

And some extent of property damage, but property
damage to public space versusprivate property. Those are all
factors. I know, for example,that these particular protests
like, and sometimes some of thejustifications for the the the
breakups of these, like,encampments. I'm talking about
the pro Palestinian Mhmm.Protests in college campuses.

(21:52):
Some of the breakups werejustified as it's not peaceful
because they're on the lawn, andthe lawn's being destroyed by
these people. And it's the lawnof probably a public college, so
that's destructive, quoteunquote. So it can get kind of
tenuous as to the justificationfor this is no longer within the

(22:15):
realm of allowed protestactivity.

Right. Well, yeah, and I think this came
about a lot with the abortionprotest, but now we've seen it
on campuses with the proPalestinian is the constant
presence of people who are, Idon't even know how to describe
it, but if you're on the otherend of that, if you're the

(22:39):
receiving end of that, you know,I'm sure it's causing students
or it has for sure causedstudents not to go to class, to
wanna leave their dorms, not towanna because it's in your face.

Yeah. Mean, that's right. It's like a, a sense of
like, does this person feel safegoing about their life and
everything else? I mean, yes.But that does not speak to the
legal requirements that we'retalking about though.
That speaks to the level ofdiscomfort that the protest

(23:09):
causes people, but that's kindathe point of protest, you know?

Yeah, if we're talking just about people
assembling, yes, of course,that's the point. But there are
avenues for the government toput in reasonable time, place,
manner type of requirements, andthat's just to allow society to
continue forward in the mannerthat it should.

Like not blocking intersection during rush Yeah.

Yeah. Or setting even like I'm sure
there's statistics that morecrime happens at night. So all
protests must end before dusk orwhatever.

Permitting, etcetera.

Permitting, yes. Requiring permits for large
groups. As long as it's done ina neutral manner, in that it's
not based on who's requestingthe permit or the type of speech
they're gonna be conveying, thenthose types of things are
generally found to be notintrusions on your rights under
the First Amendment. But schoolsis kind of an interesting

(24:10):
dynamic because there has andthere hasn't been a lot of
litigation on this. What we knowbased on our precedent is that
there there is a distinctionmade obviously between public
and private.
There's also a distinction madebetween primary and secondary

(24:31):
schools. So, like, elementary,middle, and high schools versus
colleges and universities. Sothe lower levels there, I would
say, there's more freedom forthe schools to restrict speech
based on the circumstances. Ifit's inconsistent with their

(24:53):
basic educational mission. Ithink it's just viewed at this
level of like yes students dohave free speech rights.
But I think honestly, I I thinkthey look at it more of like a
maturity thing. And like highschool education being like

(25:14):
something you have to getthrough. So like, you know, we
gotta focus on making sure thatwe fulfill our mission of
educating you whereas collegesand universities are looked at
as this kind of like think tankwhere you really want to protect
the freedom of speech and ideasand debate

Which, yeah, that's what they all love to say about
themselves.

Right, As

an aside, there's a long and detailed history of
crackdowns on speechpredominantly happening on
college campuses.

Yes, no doubt. Even more recently.

Yeah, and so I think when everything is good
and there's not protests, theykind of all take this position
of like, we love studentactivism. And then when anyone
becomes an activist, the tonechanges for right or for wrong,
but there's a lot of instancesof

that. Mhmm. Well, and I think that's kind of
the concern now with this lateststatement from the president and
the action of itsadministration. In, you know,
looking at they've actuallysuspended, I think is it

(26:31):
51,000,000 that Columbia gets? Ihave that number here.
51,400,000.0 in in contractsbetween Columbia University and
the federal government that arecurrently being stayed.

And those are part of the whole Doge thing, I would
assume?

I didn't see a connection with that. Actually,
yeah, that's an interestingpoint. Haven't seen or haven't
personally read anything thatit's connecting it to that.

Because that's a separate element of this. Yeah.
The tweet from Trump is, know,the threat is we're gonna defund
universities that allow quoteunquote illegal protests.

Mhmm.

And that's like, well, of who's we here? And the
federal funding will stop. Imean, is maybe better done in a
separate episode, but the wholecan the president just align
item veto spending that's beenapproved by Congress to
universities based on whateverhis grievance is of the day. So

(27:38):
that's by the book that itrequires, or at least as we were
all taught it in law school, itwould require congressional
action. It's different, and itgets run through the executive
agencies which administer thisstuff.
And it's honestly so much tothink and talk about that I
haven't wrapped my head aroundit because of the way in which

(27:58):
the Department of GovernmentalEfficiency, is that what's,
Yeah. Yeah. Is approaching thisby just basically, you know,
turning the light switch off forevery one of these contracts. So
that's, I mean, that's anotherthing. That's a even if there's
a, this is okay from a FirstAmendment threshold, can the

(28:20):
president unilaterally do that?
And I think the jury's very muchstill on that. Although I saw
that the USAID decision justcame down, also probably good
for another podcast episode,which restored like 2 and a half
billion

Right.

In funding because it was done illegally through
Doge and everything else. Sothere's it's an onion, you know?
There's lots of layers.

Yeah. No. Oh, for sure. So many layers. Yeah.
And I yeah. We can't unpack allof the you know, whether whether
Trump or his administration cando any of these things. I'm more
concerned from a standpoint ofif this is the message that's
going out, how are colleges anduniversities gonna respond to

(29:04):
it? And it actually sayscollege, school, or
universities. So I would argueit applies to any public school
at any education level, is theintent.
How are they going to interpretillegal protests? I I just
discussed some of the basics,but there's so much gray area
there. And are they going tostart, I don't know,

(29:31):
implementing policies orrejecting permits or, you know,
preventing certain studentbodies from assembling just
because they're concerned abouttheir budgeting and how much
speech are we silencing.

Yeah, like theoretically you could say,
well we would prevail on alengthy lawsuit and appeal, or
we can just not allow this onegroup to, you know, have a
permit to protest in the quad.You know? And that's that's an
easy decision for, I imagine,most administrators to make.
Mhmm. Who are, you know, worriedabout their own budgets and
everything else.
Mhmm. I have kind of a dumbquestion that you might know the

(30:08):
answer to, but the for, like,student visas, like, foreign
students that are here ontemporary grounds, are they I
mean, they afforded the samespeech rights as everyone else?
You're laughing at me.

So I knew you were gonna ask this question.
And I should have probablyprepared a better answer. My
understanding is yes, asteriskMhmm. As is a typical lawyer
answer. The free speech rightshave been ruled to be afforded

(30:53):
to non citizens regardless oftheir immigration status.
I think that's the easy answer.

There's also the element of the tweet where it's
quote unquote illegal protests.

Right.

And so I understand that criminal offenses, things
like that can be a factor interms of immigration status, of
course. If someone comes hereand commits a bunch of horrible
felonies, they can be removed.So this is, to take it at its
face value, this is predicatedon the protesters in question

(31:31):
here being involved in a quoteunquote illegal protest, which
is subject to all of thosethings you were just talking
about, of course, whether it'spermitted under the First
Amendment or not. However, Ithink we're going to see a
expansion of, you know, what'sdeemed illegal, you know, as you

(31:51):
mentioned.

So, I mean, just to wrap this up because I
think we could go down sixdifferent wormholes here. I
guess we're just gonna have tosee as always about how I mean,
that's the only answer I have isto see how universities react to
this. And no doubt there willprobably be some lawsuits filed

(32:15):
as a result of this by studentswho feel that their right to
speech, their right to assemblyis being infringed upon. I I,
you know, I just it's it's crazyhow I mean, how many words is
this? Like, 25 words?

(32:35):
A 25 word post has so manyimplications and raises so many
it's just it's all gray.

Right. And none of this is through the normal
channels of legislation andeverything else. You don't wanna
let a tail wag a dog too muchwith this stuff, but how can you
not?

Mhmm. Alright. Well, more on that.

Fantastic. So I'm gonna be talking more about
tariffs again because I can'tcan't avoid it, can't escape it.
Everyone keeps asking me aboutit. I'm not a trade lawyer. We
have excellent trade lawyers atthe firm.
I've I plugged one of our tradelawyers in our most recent

(33:35):
tariff episode who can talkabout the ins and outs of the
tariffs, and I think that's allinteresting to kinda know as
background, but, you know, notwhat we're gonna be talking
about here. What I want to getinto a little more is the sort
of boots on the ground practicaleffects of the new tariffs that
have been rolled out kind ofevery week now for the past

(33:56):
month or so from the Trumpadministration and how it's
trickling down into the realworld and what you're you know,
and this isn't an economicspodcast. This isn't, you know, a
finance podcast, but we're kindof around it, and I think those
are important things toconsider. What I'm gonna be
talking about today and relyingon is a publication from Law

(34:21):
three sixty. It's their taxauthority kind of sub vertical
where they did a survey of abunch of different real estate
and construction attorneys.
I was not asked to participate,but kind of yeah. What's
everyone's 2¢ on these tariffsand how it's gonna affect real
estate and construction inparticular? And and it's a lot
of what I've already said on theshow is kind of, you know,

(34:44):
coming true. I think anyone inthe industry can put two and two
together and tell you that a 25%blanket tax on, steel and
aluminum imports is going todrive the price of steel and
aluminum products up a certainamount. So that's, I think,
fairly obvious.
But to recap, what are thetariffs? Like, the tariffs.

(35:04):
Right? 25 tariffs on goods fromCanada and Mexico, Ten Percent
on all Chinese goods. This isall, by the way, it's the 25%
tax on goods from Canada andMexico that is being raised
from, I believe, 10%.
So it's not 25 on top of 10,it's just it is two twenty five.
10 percent on Chinese goods, Ithink, is being raised to

(35:26):
certain amount from pre existingones. 25% on steel and aluminum
is, I think, being raised from10%.

And as we're recording this, like literally,
I was gonna say ninety minutesago. Yeah. There is a a stay on
or a reversal of both the Canadaand Mexico tariffs.

Alright. Well, okay.

Well, just a delay.

I'm gonna interject my previous line of thought and
of speaking because as we'resitting here recording, all the
tariff numbers changed again. Sothere's now a a month long stay,
I guess we'll call it, to theimposition of the auto tariffs
that assume are the product ofsome pretty fancy lobbying on

(36:16):
behalf of the auto industry.Right? A similarly, a delay on
the imposition of the newtariffs on Mexico. The Chinese
tariffs on all goods were 10%about three hours ago and are
now 20% as we sit here recordingit.
So that's like a good flavor forthe environment that we're all

(36:38):
in. Why does that matter somuch? Mean, who cares? Some of
these tariffs are being adjustedbefore they're even formally
implemented. The Canadian andMexico tariffs had only gone
into effect for I think one day,then they were changed and they
were rolled back.
You know, some people might beinclined to say, okay, what's

(36:59):
the big deal? They were only inplace for one day.

It's like the Twitter ban, right?

Yeah. I mean, why is that a big deal? Because
people are signing contractsthat last longer than one day,
of course, And people are makingdecisions that are, you know,
based on some reasonable levelof predictable projection of,
like, things. Know, if you lookat a couple months ago, if you
would look at whatever yoursmall business that imports,

(37:24):
widgets from China, you wouldsay, I don't think as of the
March that there will be a 20%increase in Chinese tariffs, so
I could sign this contract withthis supplier or whatever to
import their things. And now,you know, now you're screwed.
Right? That's what we're talkingabout here today is the the kind

(37:45):
of up and down effects of thetariffs, price hikes, really the
uncertainty so much more thanthe individual prices. And we
have seen price hikes in thethings that I deal with. So
steel, hardware, tools likethat, you know, box of nails,
for example, raw materials,manufactured goods, things like

(38:08):
that, the prices have alreadygone up, prices go up when the
rumors of the tariffs comeabout, not even when the tariffs
are announced. And even whenthey're announced, they're
announced they're gonna go intoeffect a month from now or
whatever.
Prices go up in advance becausea lot of these businesses are
selling an item or taking anorder for an item that then has

(38:30):
to come and get shipped fromacross the world or whatever. So
by the time it gets here, may besubject to those tariffs or or
whatever. So when when you starttinkering with these type of
things, the safest thing thatsomeone who's in the supply
chain can do is assume the pricehike is gonna be permanent and
include it in their pricing. Sothe so the a lot of these price

(38:53):
hikes, whether they're permanentor not, have already been passed
on to further down the supplychain and ultimately to
consumers. Whether that awhiplash back, if and when these
things are removed, who knows?
I mean, in my experience, pricesrarely go down. They just
especially if there's enoughdemand, the prices just kinda go
up and stay up.

But I think you had said this in a prior
episode, this is kind of theimportance of having an attorney
review your contract though andmaybe add in the type of
language that allows for thatfluctuation so that it's, you
know, not falling on one partyor the other.

Yeah. I mean, I I hate to to to be so glib about
it, but, you know, uncertaintyin contracting and everything
else is, you know, it benefitsthe lawyers because people now
have to plan for a contingencythat was never on their mind.
And and this reminds me a lot ofwhat things were like during

(39:56):
COVID. And you saw everythingfrom commercial leases to,
again, like anywhere up and downthe supply chain of what to do
now when, for example, ports areclosed or ports can't be staffed
because there's not people to goand work there. So things can't
be imported.
So products that you've alreadytaken an order for sitting in a

(40:17):
shipping crate, you know, in theocean or or at a dock for months
at a time, things like that. Andaround that stuff, what you saw
was a a lot of focus on acontractual mechanism that is
already common enough, is theforce majeure clause, which is

(40:38):
kind of a term of art for anunexpected, complicating factor
that no one could havereasonably foreseen. We don't
call it this anymore, but youmight have heard the term act of
God, things like that. Thatrelieves you of your contractual
obligation, right, because noone could have seen this coming.
So there's no way you could haveforeseen this risk.

(41:00):
Right? So two consenting partiescould not have bargained for
this in a contract. So, okay,these tariffs, right, are they
is this a force majeure typesituation? The answer seems to
be no, is what we're seeing.There are legal standards, I

(41:21):
won't get into, I don't havethem in front of me, But there
are legal standards for, like,you know, what is in in this
this type of unaccepted, orunanticipated risk.
And, I will quote from the Lawthree sixty piece, which is
itself quoting from a LosAngeles Attorney who's who's I

(41:46):
think puts it right, quote,force majeure based on a
contract provision. It has tomeet certain standards. A tariff
is not like most of thecategories in force majeure,
unexpected events, acts of God,weather events, outbreaks of
disease, war, general strikes.It's usually pretty extreme,
totally beyond contemplation ofthe parties. That doesn't mean
the parties can't contract.
The better way to do it is totake it on straight up the

(42:06):
impacts of the tariffs and othertrade regulations and
restrictions, what might happenand what the parties want to do
about that. You can do that witha very fine tooth comb, unquote.

The idea being that it's not completely
unforeseeable that we're gonnahave a change in government.
We're gonna have new laws. Gonnabe new trade regulations.
There's like those sort ofthings are something that
contracting parties cananticipate even if unlikely,
they can still foresee that thatwould affect their contract. Is

(42:41):
that the idea?

Yeah. And a lot of these you know, it's the
separate question of what youshould do if you're signing a
contract today, which is ifyou're if you're signing a
contract today, what you oughtto do is make sure that you talk
to someone who knows how toprotect and add something into
your contract, which I Imentioned on the last time we
covered tariffs, of how to addprotections in. One way you
could do it is cost sharingprovisions if the price of a

(43:05):
certain material that'scontemplated by the contract
goes above a certain percentageas measured by, like, a neutral
trusted arbiter and that type ofthing. The Bureau of Labor
Statistics seems to be wherewe're seeing this most, and
they're looking at the producerprice index, PPI. So you could
say, right, if if a, you know,price of steel goes up 10% as

(43:28):
recorded by PPI, that thatchange in cost will be shared
between, you know, the prime andthe sub or the owner and the sub
or whatever.
You can also include to kind ofcontract around this change of
law provisions, which iseffectively saying if the law

(43:49):
has changed that wouldmaterially alter the performance
of this contract, then you canbe subject to certain relief.
You can do again like a costsharing agreement, or you can
just be straight up alleviatedfrom performance of the
contract. You can walk away fromthe contract, right? And if the
price of you know, if you'rebuilding a house and the price
of lumber goes up 40%, like, youjust can't do it and make money.

(44:10):
So you have to walk away or putyour company under, right?
That is these types of thingsare not standard. They're not in
most contracts, especially lowerdown with smaller subs and
smaller distributors and andthings like that. But they ought

(44:31):
to be contemplated and theyought to become more common. The
bigger issue is what people aregetting stuck with now, which is
trying to fit the square pegthrough the round hole in
existing contracts. If yousigned a deal two years ago, for
example, and now you're stuckdealing with these tariffs, what
can you do given the fact thatwhatever you promise to deliver

(44:52):
relies on imported goods, theprice of which has now gone up
25% or more.
What do you do there? Well, youcan litigate the force majeure
issue, which, you know, I I Idon't know on hand how that's
gonna work. I'll be interestedto see. I know I saw some people
try some really interestingthings during COVID. I'll be a

(45:15):
hater here because I saw a rivallaw firm try to get out of their
commercial lease by claimingthat force majeure because of
COVID, and so they can't youknow, they shouldn't have to pay
their the remainder of their tenyear lease at their, like, their
nice Downtown Chicago office.
It was not us.

It was it was not us. Okay.

It was but it was a rival firm. It was like,
alright. I thought that waskinda slimy. But you saw people
try to bend those definitions ofthose established things to
address the current scenario,and you're just seeing that
again now. The and what I thinkis let me go back to another

(46:02):
quote here, from the law threesixty piece.
Regarding current projects thatare already under contract, the
best avenue for seeking reliefis probably going to be change
in law provisions. Change in lawmay be listed as a force majeure
event, which I think is prettyrare, or maybe a standalone
provision of the contract. Newtariffs are essentially new
taxes and, unquote, what they'reimplying there is that new taxes

(46:24):
are new laws. I don't know if Iagree with that because the
statutory authority for thesetariffs have been in place for
decades. So I don't know how acourt would interpret that, but,
you know, unquote, quote again.
Regulations treat tariffs thatway and allow relief for
contractors who pay tariffs thatwere imposed after the date set

(46:46):
for the bid opening. The closerthe contractor is to the supply
chain to the imposition of thetariff, the better chance they
have of seeking recovery. Whenthey're importing directly or
buying them from a supplier whois importing directly, it's
easier to claim the tariff is anew tax paid by the contractor.
It gets more complicated though,when the product passes through
multiple hands, crosses theborder multiple times, etcetera,

(47:06):
because the tariffs get bakedinto the price the contractor
pays later down the the line. Inthose situations, the contractor
may be better off relying on abroader material cost escalation
provision, which is something Italked about two episodes ago,
that allows for reimbursementfor the increased costs,
unquote.
So what they're saying here isif if you're the the direct

(47:28):
importer, right, if you are theperson who is at the port
picking up the widgets from theshipping crates, and you're the
one who is now dealing, youknow, directly with the price
hike that's coming from theexporter as they pay these new
tariffs, You know, that newprice is directly attributable
to the tariffs. I think youcould argue, and you could say,

(47:52):
well, okay, that's change oflaw. I've been affected by that.
This implicates, you know, ourforce majeure clause or our
change in law provision. But ifyou're three or four rungs down
the ladder in terms of thesupply chain, the reason that
the price of your widget or yourmaterial went up is because the
person who sold it to you hikedtheir price, right?

(48:12):
And they may have hiked theprice because the person they
bought it from hiked theirprice, and they may have done
the same because ultimately theperson they imported it from
hiked theirs up. But it's adownstream thing. People don't
generally impose price hikes ona one for one basis in new taxes
either. A lot of these contractsare like cost plus contracts

(48:35):
too, where it's cost of laborand materials plus a percentage.
That's how a lot of constructioncontracts are in particular.
So that percentage goes up aswell. So the cost of a project
is $100,000 it's cost plus 30%is the contract. So $100,000
materials and labor plus 30%,it's 130,000 If the price of

(49:00):
materials and labor goes up to$150,000 not only are you paying
the additional $5,050,000dollars for material and labor,
your 30% has now also risen byanother $15. So now you're
paying what? $1.90 no.
$1.85? Yeah. 185,000. On acontract that was originally set

(49:23):
to be, you know, 100,000 or130,000, right? So it's like I
not do the math there, right?
But you guys know what I'mtalking about. And now, by the
way, that person who purchasedthat thing on a cost plus basis
now has to do the same and mayberesell it to whoever else is
next down the line for them. Andso it's a multiplier effect. The

(49:47):
price goes up not just 25%because we're not buying our
goods from the importer,generally. We're buying our
goods from distributors at alllevels of supply chain.
Kinda to drive this home. I'llgo back to the piece. And I'm

(50:10):
just reading these quotesbecause it's it's from different
geographic areas, differentmarkets. This is one from a
partner at a prominentPhiladelphia firm. Quote, I
don't have any contracts top ofmind that have provisions that
specifically mention tariffs ina first major section.
The first major section willusually discuss change in law,
which this situation may cover.Similarly, this potentially
falls under government action,frustration of purpose,

(50:31):
impossibility, and commercialimpractibility. All this is
gonna be very contract specificgiven that every contract is
different, unquote. Soeveryone's kind saying the same
thing here, which is we don'treally know how this is gonna
shake out, and it's going to bea developing set of laws in
every jurisdiction, frankly,because people going to to, are
going to sue over this, and thecourts are going to have to

(50:52):
decide what is or what isn'tfrustration of purpose, force
majeure, change in law,etcetera. And you're going get
disparate outcomes too, becauseas I sit here now, there's some
of those things that, you know,are seem appealing and
persuasive to me and some ofthem right away, which don't.

(51:13):
And, you know, I'm just, youknow, humble city lawyer here,
but that's how the judges aregonna view them as well. What
it's gonna lead to is likereally, really, really
disruptive pricing across thesupply chains across. And by the
way, I haven't even gotten taximplications on this stuff too.
State state income taxes and andstate sales taxes and all of

(51:35):
that too because the price isgoing to drive up the cost of
doing of state administeredtaxation as well. So it's gonna
not only lead to, like, higherprices, which I think is pretty
clear, but just uneven pricingand, unforeseeability, is the
bigger issue.
I think a lot of businesseswould stand a better chance if

(51:57):
they knew, okay, the price of myinputs are going up 25%, you
know, I can either budget forthat or I can't, you know,
that's it. Right? Some peoplecan and they can absorb that,
they can absorb it into theirmargins, they can restructure,
I'm sure a lot of people getlaid off, you know, things like
that, or they can't and, youknow, someone else maybe can, or

(52:20):
we just don't have that widgetin our, you know, on our grocery
shelves or or Best Buy shelvesanymore. But if you don't, know,
you know, like, ultimately whatthe price tag is of the thing
that you're doing, you're kindafrozen. And that's, like,
that's, I think, the biggerissue, especially in light of
the slowdown in in newconstruction in this country and
our local market in particular.

(52:43):
Housing in general is mostpeople will say, I'm not gonna
sign anything that obligates me,you know, to pay something
twelve months out until I knowwhere this all shakes out at. So
people are just frozen in place.You see it show up in the data
on consumer sentiment, onbusiness investment,

(53:04):
expectations, things like that.Everyone's more or less saying,
we're gonna hit pause until weknow what's going on here, and
maybe, you know, do something,like, you know, like buy bonds.
Right?
Which is what a lot of peopleare doing. So it's it's just a
wacky time to do it, and there'sno sense getting upset about it

(53:24):
from a political perspective.You know, the president, like,
has this prerogative for tariffsin some respect. But it's it is
frustrating, the lack ofclarity. And I think, you know,
as again, in the middle of theepisode, we have to interrupt to
to make mention that the thetech the tariff rates had

(53:46):
changed.
It just makes it impossible toplan more than five minutes in
advance, and that's the realissue that in my industry and in
in a lot of related industriesare seeing right now. Thanks,
everyone. Thanks for listening.As always, you can find us on
Apple Podcasts, Spotify,YouTube, wherever you get your

(54:08):
shows. We put out new episodesonce every two weeks.
We'll try not to dwell so muchon every step of the way, the
Trump administration, everythingelse, but it's kinda hard not
talk about anything else rightnow. Otherwise, talk to you in a
few weeks.

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Protests, Tariffs, and the First Amendment: The Ripple Effects of Policy Changes - Ep. 63

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.css-14f5ked{margin:0;word-break:break-word;display:-webkit-box;-webkit-box-orient:vertical;box-orient:vertical;-webkit-line-clamp:2;overflow:hidden;}Protests, Tariffs, and the First Amendment: The Ripple Effects of Policy Changes - Ep. 63