American Businesses & Courts Must Stand Up To Vigilante Regulation

Political extremism has a new target: American companies. Protesting has a storied place in America, but some protesters are crossing the line. They are threatening, intimidating, and coercing companies to succumb to a political viewpoint. Giving in to their political demands may be the path of least resistance, but it won’t lead to the right answer for the impacted businesses or the American people. Companies looking to push back against these protests can turn to tort law for answers.

This week, my colleagues and I released a report for the Grow America’s Infrastructure Now (GAIN) Coalition on a new wave of protests against the pipeline industry. Activists bent on stopping the use of fossil fuels have been trying to cease pipeline construction at all costs. Their latest tactic is to target banks to pull out of their existing contracts to fund pipeline construction. The organizers publicize which banks have pipeline funding commitments and provide roadmaps on how to attack the banks.

For example, in an effort to punish Wells Fargo for not retracting its funding commitment for the Dakota Access Pipeline, activists threatened investors, took over bank lobbies and engaged in other efforts aimed at tarnishing the banks’ business dealings and reputations. In 2017, they convinced the City of Seattle to withdraw $3 billion from Wells Fargo. In 2016, they took over a Wells Fargo branch office in Baltimore demanding the bank break its pipeline commitments. Similar “defund protests” are aimed at all major U.S. pipelines and their lenders.

In Europe, some financial institutions have surrendered to this pressure. In 2017, the Norwegian Bank DNB, one of the original funders of the Dakota Access Pipeline, reportedly canceled its $2.5 billion credit line to pipeline developers after protesters faced off with bank executives. Other targeted European banks have done the same, resulting in millions of dollars in severed financing commitments. 

Our analysis suggests that banks in the United States should stand strong. Pipelines are an essential part of our economy. The federal government studies them carefully, subjecting pipelines to rigorous legal and regulatory requirements. The environmental permitting process involves coordination of multiple federal agencies, as well as solicitation for public comments, scoping meetings, and hearings. The public, including the protesters, have extensive opportunities to participate throughout this process.

The activists’ failure to get their way under our regulatory system does not give them the right to impose their agenda onto the American public by force. Intimidating banks into voiding their existing contractual obligations is not protected speech. People who intentionally interfere in such ways with the lawful business endeavors of others can be liable for the damages they cause through tort law. “Tortious interference with contractual relations” has a long history of protecting the sanctity of contracts, which are essential to our legal, social and financial systems.

Courts should willingly apply this tort to the defund protesters when their efforts cross the line into unlawful conduct.  As our report “Vigilante Regulation: When Anti-Pipeline Activism Become Tortious Interference” explains, it is unlawful to pressure companies to breach a contract, whether for competition, shakedowns, or political agendas. Here, the elements of the tort — existence of a valid contact, intent to induce a breach, and damages — could hardly be disputed. The defund protests’ own public relations efforts admit that their goal is to coerce banks into tearing up their existing pipeline financing obligations.

Banks are not in the business of public policymaking, nor should they be. They cannot weigh national energy policy, determine which sources of energy are best for which purposes, or balance the competing interests of energy independence, affordability and environmentalism. Rather, they are engines of commerce, designed to fund legitimate business enterprises. The truth is that pipelines are lawful, profitable and legitimate endeavors. They deliver the energy we all need to fuel our economy and our way of life. Political battles over where and how to build pipelines or over fossil fuels generally must remain with the government bodies responsible for deciding these issues.

If American businesses do not fight back against the defund protesters, then companies will increasingly become the new targets for a slew of other political issues. Businesses and courts should understand that these protests are different and decide that there is no room for vigilante regulation.

Phil Goldberg is the Office Managing Partner for Washington, D.C. office of Shook Hardy & Bacon LLP.  He co-chairs the firm’s Public Policy Group and is the Director of the Progressive Policy Institute’s Center for Civil Justice.  The report on Vigilante Regulation that he and his Shook colleagues Jamie Thompson and Dalton Mott prepared for GAIN can be found here.