Can NJ’s threat of divestment stand in court?
New Jersey plans to leverage $ 182 million in investments from the parent company of Ben & Jerry’s after the ice cream maker’s decision to end sales in Israeli settlements on Palestinian land.
The question of whether these sanctions can stand in court is open.
New Jersey is one of the more than 30 states with laws that impose sanctions for boycotts of Israel, Israeli-controlled territories, or Israeli products or businesses. Last week, the state’s Division of Investment informed Unilever plc, a UK conglomerate with US operations based at Englewood Cliffs, that Garden State was required by law to divest.
Unilever, which employs 1,600 people at its Bergen County headquarters, has 90 days to appeal.
In First Amendment challenges to anti-boycott laws in Arizona, Georgia, Kansas and Arkansas, courts have ruled in favor of companies and individuals who sued after losing their jobs because of their support alleged to boycotts.
But none of these cases involved a challenge to the divestment of state pension funds.
What is clear is that the international debate over the Israeli-Palestinian conflict is unfolding in courthouses and courts across the United States, as progressive support for the boycott, divestment and sanctions (BDS) movement is met with a backlash from Israel and its supporters.
Freedom of expression or discrimination?
Illinois, Florida, Texas and New York are among the states considering withdrawing investments in Unilever. Arizona has has previously announced that it is selling $ 143 million in corporate bonds in response to Ben & Jerry’s action.
Divestment can send a political message, but on its own it isn’t likely to put much financial pressure on Unilever: the company’s shares have full value. market capitalization over $ 140 billion and its obligations are valued at around $ 26 billion.
Civil rights groups say anti-boycott laws are unconstitutional because they infringe the right to free speech. Advocates say they are allowed because they protect against discrimination against Israel and its Jewish citizens. New Jersey also maintains that boycotts are bad for business, as $ 1.3 billion worth of goods and services are negotiated annually between the state and Israel.
Legal challenges could depend on the intention of lawmakers when passing the law, said Amanda Shanor, assistant professor of legal studies and business ethics at the Wharton School at the University of Pennsylvania. A judge will determine whether this was to protect a targeted group from discrimination or to suppress political discourse, she said.
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“If they pass a law to try to stamp out boycotts because of what they say, then it will be unconstitutional,” Shanor said.
Debbie Kaminer, a law professor at the Zicklin School of Business at Baruch College in New York City, said business entities do not have the First Amendment right to discriminate against people of a protected class.
“The state has the power to tell business enterprises with whom to partner,” Kaminer said. “You have to allow the gay customer, the black customer, the Jewish customer. “
States have laws protecting people from discrimination based on race, religion and national origin, but also have wide latitude to create additional protected classes, Kaminer said. She noted, for example, that Texas has declared people who refuse to be vaccinated against COVID as a protected class.
“State legislatures can choose roughly whatever protected class they wish to choose from a political standpoint,” Kaminer said. “For the most part, this will not be unconstitutional.”
Unilever declined to comment on its legal strategy, but CEO Alan Jope sent a letter Aug. 8 to the director of the New Jersey investments division about it. He wrote that the company’s agreement to purchase Ben & Jerry’s gave the ice cream maker’s board the independence to decide on its social mission. Unilever does not support the boycott movement, Jope added.
The reason corporations exist is to protect owners from liability, said Charles Sullivan, professor of law emeritus at Seton Hall University. “If a company goes bankrupt, you can’t sue the shareholders. The company is a kind of insulator for the owner. A company is limited liability for a reason, ”he said.
“Unilever has not engaged in any boycott,” added Sullivan, a specialist in business law. “As a business, that’s not the case. Another company did. She owns the business, but that is the purpose of isolating the business.
The wording of the New Jersey law, which says it will divest itself from “companies” boycotting Israel, is open to interpretation. The “real question, in this case, is what the state legislature meant by the word ‘business’ and if that means larger corporate entities,” Sullivan said.
Even though it is immune to any liability, Unilever should be concerned, he said. The investment division of the state’s Treasury Department might simply decide not to invest – without making a public relations demonstration – because it believes that is the intention of New Jersey law.
“If I were a director [of investment] and if this law looked me in the face, I would quit because that is what the law wants me to do, ”he said.
On September 2, the Division of Investment informed Unilever that it has 90 days to dispute a preliminary finding that calls for removing stocks and bonds from public pension funds.
Is it a boycott?
Some businesses and organizations that support shutting down business in settlements, including Ben & Jerry’s and its Jewish founders, say their actions are pro-Israel because the settlements are a risk to peace and democracy.
In a July statement, Ben & Jerry’s said the decision to stop sales outside Israel’s borders was not a boycott of Israel. But Israel the rulers do not distinguish between the colonies and the rest of its territory. Neither does New Jersey, which extends protections to “Israeli-controlled territories” in its 2016 law.
The New Jersey attorney general’s office declined to comment on legal issues related to the divestment. Bergen County Democrat Valerie Vainieri Huttle said in a previous statement that the anti-boycott bill she co-sponsored “has been deemed constitutional by our non-partisan Legislative Services Office and has never aimed at prohibiting freedom of expression ”.
“There are at least 26 states that have passed anti-BDS laws and some have been struck off for violating the First Amendment,” she said. “However, since Israel is the only Jewish state in the world, the boycotts are discriminatory and violate the law.”
Hannan Adely is a diversity reporter covering Arab and Muslim communities for NorthJersey.com, where she focuses on social issues, politics, prejudice and civil rights. To get unlimited access to the latest news, please subscribe or activate your digital account today.
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