What the gun ruling means for corporate America
Yesterday’s sweeping Supreme Court decision striking down a New York State law that restricted concealed weapons is likely to set off another round of soul searching among law firms, banks and others about whether to work with the gun industry and its allies.
The law firm Kirkland & Ellis, which argued the case on behalf of gun rights advocates, said it would no longer take Second Amendment cases, In response, Paul Clement and Erin Murphy, the two star Kirkland partners who won the case, said they were leaving Kirkland to form a boutique law firm that would continue to represent gun rights advocates, as well as other clients. It’s not clear how much their departure will hurt the firm financially, given their focus on appellate law, and the billions the firm brings in buttressed by deal making and corporate litigation.
“Having just secured a landmark decision vindicating our clients’ constitutional Second Amendment rights in New York State Rifle & Pistol Association v. Bruen, we were presented with a stark choice — withdraw from representing them or withdraw from the firm,” Clement and Murphy wrote in a WSJ Opinion article. “There was only one choice: We couldn’t abandon our clients simply because their positions are unpopular in some circles.”
Kirkland’s decision came after several high-profile clients expressed reservations about the firm’s work on gun rights, The Wall Street Journal reported. But banks and others are facing pressure from legislatures in a number of Republican-dominated states to continue to do work for the gun industry. Texas, for instance, passed a law last year that bans government agencies from working with banks and other professional services firms that “discriminate” against the gun industry. That could affect Kirkland, which has recently been expanding aggressively in Texas, and last year was the highest grossing non-Texas-based firm in the state. Besides Kirkland, there appears to be little or no public response to yesterday’s Supreme Court ruling from other corporate leaders.
Further legal sparring is guaranteed, as legislators will try to craft laws that honor the new Supreme Court decision while still finding ways to limit gun permits. “This sets a new test for Second Amendment cases that calls into question most of the key elements of the gun safety agenda over the last decade,” said Adam Winkler, a professor at the University of California, Los Angeles, who specializes in gun policy .
The share prices of gunmakers and ammunition manufacturers jumped yesterday. Smith & Wesson was up more than 9 percent. Shares of Sturm Ruger rose 4 percent, as did shares of Ammo Inc. Firearms companies often rally when investors anticipate a spike in sales ahead of calls for stricter laws, as after the mass shooting in Uvalde, Texas. Yesterday’s gains reflect the idea that legal victories over limits on guns are good for the industry.
HERE’S WHAT’S HAPPENING
The FDA orders Juul to stop selling e-cigarettes. It is a deeply damaging blow to the once-popular company whose brand was blamed for the teenage vaping crisis. The FDA’s decision was based on what it said was insufficient and conflicting data from Juul about potentially harmful chemicals that could leach out of its e-liquid pods.
Toyota recalls electric cars over concerns that their wheels could detach. The company issued a recall for 2,700 bZ4X SUVs in the US, Europe, Canada and Japan because of a risk that the bolts on the car’s wheels could loosen to the point that the wheels could fall off.
The Fed says stress tests show big banks can withstand a severe recession. The nation’s largest banks are well capitalized and could weather a severe economic downturn, Fed officials said after an annual review of the big banks’ resilience. The tests took on new significance as some economic indicators, like slowing home sales and rising interest rates, appeared to increase the likelihood of a recession.
Deutsche Bank’s CEO waives a fraction of his bonus over use of unapproved messaging apps. Christian Sewing and nine other members of the bank’s executive board voluntarily gave up $79,000 of their 2021 bonuses, a sign that they were taking the blame for their staff’s use of apps like WhatsApp. The practice can involve evading the record-keeping regulators require from banks.
Klarna’s valuation is slipping. As the fintech start-up reportedly struggles to raise more capital, investors have lowered their valuation of the company to $15 billion from $30 billion, The Wall Street Journal reported. Technology start-ups across the board have had trouble finding investors amid troubling economic forecasts.
Intel pushes hard on Congress
Top chip makers have been pressing Congress to approve long-stalled funding for the CHIPS Act, a $52 billion bill to jump-start US semiconductor production. Yesterday, Intel raised the pressure. It announced that it would postpone a groundbreaking ceremony for a new factory in Ohio, planned for next month, blaming the congressional holdup. “Unfortunately, CHIPS Act funding has moved more slowly than we expected, and we still don’t know when it will get done,” a spokeswoman said.
The move is a sign of industry leaders’ frustration. Intel plans to spend $20 billion building chip plants in Ohio. It’s also on course to complete construction of a $3.5 billion upgrade to a plant in New Mexico, according to The Albuquerque Journal. But the company is frustrated by the funding delays. In May, President Biden, on a visit to Ohio to highlight manufacturing jobs there, said Intel planned to increase its investment in chip manufacturing in the state to $100 billion if funding passed. As supply chain snarls continue, American companies say they need the funding to bolster US competitiveness and decrease reliance on suppliers in Asia. That part appears to have bipartisan support. But debates have dragged on, and chip makers have signaled that their commitments depend on Congress taking action.
International competition is heating up. “Other countries are out there now cutting deals,” Gina Raimondo, the commerce secretary, told The Times last week. “And if Congress continues to dither, that dithering will send a message that the United States is not serious, and we will lose out on these once-in-a-generation investments and all of the jobs and national security benefits that come with it.” Earlier this month, over 100 tech executives wrote a letter urging lawmakers to approve funding for the act, arguing that American competitiveness and national security matters were at stake. India, Japan and South Korea have all recently passed incentives to boost local industry. The EU could soon finalize similar legislation. China has also passed measures to upgrade production. “Our global competitors are investing in their industry, their workers and their economies,” said the executives, who included Google’s CEO, Sundar Pichai, and Amazon’s chief, Andy Jassy. On Tuesday, another meeting of lawmakers ended without a resolution.
“One of the consequences of this conflict is a fundamental realignment of the global energy system, trading relationships and geopolitical alignments, with China and India more closely aligned with Russia.”
— Jason Bordoff, a former Obama adviser who is director of Columbia University’s Center on Global Energy Policy, on the impact of efforts by Europe and the US to isolate the Kremlin.
Citadel heads south
The billionaire Ken Griffin is moving his hedge fund Citadel and the trading firm Citadel Securities to Miami after more than three decades in Chicago. Zia Ahmed, a Citadel, cited Chicago’s high crime rate as a reason for the move — something Griffin has referenced repeatedly, including the DealBook conference in November. But there may be more to it than just crime.
There is bad blood between Griffin and Gov. JB Pritzker of Illinois, a Democrat who is also an heir to the Hyatt fortune. The two billionaires have been going at it for years. Among their many points of contention: Pritzker has pushed an income tax system with higher rates for bigger earners, which Griffin has staunchly opposed — and spent plenty to fend off. Griffin is a major donor to Republican candidates and is also among the biggest supporters of Gov. Ron DeSantis of Florida, a potential 2024 Republican presidential candidate. Asked how much Florida’s lower tax rates played a role in the move, Ahmed said: “None.”
Citadel said crime in Chicago was making it hard to recruit talent. The firm has 1,000 employees in Illinois, down roughly 10 percent from two years ago. It cites violence for that decline — though firms across the nation have had a hard time holding on to workers for scores of reasons. Chicago crime rates have been rising, with 797 murders in 2021, up from 772 in 2020, though most violence is concentrated in a few areas of the city. While it is not a direct comparison, Miami-Dade County reported 30 homicide offenses this year through May, down from 48 over the same period last year.
Is crime a reason to leave? Johnny Taylor Jr., CEO of the Society for Human Resource Management, said he had never heard of a company moving its headquarters because of concerns about crime. Typically, he said, companies move because they want more access to skilled talent or a more favorable tax policy, or after disputes over social policy. “Those are the top three reasons that I’ve heard,” Taylor said. “This doesn’t even make the top 10 list.”
The rise of remote work during the pandemic has enabled companies to more easily uproot themselves, often in of lower taxes or friendlier state search governments — as with Tesla’s move from California to Texas. (Citadel, for its part, has had workers back in the office full time since last year.) In recent months, Caterpillar and Boeing also ditched headquarters in Illinois for Texas and Virginia, respectively. But just this week Kellogg said it was leaving its longtime home in Michigan … and moving to Chicago.
THE SPEED READ
Hybrid work is “hell,” so Yelp’s CEO has decided the company will go fully remote. (Fortune)
The North Dakota attorney general’s office is investigating a land transaction purchase by a trust with ties to Bill Gates. (KFWR TV)
Covid-19 vaccines prevented around 20 million deaths worldwide, according to a new study published in The Lancet. (FT)
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