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Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio.

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Speaker 1: In her first campaign rally as the presumptive Democratic presidential nominee,

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Speaker 1: Vice President Kamala Harris targeted Donald Trump and what she

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Speaker 1: called his Extreme Project twenty twenty five.

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Speaker 2: Donald Trump wants to take our country backward.

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Speaker 1: He and his Extreme Project twenty twenty five.

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Speaker 3: Agenda will weaken the middle class.

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Speaker 1: Like we know, we got to take this serious thing.

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Speaker 2: Can you believe they put that thing in writing?

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Speaker 1: Read it as nine hundred pages.

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Speaker 4: But here's the thing.

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Speaker 2: When you read it, you will see Donald Trump intends

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Speaker 2: to cut Social Security and Medicare.

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Speaker 1: Project twenty twenty five, the nine hundred page conservative manifesto

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Speaker 1: by the right leaning Heritage Foundation, proposes a massive overhaul

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Speaker 1: of the federal government, including scrapping climate change rules, stopping

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Speaker 1: sales of the abortion pill, lessening worker protections, replacing civil

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Speaker 1: servants with Trump loyalists, and dismantling the Education, Commerce, and

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Speaker 1: Homeland Security departments. Harris is putting it in the spotlight,

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Speaker 1: although Democrats, including President Joe Biden, have been using it

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Speaker 1: to showcase the threats to the country if Trump wins

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Speaker 1: the White House again.

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Speaker 5: It's a blue crid for the second Trump term that

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Speaker 5: every American should read and understand. Now. Of course Trump

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Speaker 5: is lying about him now, he said, tries to this

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Speaker 5: is himself, just like he's tried to this himself for

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Speaker 5: Overturny Grovy Wade.

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Speaker 1: And recent polling shows there's been a dramatic uptick in

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Speaker 1: awareness and negative views of Project twenty twenty five since

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Speaker 1: late June, when Democrats began emphasizing the plan as it's

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Speaker 1: a central plank of their campaign against Trump. Trump has

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Speaker 1: tried to distance himself from Project twenty twenty five. The

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Speaker 1: critics point out that it was led by former officials

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Speaker 1: in his administration. Joining me is Bloomberg Lobbying and legal

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Speaker 1: affairs reporter Emily Burnbaum. Emily tell us the point of

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Speaker 1: Project twenty twenty five what it's aimed at.

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Speaker 2: So, this is an effort spearheaded by the Heritage Foundation,

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Speaker 2: which is a right leaning think tank in Washington. They

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Speaker 2: brought together over one hundred conservative groups to create a

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Speaker 2: playbook for a second Trump administration. It lays out a

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Speaker 2: very expansive vision for how to push a far right

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Speaker 2: agenda through every federal agency. Essentially, you know some of

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Speaker 2: The proposals that have gotten the most attention include using

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Speaker 2: power of the federal government to ban abortion, dismantling the

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Speaker 2: Department of Education, banning pornography. So there's a ton in there,

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Speaker 2: and the thrust of it is in visioning a truly conservative government.

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Speaker 1: Trump has said his campaign isn't affiliated with Project twenty

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Speaker 1: twenty five, but there are connections there, definitely.

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Speaker 2: So there have been tallies showing that over one hundred

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Speaker 2: and forty people associated with Project twenty twenty five served

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Speaker 2: in the Trump administration. It's led by former Trump administration officials.

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Speaker 2: A lot of the proposals in the plan itself echo

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Speaker 2: Trump campaign promises. So the connections are undeniable and they're

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Speaker 2: increasingly difficult to shake as Democrats keep hammering on this.

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Speaker 2: You know, Trump tied to Project twenty twenty five. Trump

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Speaker 2: tied to the Project twenty twenty five ideas.

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Speaker 4: So this has been out for a while.

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Speaker 1: Why suddenly is it coming, you know, into focus for

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Speaker 1: the public.

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Speaker 2: Democrats have really leaned into this messaging around Project twenty

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Speaker 2: twenty five. You know, they're using it as a way

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Speaker 2: to say, here's what the world will look like if

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Speaker 2: Trump is re elected. You know, sort of to scare people.

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Speaker 2: And also it was brought into the news just a

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Speaker 2: couple of weeks ago because the head of the Heritage Foundation,

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Speaker 2: Kevin Roberts, said that we are in the process of

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Speaker 2: carrying out a second American Revolution to take back power

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Speaker 2: from the elite, and he said it'll be bloodless as

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Speaker 2: long as the left allowed it to be. So that

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Speaker 2: was really scary rhetoric, and I think that created another

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Speaker 2: opportunity for Democrats to point to this as a boogeyman.

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Speaker 1: And here's a clip of that Robert's statement, in.

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Speaker 6: Spite of all this nonsense from the left, we are

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Speaker 6: going to win. We're in the process of taking this

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Speaker 6: country back, and we are in the process of the

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Speaker 6: Second American Revolution, which will remain bloodless if the left allows.

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Speaker 3: It to be.

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Speaker 1: Do you think that Roberts and conservatives like him want

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Speaker 1: to get attention for this, even if it's negative A.

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Speaker 2: I think so. I think that they've been a little

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Speaker 2: frustrated by how much they've been tied to Trump. You know,

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Speaker 2: the Trump campaign has continually pushed back. They say, we

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Speaker 2: don't know these people. That doesn't make them look great.

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Speaker 2: But I do think that they are standing by everything

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Speaker 2: in the plan. You know, they're proud that they brought

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Speaker 2: together so many conservatives to come up with an agenda.

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Speaker 2: You know, when Trump came into power last time, one

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Speaker 2: of the issues was that they didn't really know how

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Speaker 2: to wield power effectively. They had some policy ideas you

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Speaker 2: know about immigration, et cetera, but they didn't know how

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Speaker 2: to use the government to make that happen. So this

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Speaker 2: is an effort to fill in that vacuum. So I

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Speaker 2: think the more attention is on the plan, you know,

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Speaker 2: the more they're getting out their message.

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Speaker 1: If they didn't want to be tied to Trump, then

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Speaker 1: why did they have so many people who were in

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Speaker 1: the Trump administration writing these things.

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Speaker 3: It's a good.

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Speaker 2: Question, and they say, you know, this playbook could be

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Speaker 2: used by any few Republican administration. I think they want

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Speaker 2: to create some daylight because they want to differentiate between

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Speaker 2: the conservative movement and the Trump campaign. You know, conservative

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Speaker 2: movement has a broader vision, has more long term momentum

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Speaker 2: than just the next four years.

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Speaker 1: Project twenty twenty five proposes that the entire federal bureaucracy,

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Speaker 1: including independent agencies like the Department of Justice, be placed

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Speaker 1: under direct presidential control and In the nine hundred pages,

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Speaker 1: they take each of the departments and give suggestions about

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Speaker 1: what should be done. So let's start with the Department

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Speaker 1: of Labor. The section was written by Jonathan Berry, who

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Speaker 1: headed the regulatory office at Trump's Labor department. What's the

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Speaker 1: sort of message here, anti working class, anti unions.

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Speaker 2: Yes, it's definitely very anti union, pro employer. And that's

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Speaker 2: according to labor experts who I talk to. A lot

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Speaker 2: of the proposals would just make life easier for companies, so,

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Speaker 2: you know, it would make it harder to create unions.

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Speaker 2: It would allow them to avoid paying over time. It

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Speaker 2: would even allow miners to take on some potentially dangerous

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Speaker 2: work as long as their parents that it was okay.

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Speaker 2: So it lays out a pretty pro employer visions under

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Speaker 2: Republican administration.

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Speaker 1: I thought that was so odd to let miners take

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Speaker 1: on dangerous work.

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Speaker 4: What is that about.

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Speaker 2: That's an increasingly popular position among Republicans. You know, a

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Speaker 2: lot of this comes down to the administrative state. You know,

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Speaker 2: there's this frustration among conservatives that Democrats have effectively taken

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Speaker 2: over the government bureaucracy. They're imposing all these rules to

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Speaker 2: push their vision of society. You know, and so this

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Speaker 2: is their respond to that, and I think that, you know,

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Speaker 2: this is just a small piece.

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Speaker 1: Of that, and apparently wanting to undo labor laws that

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Speaker 1: protect children. I thought it was strange that he denied

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Speaker 1: in an email that Corporate America backs all of his proposals,

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Speaker 1: pointing out he favors phasing out temporary guest work of visas,

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Speaker 1: eliminating use of forced labor abroad, and giving workers time

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Speaker 1: off for Sabbath observance. Those particular things seem so odd

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Speaker 1: to single.

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Speaker 4: Out to me.

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Speaker 2: Yeah, I mean, you know, there's a lot of wonky

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Speaker 2: policy proposals in there. But you know, Jonathan Barry himself,

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Speaker 2: he worked at Trump's labor department, like you said, then

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Speaker 2: he revolved out to a corporate law firm called Boyden Gray.

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Speaker 2: They take on a lot of conservative cases. Now he's

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Speaker 2: representing companies, including a coalition of home care companies that

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Speaker 2: are accused of feeling to pay over time. You know,

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Speaker 2: he's plotting how to get back in the administration. I

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Speaker 2: think it's a very Washington story. You know, the pro

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Speaker 2: corporate agenda in government outside government, and then back in government.

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Speaker 1: Then you have the Department of Energy and This was

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Speaker 1: written by Bernard mcnamie, a Trump appointee of the Federal

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Speaker 1: Energy Regulatory Commission. What are they looking to do with

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Speaker 1: the Energy Department?

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Speaker 2: Among other proposals, they should eliminate offices that work on

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Speaker 2: net zero carbon goals.

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Speaker 4: You know.

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Speaker 2: They basically say the Biden administration has moved too fast

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Speaker 2: with green policies. They're trying to accelerate the energy transition

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Speaker 2: too quickly. So he's calling for an end to the

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Speaker 2: so called war on oil and natural gas, trying to

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Speaker 2: pull back a lot of government efforts to fight climate change,

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Speaker 2: you know, create a much more oil and gas friendly

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Speaker 2: energy department.

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Speaker 4: The Department of Transportation.

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Speaker 1: Note was written by Diana I don't know if I'm

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Speaker 1: pronouncing this correctly.

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Speaker 4: Firch got Roth, a deputy.

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Speaker 1: Assistant director in Trump's Transportation Department. I just want to

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Speaker 1: note that so far all of the authors has worked

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Speaker 1: in the Trump administration. Tell us about her proposals.

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Speaker 2: Yeah, so the main message is that the Biden administration

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Speaker 2: has moved too fast on electric vehicles, that they are

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Speaker 2: subsidizing EV producers like Tesla at the expense of legacy automakers.

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Speaker 2: So a lot of her positions align with the positions

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Speaker 2: of you know, Ford and other automakers.

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Speaker 1: So how would Elon Musk, who's already given fifty million

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Speaker 1: dollars to a Trump back, how would you.

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Speaker 4: React to this?

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Speaker 2: I think Elon Musk definitely wouldn't be happy with a

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Speaker 2: lot of the proposals in this chapter. But I think

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Speaker 2: part of his play is getting close to Trump in

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Speaker 2: order to push his agenda to the Republican administration. So

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Speaker 2: something a lot of people say about Trump is his

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Speaker 2: opinion is informed by whoever he talked to last. So

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Speaker 2: for Elon Musk, it's the very strategic play to get

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Speaker 2: really close to him.

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Speaker 1: The EPA chapter in Project twenty twenty five was written

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Speaker 1: by the former chief of staff for Trump's EPA administrator.

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Speaker 1: We can sort of imagine what it is, but tell

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Speaker 1: us a little more so her.

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Speaker 2: Vision of the EPA. They would cut a lot of offices,

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Speaker 2: so in general, it's a lot about shrinking the EPA,

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Speaker 2: which she says is bloated and bureaucratic, especially cutting offices

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Speaker 2: dedicated to climate protection. It would expand oil and gas leases.

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Speaker 2: It would shrink the workforce, so it would also halt

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Speaker 2: grants to advocacy groups, so it would disentangle itself from

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Speaker 2: a lot of the you know, pro climate groups that

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Speaker 2: are operating on the ground. So it would it would

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Speaker 2: really make the EPA much less effective as an agency.

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Speaker 1: Which Trump also did during his presidency. Now, the Department

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Speaker 1: of Justice chapter was written by Gene Hamilton, who served

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Speaker 1: as counselor to the AGE during the Trump administration. Here

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Speaker 1: a lot of of sort of endorsement of conspiracy theories

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Speaker 1: that we've been hearing, you know, since the Trump administration.

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Speaker 1: I want to read a quote from that chapter. Quote,

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Speaker 1: large swaths of the Department have been captured by an

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Speaker 1: unaccountable bureaucratic menagerial class and radical left ideologues who have

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Speaker 1: embedded themselves throughout its offices and components.

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Speaker 2: Yeah, a lot of this chapter is focused on, you know,

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Speaker 2: this anxiety that the dj has been captured by what

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Speaker 2: he calls the radical left, you know, pointing to the

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Speaker 2: FBI bringing back up some of the concerns around Hunter

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Speaker 2: Biden's laptop. So it really lays out a plan to

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Speaker 2: ensure that conservatives are calling the shots at the Justice Department.

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Speaker 2: It you know, envisions pivoting away from a focus on

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Speaker 2: domestic terrorism, rejecting federal probes of police abuse. It calls

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Speaker 2: for actor duty military personnel and National guardsmen at the border,

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Speaker 2: so kind of totally revamping the DJ turning away from

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Speaker 2: civil rights, turning towards violent crime. That's the gist of

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Speaker 2: that chapter.

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Speaker 1: And the chapter on the White House by a former

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Speaker 1: Trump Deputy Chief of Staff. Of course, wokism has got

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Speaker 1: to be in this somewhere.

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Speaker 2: Focism is basically in every chapter, and it's especially in

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Speaker 2: this chapter, which is one of the first. So it's

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Speaker 2: about combating wokeism. It's about, you know, creating better connections

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Speaker 2: with conservative media, you know, how to use the media

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Speaker 2: to promote the president's agenda. And it focuses a lot

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Speaker 2: on pushing back on what he says is the less

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Speaker 2: aggressive attacks on life and religious liberty. So Rick Dearborn,

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Speaker 2: you know, he's a lobbyist for a lot of companies,

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Speaker 2: a lot of well known companies, you know, City Group, Rizon, Meta, Amazon,

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Speaker 2: and he is calling for a White House that is,

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Speaker 2: you know, corporate friendly and anti woke.

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Speaker 1: I think most people haven't read through this whole nine

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Speaker 1: hundred pages and just know about the bullet points. Do

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Speaker 1: you know how many of these they've distributed or sent

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Speaker 1: to people.

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Speaker 2: They're definitely trying to get this out across Washington, you know,

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Speaker 2: like Project twenty twenty five is more than just a playbook.

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Speaker 4: Two.

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Speaker 2: They're also soliciting resumes for conservatives who want to serve

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Speaker 2: in a Trump administration. They're doing trainings about how to

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Speaker 2: use the levers of government to push a conservative agenda.

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Speaker 2: So they're trying their best to push this across the

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Speaker 2: conservative movement. Interestingly, there have been a few conservative groups

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Speaker 2: that were associated with it at the beginning that have

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Speaker 2: distanced themselves as it becomes more controversial. So we'll see,

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Speaker 2: you know over the next month how many conservative groups

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Speaker 2: are left standing as supporters of this agenda.

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Speaker 1: Looks like the Democrats are not going to let it

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Speaker 1: go easily. Thanks so much, Emily. That's Bloomberg Lobbying and

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Speaker 1: legal affairs reporter Emily Burnbaum turning out a corporate law

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Speaker 1: in the Delaware courts. The Delaware judge whose landmark ruling

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Speaker 1: on shareholder agreements landed him at the center of a

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Speaker 1: month's long legal drama, issued a novel decision yesterday in

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Speaker 1: a dispute involving a Morgan Stanley subsidiary Vice Chancellor Jay

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Speaker 1: Travis Laster handed six billion dollars to XRI Investment Holdings,

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Speaker 1: ruling again for the water recycling company, two years after

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Speaker 1: he took the rare step of asking Delaware's top court

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Speaker 1: to overturn his decision in the company's favor. Joining me

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Speaker 1: to sort all this out is business law professor Eric

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Speaker 1: Tally of Columbia Law School. Eric, this is a very

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Speaker 1: confusing set of facts.

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Speaker 4: Can you walk.

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Speaker 1: Us through it?

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Speaker 3: Yes. The case itself was kind of an interesting case

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Speaker 3: because it involved, you know, setting up various type of

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Speaker 3: business structures to try to create what essentially amounted to

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Speaker 3: kind of like a second mortgage or a subordinated loan,

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Speaker 3: and so there were all kinds of constraints in doing it.

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Speaker 3: But the person that was trying to basically use stock

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Speaker 3: that he had in a company called XRI. He had

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Speaker 3: some stock in this company and he wanted to you know,

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Speaker 3: basically borrow money for another company to try to turn

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Speaker 3: that company into a more profitable venture. But the problem

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Speaker 3: was that he had already entered into this agreement not

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Speaker 3: to use the stock that he owned as direct collateral.

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Speaker 3: He couldn't, you know, do what's called getting secured loan

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Speaker 3: secured against that because the company he owned a stock

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Speaker 3: and had lent him money as well, and they basically

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Speaker 3: were saying, look, if you don't pay it back, we're

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Speaker 3: going to use that stock as the collateral for our

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Speaker 3: first loan. He ended up working with his own lawyer,

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Speaker 3: but then also worked with like the CEO of the

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Speaker 3: company that he owned stock in, to try to set

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Speaker 3: up a way to structure things so that he could

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Speaker 3: still kind of borrow more money against the value of

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Speaker 3: these these shares that he owned, but not to step

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Speaker 3: on the toes of the company that already had that

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Speaker 3: claim on those shares as collateral. So it was a

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Speaker 3: little bit complicated because there are all kinds of balls

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Speaker 3: in the air at the same time. But even though

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Speaker 3: it was really complicated, it was also true that he,

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Speaker 3: you know, had been working kind of hand in glove

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Speaker 3: with the CEO of the company he owned stock in

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Speaker 3: to try to you know, design this thing. And this

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Speaker 3: was an old friend of his as well. And so

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Speaker 3: you know where things ended up getting is things didn't

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Speaker 3: go particularly well for this new business that he was

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Speaker 3: trying to create. He wasn't able to make payments on

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Speaker 3: his various loans, including that original one, and only then

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Speaker 3: when relationships began to sour, did the guy that he

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Speaker 3: was working with, the CEO, basically blow the whistle and say, oh,

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Speaker 3: he set up this elaborate scheme and violated some of

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Speaker 3: the contractual restrictions that he had agreed to long ago

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Speaker 3: when he borrowed that first amount secured against the stock.

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Speaker 3: So it was a you know, a kind of a

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Speaker 3: big Rube Goldberg machine that absolutely this person had built,

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Speaker 3: but he kind of was working with someone that was

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Speaker 3: the CEO of the other side that would make a

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Speaker 3: complaint about it, and they never really sort of voiced

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Speaker 3: their own concerns until it was really really late in

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Speaker 3: the game, and then they did.

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Speaker 1: So that was the case that Laster got tell us

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Speaker 1: what he.

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Speaker 4: Did with it.

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Speaker 3: He had to deal with what was kind of an

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Speaker 3: odd situation in that, you know, when you sort of

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Speaker 3: look at the from sixty thousand feet, you know this guy, yes,

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Speaker 3: he probably built a Rube Goldberg machine that violated some

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Speaker 3: of the terms in the deal that he had struck,

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Speaker 3: but by the same token to the other side, at

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Speaker 3: least the CEO the other side knew what he was

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Speaker 3: doing and they didn't object to it until things really

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Speaker 3: went south. And that's what Vice Chancellor Laster in his opinion,

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Speaker 3: he wanted to sort of recognize this fact that you know,

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Speaker 3: they kind of acquiesced in what he was up to,

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Speaker 3: but the way that the law works didn't give him

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Speaker 3: the ability to use this, this idea that you know

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Speaker 3: they were in on it, and therefore they shouldn't be

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Speaker 3: able to just foreclose and seize the shares away. So

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Speaker 3: when he wrote that opinion, that first opinion, he almost

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Speaker 3: asked the Delaware Supreme Court please overruled me on this,

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Speaker 3: because I kind of don't like the outcome that I

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Speaker 3: got to here, but it seems to be the outcome

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Speaker 3: that our precedents have suggested for this case. And so

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Speaker 3: then goes to the Delaware Supreme Court and they come

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Speaker 3: back and said, no, by Standsley last year, you got

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Speaker 3: it exactly right. We're not going to overrule you. The

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Speaker 3: fact that you know that you know this guy had

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Speaker 3: done something that was not allowed in his original loan,

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Speaker 3: even if he was helped by this CEO, does not

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Speaker 3: does not foreclose the conclusion that this was something that

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Speaker 3: was in violation of his loan, And from the very

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Speaker 3: moment he did it, it was void and they could

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Speaker 3: just seize the shares back from him. So this this gentleman,

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Speaker 3: mister Hollyfield, really kind of took at the chops from

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Speaker 3: multiple directions, and by Standley Laster you kind of get

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Speaker 3: the sense he sort of felt for the guy, but

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Speaker 3: didn't see the law on the books to give him

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Speaker 3: much relief. In the Delaware Supreme Court wasn't willing to

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Speaker 3: go there either.

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Speaker 1: Have you ever heard of a judge sort of asking to.

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Speaker 3: Be reversed, Well, it's not as unusual as you might

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Speaker 3: think it would be, because I think a lot of

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Speaker 3: times when judges sort of say, look, the law is

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Speaker 3: clear on this, this seems somewhat inequitable, and it would

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Speaker 3: be a good idea if someone at a higher level,

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Speaker 3: whether it's a legislature or a supreme court, would sort of,

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Speaker 3: you basically say we're going to do things differently, either

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Speaker 3: with a new statute or by overruling an existing precedent.

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Speaker 3: So a lot of times this is not a completely

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Speaker 3: surprising thing for a trial court judge to say, look,

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Speaker 3: I'm bound by the precedents that have been handed to

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Speaker 3: me by, among other folks, the Supreme Court of Delaware.

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Speaker 3: I've got to live within them. I think that leads

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Speaker 3: me to kind of an outcome that seems kind of

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Speaker 3: unfair here, and I want to signal to the Supreme Court,

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Speaker 3: don't worry, I won't take it personally if you reverse

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Speaker 3: me here, and in fact I invite you to consider

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Speaker 3: doing so. What was sort of interesting, particularly in this instance,

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Speaker 3: is that while by chances the last probably does get

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Speaker 3: reversed more than the average judge for reasons largely having

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Speaker 3: to do with his creativity, this is a situation where

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Speaker 3: they chose not to reverse him and basically sort of

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Speaker 3: continued the outcome that he got to that he felt

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Speaker 3: uncomfortable with, but the Supreme Court of Delaware evidently felt

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Speaker 3: more comfortable with it.

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Speaker 1: Coming up next on the Bloomberg Law Show, I'll continue

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Speaker 1: this conversation with Columbia Law School professor Eric Tally, and

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Speaker 1: we'll talk about that landmark ruling on shareholder agreements that

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Speaker 1: landed Judge Laster at the center of a month's long

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Speaker 1: legal drama and led to the Delaware legislature taking action.

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Speaker 1: I'm June Grosso, and you're listening to Bloomberg. I've been

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Speaker 1: talking to business law professor Eric Tally of Columbia Law School.

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Speaker 1: What's with the length of these opinions? One with his

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Speaker 1: was one hundred and fifty four pages. The Delaware Supreme

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Speaker 1: Court came back with a seventy eight page opinion.

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Speaker 3: Delaware Chancer Court opinions tend to be a little bit

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Speaker 3: longer than others. I think this is in large part

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Speaker 3: because they realize that people are watching right, that this

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Speaker 3: is a transaction that has caused a dispute. But regardless

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Speaker 3: of the holding that they have, there may be fifty

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Speaker 3: sixty two thousand other future transactions that may be designed

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Speaker 3: around the very holding of this situation. And so, because

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Speaker 3: Delaware is such a focal area, even its trial court

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Speaker 3: opinions can tend to be a little bit more on

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Speaker 3: the on the lengthy side, simply to anticipate a bunch

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Speaker 3: of the different ways that people might read it. Now,

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Speaker 3: add on top of that the fact that that by

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Speaker 3: chance the Last himself, you know, he does sort of

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Speaker 3: relish the idea of trying to excavate the historical origins

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Speaker 3: of some of these doctrines, and he did so in

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Speaker 3: multiple ways here and sort of developed that in his

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Speaker 3: early opinion. For someone who's sort of a student or

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Speaker 3: a researcher in the origins of Delaware jurisprudence or just

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Speaker 3: common law jurisprudence. It's actually quite a tree to read

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Speaker 3: these opinions. However, I have to confess and that when

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Speaker 3: I a sign a Vice Chancellor Laster opinion, to my

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Speaker 3: own students, there's a sort of a collective groan because

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Speaker 3: they know they're going to be reading something that's one

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Speaker 3: hundred and fifty hundred and sixty two hundred pages long.

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Speaker 1: And then he had ten months of additional proceedings. This

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Speaker 1: case is never ending. What took ten months.

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Speaker 3: Well, one of the things that the court basically said,

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Speaker 3: the Supreme Court said, is no, no, no. It turns

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Speaker 3: out that they were well within their rights to just

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Speaker 3: seize this stock away from this guy because he had

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Speaker 3: violated his original loan agreements. But now you've got to

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Speaker 3: go back and determine whether there are additional damages that

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Speaker 3: are due to the original lender. And those took a

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Speaker 3: couple of different forms. One because our defendant in this

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Speaker 3: case held stock in this company. That company had lent

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Speaker 3: him money. He was also a board member of that company,

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Speaker 3: and most companies have an indemnification provision in their governance

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Speaker 3: Dockments basically says, if we get into litigation with you,

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Speaker 3: we have to pay for your attorney spees. And they

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Speaker 3: had one with this guy as well. Now that seems

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Speaker 3: a little bit weird when you are suing someone and

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Speaker 3: then you're having to pay your own attorney and pay

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Speaker 3: theirs as well. And so a lot of these indemnification provisions,

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Speaker 3: and this one was true. In addition, have a kind

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Speaker 3: of an off switch that says, you know, if you

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Speaker 3: behave in a way that was either fraudulent or willful

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Speaker 3: or grossly negligent, then we get to claw back the

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Speaker 3: attorney speed. So part of what by stance Laster had

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Speaker 3: to do once the case came back is to ask

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Speaker 3: what does it mean to willfully breach one of these agreements?

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Speaker 3: And did this individual do so? And ultimately he determined

441
00:25:44,240 --> 00:25:48,800
Speaker 3: that the person had willfully breached the agreement and because

442
00:25:48,840 --> 00:25:51,360
Speaker 3: of that, the company got to claw back the attorney

443
00:25:51,440 --> 00:25:54,359
Speaker 3: spees that they had been paying. You know, this guy's

444
00:25:54,359 --> 00:25:57,640
Speaker 3: attorney spees that they got to claw back those those payments.

445
00:25:57,960 --> 00:26:01,000
Speaker 3: The other thing that he had to inherit, you know,

446
00:26:01,040 --> 00:26:03,920
Speaker 3: there was this initial loan and then this defendant had

447
00:26:04,280 --> 00:26:07,320
Speaker 3: had a loan with another you know, with this other lender,

448
00:26:07,640 --> 00:26:10,400
Speaker 3: and the shares were kind of caught up. Who who,

449
00:26:10,600 --> 00:26:13,600
Speaker 3: you know basically could claim these shares as collateral. So

450
00:26:13,640 --> 00:26:16,560
Speaker 3: the two lenders were litigating against each other, and then

451
00:26:16,600 --> 00:26:20,360
Speaker 3: that eventuated in a big settlement. So our plane iff

452
00:26:20,359 --> 00:26:22,240
Speaker 3: in this case said, not only should we have been

453
00:26:22,240 --> 00:26:24,960
Speaker 3: able to claw back the shares, but we had to

454
00:26:25,000 --> 00:26:27,040
Speaker 3: spend all this money on this other lawsuit, and that

455
00:26:27,080 --> 00:26:29,520
Speaker 3: should be part of our damages that he could have

456
00:26:29,680 --> 00:26:32,800
Speaker 3: foreseen that we were going to have to suffer. And

457
00:26:32,880 --> 00:26:35,960
Speaker 3: so by Chancellor Alaster had to adjudicate that as well,

458
00:26:36,000 --> 00:26:39,199
Speaker 3: and he also said, yeah, there were payments in that

459
00:26:39,520 --> 00:26:43,000
Speaker 3: external lawsuit that they also had to pay. So when

460
00:26:43,040 --> 00:26:45,760
Speaker 3: this case came back and by Chancellor Alaster got it,

461
00:26:45,840 --> 00:26:48,720
Speaker 3: not only did the Supreme Court, hell know, your original

462
00:26:48,760 --> 00:26:51,560
Speaker 3: opinion is going to hold water and we're not going

463
00:26:51,600 --> 00:26:54,919
Speaker 3: to reverse it, but now you need to assess further

464
00:26:55,040 --> 00:26:58,760
Speaker 3: damages against this person that he's going to have to

465
00:26:58,800 --> 00:27:04,000
Speaker 3: pay because of his original violation of his contractual obligation.

466
00:27:04,119 --> 00:27:07,159
Speaker 3: So this most recent opinion was basically by chance Or

467
00:27:07,240 --> 00:27:10,640
Speaker 3: Laster then trying to unpack what those additional damages would

468
00:27:10,680 --> 00:27:12,240
Speaker 3: be you really need to.

469
00:27:12,200 --> 00:27:15,680
Speaker 1: Make a diagram to try to keep this all straight.

470
00:27:16,160 --> 00:27:18,840
Speaker 1: Is this latest opinion controversial.

471
00:27:18,480 --> 00:27:21,920
Speaker 3: Well, in some ways it's not amazingly controversial, But there

472
00:27:21,920 --> 00:27:23,960
Speaker 3: are a couple things that I think are really interesting

473
00:27:23,960 --> 00:27:26,800
Speaker 3: about it. So one is this idea. And when you

474
00:27:26,880 --> 00:27:28,960
Speaker 3: read the opinion, you do kind of get this sense

475
00:27:29,040 --> 00:27:31,639
Speaker 3: that the person who ends up being held liable here,

476
00:27:32,240 --> 00:27:36,760
Speaker 3: you know, he wasn't completely above board on everything. But

477
00:27:37,040 --> 00:27:38,720
Speaker 3: there was also a sense to the other side knew

478
00:27:38,760 --> 00:27:40,840
Speaker 3: what was going on as well. So the fact that

479
00:27:40,880 --> 00:27:43,960
Speaker 3: the Supreme Court didn't give by chances laster here or

480
00:27:44,000 --> 00:27:47,880
Speaker 3: more generally, other trial courts the discretion to kind of

481
00:27:48,240 --> 00:27:50,679
Speaker 3: pull back to sixty thousand feet and say we're going

482
00:27:50,720 --> 00:27:53,720
Speaker 3: to try to do what's fair under the circumstances, that

483
00:27:53,760 --> 00:27:56,439
Speaker 3: I think is a little bit controversial, right, that the

484
00:27:56,480 --> 00:27:59,360
Speaker 3: Supreme Court basically said, now, if you've done something that

485
00:28:00,040 --> 00:28:02,520
Speaker 3: basically causes the deal that you've made to be to

486
00:28:02,560 --> 00:28:05,600
Speaker 3: be void from the very beginning, even if people have

487
00:28:05,920 --> 00:28:11,680
Speaker 3: acted in you know, possibly less than completely upfront ways,

488
00:28:12,119 --> 00:28:15,320
Speaker 3: we're not going to give judges the discretion to kind

489
00:28:15,359 --> 00:28:18,000
Speaker 3: of try to do justice on a broader plane, and

490
00:28:18,240 --> 00:28:21,720
Speaker 3: I think that in some ways limits what the Delaware

491
00:28:21,760 --> 00:28:25,080
Speaker 3: Chancery Court has historically done. So I think that's that's

492
00:28:25,160 --> 00:28:27,359
Speaker 3: one thing that is possibly going to be a little

493
00:28:27,359 --> 00:28:31,159
Speaker 3: bit controversial. There may be some other things about how

494
00:28:31,160 --> 00:28:34,399
Speaker 3: do you calculate damages in this case that you know

495
00:28:34,480 --> 00:28:36,600
Speaker 3: could stay alive. You know, one of the things that

496
00:28:36,880 --> 00:28:38,680
Speaker 3: you know, if ice changed the last didn't try to

497
00:28:38,680 --> 00:28:40,560
Speaker 3: do in the opinion, is to try to say, well, like,

498
00:28:40,720 --> 00:28:43,400
Speaker 3: just how valuable were these shares that got seized back?

499
00:28:43,480 --> 00:28:48,040
Speaker 3: Did these guys get overcompensated when they seized back these shares?

500
00:28:48,920 --> 00:28:52,760
Speaker 3: And as a result, should I have shaved my damages

501
00:28:52,840 --> 00:28:55,200
Speaker 3: but a little bit more to reflect the fact that

502
00:28:55,240 --> 00:28:57,720
Speaker 3: they might I got it overcompensated. So I think there

503
00:28:57,760 --> 00:28:59,840
Speaker 3: may be a few things that are you know, certainly

504
00:28:59,840 --> 00:29:02,960
Speaker 3: for someone like myself who teaches and does research and

505
00:29:03,080 --> 00:29:06,440
Speaker 3: contracts that are kind of in the weeds of contract

506
00:29:06,520 --> 00:29:10,600
Speaker 3: damages law that are super interesting. And this case may

507
00:29:10,680 --> 00:29:12,920
Speaker 3: end up casting a longer shadow, and it may not

508
00:29:13,120 --> 00:29:16,160
Speaker 3: even be done at the Dallas Supreme Court level if

509
00:29:16,240 --> 00:29:19,720
Speaker 3: in fact some of the computations of damages themselves get appeal.

510
00:29:20,400 --> 00:29:23,400
Speaker 1: Tell us a little about last he had this decision

511
00:29:23,960 --> 00:29:28,200
Speaker 1: that got a lot of attention that invalidated many shareholder agreements.

512
00:29:28,600 --> 00:29:31,000
Speaker 3: Yeah, so this was a decision not that long ago

513
00:29:31,120 --> 00:29:38,360
Speaker 3: actually that invalidated some side shareholder agreements that had become

514
00:29:39,040 --> 00:29:43,480
Speaker 3: a little bit more popular, particularly outside of the public

515
00:29:43,560 --> 00:29:48,600
Speaker 3: company space, but also had never really been tested in courts.

516
00:29:49,080 --> 00:29:54,120
Speaker 3: That basically gave a favored shareholder extra special rights to

517
00:29:54,160 --> 00:29:57,360
Speaker 3: control what the board of directors does, and you didn't

518
00:29:57,520 --> 00:30:00,400
Speaker 3: really even have to get the consent sometimes that even

519
00:30:00,480 --> 00:30:04,480
Speaker 3: have to tell other stockholders about the existence of these contracts.

520
00:30:04,480 --> 00:30:06,560
Speaker 3: And by chance to the laster had one of these

521
00:30:06,600 --> 00:30:10,040
Speaker 3: opinions less than a year ago, and he came out

522
00:30:10,080 --> 00:30:13,560
Speaker 3: with an opinion that basically invalidated those contracts. They said, look,

523
00:30:13,800 --> 00:30:16,400
Speaker 3: you can't do this on a side contract. These are

524
00:30:16,440 --> 00:30:20,480
Speaker 3: about sort of fundamental governance provisions that you know pretty

525
00:30:20,520 --> 00:30:22,720
Speaker 3: much have to be in the charter of a company

526
00:30:22,840 --> 00:30:25,880
Speaker 3: or its bylaws, but you can't hide him in a contract.

527
00:30:25,880 --> 00:30:29,720
Speaker 3: And so he invalidated the contracts. It caused a huge

528
00:30:30,120 --> 00:30:33,800
Speaker 3: storm when that came out, and a lot of folks

529
00:30:33,840 --> 00:30:36,600
Speaker 3: who had you know, already advised their clients so it's

530
00:30:36,640 --> 00:30:39,640
Speaker 3: okay to get into these side contracts. I think felt

531
00:30:39,720 --> 00:30:41,360
Speaker 3: a little bit of a danger that, you know, there

532
00:30:41,440 --> 00:30:43,720
Speaker 3: might be some egg on their face and they're they're

533
00:30:43,760 --> 00:30:46,920
Speaker 3: already knee deep and executing even more of these contracts.

534
00:30:47,280 --> 00:30:50,840
Speaker 3: And so over the summer this past summer, there was

535
00:30:50,960 --> 00:30:55,600
Speaker 3: a concerted effort that was ultimately successful in getting the

536
00:30:55,680 --> 00:30:59,440
Speaker 3: Delaware Assembly to essentially, you know, pass a new law

537
00:30:59,760 --> 00:31:03,560
Speaker 3: that basically overruled Vice Chancellor Laster's opinion before it even

538
00:31:03,600 --> 00:31:07,200
Speaker 3: went up to the Delaware Supreme Court. And that itself

539
00:31:07,280 --> 00:31:10,640
Speaker 3: was quite controversial. I was one of several co authors

540
00:31:10,640 --> 00:31:13,880
Speaker 3: of a letter to the Delaware Assembly is that this

541
00:31:13,920 --> 00:31:16,400
Speaker 3: is a little bit hasty, it's a little bit fast.

542
00:31:16,880 --> 00:31:19,400
Speaker 3: It seems to be that rather than you know, waiting

543
00:31:19,480 --> 00:31:22,680
Speaker 3: for this appeals process to play out, parties have just

544
00:31:22,720 --> 00:31:26,120
Speaker 3: decided to turn to the legislature to use the legislature

545
00:31:26,160 --> 00:31:30,080
Speaker 3: to overrule a trial court opinion, which seemed somewhat unprecedented.

546
00:31:30,120 --> 00:31:32,600
Speaker 3: And I can't think of other circumstances where it's happened.

547
00:31:32,640 --> 00:31:36,200
Speaker 3: So five chances of Laster. Interestingly enough, in the span

548
00:31:36,280 --> 00:31:39,320
Speaker 3: of you know, of a year, he got overruled by

549
00:31:39,360 --> 00:31:43,520
Speaker 3: the Delaware legislature. But he didn't get overruled by the

550
00:31:43,520 --> 00:31:46,000
Speaker 3: Supreme Court, which is what he really wanted to get

551
00:31:46,520 --> 00:31:50,320
Speaker 3: overruled by. So this, this law now has been signed

552
00:31:50,440 --> 00:31:54,920
Speaker 3: into effectiveness by the Governor of Delaware, and the legal

553
00:31:54,960 --> 00:32:02,120
Speaker 3: permissibility of these side contracts now is evidently okay under

554
00:32:02,160 --> 00:32:06,160
Speaker 3: Delaware law. But there's all kinds of open questions about

555
00:32:06,560 --> 00:32:08,880
Speaker 3: how is that law going to come out? And much

556
00:32:08,920 --> 00:32:12,080
Speaker 3: of this kind of started by what seemed to be

557
00:32:12,240 --> 00:32:15,960
Speaker 3: kind of a strong pushback against a Vice Chances the

558
00:32:16,040 --> 00:32:21,040
Speaker 3: Laster opinion. The opinion itself, you know, I've taught it,

559
00:32:21,080 --> 00:32:24,520
Speaker 3: I've read it many times. It really is a kind

560
00:32:24,520 --> 00:32:27,280
Speaker 3: of a by the book opinion. So so my sense

561
00:32:27,400 --> 00:32:30,640
Speaker 3: is that, you know, Vice Chansor Laster's reasoning in the

562
00:32:30,680 --> 00:32:35,040
Speaker 3: case was pretty consistent with Delaware law, and the fact that,

563
00:32:35,240 --> 00:32:37,920
Speaker 3: you know, there had been so many examples of people

564
00:32:38,000 --> 00:32:39,920
Speaker 3: basically saying, oh, don't don't worry, this is going to

565
00:32:40,000 --> 00:32:42,160
Speaker 3: be okay. You know, if this is tested, it's not

566
00:32:42,200 --> 00:32:47,000
Speaker 3: going to come out against us. That expectation got deeply disappointed,

567
00:32:47,040 --> 00:32:49,440
Speaker 3: and I think that's what caused this really, you know,

568
00:32:49,880 --> 00:32:54,080
Speaker 3: fairly fairly forceful rush to try to change Delaware law

569
00:32:54,120 --> 00:32:54,960
Speaker 3: through its statutes.

570
00:32:55,680 --> 00:32:57,440
Speaker 4: And what's his reputation.

571
00:32:57,640 --> 00:33:00,920
Speaker 3: Well, Vice Chancel Laster is well known be an extremely

572
00:33:01,080 --> 00:33:04,680
Speaker 3: thoughtful person. Uh he is. He is a person that

573
00:33:04,840 --> 00:33:09,000
Speaker 3: like tries to to to reason from first principles and

574
00:33:09,120 --> 00:33:11,400
Speaker 3: to try to sort of think where does this practice

575
00:33:11,440 --> 00:33:15,560
Speaker 3: fit within the longer role that uh that you know,

576
00:33:15,600 --> 00:33:20,280
Speaker 3: the Delaware Court of Chancery has you know, historically and institutionally.

577
00:33:20,360 --> 00:33:24,960
Speaker 3: Now that sometimes rankles people because he is not a

578
00:33:25,200 --> 00:33:26,920
Speaker 3: kind of I'm just going to go with the flow

579
00:33:27,000 --> 00:33:29,560
Speaker 3: of what the cool kids are doing these days type

580
00:33:29,560 --> 00:33:32,600
Speaker 3: of judge. And if if he can't find a way

581
00:33:32,640 --> 00:33:36,160
Speaker 3: to reason to the outcome, he may well end up

582
00:33:36,280 --> 00:33:41,360
Speaker 3: resisting that outcome. And and so that inevitably causes some

583
00:33:41,480 --> 00:33:45,520
Speaker 3: frictions inside Delaware law. I find when I when I

584
00:33:45,640 --> 00:33:49,320
Speaker 3: teach Vice Chancellor Laster's opinion, they're very long. So the

585
00:33:49,320 --> 00:33:51,840
Speaker 3: students are a little bit are a little bit grumpy

586
00:33:51,880 --> 00:33:54,120
Speaker 3: by the time I'm teaching the case because they've had

587
00:33:54,160 --> 00:33:56,440
Speaker 3: to spend so much time reading it. But they're very

588
00:33:56,480 --> 00:33:59,160
Speaker 3: well reasoned and they build up in a logical way

589
00:33:59,280 --> 00:34:01,800
Speaker 3: to where they're going to end up getting. And this

590
00:34:01,880 --> 00:34:05,400
Speaker 3: opinion that was you know, effectively nullified or at least

591
00:34:05,480 --> 00:34:09,240
Speaker 3: going forward, was nullified by the legislature. It was similar.

592
00:34:09,480 --> 00:34:14,160
Speaker 3: It was not a quick or slap dash and it's reasoning.

593
00:34:14,200 --> 00:34:16,640
Speaker 3: It sort of built it up piece by piece, and

594
00:34:16,680 --> 00:34:19,680
Speaker 3: so by chance to the last year, absolutely has a

595
00:34:19,760 --> 00:34:24,600
Speaker 3: reputation of being a very smart, very articulate judge who

596
00:34:24,680 --> 00:34:27,239
Speaker 3: also you know, is going to you know, try to

597
00:34:27,280 --> 00:34:29,840
Speaker 3: reason his own way to the outcome. And if the

598
00:34:29,880 --> 00:34:33,520
Speaker 3: reasoning doesn't hold together, it's unlikely he's just gonna you know,

599
00:34:33,560 --> 00:34:36,279
Speaker 3: wave his hands at it and say, well, that's still

600
00:34:36,280 --> 00:34:38,799
Speaker 3: good to the outcome, because that's just what everyone else

601
00:34:38,920 --> 00:34:41,520
Speaker 3: is doing. So he's you know, maybe a little bit

602
00:34:41,600 --> 00:34:44,680
Speaker 3: more of an iconoclastic judge than you will have elsewhere,

603
00:34:44,719 --> 00:34:48,080
Speaker 3: but he's also a very engaged thinker. In the opinions

604
00:34:48,080 --> 00:34:48,960
Speaker 3: that he writes.

605
00:34:48,840 --> 00:34:52,960
Speaker 1: He certainly sounds like an interesting judge. Thanks so much, Eric, Best,

606
00:34:52,960 --> 00:34:56,279
Speaker 1: Professor Eric Talley of Columbia Law School. And that's it

607
00:34:56,320 --> 00:34:59,239
Speaker 1: for this edition of the Bloomberg Law Podcast. Remember you

608
00:34:59,280 --> 00:35:02,000
Speaker 1: can always get the latest legal news by subscribing and

609
00:35:02,080 --> 00:35:05,600
Speaker 1: listening to the show on Apple Podcasts, Spotify, and at

610
00:35:05,640 --> 00:35:08,640
Speaker 1: Bloomberg dot com slash podcast Slash Law.

611
00:35:08,960 --> 00:35:11,680
Speaker 4: I'm June Grosso and this is Bloomberg