Reclaim Democracy!

Archives for August 2004

Law Firm Fined for Frivolous SLAPP Suit

by

Judge punishes firm for attempted intimidation

By Henry Weinstein
First published by the Los Angeles Times, August 16, 2005

Los Angeles federal judge on Monday ordered a large law firm and two of its attorneys to pay $267,000 in sanctions for filing a “frivolous lawsuit” against a community activist and three Forest Service employees who opposed a luxury condominium development on Big Bear Lake.

U.S. District Judge Manuel Real issued the unusual order against Foley & Lardner and two lawyers in its San Diego office, who had filed suit on behalf of developer Irving Okovita against the employees and Sandy Steers, executive director of the Friends of Fawnskin. The group played a key role in fighting Okovita’s proposed Marina Point development.

Real in March threw out the suit against the Forest Service, which substituted as a defendant for its employees, and Steers, saying she was exercising her 1st Amendment right to petition the government.

New York University law professor Stephen Gillers, an expert on legal ethics, said it is “quite unusual” for a federal judge to issue a “six-figure sanction against a law firm. For a court to award that kind of money, the court has to find an utter lack of basis” for the position that the lawyer took in the case, Gillers said.

Attorney David Greene, director of the Oakland-based 1st Amendment Project, who represented Steers, said “hopefully this award of sanctions will have a deterrent effect, not only on these lawyers, but lawyers elsewhere, preventing attacks like this one on people who legitimately petition their government.”

The 1st Amendment group had asserted in a court brief that the developer had “sued Steers in order to harass and intimidate her, to chill her exercise of free speech and to intimidate others from similarly engaging in the lawful activity of petitioning government agencies.”

Steers said she was pleased with Real’s order. “I know that I did nothing wrong. All I’ve been trying to do is make this developer follow the law.”

Foley & Lardner, a large law firm with 18 offices around the country, including six in California, issued a statement: “We are disappointed by the ruling. With all due deference to the court we disagree with the decision and anticipate filing an appeal.” The two attorneys named in the sanction order are S. Wayne Rosenbaum and Suzanne Washington.

Okovita’s suit had raised eyebrows in legal and law enforcement circles because it was believed to be the first time the Racketeer Influenced and Corrupt Organizations Act – known as RICO – had ever been used against Forest Service workers.

Okovita’s proposed development would place 132 luxury condominiums, a 175-slip marina and tennis courts on 12.5 acres on Grout Bay on the north shore of Big Bear Lake near the tiny town of Fawnskin.

Developer Okovita filed his RICO suit last year after U.S. District Judge Robert Timlin, in response to a suit filed by his opponents, issued an order to halt the project. Timlin found it had “the potential to both harass and harm the bald eagle,” which is protected under the federal Endangered Species Act. Further hearings on the opponents’ suit are scheduled for next week.

© 2005 Los Angeles Times

Editors note: To let the giant national law firm of Foley & Lardner know what you think of their plan to appeal, costing taxpayers additional tens of thousands of dollars in court costs, try their San Diego office at 619.234.6655.

Wal-Mart Tries to Shine Its Image By Supporting Public Broadcasting

by

By Constance L. Hays
First published by the New York Times, August 16, 2004

Wal-Mart Stores, stung by criticism of its labor practices, expansion plans and other business tactics, is turning to public radio, public television and journalism schools to try to improve its image.

So far this year, the company has become a sponsor on National Public Radio, where recorded messages promote its stores. It has underwritten a popular talk show, “Tavis Smiley,” accompanied by similar promotional messages, on a public television station in California .

This month, Wal-Mart announced plans to award $500,000 in scholarships to minority-group students at numerous journalism programs around the United States , including Howard University , the University of Southern California and Columbia University .

Wal-Mart has not supported any of these organizations in the past.

But as the company outgrows its rural roots and moves into suburbs and cities, it is encountering more resistance from people whose views may differ from those of Wal-Mart’s traditional customers.

The company has been faulted, for instance, for its selective approach toward the publications that it sells. It bans three men’s magazines and uses plastic covers to conceal what it considers uncomfortable headlines on several women’s titles, including Glamour and Redbook. It does not sell recordings with what it deems offensive lyrics, and manufacturers acknowledge producing sanitized versions of popular CDs to maintain a presence in the giant retailer’s stores.

Mona Williams, a spokeswoman for Wal-Mart, said the journalism scholarships were “a first of their kind” for the retailer and had come about because of recent publicity prompted by its business practices.

“We’ve really been in the spotlight, and I think that’s made us especially sensitive to the need for balanced coverage,” Williams said.

Influencing news presentation may be at the heart of the company’s recent efforts, but Williams said there was “no hidden agenda here.” She added that Wal-Mart probably would have taken its initiatives even if it had not come under scrutiny.

“Wal-Mart is doing what most corporations do,” said John Siegenthaler, founder of the First Amendment Center at Vanderbilt University . “When they feel pain, they try to salve the wound.”

As for public radio, Williams said the company sought the demographic profile that National Public Radio listeners represented. The goal, she said, is to “reach community leaders and help them understand the value that we bring to their areas.”

A spokeswoman for National Public Radio, Jenny Lawhorn, said its audience consisted of “intelligent and well-educated people” who “tend to be business leaders and tend to be engaged in the civic process.” According to a recent survey, about 56 percent of them are Wal-Mart shoppers, she said, compared with 66 percent of the general population.

Cultivating community leaders fits well into Wal-Mart’s plans, as the company has faced opposition to its stores in recent months. In April, its effort to open a large store in Inglewood , California , a suburb of Los Angeles , was defeated after the company took the unusual step of putting the issue on a ballot. An attempt to build a store in Chicago was rejected, although a second store was approved.

The company has also been criticized by labor unions, which say Wal-Mart fights their organizing efforts.

Neither Wal-Mart nor NPR would reveal what the company pays as an NPR sponsor. Their contract began on Feb. 16 and runs until January.

NPR’s total corporate financing is expected to reach $30 million this year, Lawhorn said. As part of its arrangement with NPR, Wal-Mart is described in several ways when it is mentioned on the network as an underwriter. The descriptions have included the following: “Wal-Mart. Providing jobs and opportunities for millions of Americans of all ages and all walks of life.”

“Tavis Smiley,” the talk show that Wal-Mart underwrites, is broadcast on KCET, the public television station in Los Angeles . The program began in January, and Wal-Mart began supporting it immediately, a spokesman for the show, Joel Brokaw, said. In late March, Smiley interviewed Wal-Mart’s chief executive, H. Lee Scott Jr., who is seldom made available to reporters. After disclosing twice that Wal-Mart sponsored the show, Smiley went on to ask his guest about Wal-Mart’s image problems. Brokaw said he did not know how much Wal-Mart paid to be a sponsor.

The journalism plan evolved separately from the radio sponsorship plan, Williams, the Wal-Mart spokeswoman, said. Wal-Mart plans to give 10 journalism schools $50,000 each to be distributed as scholarships.

©2004 New York Times

Will the Induce Act Outlaw Silly Putty?

by

By Hanah Metchis
First published by Reason.com, August 11, 2004

Editor’s note: Unmentioned in this article, Sen. Orrin Hatch, co-sponsor of the Induce Act, suggested last year that people who download copyrighted material without prior permission deserve to have their computers destroyed. At the time, Hatch’s website was using unlicensed software. Details here.

A few short years ago, technology enthusiasts used to claim that technology moves too fast for the law to hold it back. Those predictions turn out to be overly optimistic. In fact, lawmakers trying to put a stop to one evil are likely to create dozens more with legislation about a field they don’t fully understand. Vague language designed to catch potential technological workarounds can put a stop to innovation in completely unrelated areas.

The latest example of this dangerous mix of law and technology is the Induce Act, sponsored by Sen. Orrin Hatch. Its intent-to stop downloading of copyrighted material by making peer-to-peer file trading networks illegal-is bad enough. P2P networks have legitimate uses, like the distribution of taped Senate hearings. But the language of Hatch’s bill is so open-ended that many other electronic devices, from the iPod to TiVo to email-to-RSS converters, would be called into question.

The Inducing Infringement of Copyrights Act (S. 2560) says that anyone who “intentionally aids, abets, induces, or procures” a copyright violation can be sued for copyright infringement. That surely applies to the file trading networks, which make it easy to find and download a free copy of any song you desire. Apple’s iPod could also come under fire for its huge hard drive, which would cost about $10,000 to fill with legally downloaded music. The Electronic Frontier Foundation has prepared a sample complaint against the iPod, pointing out the dangers of the Induce Act against established, respectable companies and technologies.

Others have gone even farther in pointing out the absurdities that could result from an expansive reading of the Induce Act. Tech blogger Ernest Miller is keeping track of an Induce Act “Hit List,” pointing out products and companies that might be seen to “induce” copyright infringement. Among the everyday companies on Miller’s list are The New York Times, which in a recent article “painted a romantic picture of copyright infringers who violate the public performance right for films,” and Lego, which lets users upload pictures to create a Lego mosaic template. One commenter even joked that the manufacturers of Silly Putty could be liable for promoting the gooey toy’s ability to lift an impression off a printed page.

The Induce Act would have a definite chilling effect on technological innovation. Even if judges are not inclined to interpret it broadly, the vague language opens the door to harassing lawsuits. Companies creating multipurpose technologies would have to be prepared to defend themselves against copyright infringement allegations. To avoid that, the Business Software Alliance has proposed changes to the bill, including a limit on frivolous lawsuits and a provision for products with legitimate commercial purposes to be exempted from liability. The latter would reaffirm the Supreme Court’s 1984 Betamax decision which held that the VCR maker was not responsible for copyright infringement by its customers.

Faced with so many unintended consequences, Congress needs to consider whether this solution to copyright infringement is worse than the original problem. Digital content distribution is still in its infancy, but iTunes and other legal download services are growing in popularity. The digital music landscape could change next year, or even next month, in ways that the Induce Act would be unprepared to deal with. The law can undoubtedly cut off some avenues of technological innovation. But at the same time, the tech lovers of 1999 are right-the law cannot anticipate where technology will turn next. In the worst case scenario, a bad tech law could be simultaneously stifling and irrelevant.

© 2004 Reason Foundation

Editor’s note: The bill is co-sponsored by Senators Leahy (D-VT), Frist (R-TN), Daschle (D-SD), Graham (R-SC), Boxer (D-CA). You can reach your Senators via the U.S. Capitol switchboard at 1-800-839-5276 (temporary number).

Voting With Your Dollars?

by

Wal-Mart executives raise big money for Bush while Costco execs favor Democrats

By Michael Forsythe and Rachel Katz
First published by Bloomberg News July 25, 2004

WASHINGTON — Executives at Wal-Mart Stores Inc. and Costco Wholesale Corp., competitors in the $76 billion US warehouse-club market, have taken their rivalry to a new level: national politics.

Wal-Mart, the world’s largest retailer and owner of Sam’s Club warehouse stores, gives more money to Republican candidates than any other company. Its top three managers, including chief executive H. Lee Scott, donated the individual maximum $2,000 to President George W. Bush, and Jay Allen, vice president for corporate affairs, raised at least $100,000 to reelect the president, earning him the Bush campaign’s designation of ”Pioneer.”

Wal-Mart — two-thirds of whose 3,580 stores are in the ”red states” that voted for Bush in 2000 — is backing White House policies on everything from trade to limiting overtime pay.

Costco chief executive Jim Sinegal, 68, is a Democrat who says Bush’s $1.7 trillion in tax cuts unfairly benefit the wealthy. He opposed the Iraq war and supports Democratic Senator John Kerry of Massachusetts for president. And he’s the only chief executive of a company in the Standard & Poor’s 500 index to donate money to independent political groups formed to oust Bush, Internal Revenue Service records show.

”Wal-Mart is extremely strong in Republican strongholds; they are a red-state retailer,” said Amy Bonkoski, an investment adviser at Cleveland-based National City Corp.’s private-client group, which manages about $26 billion, including Wal-Mart and Costco shares. ”Costco is stronger in Democratic states. Costco is a friend to labor. Unions hate Wal-Mart.”

The differences are based on more than ideology: Each retailer has a stake in the election’s outcome in areas from healthcare to the minimum wage to the way unions can organize workforces.

Kerry, 60, a four-term senator, pledges to induce more employers to insure workers with a $257 billion proposal calling for the government to pay most so-called catastrophic healthcare costs — only for companies that provide comprehensive coverage. He’d raise the minimum wage and make it easier for workers to join unions.

Those policies may benefit Costco and hurt Wal-Mart.

Issaquah, Wash.-based Costco offers comprehensive health insurance to most of its 78,000 US employees, making it eligible for Kerry’s plan, said Kerry’s top domestic policy adviser, Sarah Bianchi, 31. That may cut 10 percent, or $35 million, off its annual healthcare premiums.

Wal-Mart’s health plan for its 1.3 million US workers is probably not broad enough to qualify for the savings that Kerry’s proposal would bring, since it doesn’t cover enough workers, said Jason Furman, 33, the Democrat’s chief economic policy adviser. Fewer than half of Wal-Mart’s employees are enrolled in the company health plan, according to figures supplied by the retailer.

Costco wouldn’t have to raise salaries with Kerry’s proposal to increase the minimum wage to $7 an hour, from $5.15 now. It already pays hot-dog vendors as much as $16 an hour, and the lowest wage it pays is $10 an hour. That’s higher than the $9.96 average wage paid at discount stores bearing the Wal-Mart name.

Bentonville, Ark.-based Wal-Mart supports the Bush administration’s expansion of free-trade agreements and its bid to curtail the number of workers eligible for overtime pay, according to its lobby disclosure reports.

Wal-Mart has benefited from the president’s opposition to raising the minimum wage, since some employees make less than $7 an hour, and from the Republican-controlled Congress’s reluctance to make it easier for workers to unionize. Wal-Mart has no unions; about one-sixth of Costco’s workers are represented by labor groups.

Wal-Mart and Costco aren’t the only companies in the same industry whose executives are on opposing sides in the election. Google Inc. chief executive Eric Schmidt is backing Kerry, while Internet rival Yahoo Inc. chief executive Terry Semel endorsed Bush.

What makes the Wal-Mart and Costco rivalry stand out is that their political donations are so partisan and both companies are likely to gain if their party wins in November.

IRS disclosure records show that Sinegal and Costco chairman Jeffrey Brotman each gave $95,000 last December to the fund-raising arm of America Coming Together, a group organizing voters against Bush, and the Media Fund, which is running anti-Bush advertisements.

Wal-Mart’s political action committee, the biggest company PAC, gave Republicans 81 percent of its $1.3 million in donations in the past two years, a higher proportion than any of the top 25 corporate PACs, according to PoliticalMoneyLine, a nonpartisan Washington-based group.

Sixty-seven percent of Wal-Mart’s stores are in the 30 states that voted for Bush and Cheney in 2000, according to a comparison of store-location figures in the Wal-Mart 2003 annual report and election results. Costco’s stores are mostly located on either coast, with 208 of its 321 stores in the higher-wage, more union-friendly 20 states that voted for Democrat Al Gore in 2000.

Sinegal makes no apologies for Costco’s policies, saying higher wages reduce employee turnover, which lowers training costs. ”I’m not a social engineer,” he said in an interview. ”Paying good wages is simply good business.”

© 2004 Bloomberg News

Related features:

The Costco Dilemna: Is Treating Employees Well Unacceptable for Publicly Traded Corporations? (Wall St. Journal)

Wal-Mart Becomes Largest Corporate Political Investor

The better alternative: support your local, independent businesses