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Can You Be Sued for Boycotting Israeli Companies?

 By Benjamin Ryberg

May 1, 2013

Is the pro-BDS (Boycott, Divestment and Sanctions) movement advocating unlawful discriminatory business practices? Any New York company approached with calls to boycott or divest from Israeli companies should be forewarned: such activity may violate New York State’s human rights law.

The official website of the BDS movement calls for “a campaign of boycotts, divestment and sanctions (BDS) against Israel” based on spurious allegations that Israel is responsible for violations of Palestinian rights. Operating under the guise of seeking to protect Palestinian rights, the BDS movement was aptly described in a recent report as being “a thinly-veiled, anti-Israel and anti-Semitic ‘poison pill,’ whose goal is the demonization, delegitimization, and ultimate demise of the Jewish State.”

Since 2005, anti-Israel groups–many affiliated with the BDS movement–have increasingly and publicly pressured U.S.-based corporations to engage in economic warfare against Israel. BDS proponents routinely call for U.S. companies to stop carrying Israeli products and to divest from Israeli companies (as well as non-Israeli companies that do business with Israel).

It is doubtful, though, that pro-BDS groups campaigning in New York State are informing their audiences of the potential legal implications of engaging in business practices that discriminate against companies because of the latter entities’ ties with Israel.

Section 296(13) of New York State Executive Law Article 15 (Human Rights Law) provides that “[i]t shall be an unlawful discriminatory practice (i) for any person to discriminate against, boycott or blacklist, or to refuse to buy from, sell to or trade with, any person, because of the race, creed, color, national origin or sex of such person, or of such person’s partners, members, stockholders, directors, officers, managers, superintendents, agents, employees, business associates, suppliers or customers, or (ii) for any person willfully to do any act or refrain from doing any act which enables any such person to take such action. This subdivision shall not apply to: (a) Boycotts connected with labor disputes; or (b) Boycotts to protest unlawful discriminatory practices.”

Commonly referred to as the “Arab Boycott Law,” the statute’s 1975 enactment was motivated by Arab OPEC nations’ use of their “new-found economic strength to discriminate against and boycott certain religious and ethnic groups,” namely Jewish-owned businesses.

New York courts have repeatedly acknowledged that the purpose of section 296(13) is to prevent and punish discriminatory business tactics implemented to harm individuals or corporations because of race, skin color, national origin, or other protected status. Section 300 of the law directs that all provisions of the state’s human rights law, which includes section 296(13), shall be “construed liberally” to accomplish the legislation’s purposes.

As such, courts have stressed that section 296(13) must be read broadly to include and prohibit discrimination in all forms of commercial activity and business practices. This construction reflects the observation of then Governor Hugh Carey who, in his memorandum approving the enactment of the legislation, stated that it was intended to “affirm that no nation or person is welcome to do business in [New York State], if that business is accompanied by religious or racial bigotry.”

Additionally, courts have held that a discrimination claim under section 296(13) does not necessarily require evidence that a defendant was taking part in a formal boycott or blacklisting campaign. For instance, “evidence establishing that a defendant engaged in a pattern of conduct that commercially disadvantaged only members of a protected class may be sufficient to defeat a motion for summary judgment.”

Nor must the discriminatory conduct be widespread: indeed, a defendant’s refusal to trade with one particular individual may violate the statute if it can be shown that the refusal was based on the defendant’s “desire to collectively discriminate against a protected class that includes [the] plaintiff.” However, courts have considered whether the practice at issue is based on “legitimate business concerns unconnected with . . . bigotry”–such as a product’s merchantability–in determining whether a boycott, for instance, was enacted for discriminatory purposes.

Section 296(6) of the statute further provides that it is an “unlawful discriminatory act” to “aid, abet, incite, compel or coerce the doing of any acts forbidden under [Article 15], or to attempt to do so,” such that corporate officers and other parties who bring about (or try to bring about) discriminatory business practices may also face liability. Section 297(9) creates a private right of action for “[a]ny person claiming to be aggrieved by an unlawful discriminatory practice,” such that an individual claiming a violation of the statute may sue for monetary damages, injunctive relief, and civil fines to be paid to New York State.

In sum, New York Law prohibits the boycotting of any company or person because of their national origin, or the national origin of their business associates and employees, and similarly proscribes aiding, abetting, or inciting such discriminatory activity.

In the context of BDS, boycotts and other discriminatory business practices instituted against Israeli companies and companies doing business with Israel would likely violate section 296(13) if it can be shown that the discriminatory conduct was motivated by the injured company’s ties to Israel and absent proof that the conduct at issue was motivated by legitimate business judgment.

Not surprisingly, there has been no indication that legitimate business concerns are a basis for the anti-Israel practices pushed for by BDS.

Pursuant to section 298-a of the statute, New York residents and corporations (including those authorized to do business in New York) can also sue for discriminatory business practices that violate the statute committed outside of New York State. While the New York Court of Appeals has held that nonresident persons can only bring claims if the “impact of the discriminatory act” is felt within New York State–a requirement that would be met if a nonresident plaintiff worked in New York–it remains unclear whether foreign corporations must satisfy a similar “impact” test to bring a claim based on section 296(13) against a New York entity.

The case of Scott v. Massachusetts Mutual Life Ins. Co. indicates that foreign corporations need not make such a showing to bring a viable claim. In Scott, the New York Court of Appeals reemphasized that section 296(13) was drafted broadly to forbid “any business tactics [driven by ‘religious or racial bigotry’], utilized in New York State or against a New York State resident or corporation . . . ” (emphasis added). The court’s language clearly addresses (and thereby makes a distinction between) discriminatory business activities carried out in New York State, on the one hand, and such activities carried out against New York residents or corporations, on the other.
Hence, the Scott holding supports application of the statute so as to prohibit and penalize any business practices carried out in New York State that would constitute unlawful discrimination under section 296(13), irrespective of whether the party being discriminated against resides in or is otherwise connected with the state.
Given the persistent assertions of BDS proponents that discriminatory boycotts should be enacted as a response to Israel’s supposed violations of Palestinian rights, a New York business sued under section 296(13) might seek to defend its activity by citing subdivision (b) of the section, which provides that the statutory prohibitions do not apply to “[b]oycotts to protest unlawful discriminatory practices.” Put another way, a defendant sued for instituting a boycott of Israeli companies could foreseeably allege that Israeli policies unlawfully discriminate against Palestinians and, consequently, a boycott aimed at protesting Israel’s alleged discrimination is legally permissible.

However, this defense is flawed for several reasons. First, it requires that the statute be read to permit otherwise unlawful discriminatory boycotts against Israeli businesses for alleged discrimination committed not by the targeted businesses but by another entity, the Israeli government.

Nothing indicates that the legislature sought to limit the statute’s protections by allowing a discriminatory boycott of one particular entity as a form of protest against the conduct of another. Second, and only if a New York court first determines that Israeli policies could somehow be imputed to BDS-targeted businesses, the court would also be obliged to find that Israel had actually engaged in unlawful discriminatory practices to implicate subdivision (b). Subjective, sweeping accusations against Israel by BDS supporters, however, fail to establish that Israel has in fact acted illegally. It is hard to ignore the hypocrisy of the BDS movement, the proponents of which claim to be fighting discrimination but are indeed engaging in discrimination, further revealing the hollowness of BDS’s stated goals.

New York-based legal think tank The Lawfare Project and Israeli civil rights organization Shurat HaDin were among the first entities to recognize the applicability of section 296(13) to anti-Israel discriminatory business practices perpetrated by New York companies. In March 2012, human rights attorney and Lawfare Project Director Brooke Goldstein briefed the Brooklyn-based Park Slope Food Co-op on the potential legal implications of its proposed boycott of Israeli products, which contributed to the Co-op’s overwhelming vote against enacting the boycott.

Just this month, after BDS activists submitted a resolution to the Teachers Insurance and Annuity Association-College Retirement Equities Fund (TIAA-CREF) calling for divestment from Israeli companies, Shurat HaDin sent a letter to TIAA-CREF cautioning that adoption of the resolution would violate New York State law.

The Lawfare Project broadens this warning to all persons and organizations encouraged to boycott and urges those targeted to assert their civil rights.

Benjamin Ryberg is an attorney and serves as Director of Research at The Lawfare Project.

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Posted by on May 2, 2013. Filed under Jewish News. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.