Minimum Competence - Daily Legal News Podcast
Minimum Competence
Legal News for Tues 1/23 - Exxon Sues to Block Climate Proposal, SCOTUS Rules on Texas Fencing, Apple Faces $1b UK Lawsuit over App Store, Leveraging Tax Policy to Combat Executive Compensation

Legal News for Tues 1/23 - Exxon Sues to Block Climate Proposal, SCOTUS Rules on Texas Fencing, Apple Faces $1b UK Lawsuit over App Store, Leveraging Tax Policy to Combat Executive Compensation

ExxonMobil sues to block shareholder proposals, SCOTUS rules on TX border fencing, Apple faces a $1b UK lawsuit over App Store fees, and Column Tuesday on leveraging tax policy against executive comp.

Exxon Valdez spilling burning oil into a bay of ducks, pencil sketch

This Day in Legal History: The Poll Tax is Eliminated

On January 23, 1964, a monumental moment in the evolution of American democracy occurred with the ratification of the 24th Amendment to the United States Constitution. This Amendment struck a decisive blow against a longstanding barrier to voting rights: the poll tax. The poll tax, a fee levied on voters at the time of an election, had long been a tool to disenfranchise particularly African American and poor white voters in various states.

The roots of the poll tax in America trace back to the late 19th and early 20th centuries, primarily in Southern states. These states implemented the tax as a part of Jim Crow laws, designed to circumvent the 15th Amendment, which granted African American men the right to vote. By imposing a tax on voting, states effectively prevented a significant portion of the African American community, as well as many poor whites, from exercising their voting rights, as these groups often could not afford the fee.

The battle against the poll tax in federal elections was part of a broader struggle during the Civil Rights Movement to achieve equal voting rights. Figures such as Martin Luther King Jr. and organizations like the NAACP played a crucial role in highlighting the injustices of voter suppression tactics, including the poll tax. The momentum for change was partly fueled by the broader context of the Civil Rights Movement, which brought national attention to the various ways in which African Americans were denied basic rights and freedoms.

The passage of the 24th Amendment was a clear recognition of the fundamental principle that the ability to vote should not be contingent upon one's financial status. It reinforced the concept that such economic barriers to voting were incompatible with the ideals of American democracy. However, it's important to note that while the 24th Amendment abolished the poll tax in federal elections, it did not eliminate it in state elections, which was a gap later addressed by the Supreme Court in the 1966 decision in Harper v. Virginia State Board of Elections.

The ratification of the 24th Amendment was more than a legislative change; it was a symbolic victory for civil rights and an affirmation of the ongoing fight for equality in the electoral process. It served as a precursor to the Voting Rights Act of 1965, further solidifying the legal framework that protected the voting rights of all Americans. The amendment stands as a testament to the idea that democracy is strengthened when it is made more accessible and inclusive, a principle that continues to resonate in contemporary debates over voting rights and electoral reforms.

ExxonMobil Corp. has taken an unconventional legal step in its latest clash with activist investors over environmental concerns. The oil giant is suing Arjuna Capital and Follow This in an attempt to block their environmental and social investor proposals from being included in annual meetings. This approach, possibly the first of its kind, bypasses the usual Securities and Exchange Commission (SEC) objection process and takes the battle directly to federal court.

The lawsuit, filed in the Northern District of Texas, challenges a shareholder proposal demanding Exxon accelerate its emission reductions. The proposal targets all scopes of greenhouse gas emissions, a similar ask to previous years' unsuccessful bids. Exxon argues that the proposal oversteps shareholder boundaries by attempting to dictate company operations.

Legal experts see this move as a potential precedent-setter. If the court rules on broader environmental and social issues, it could open the door for more companies to use the judiciary to fend off similar proposals. This trend could extend to various sensitive topics, from climate risk to social issues.

Traditionally, companies have turned to the SEC to block shareholder proposals, especially those deemed as ordinary business operations. However, the SEC has been more receptive to environmental and social proposals since 2021, reflecting a shift in regulatory stance.

Exxon's complaint highlights a significant rise in shareholder proposals, particularly those focusing on environmental and social issues. Despite this increase, overall support for such proposals has decreased since 2021.

The lawsuit raises fundamental questions about the role of shareholders in corporate governance. Exxon contends that the proposal infringes on management and board responsibilities, while critics argue that investor input is vital, especially on matters like climate change that materially impact business. This legal battle underscores the ongoing tension between corporate management and shareholder activism, particularly in the realm of environmental responsibility and governance.

The escalation of Exxon's conflict with its shareholders to the courts brings into sharp relief the potential implications of the Supreme Court's stance on Chevron deference. Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., a landmark case, established that courts should defer to administrative agencies' interpretation of ambiguous statutes. The possible reconsideration or overturning of Chevron by the Supreme Court could significantly alter the landscape of regulatory decision-making. In this context, if the courts become more inclined to scrutinize and potentially overrule the judgments of regulatory bodies like the SEC, especially on matters of environmental and social governance, this could reshape the balance of power between corporations, their shareholders, and regulatory agencies. The Exxon case might thus be a harbinger of a broader shift in how environmental and corporate governance issues are adjudicated, moving away from regulatory bodies and into the judicial arena.

Exxon Suit Seeks Novel Path to Block Shareholder Climate Votes

The U.S. Supreme Court has allowed U.S. Border Patrol agents to temporarily remove or cut razor-wire fencing installed by Texas along its border with Mexico. This 5-4 decision temporarily sets aside a lower court ruling that had prevented federal agents from disturbing the fencing. Chief Justice John Roberts and Justice Amy Coney Barrett, both conservatives, joined the three liberal justices in the majority, while Justices Clarence Thomas, Samuel Alito, Neil Gorsuch, and Brett Kavanaugh dissented.

The razor-wire barrier, installed on private property along the Rio Grande river by the Texas National Guard as part of Operation Lone Star, was Texas' initiative to deter illegal border crossings. The operation, launched by Republican Texas Governor Greg Abbott in 2021, faced a legal challenge from the Biden administration, arguing that the barrier impedes Border Patrol agents' ability to monitor and respond to emergencies.

Texas sued the administration in October 2023, claiming U.S. Customs and Border Protection agents were cutting or destroying the fencing. U.S. District Judge Alia Moses initially ruled that Texas's legal claims couldn't overcome the federal government's sovereign immunity, which shields it from civil lawsuits and criminal prosecution. However, the 5th Circuit Court of Appeals later blocked federal agents from interfering with the fencing, except in medical emergencies, suggesting Texas might prevail in its lawsuit.

The Biden administration countered, stating the wire had not deterred migrants and that the new barriers hindered Border Patrol operations. The Supreme Court's decision has been welcomed by the White House, emphasizing the need for adequate resources and policy changes to address the immigration system. The administration is seeking a bipartisan agreement with Congress for additional resources and meaningful policy reforms.

This issue, a point of contention between Republicans and Democrats, is expected to intensify ahead of the upcoming November elections, where President Biden seeks re-election. Republicans have been critical of Biden's immigration policies and the increasing illegal entries across the U.S.-Mexico border.

US Supreme Court lets Border Patrol remove Texas razor-wire fencing - for now | Reuters

Apple is currently embroiled in a legal battle in the UK, where it has been hit with a lawsuit valued at approximately $1 billion. This lawsuit, representing over 1,500 app developers, accuses the tech giant of imposing unfair commissions, up to 30%, on app and content purchases through its App Store. The case is one of several legal challenges Apple faces in the UK.

Sean Ennis, a competition law professor and former OECD economist, is leading the lawsuit, which was filed at the Competition Appeal Tribunal (CAT) last year. The suit alleges that Apple has abused its dominant market position, leading to overcharging UK-based app developers.

In response, Apple is seeking to dismiss the case, arguing that 85% of developers on its App Store are exempt from paying any commission. The company's legal team contends that developers can only claim in the UK if they were charged for purchases made through the UK App Store, which applies to a minority of claimants.

However, Ennis' legal team counters this argument, stating that Apple, by offering services to UK businesses in the UK market, is subject to UK law for the entire case. They argue that Apple's dominant position has led to overcharging, and therefore, the case is valid under UK jurisdiction.

Apart from this lawsuit, Apple faces another mass lawsuit in the UK related to App Store commissions on behalf of around 20 million UK users, which was greenlit in 2022. Additionally, the company is dealing with a separate legal action regarding allegedly defective iPhone batteries, representing around 24 million iPhone users. Both cases are significant, and trials are not expected to begin before 2025. Apple is actively contesting both lawsuits.

Apple bids to throw out $1 bln UK lawsuit over app store fees | Reuters

In my latest column, I delve into the critical issue of how tax policy influences skyrocketing executive compensation and its broader implications for wealth disparity. Despite the economic challenges of 2023, top executives in major companies continued to receive hefty salaries and bonuses, exacerbating the gap between the rich and the poor. This growing divide is partly attributed to the tax breaks that corporations enjoy, which have historically favored the upper echelons of corporate leadership.

In the column, I argue for a reevaluation of the tax code to better align with societal objectives. One key proposal involves reforming tax breaks, specifically under Section 174, to introduce thresholds for executive compensation. This change is aimed at encouraging corporations to balance their financial objectives with their social responsibilities.

I discuss the research and experimentation credit as a case study in how well-intentioned tax policies can inadvertently worsen income inequality. A significant portion of these tax savings ends up boosting executive pay, which undermines efforts to bridge the income gap. I suggest that companies lavishing large sums on executives should not benefit from taxpayer-funded support.

Linking tax credits to executive compensation thresholds is presented in my column as a method to instill a sense of corporate responsibility and address wealth disparity. This approach forms part of a broader strategy that calls for transparency and a comprehensive review of the tax code to ensure tax expenditures are conducive to societal goals.

I explore the economic literature that establishes a clear connection between corporate tax breaks and increased executive compensation. The column highlights that a notable percentage of every tax break dollar received by a firm contributes to the pay of its highest executives. Consequently, I propose a reform that would compel companies to balance the pursuit of conditioned tax credits against the cost of maintaining high executive pay, potentially fostering more equitable economic outcomes.

The issue also intersects with racial and gender equity in corporate structures. The current tax policies disproportionately benefit white and male executives, further entrenching existing disparities. 

In conclusion, the proposed reform, as discussed in my column, transcends economic measures and represents a stride toward a more equitable society. This policy alignment could lead to a more rational and cohesive approach to societal investment, blending corporate success with a commitment to social justice.

Use Tax Policy to Combat Skyrocketing Executive Compensation

Minimum Competence - Daily Legal News Podcast
Minimum Competence
The idea is that this podcast can accompany you on your commute home and will render you minimally competent on the major legal news stories of the day. The transcript is available in the form of a newsletter at