Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio.
Speaker 2: The Department of Justice, joined by eight states, filed a
Speaker 2: civil antitrust lawsuit in the United States District Court for
Speaker 2: the Eastern District of Virginia against Google.
Speaker 1: The Justice Department suit, accusing Google of monopolizing the digital
Speaker 1: advertising market, is scheduled to go to trial before a
Speaker 1: jury in September, but Google is trying to avoid trying
Speaker 1: the case to a jury with a novel move cutting
Speaker 1: the government to check the search Giant wants a judge,
Speaker 1: not a jury, to decide the case, and argues the
Speaker 1: government has no right to a jury trial without a
Speaker 1: claim for money damages. Joining me is anti trust law
Speaker 1: expert Harry First, a professor at NYU Law School. Harry,
Speaker 1: has this been done before, paying damages before a trial
Speaker 1: or a finding of liability?
Speaker 3: Not to my knowledge, it's a you know, you might
Speaker 3: say a clever move, or you might say it's a
Speaker 3: silly move, or you might say, when it's Google, who
Speaker 3: cares how many millions of dollars you may pay unnecessarily?
Speaker 3: So I've never seen this before. Liligans don't usually pay
Speaker 3: out money in advance of a trial an indvansive even losing,
Speaker 3: So you've got to have a lot of money to
Speaker 3: do that.
Speaker 1: The Google argument is that without a monetary damage's claim,
Speaker 1: the government has no right to a jury trial. Is
Speaker 1: that true?
Speaker 3: Well, Google's argument is, let's see, should we call it silly,
Speaker 3: ridiculous or desperate? I don't know. So if you are
Speaker 3: not asking for money, go back to day one. You
Speaker 3: file a complaint and all you're asking for is an injunction.
Speaker 3: That is what's called a suit in equity and is
Speaker 3: just handled by a judge. That's the way cases have
Speaker 3: been handled since common law period. If, on the other hand,
Speaker 3: you go into court and you ask for money damages,
Speaker 3: that has to be before a judge with under the
Speaker 3: Seventh Amendment, if it's for more than twenty dollars, I think,
Speaker 3: with a jury. So that's the distinction. Now what Google's
Speaker 3: trying to say is, oh, guess what. Now there's no damages,
Speaker 3: so you don't get the jury trial. So presumably the
Speaker 3: Justice Department will say to this check thank you, but
Speaker 3: no thank you. You know, we want to prove our
Speaker 3: damages and we'll prove them anyway. So it is still
Speaker 3: a suit for damages, and you can't get out of
Speaker 3: it by sort of pre paying the damages and now saying,
Speaker 3: guess what, it's not for damages. The suit was always
Speaker 3: for damaging.
Speaker 1: The size of the payment hasn't been disclosed, but Google
Speaker 1: said that after months of discovery, the Justice Department could
Speaker 1: only point to estimated damages of less than a million.
Speaker 1: Since the law allows the court to issue treble damages.
Speaker 1: The speculation is that Google's check is for about three million,
Speaker 1: which is a drop in the bucket to Google.
Speaker 3: Well, yeah, I mean originally they claimed at least one
Speaker 3: hundred million, and what they're going to be able to
Speaker 3: prove up a trial, it seems to me, is still
Speaker 3: a question for trial. So I don't know what their
Speaker 3: expert reports show or whether they have some additional evidence.
Speaker 3: So I don't know what the amount is, and I think, frankly,
Speaker 3: it doesn't really matter. The legal point is the case
Speaker 3: was filed for damages, it is still the case for damages,
Speaker 3: and paying them off doesn't and the case and doesn't
Speaker 3: change the nature of the case. So I don't see
Speaker 3: this as the gambit that's going to work. Their claim
Speaker 3: is not mooved no matter what how much the checks
Speaker 3: for and you're right, from anyone's point of view, whether
Speaker 3: it's five million, ten million, one hundred million dollars, this
Speaker 3: is not very much to Google. And that's really, frankly
Speaker 3: not the point. So I think, you know, more significant
Speaker 3: are the other arguments that Google tries to make, which
Speaker 3: is that this shouldn't be a tried by a jury.
Speaker 3: And that's a more straightforward argument. It's not yes, it's
Speaker 3: a jury trial, but no, it's not a jury trial,
Speaker 3: because I mean, it would sort of be like saying, well,
Speaker 3: you asked for an injunction, so yeah, it's fine, We're
Speaker 3: fine with an injunction. So now it's not a case
Speaker 3: for anything, So that I don't think that's going to work.
Speaker 1: Google said that the government has said the case is
Speaker 1: highly technical and outside the everyday knowledge of most prospective jurors.
Speaker 1: Google said it's aware of no case in American history
Speaker 1: where a civil suit brought by the United States pressing
Speaker 1: only antitrust claims was tried to a jury.
Speaker 3: You know, it's likely that that's correct simply because the
Speaker 3: Justice Department has almost never filed suit for damages and
Speaker 3: so it's not a major claim. What would be an
Speaker 3: interesting claim is if nobody had ever filed for a
Speaker 3: jury trial, including private party, and that actually is not true.
Speaker 3: And in fact, this claim was made in the nineteen
Speaker 3: eighties in litigation involving the sale of Japanese televisions in
Speaker 3: the United States at allegedly predatory prices, and the defendant,
Speaker 3: Japanese television manufacturers, made a strong effort to say there
Speaker 3: is no right to a jury trial here because it's
Speaker 3: too complex. The courts never quite got to that holding
Speaker 3: for other reasons. They focused on other issues. But we've
Speaker 3: seen the claim before and courts are not all that
Speaker 3: well disposed to it. In private cases, there are lots
Speaker 3: of complicated cases, patent infringement cases. Patents are complicated. A
Speaker 3: lot of patent infringement cases a large part of it
Speaker 3: to try to juries, trade secret cases, complex fraud cases.
Speaker 3: There's a lot of complex cases. To say somehow anti
Speaker 3: trust is beyond the realm is a little silly, particularly
Speaker 3: after Google had a jury trial in the epic case. Now,
Speaker 3: Google's right to say that this is unusual for the government,
Speaker 3: but that's a knock on the government, but not on
Speaker 3: the legal case. And there are reasons for that. But
Speaker 3: the government clearly has the statutory right to sue for
Speaker 3: treble damages. Congress gave that to them in nineteen ninety,
Speaker 3: originally with single damages nineteen fifty five. I mean it's
Speaker 3: a specific statue. So, as I said, frivolous, bad argument.
Speaker 1: Harry, before we go any further, tell us about the
Speaker 1: government's case against Google here.
Speaker 3: Basically, it involves the advertising side of what Google does
Speaker 3: and the auctions that it runs for those ads that
Speaker 3: you see popping up every time you move online that
Speaker 3: seem to say, Hi, Harry, this is for you. You know,
Speaker 3: starts advertising display advertising, and they run auctions. I forget
Speaker 3: the number every second, but it's a huge volume of
Speaker 3: advertising auctions. And they run the platform, and they provide
Speaker 3: the tools for both the advertisers and the publishers of
Speaker 3: these ads to figure out how much space there is
Speaker 3: where these ads could go, what to charge, how to
Speaker 3: aunction them off, so that each side feels they're getting
Speaker 3: the best deal, and you know, they sort of run
Speaker 3: the show. And they also have the search engine that
Speaker 3: generates you know, a lot of the information. So they
Speaker 3: are all over what people call the ad tech space,
Speaker 3: and the Justice Department wants to separate out some of
Speaker 3: these functions so that different platforms might arise that could
Speaker 3: compete against Google without you know, having the same search engine,
Speaker 3: having sort of the same tools that seem to favor Google,
Speaker 3: and placement on Google websites rather than through being so forth.
Speaker 3: So that's the real thumbnail sketch. But you know everything
Speaker 3: you read. The first thing you know that people say
Speaker 3: is well, this is a complicated market to understand. But
Speaker 3: you know, again, this is what good trial lawyers do.
Speaker 3: They break down complexity so that the people who have
Speaker 3: to decide the case. In this case, the jury can
Speaker 3: follow it through and that's going to be their challenge.
Speaker 1: You mentioned the Fortnite maker Epic Games case that was
Speaker 1: one of the worst legal losses for Google. So Google's
Speaker 1: been burned by a jury. Is that why it may
Speaker 1: be looking for a judge to decide this case, although
Speaker 1: I would think that it would be harder to try
Speaker 1: a case before an experienced trial judge than before a jury.
Speaker 1: And also a jury can't order the breakup of a company, right.
Speaker 3: Well, that part of the remedy is going to be
Speaker 3: decided by the judge and not by the jury. The
Speaker 3: jury will assess damages, but the sort of equitable part
Speaker 3: of it. What the ongoing relief will be will be
Speaker 3: decided in some sort of separate post trial hearing where
Speaker 3: the government presents few and evidence on what it wants
Speaker 3: to cure the problem going forward. But damages are compensation
Speaker 3: for harm in the past, so that will be decided
Speaker 3: by a jury. And you know, your question now has
Speaker 3: moved from are they making a frivolous legal argument to
Speaker 3: are they making a smart tactical argument. And you know,
Speaker 3: I'm not sure the answer to that. Why do they
Speaker 3: prefer judge bring them to a jury. And the only
Speaker 3: answer I can come up with is just what you said.
Speaker 3: They don't want to present themselves to a jury. They
Speaker 3: did that an epic which they wanted to avoid desperately
Speaker 3: and were unable to. And in less than four hours
Speaker 3: the jury said, we know who you are. You are
Speaker 3: a monopolist. You know, cut the fancy junk, you're a
Speaker 3: monopolis and you've excluded competitors. They didn't have much trouble
Speaker 3: with this. Now you could say, well, one strategy is
Speaker 3: you make this soak complicated the jury to just throw
Speaker 3: up their hands and say we can't figure this. On
Speaker 3: the other hand, a jury trials incentive to both parties
Speaker 3: to present an understandable case. And you know, the government
Speaker 3: chose this, and they actually chose a difficult path because
Speaker 3: they have the burden of proof and they have to
Speaker 3: make this understandable to the jury. And it's not going
Speaker 3: to be easy. I don't think it's complicated industry, But
Speaker 3: you know, if they do it well, the jury will
Speaker 3: understand it. And maybe that's exactly what Google's afraid of.
Speaker 3: The jury will see. They're on both sides of these transactions.
Speaker 3: Even Microsoft, the second largest company in the United States
Speaker 3: by market cap but valued over what now, three trillion
Speaker 3: or two trillion, I lose a trillion here or there,
Speaker 3: even they are having trouble in this space. And you know,
Speaker 3: I think jurors will get it, and I think Google's
Speaker 3: afraid that jurors will get it. And obviously they're not
Speaker 3: so much afraid of the money part here, since they said, hey, here,
Speaker 3: take our money please. They're worried that the jury is
Speaker 3: going to find against them that they've monopolized this market
Speaker 3: and then strong relief is going to follow.
Speaker 1: But if a jury would get it, wouldn't a judge
Speaker 1: get it as well? And you know, get it faster
Speaker 1: and with more background information.
Speaker 3: I do wonder about that. Judge Brinkhama is a really
Speaker 3: good district court judge. She's moved this case along pretty quickly.
Speaker 3: She doesn't seem disposed to, you know, to Google's efforts
Speaker 3: to get out of her court to do various things.
Speaker 3: She hasn't dismissed the complaint, So I wonder why they
Speaker 3: think they'd have a better chance with her when it
Speaker 3: comes to tactics. These are judgment called. You know, those
Speaker 3: lawyers may know things about their case, may feel that
Speaker 3: she could understand better why they're on both sides of
Speaker 3: the transaction, how these marketplaces work. I don't know. That's
Speaker 3: a decision they have made, though they don't want twelve
Speaker 3: people judging their behavior.
Speaker 1: Some of the plaintiff states that had joined the Justice
Speaker 1: Department suit said the court to deny Google's motion for
Speaker 1: some rejudgment allow the case to procedure trial.
Speaker 4: Quote.
Speaker 1: Google argues that it lacks monopoly power along every dimension
Speaker 1: except the one that matters most under the law, whether
Speaker 1: it has the power to control price or output, and
Speaker 1: it does. Which side do you think has the easier
Speaker 1: case here? Because you know, it sounds like Google will
Speaker 1: have a hard time defending well.
Speaker 3: As I said, you know, just as in the epic
Speaker 3: litigation with Fortnite. Yeah, don't look over here that we
Speaker 3: have a monopoly, look over there, that we compete for
Speaker 3: lots of other advertising and so forth. And a lot
Speaker 3: of this does turn on some sort of technical concepts
Speaker 3: about how we define markets and what the market share is.
Speaker 3: And the state's position, which I assume will come out
Speaker 3: in litigation as well, is that we can figure out
Speaker 3: whether someone is a monopoly, not just buy or even
Speaker 3: exclusively by defining a market and seeing whether they have
Speaker 3: most of it. We look and see whether they can
Speaker 3: do what monopolists do. You know, does it walk like
Speaker 3: a duck and talk like a duck. It is a duck.
Speaker 3: So monopolist control price, they raise it, and they restrict output.
Speaker 3: And that's what you know, they want to show in
Speaker 3: their case that they control the output of advertising and
Speaker 3: these advertising services, and that leads to higher prices. And
Speaker 3: that's sort of what's behind the damages claim, which is
Speaker 3: why the government shouldn't abandon it so quickly, because they
Speaker 3: want to show harm that prices have gone up, and
Speaker 3: you know, there's a direct way of doing it. They
Speaker 3: bring in a buyer and says, heck, you know, if
Speaker 3: things were right, I would add to pay less for
Speaker 3: my ads, and I don't really have a choice but
Speaker 3: to go through Google, and you know they sack their
Speaker 3: tolls and if I've got use their platform. So you know,
Speaker 3: I think they're still going to want to present that
Speaker 3: that evidence, assuming that they can muster it from their
Speaker 3: own buyers, which is the federal government.
Speaker 1: Maybe Google will have a change of heart if Judge Meta,
Speaker 1: the DC trial judge who's still weighing allegations that Google
Speaker 1: unlawfully stifled competition for web search, comes out with a
Speaker 1: ruling against Google.
Speaker 3: You mean, dropping another shoe might not miss their feet. Yeah,
Speaker 3: you are right, there's one way or the other. They're
Speaker 3: in the fire. And the question is, you know, I
Speaker 3: don't want to pursue the metaphor, but you're right. It's
Speaker 3: a great point. As this is going along before trial,
Speaker 3: Judge Meta comes down with the decision, which I think
Speaker 3: you will that just at least to some degree, they
Speaker 3: have monopoly and they've engaged in monopolizing conduct, any competitive conduct. Yeah,
Speaker 3: that may make them say, well, yes, we didn't do
Speaker 3: so well necessarily before judge. But you know, in some
Speaker 3: way least they get a cleaner opinion to appeal from
Speaker 3: as a judgester right, an opinion, so it's going to
Speaker 3: look different.
Speaker 1: I hadn't thought about that. That's a good point, Harry.
Speaker 1: Of course, of course you make a good point, Harry,
Speaker 1: and that's why I so enjoy having you on the show.
Speaker 1: Thanks so much. That's Professor Harry First of NYU Law School.
Speaker 1: Conservatives have targeted the Consumer Financial Protection Bureau since its
Speaker 1: creation in two thousand and eight, part of the attack
Speaker 1: on the so called administrative state, but a Supreme Court
Speaker 1: decision last week upholding the bureau's funding system has vaporized
Speaker 1: the legal threat to the CFPB, Senator Elizabeth Warren's brainchild.
Speaker 2: The CFPB is here to stay. And this is really
Speaker 2: important because you know, it's all about a level playing field.
Speaker 2: The CFPB is out there fighting every time somebody gets
Speaker 2: cheated by a bank, every time somebody gets tricked by
Speaker 2: a mortgage company.
Speaker 1: Seven to two vote, which divided the justices along unusual lines,
Speaker 1: was a rare victory for regulation at the Court, which
Speaker 1: has been slowly chipping away at the power of administrative agencies.
Speaker 1: The question is whether this ruling is a sign that
Speaker 1: a majority of the Justice says will reject challenges to
Speaker 1: agencies in three key decisions yet to be decided this term.
Speaker 1: Joining me is Andrew Kim, a partner in the Appellate
Speaker 1: and Supreme Court litigation practice at Goodwin Proctor. The case
Speaker 1: divided the Court along unusual lines in the concurrence and
Speaker 1: also with Justice Clarence Thomas writing the majority opinion and
Speaker 1: his fellow i'll say ultra conservatives Samuel Alito and Neil
Speaker 1: Gorsich dissenting.
Speaker 4: I think if this opinion shows anything, the majority opinion
Speaker 4: shows anything, it's something that we've known all along, which
Speaker 4: is Justice Thomas marches to the beat of his own drum.
Speaker 4: And I think most individuals who are watching this decision
Speaker 4: were expecting some alignment amongst the conservatives on this issue.
Speaker 4: But I think Justice Kavanaugh, for example, Justice Barrett, you
Speaker 4: saw that in the concurrence that they joined. I think
Speaker 4: those two justices and Justice Thomas as well, might have
Speaker 4: had serious concerns about the more sweeping implications of what
Speaker 4: it means to defund the entire agency on this novel
Speaker 4: constitutional theory. And I think Justice Thomas staked out his
Speaker 4: position in a way that was faithful to what he
Speaker 4: believed in with respect to the text of the Constitution
Speaker 4: and the history and tradition of that provision. Obviously, there
Speaker 4: is a divide now, and it'd be interesting to see
Speaker 4: how this plays out. How do you apply a history
Speaker 4: and tradition going forward, especially with Justice's Kavanaugh and Barrett
Speaker 4: joining Justice Kagan's concurrence, and can you look to a
Speaker 4: continuing tradition. I think that will be an interesting question
Speaker 4: going forward. But for at least this case, Justice Thomas
Speaker 4: stuck to his principles and came out in a way
Speaker 4: that surprised a lot of people, I think, but I
Speaker 4: think is also a faitful to his vision of what
Speaker 4: it means to interpret constitutional provisions with respect to the
Speaker 4: structure of government and how the government is still to
Speaker 4: function going forward. And obviously there is a divide between
Speaker 4: him and Justice's Alito and Gorsag and we'll see going
Speaker 4: forward whether that division plays a role in future cases,
Speaker 4: in future structural constitutional challenges that have separations power implications.
Speaker 4: But if anything, at the end of the day, Justice
Speaker 4: Thomas sticks to his guns and he decided, and I
Speaker 4: don't mean to quote Fank Sinatra, but he did it
Speaker 4: his way, and I think this should surprise in some ways,
Speaker 4: should surprise nobody.
Speaker 1: You mentioned Justice Elena Kagan's concurrence, which was joined by
Speaker 1: liberal Justice Sonya Sotomayor and conservatives Brett Kavanaugh and Amy
Speaker 1: Coney Barrett. She wrote to emphasize the importance of continuing
Speaker 1: tradition in interpreting the Constitution's meaning. Quote the founding error
Speaker 1: practice that Theourt relates became the nineteenth century practice, which
Speaker 1: became the twentieth century practice, which became today's. If you
Speaker 1: read between the lines, what do you see in her concurrence?
Speaker 4: My sense from Justice Kaigan's concurrence is that the Court bipartisan,
Speaker 4: for lack of a better way of putting it, although
Speaker 4: there are no parties in the Court, but a combination
Speaker 4: of liberal and conservative justices are signaling that they don't
Speaker 4: want novel constitutional arguments that would upturn our system of government,
Speaker 4: turn over the table, so to speak, and those won't
Speaker 4: be welcome under this approach to or at least their
Speaker 4: approach to history and tradition. I think it is a
Speaker 4: bit of a warning that the Court is not going
Speaker 4: to entertain every novel argument drawn under the Constitution to
Speaker 4: try to curb the administrative state, and that there are
Speaker 4: certain things that are essential to the function of government,
Speaker 4: like how agencies are funded. So long as there is
Speaker 4: a long standing tradition of it, the court is going
Speaker 4: to be very hesitant to overturn that going forward.
Speaker 1: And explain the novel argument suggested here.
Speaker 4: Yeah, before this particular case, I think the notion that
Speaker 4: the Appropriation's clause had much teeth to it in terms
Speaker 4: of being a check on executive power. I think Appropriation's
Speaker 4: clause generally had only been litigated only a handful of times.
Speaker 4: I think opm versus Richmond comes to mind. It's not
Speaker 4: a constitutional provision that one would think serves as affirmative
Speaker 4: check on the executive branch in the way that other
Speaker 4: constitutional provisions might be. Or for example, a recent issue
Speaker 4: of litigation has been over the take care clause and
Speaker 4: making sure that the president has the ability to oversee
Speaker 4: executive officers, especially those who are heads of agencies. The
Speaker 4: Appropriation's clause is one of those constitutional provisions that rarely
Speaker 4: gets litigated, and all it serves by its text is
Speaker 4: it gives power to the Congress the power of the
Speaker 4: person to speak to ensure that appropriations are made by
Speaker 4: law and says no money shall be drawn otherwise. It's
Speaker 4: not a provision that one would think serves as an
Speaker 4: essential you know, often litigated check on the federal government.
Speaker 4: But the proponents of this litigation, the Community Financial Services
Speaker 4: Association of America, they try to turn it into that,
Speaker 4: they try to weaponize a little used constitutional provision, little
Speaker 4: use at least in terms of active litigation constitutional litigation.
Speaker 4: Then they try to turn it into something that could
Speaker 4: uproot an entire federal agency, citing the admittedly novel although
Speaker 4: has the majority found grounded, but novel approach to funding
Speaker 4: a federal agency that we see with the CFPB. So
Speaker 4: that's what I meant by novel constitution oral argument. You know,
Speaker 4: we don't see a lot of appropriation's clause litigation, and
Speaker 4: it is certainly a creative argument. There have been other
Speaker 4: similar arguments that raised against other federal agencies, but at
Speaker 4: the end of the day, it is rare to see
Speaker 4: an argument like this one drawn up in the grand
Speaker 4: scheme of things when you're talking about separation of power.
Speaker 1: Coming up next on the Bloomberg Law Show, I'll continue
Speaker 1: this discussion with Andrew Kim, and we'll talk about what
Speaker 1: this decision means for the CFPB as it tries to
Speaker 1: enforce new regulations. I'm June Grosse. When you're listening to Bloomberg,
Speaker 1: I've been talking to Andrew Kim, a partner at Goodwin Proctor,
Speaker 1: about the Supreme Court's decision upholding the CFPB's funding system.
Speaker 1: You know, I've done many segments on the Roberts Court
Speaker 1: chipping away at the power of the so called administrative state,
Speaker 1: and this term there are still other cases out there
Speaker 1: where agency powers are on the chopping block. Shall we say?
Speaker 1: There are cases involving the Security Exchange Commission, the National
Speaker 1: Marine Fishery Service, the Environmental Protection Agency, and one of those,
Speaker 1: the Chevron doctrine is on the chopping block. Can you
Speaker 1: look at this case and say, well, there'll be a
Speaker 1: similar result in the other cases and the agencies will
Speaker 1: be in the winning column. Or is it too soon
Speaker 1: or are the cases too different?
Speaker 4: I think you might see some flavor of this in
Speaker 4: the Jarcacy case, for example, which involves you know, the
Speaker 4: Seventh Amendments and the non delegation doctrine and the use
Speaker 4: of aljs because there are still separation of powers concerns raised.
Speaker 4: And that's what I meant when I said, you know,
Speaker 4: for example, the ALJA issue, the administrative law judge issue.
Speaker 4: In jocacy, that's more the kind of structural constitutional challenge
Speaker 4: that you see. You don't see something like that, you know,
Speaker 4: the CFPV case where you're trying to challenge the very
Speaker 4: existence of the agency. I think you may see these
Speaker 4: principles come into play in jocracy, for example, which is
Speaker 4: the case concerning the SEC. I will say that jocacy
Speaker 4: is a little different in that it's not the SEC
Speaker 4: isn't fighting for its existence in that case, whereas the
Speaker 4: stakes were much higher for the CFPV here, and I
Speaker 4: suspect that had something to do. If you see in
Speaker 4: Justice Cakes's concurrence, I think that's had something to do
Speaker 4: with the outcome here on cases like relentless or lowber Ride,
Speaker 4: depending on which one you want to call it. On
Speaker 4: the Chevon doctor and Chevron defference, I suspect that'll have
Speaker 4: this case far less of an impact because they're The
Speaker 4: question is you know, at the end of the day,
Speaker 4: who is responsible for interpreting statutes and should the agencies
Speaker 4: that are responsible for the enforcement of the statutes get
Speaker 4: deference in how they interpret them. I mean, there are
Speaker 4: separation of powers considerations there with respect to the judiciary,
Speaker 4: but it's not the sort of thing that's going to
Speaker 4: cause an existential crisis for a particular agency. And again
Speaker 4: that that is more a question of statutory interpretation and
Speaker 4: judicially created doctrines giving deference to the executive branch and
Speaker 4: their application of admittedly specialist statutes. So I think you're
Speaker 4: going to see less to draw there. Give. This goes
Speaker 4: back to your earlier question about the significance of Justice
Speaker 4: Kaigan's concurrence. You know, to the extent that a case
Speaker 4: involves a constitutional challenge to essential functioning of what an
Speaker 4: agency does, that applies across the board to all federal agencies.
Speaker 4: I think you will see the kind of caution that
Speaker 4: at least the four justices and really five, because I
Speaker 4: think some would argue that Justice Jackson I would argue
Speaker 4: that Justice Jackson signed on with her concurrence. I think
Speaker 4: you are going to see the more that's at stake
Speaker 4: for a federal agency and federal agencies across the board.
Speaker 4: Chevron notwithstanding, I think that is the one issue that
Speaker 4: really is a question of should the judiciary be affording
Speaker 4: difference to the executive But other than that, if it's
Speaker 4: the question of an agency's existence or federal agencies and
Speaker 4: how they operate across the board, I think the Court
Speaker 4: will exercise the kind of caution that you saw in
Speaker 4: the CFPB case.
Speaker 1: The CFPB has been threatened since its origin. Does this
Speaker 1: end the threat to the CFPB once and for all.
Speaker 4: I'm going to give an absolute statement, which is rare
Speaker 4: for me. I think the answer is yes. I think
Speaker 4: this is probably the last major constitutional challenge to the
Speaker 4: existence of the bureau. That's not to say others won't
Speaker 4: bring challenges against the CFPB with respect to what the
Speaker 4: agency is doing, and they may say that. Challengers may
Speaker 4: say what the agency is doing is unconstitutional, but those
Speaker 4: are questions about how the agency conducts itself. I think
Speaker 4: this will be the last constitutional challenge. I may be wrong.
Speaker 4: I think there are those who will try to defeat
Speaker 4: the agency, you know, using every effort that they have.
Speaker 4: But I think this is the major, last major constitutional
Speaker 4: challenge against the agency's existence. Now it's a question of
Speaker 4: how the agency comports itself as a federal agency as
Speaker 4: a regulator.
Speaker 1: What's been happening with the enforcement actions of the CFBB
Speaker 1: while this case has been pending before the Supreme Court.
Speaker 4: They've wasted no time. I mean, the day after the
Speaker 4: court's decision, you saw a flurry of activity. In fact,
Speaker 4: Director Chopra had issued a statement saying that they were
Speaker 4: firing on all cylinders. And on the day after, you know,
Speaker 4: the one day after the court decisions, the CFCB had
Speaker 4: issued a number of supplemental notice is filed in court
Speaker 4: saying we'd like to unfreeze these cases. The CFPB took
Speaker 4: steps to try and unfreeze the two rules that had
Speaker 4: been blocked through preliminary injunctions or state through preliminary injunctions
Speaker 4: challenges to the Small Business Data Rule and also the
Speaker 4: credit card fee rule. And the CFP brought an enforcement
Speaker 4: action literally the next day. And we've seen behind the
Speaker 4: scenes that it seems like the CFPB has been gearing
Speaker 4: up on the private side as well, you know, reinitiating investigations,
Speaker 4: reinitiating discussions on the enforcement side. I think they were
Speaker 4: all holding their breath over there at the CSPV waiting
Speaker 4: to see how the Supreme court would come out and
Speaker 4: they've finally been able to let that breath go and
Speaker 4: they're finally breathing out, exhaling, and in that exhale, you're
Speaker 4: seeing a lot of a flurry of enforcement activity.
Speaker 1: Did the CFPB itself put enforcement activity on hold during
Speaker 1: this period or was it that the people that they
Speaker 1: were targeting put cases on hold.
Speaker 4: Both those who were the targets of enforcement actions by
Speaker 4: the Bureau did ask the courts ruling on their cases
Speaker 4: to stay the lawsuits, to temporarily stop them while the
Speaker 4: Supreme courts deciding the CSPB case. But we saw this
Speaker 4: is something rare. When Director Chopar issued his remarks on
Speaker 4: the day of the Supreme Court decision, you saw something
Speaker 4: rare and that when he went and did I think
Speaker 4: a press call afterwards, he confirmed that the Bureau had
Speaker 4: at least frozen or slow rolled enforcement actions that had
Speaker 4: not yet come to fruition, meaning that companies that were
Speaker 4: either being investigated or being subject to pre lawsuit enforcement
Speaker 4: activity by the Bureau that had been slow rolled or
Speaker 4: that had been frozen while the Bureau was waiting for
Speaker 4: this decision. So it was a mix of both. It
Speaker 4: was those both challenging the Bureau had asked to put
Speaker 4: rules that the Bureau had enacted on hold. Those being
Speaker 4: investigated or subject to enforcement actions by the Bureau had
Speaker 4: asked courts to put those cases on hold, and the
Speaker 4: Bureau itself decided to slow roll things on its end.
Speaker 4: That's not to say the Bureau was doing nothing, and
Speaker 4: it continued with its investigations and with some of its
Speaker 4: enforcement activity, but it wasn't going at full strength as
Speaker 4: it is you know, clearly doing now in the wake
Speaker 4: of the Supreme Court's decision.
Speaker 1: So the case over the cap on credit card late fees,
Speaker 1: which is the case that seems to be getting the
Speaker 1: most attention, do you think that's an uphill battle for
Speaker 1: the CFPB. I noticed that that case and the case
Speaker 1: over the small business lending demographic data collection filed in Texas.
Speaker 1: I don't think it's any you know, surprise or coincidence
Speaker 1: that it's filed in Texas.
Speaker 4: I'm not going to opine on the specific merits of
Speaker 4: either of those cases, but I will say I think
Speaker 4: that's the CFPB's next biggest challenge in terms of this
Speaker 4: is the type of thing that we're going to see
Speaker 4: going forward with respect to the CSTB challenge just to
Speaker 4: how it engages in rule making, whether it's engages in
Speaker 4: sound decision making at least in promulgating rules. That is
Speaker 4: the kind of thing that you typically see in the
Speaker 4: agents federal agencies that litigate often in court because of
Speaker 4: trying to defend their actions, and I think this will
Speaker 4: be a challenge for the CFPB On both cases. I
Speaker 4: don't think either will be an easy case for the CFPB.
Speaker 4: I think there are serious merits that the reviewing courts
Speaker 4: will need to address. I'm not going to opine on
Speaker 4: the specific arguments because I don't think it's my place
Speaker 4: to do so. But I think this is very much
Speaker 4: a type of activity that we'll be seeing affirmative litigation
Speaker 4: brought against the CFPB that we'll see going forward. Rather
Speaker 4: than these attempts to broadly strike down the agency and
Speaker 4: its existence, it's more going to be these affirmative lawsuits
Speaker 4: are going to be a check on what the bureau
Speaker 4: is doing and how it is carrying out its activities
Speaker 4: as an agency.
Speaker 1: Let me ask you a broad question. The Fifth Circuit,
Speaker 1: the case that we're talking about on the CFPB was
Speaker 1: from the Fifth Circuit. It the sec case is from
Speaker 1: the Fifth Circuit, and the Fifth Circuit has an inordinate
Speaker 1: amount of cases before the Supreme Court this term. Do
Speaker 1: you think that the Supreme Court is sort of slapping
Speaker 1: down the Fifth Circuit when it's come out with some
Speaker 1: pretty novel and on the edge legal theories.
Speaker 4: I think you're putting it very generously. My suspicion is
Speaker 4: I don't think that the CFPB decisions is to be
Speaker 4: construed as an admonition of the Fifth Circuit per se.
Speaker 4: I would be really interested to see what happens in
Speaker 4: the Jarcracy case, because I will say the appropriation's clause
Speaker 4: argument had been kicking around for the better part of
Speaker 4: a decade. I would say it wasn't entirely new. There
Speaker 4: was some basis for it. It is very novel in
Speaker 4: the sense that you're using this, as I said earlier,
Speaker 4: little youth constitutional provision. But I put it like this,
Speaker 4: it wasn't a departure from established case law because there
Speaker 4: wasn't much established case law at least as to the
Speaker 4: meaning of what the appropriation clause is and how to
Speaker 4: apply it. And that's why you know, the justices in
Speaker 4: this case had really had to rely and lead in
Speaker 4: on history and tradition and really the mere text of
Speaker 4: the recent clause. I would be interested to see what
Speaker 4: happens in jercracy because I think for the Court and
Speaker 4: the Myth of Perstone case as well. I think that
Speaker 4: those cases from the Fifth Circuit, I won't say that
Speaker 4: they mark an extreme departure from case law, but they
Speaker 4: give rise to some serious questions about the issues presented
Speaker 4: in those cases, especially with respect to in jocracy. For example,
Speaker 4: the SEC case, you have very interesting questions about the
Speaker 4: Seventh Amendment and the fact that the Court, the Fifth
Speaker 4: Circuit in that case took the effort to say you
Speaker 4: not only lose on one of these grounds, but you
Speaker 4: lose on all three of these grounds. SEC. If there
Speaker 4: is a case where there might be some reading between
Speaker 4: the lines admonitions of the Fifth Circuit, I think it
Speaker 4: might be from jercacy. Maybe less so in the Myth
Speaker 4: of Perstone case.
Speaker 1: We'll find out by the end of June. So much, Andrew.
Speaker 1: That's Andrew Kim, a partner at Goodwin Proctor. And that's
Speaker 1: it for this edition of the Bloomberg Law Podcast. Remember
Speaker 1: you can always get the latest legal news by subscribing
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Speaker 1: at bloomberg dot com, slash podcast, slash Law. I'm June
Speaker 1: Grosso and this is Bloomberg