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At 8am, two hours before the US supreme court officially slapped down Donald Trump’s “liberation day” tariffs on 20 February, Joseph Spraragen’s phone was already ringing off the hook.
The seasoned New York-based attorney and his 40-strong specialised trade team at Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt (GDLSK) had spent months filing hundreds of lawsuits for heavy-hitter clients, including luxury brands Prada and Dolce & Gabbana, in protest of the US president’s decision to impose sweeping import taxes last April.
But that Friday’s ruling – deeming Trump’s tariffs illegal – opened the floodgates, sending hundreds of thousands of businesses across the US scrambling for advice on how to secure their share of an estimated $175bn (£129bn) tariff refund pot.
Already, FedEx, L’Oreal, Dyson and others have sued for refunds. Now clients are looking for trade lawyers at a rate unseen throughout Spraragen’s 30-year career. “It’s unprecedented,” he said.
And that wave, some experts say, will result in a mini-gold rush for a usually unglamorous corner of the US legal sector: delivering fees for trade lawyers, paydays for hedge funds buying up rights to businesses’ refunds and a cut for AI firms that are – inevitably – trying to get in on the action.
How any of that money ultimately filters through to American consumers, who shouldered tariff costs through widespread price hikes, remains to be seen.
“To me, the only winners from this trade war that Trump has launched, have been the lawyers,” said Jennifer Hillman, a law professor at Georgetown University, and former general counsel for the US trade representative office.
Even before last week’s supreme court ruling, the complications of Trump’s tariffs – which resulted in different rates being charged based on where certain parts of a purse or toy might have been manufactured – were putting trade lawyers into overdrive. “All of a sudden everybody had to understand these incredibly complicated rules, or else they were committing customs fraud. So right there, you had a huge number of people having to hire a customs lawyer,” Hillman said.
Compliance costs shot through the roof, with Trump’s tariffs estimated to have cost businesses billions of dollars in extra administrative work, a portion of which would have gone to lawyers parsing out the details.
Now, with Friday’s ruling opening the door to a major fee stream, law firms across the country have been springing into action. That includes Quinn Emanuel Urquhart & Sullivan, a sprawling firm with 1,300 lawyers on tap, which quickly publicised the launch of their own “Tariff Refund Task Force”, promising to “pursue refunds aggressively” for business clients.
The final legal fees likely to pour from tariff refund cases is hard to calculate. But to start, some firms are advertising “flat fees” to get cases filed in court, a sum that is likely to cost businesses $10,000-$15,000 a pop, according to Nicole Bivens Collinson, head of international trade at law firm Sandler Travis and Rosenberg. If courts request extra documentation, or if the Trump administration drags out the process, billable hours will start to rack up.
Some believe the refund process could, and should, be sorted through automatic refunds. Trump, meanwhile, has warned that the issue could be tied up in courts “for the next five years”. And that may be by design, Bivens Collinson said. “I can see a scenario wherein this administration would try to make the refund process as difficult as it can because of the reliance that it has now on those tariffs,” which feed into government revenues, she explained.
But the legal fees that emerged from that potentially lengthy process could yield windfalls for many firms. The flat fees alone “could be in the millions, many millions, depending on how many clients for which they file”. That will only end up absorbing a small proportion of the estimated $175bn refund bill, Bivens Collinson said. But the sums are not to be scoffed at.
Not everyone should take the legal route, however. Hillman explained that most importers should be able to retrospectively change the tax rate applied to imported items before the charges are formally settled with customs, a process which usually takes place months after the goods actually went through the border.
But that could be a hefty administrative task, and firms with bigger sums on the line, and influential shareholders to appease, will face pressure to do everything they can to get every dime they are owed.
“There’s no harm in bringing these cases,” Hillman said. “That’s like belt and suspenders: you get extra, extra surety … I can understand why companies that don’t know the law and are worried about it want that assurance that a law firm can give them … they’re doubly protected,” Hillman said.
However, a two-tier system has been created: where firms that cannot afford the legal fees risk being left in limbo while the refund process plays out. That outsize demand, though, has now attracted financial speculators, with investment banks and hedge funds swooping in to buy up rights to tariff refunds.
One Atlanta-based toymaker Kids2, which imports 95% of its products from China, recently made news after selling off the rights to its $15m tariff claim to a Boston hedge fund for a $2m up front.
“There are hedge funds out there who are looking to scoop these up. And they’ve been looking to scoop up these claims since before Friday,” said Richard O’Neill, a partner in the Seattle office of customs and trade law firm Neville Peterson. “And I’m sure their rates are changing considerably now that we have the merits resolved.”
O’Neill, whose team has filed around 117 cases for clients ranging from Xerox to Jaguar Land Rover, said hedge funds approached his own firm in hopes of being linked up with clients. “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.”
Firms such as Jefferies, Oppenheimer and Seaport Global Securities are reportedly among the firms brokering deals, matching investors with importers, according to Bloomberg.
But for individual business, it will comes down to how fast they need the money. “Selling a portion of your claim or all of it, in exchange for some quick cash could make sense if there was uncertainty,” Stephan Becker, the leader of the international trade practice group at law firm Pillsbury, said. “But the uncertainty part is largely removed at this point. Giving away a huge portion of the money you’re owed is not a decision that should be made lightly.”
Some AI firms are also rumoured to be muscling in, offering to process people’s applications in exchange for cuts of any future refunds. “They’re just saying, I’ll do all the work for you, but then I get 20%,” Hillman explained.
There are separate concerns about opportunists in the legal sector, with less experienced lawyers willing to take on claims despite having little previous history in trade or customers law. “There’s a lot of firms that do want to go out and legitimately help importers and want to help guide their refund process,” O’Neill said. “And there may be some who are 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.”
For now, those with the experience are trying to keep their heads above water. Brian Janovitz, a Washington-based trade lawyer at DLA Piper, spent over a decade as a leading international trade and national security official at the White House and the office of the US trade representative. He has been fielding a non-stop wave of calls and emails from clients since Friday’s ruling, even working around a friend’s wedding rehearsal in New York. “It’s been constant,” he said.
As to whether he thinks his clients should be going to court, Janovitz said it is probably a “prudent step” if clients want to ensure they are covering all their bases and maximising their chance of getting a refund – especially if the government plays hardball. “All we can do is be as efficient as possible in helping the client achieve their objectives.”
Ultimately, though, any complaints about legal fees should be aimed at the Trump administration, Hillman said. “To be honest, it’s their fault,” she said.“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 was working just fine … before you started screwing around with all these tariffs.”
And for companies who end up successfully securing refunds, the question remains whether they will pass on any of those 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’ where everybody that comes into Walmart gets 10% off … it’s in the realm of the possible. There could be a big growing movement to say: ‘You should give some of this back to your customers’.”
