The US supreme court's recent ruling on Donald Trump's tariffs has sent shockwaves throughout the business community, with nearly $175bn on the line. As companies scramble to secure their share of the estimated refund pot, law firms, hedge funds, and AI companies are emerging as the unlikely beneficiaries of this trade war.
According to Joseph Spraragen, a seasoned New York-based attorney, the demand for trade lawyers has reached unprecedented levels. His firm, Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt (GDLSK), has spent months filing hundreds of lawsuits for clients, including luxury brands Prada and Dolce & Gabbana, in protest of Trump's decision to impose sweeping import taxes.
The supreme court's ruling, which deemed Trump's tariffs illegal, has opened the floodgates for businesses to seek refunds. Already, FedEx, L'Oreal, and Dyson have sued for refunds, and many more are expected to follow. As a result, law firms across the country are springing into action, with some advertising "flat fees" to get cases filed in court, which could cost businesses $10,000-$15,000 a pop.
Law Firms and the Tariff Refund Process
Experts warn that the refund process could be lengthy and complex, with some predicting that it could take up to five years to resolve. This has created a lucrative opportunity for law firms, which are likely to reap significant fees from the process. Nicole Bivens Collinson, head of international trade at law firm Sandler Travis and Rosenberg, estimates that the flat fees alone could be in the millions, depending on the number of clients for which they file.
However, not all businesses will be able to afford the legal fees, creating a two-tier system where firms that cannot afford the costs risk being left in limbo. This has attracted the attention of financial speculators, with investment banks and hedge funds swooping in to buy up rights to tariff refunds. One Atlanta-based toymaker, Kids2, recently sold off the rights to its $15m tariff claim to a Boston hedge fund for a $2m up-front payment.
Richard O'Neill, a partner in the Seattle office of customs and trade law firm Neville Peterson, notes that hedge funds have been looking to purchase claims since before the supreme court's ruling. "It happens through law firms, it happens through brokers. I'm sure they reach out directly to the importers. You know, there's no shortage of efforts, by those outfits, to try to purchase claims."
The Role of Hedge Funds and AI in the Tariff Refund Process
Firms such as Jefferies, Oppenheimer, and Seaport Global Securities are reportedly among the firms brokering deals, matching investors with importers. However, some experts warn that individual businesses should be cautious when considering selling their claims, as it may not be the best option for them. Stephan Becker, the leader of the international trade practice group at law firm Pillsbury, notes that selling a portion of a claim or all of it in exchange for quick cash could make sense if there was uncertainty, but the uncertainty part is largely removed at this point.
AI firms are also rumored to be muscling in, offering to process people's applications in exchange for cuts of any future refunds. Jennifer Hillman, a law professor at Georgetown University and former general counsel for the US trade representative office, explains that these firms are offering to do all the work for businesses, but in exchange for a significant portion of the refund.
Expert Analysis and Concerns
Experts are warning about opportunists in the legal sector, with less experienced lawyers willing to take on claims despite having little previous history in trade or customs law. O'Neill notes that there are many firms that want to help importers, but some may be learning on the fly. "If you want to make sure that you're getting the best counsel available, go with a law firm that actually litigates these issues."
Brian Janovitz, a Washington-based trade lawyer at DLA Piper, has been fielding a non-stop wave of calls and emails from clients since the supreme court's ruling. He notes that it is probably a "prudent step" for clients to go to court if they want to ensure they are covering all their bases and maximizing their chance of getting a refund, especially if the government plays hardball.
Conclusion and Implications
Ultimately, any complaints about legal fees should be aimed at the Trump administration, Hillman says. "To be honest, it's their fault. If you hadn't done these cockamamie tariffs, and this changing up and down, nobody would have hired a lawyer. I mean, the system was working just fine... before you started screwing around with all these tariffs."
As companies navigate the complex and potentially lengthy refund process, the question remains whether they will pass on any of the returns to consumers, barring any legal orders. Whether any companies will be pressured into lowering their prices or providing something like a 'tariff rebate day' remains to be seen. One thing is certain, however: the beneficiaries of Trump's tariff war are unlikely to be the American consumers who shouldered the costs of the tariffs in the first place.
