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

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Speaker 2: It's less than three months until the start of Luigi

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Speaker 2: Mangioni's New York State murder trial, and his defense has

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Speaker 2: finally been revealed. Mangioni plans to assert a psychiatric defense,

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Speaker 2: claiming he was suffering from extreme emotional disturbance when he

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Speaker 2: gunned down United Healthcare CEO Brian Thompson outside a midtown

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Speaker 2: Manhattan hotel in December of twenty twenty four. This defense

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Speaker 2: is not the same as a not guilty by reason

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Speaker 2: of insanity defense. If the jury accepts the emotional disturbance defense,

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Speaker 2: it won't absolve Mangioni of the killing, but it could

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Speaker 2: free him from prison sooner. My guest is criminal defense

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Speaker 2: attorney Jeremy saland a former Manhattan prosecutor. Jeremy is it

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Speaker 2: not surprising that Mangioni is going to assert a psychiatric

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Speaker 2: defense in a case where the evidence seemingly against him

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Speaker 2: is overwhelming.

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Speaker 1: To a certain extent, anyone who has knowledge of the

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Speaker 1: law and criminal defense is not shocked, meaning it's incredibly difficult,

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Speaker 1: especially after the failing at the suppression hearing by the

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Speaker 1: defense and I say that not as a negative to

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Speaker 1: the defense. It's very difficult generally to beat these things.

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Speaker 1: But when that weapon is coming in and you have

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Speaker 1: the manifestor diary and you have a video, you're going

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Speaker 1: to say it wasn't me. It was a one armed man.

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Speaker 1: Just not likely a good defense. So this is the

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Speaker 1: next best thing. But but remember this defense is not

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Speaker 1: a defensive. I didn't do it, therefore I'm exonerated. It's

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Speaker 1: I did it with a butt and an asterisk there

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Speaker 1: to minimize the exposure on the back end to a

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Speaker 1: manslaughter from a murder.

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Speaker 2: So this is different from a traditional insanity defense that

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Speaker 2: people maybe familiar with from TV and the movies. He's

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Speaker 2: claiming extreme emotional disturbance, so explain the claim.

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Speaker 1: So basically, it's an objective analysis, if you will, from

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Speaker 1: the perspective of the accused, that at the time of

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Speaker 1: this particular incident, he was under such extreme emotional disturbance

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Speaker 1: dress anxiety that it was so profound to him and

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Speaker 1: it was so overwhelming that he lost control. And if

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Speaker 1: you believe that, if that's proven by a preponderance of

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Speaker 1: the evidence by the defense, because it's their burden always

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Speaker 1: the prosecution's burden to prove the murder beyond a reasonable doubt.

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Speaker 1: But this affirmative defense is on the shoulders of the defense.

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Speaker 1: If that piece is then proven, then you go to

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Speaker 1: the analysis of was this extreme emotional duress and disturbance

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Speaker 1: reasonable given the circumstances, again from that objective perspective, and

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Speaker 1: that it really caused him to act in the way

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Speaker 1: that he did. So those are really the prongs that

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Speaker 1: you have to review, and a jury would decide to

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Speaker 1: make the determination whether this defense is applicable.

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Speaker 2: I've been reading what various legal experts have been suggesting

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Speaker 2: might be the basis for this emotional disturbance defense. They

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Speaker 2: could argue that his physical pain from a back injury

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Speaker 2: or his frustrations with the healthcare system caused him extreme

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Speaker 2: emotional distress. Do you find either of those convincing?

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Speaker 1: I think that's not to sound a little callous here,

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Speaker 1: it's dead in the water. I just don't see it.

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Speaker 1: So I had a matter, without going to too much details,

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Speaker 1: where a client was accused of shooting a person in

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Speaker 1: response and retaliation allegedly of sleeping with his underage daughters,

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Speaker 1: and the argument was, in that moment he was so

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Speaker 1: upset that he found out this guy was bragging about

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Speaker 1: doing his horrible things to his daughters, that he lost

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Speaker 1: his mind for lack of a legal term, and it

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Speaker 1: was so overwhelming, and he took that person's life as

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Speaker 1: opposed to I don't like the way you're talking about

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Speaker 1: my daughters. I don't like the what you're doing here.

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Speaker 1: You know what, The system is corrupt and it allows

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Speaker 1: people to do these things. So I'm gonna hunt you

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Speaker 1: down over weeks and days and find you. It doesn't

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Speaker 1: add up for me, but I think it also also

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Speaker 1: allows the defense to bring in what they might not

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Speaker 1: have been able to bring in before, to try to

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Speaker 1: get that maybe that juror who says, you know what,

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Speaker 1: I'm not going to go with the rest and we're

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Speaker 1: gonna hang this because now you can bring in the

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Speaker 1: healthcare system. Now you can bring in the wrongs potentially

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Speaker 1: of that system, and why cause this guy to act

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Speaker 1: as he did? Assuming that this defense moves forward, but

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Speaker 1: I still don't see it as a winner. I see

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Speaker 1: it as an attempt to run away from what is

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Speaker 1: the likely reality here with the evidence. But I don't

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Speaker 1: see it as a winner.

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Speaker 2: So if he uses this defense, he's admitting that he

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Speaker 2: killed Thompson.

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Speaker 1: Correct, So you're now taking away that ability to say

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Speaker 1: it wasn't me or some other defense. But again, that

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Speaker 1: wasn't going to be the defense anyway. So yes, he's

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Speaker 1: acknowledging saying I murdered him with an asterisk, because if

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Speaker 1: this affirmative defense applies, then it gets knocked down to

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Speaker 1: a man one a manslaughter charge. The reason why that's

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Speaker 1: relevant is instead of having up to life on the

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Speaker 1: back end and say, for example, twenty five years on

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Speaker 1: the bottom en on the man one and the manslaughter,

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Speaker 1: it's a be violent felony. It's a mandatory minimum of

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Speaker 1: five years and a maximum of twenty five years. So realistically,

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Speaker 1: is a judge going to give him if he's convicted

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Speaker 1: five years. Absolutely not. But it gives him a life

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Speaker 1: outside of incarceration as a young man potentially down the road,

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Speaker 1: as opposed to the risk of never seeing the outside

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Speaker 1: of a cell.

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Speaker 2: Since he's admitting to the killing, would it change anything

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Speaker 2: in the prosecution's presentation of the case.

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Speaker 1: Regardless, I think they're going to be methodical of the

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Speaker 1: preparation and the planning and the scope and magnitude of

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Speaker 1: all the steps that Manngoni allegedly took that ultimately culminated

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Speaker 1: in this homicide and this death. So I think the

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Speaker 1: defense was likely going to go through this anyway. So

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Speaker 1: does it change it. You're arguing a little bit different

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Speaker 1: because you want to deprive him of the ability to

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Speaker 1: use this defense. But I am guessing guess may not

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Speaker 1: be the right word. I believe, based on my training

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Speaker 1: and experience that the prosecution this was going to challenge

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Speaker 1: this anyway. But what I think with the prosecution has

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Speaker 1: to be prepared for now is there may be, by

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Speaker 1: default with this defense, some more evidence that's going to

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Speaker 1: come in to mitigate and they have to be that

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Speaker 1: much more diligent to make sure they don't get that

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Speaker 1: one or two jurors on there who might be swayed

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Speaker 1: by this outside noise about the healthcare system.

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Speaker 2: Was there any other defense available to them besides he

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Speaker 2: didn't do it or you know, suffering under emotional distress.

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Speaker 1: I mean, I think people were waiting and this was

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Speaker 1: under seal for this or something similar. It's not again,

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Speaker 1: that traditional insanity defense. Not to sound glob here, it's

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Speaker 1: not one flow over the cuckoo's nest, you know, it's

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Speaker 1: not nurse Ratchet, you know, putting him in institution. I

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Speaker 1: was so overwhelmed in that moment objectively from my own

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Speaker 1: perspective that I did this. That really has to be

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Speaker 1: the angle in the avenue, because there really is northern

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Speaker 1: defense once they lost the suppression, if they beat the suppression,

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Speaker 1: a different animal. But now they are really locked in.

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Speaker 1: And keep in mind, whatever he says or does here

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Speaker 1: is going to be memorialized in a transcript for what

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Speaker 1: is done and used later on at the federal trial.

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Speaker 1: Granted the charges are a little different, but nonetheless he's

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Speaker 1: going to be locked in, and the question will be

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Speaker 1: how is that coming in? Is it coming in? Is

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Speaker 1: he going to testify? Is it going to be coming

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Speaker 1: in through an expert only, you know, a medical health professional.

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Speaker 1: So there's gonna be a lot of questions. But got

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Speaker 1: to keep an eye on that federal case which is

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Speaker 1: hanging in the balance.

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Speaker 2: And do you think this kind of defense requires a

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Speaker 2: medical experts testimony?

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Speaker 1: Well, how else are you going to establish that he

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Speaker 1: had these mental health issues that were so overwhelming, and

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Speaker 1: he had such great dress and distress and disturbance. You're

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Speaker 1: going to need professionals and experts to help elaborate on this, absolutely,

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Speaker 1: and someone that have to explain what this means, because

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Speaker 1: to a lay person, they don't know what the eed

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Speaker 1: defense is. They're not familiar with this. Yes, there's jury instructions,

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Speaker 1: but you're going to hear from someone beyond potentially Mangioni.

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Speaker 3: I don't know if we want to call it ironic.

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Speaker 2: But days after his arrest and before Mangoni retained her

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Speaker 2: as his lead attorney, Karen Friedman, Agnifilo told CNN that

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Speaker 2: a psychiatric defense could be the right move for him. Quote,

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Speaker 2: you have someone who was a valc diictorian of his class.

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Speaker 2: He was brilliant his whole life. He comes from this

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Speaker 2: great family. I mean something changed, right, significantly, something changed.

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Speaker 1: But people can be ill, for lack of a better term,

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Speaker 1: and I'm not using that as a legal term. People

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Speaker 1: can be ill and disturbed emotionally or mentally, but not

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Speaker 1: necessarily have this extreme emotional distress. You can be a

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Speaker 1: brilliant person. I mean, think about historically some serial killers.

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Speaker 1: I'm not saying Manngoi is a serial killer, people who

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Speaker 1: had incredible You've had people come from broken families, You've

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Speaker 1: had people come from solid healthy families that would not

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Speaker 1: preclude him from having this extreme emotional distress. I think

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Speaker 1: what precludes the success of this defense as I know it,

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Speaker 1: and we'll learn more right because we don't know it.

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Speaker 1: It's under seal still is. You have the writings, you

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Speaker 1: have the preparation, you have, the planning, you have the following.

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Speaker 1: You have so many steps that he took and did

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Speaker 1: it well. As scary as that sounds, and it's not

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Speaker 1: the situation where I'm coming home and finding my spouse

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Speaker 1: sleeping with my next door neighbor and I just lose

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Speaker 1: it right then and there. This is just not what

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Speaker 1: you think of when you think of this defense, but

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Speaker 1: it is what it is. What else you're going to argue?

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Speaker 2: Do you think there's going to be a subtle jury

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Speaker 2: nullification argument? I mean, no one expected that, with what

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Speaker 2: appears to be a cold blooded murder, that he would

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Speaker 2: be made into this kind of folk hero by so

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Speaker 2: many people.

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Speaker 1: To my point than before, this defense allows you, within

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Speaker 1: not fully, to put the healthcare system on trial. It

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Speaker 1: allows you to bring out the agony and the pain

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Speaker 1: and the emotional responses that people have been dealing with

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Speaker 1: with the healthcare system in a small scope, because that

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Speaker 1: is what they're going to argue. I believe, again I

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Speaker 1: haven't seen it is part of the illness that he

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Speaker 1: was so emotional, distraught, and whatever other factors in his

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Speaker 1: life came into play, that all this collectively, So it

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Speaker 1: gives the ability of the defense to bring some of

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Speaker 1: this out, not the whole storyline, but enough that maybe

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Speaker 1: you mitigate or maybe you get that sympathetic juror who says,

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Speaker 1: you know what, you know, he did justice, as sick

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Speaker 1: as that might sound, but all you need is one.

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Speaker 1: You need one?

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Speaker 2: Is there any way the federal case goes away after

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Speaker 2: a verdict tier.

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Speaker 1: I think not. I've said this before and I'm not

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Speaker 1: afraid to say it again. I think the federal case

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Speaker 1: is driven by ego and arrogance, meaning this has no

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Speaker 1: place in a federal courtroom period. This is a state case.

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Speaker 1: This is the Southern District big footing, as we call it,

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Speaker 1: the Matt and DA's office to try to, you know,

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Speaker 1: use their strong arm and I won't go beyond politics,

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Speaker 1: and that it happens. You know, under Morgantaw's days, he

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Speaker 1: would have said go take a hike. But it happens.

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Speaker 1: It is what it is, and I don't mean that

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Speaker 1: as a shot at Bragg. I meant that more of

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Speaker 1: there's been battles in the past, But I think that

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Speaker 1: case proceeds likely regardless because they want the notoriety of it.

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Speaker 1: We all saw that moment, you know, on top of

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Speaker 1: the aircraft carrier, when we're declaring the war is over.

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Speaker 1: A little tongue in cheek here, when Mangioni came into

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Speaker 1: New York with the mayor behind them, all these armed

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Speaker 1: officers and these escorts, you would think, you know, the

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Speaker 1: un was in session and they were protecting these folks.

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Speaker 1: It was just over the top. It was a spectacle,

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Speaker 1: total spectacle. All of it's been unnecessary because what you're

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Speaker 1: forgetting about, and I think this is so important, is yes,

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Speaker 1: we have proof beyond a reasonable doubt, and we have

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Speaker 1: to get there, and he's innocent until proven guilty. But

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Speaker 1: no matter what the result is, there is a man

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Speaker 1: whose life was taken unnecessarily. There was a family that

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Speaker 1: lost the father, a husband, a son, a brother, whatever

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Speaker 1: it may be, a friend, a colleague, it's lost. It's

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Speaker 1: all lost on all these suide stories. Let's just try

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Speaker 1: to let justice be done. Let's let him put the

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Speaker 1: right defense forward, give him every right we all expect

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Speaker 1: and deserve, and that's what the jury decide.

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Speaker 2: And Manngioni's trial is expected to begin on September eighth.

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Speaker 2: Thanks so much, Jeremy. That's criminal defense attorney Jeremy Salande.

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Speaker 2: This is Bloomberg. We're used to judges sitting at the

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Speaker 2: bench and holding others accountable for their bad behavior, but

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Speaker 2: recently there have been several high profile incidents of alleged

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Speaker 2: bad behavior by judges off the bench. In fact, in

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Speaker 2: two cases the judges were charged, one with misdemeanor drunken

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Speaker 2: driving and another with misdemeanor battery and malicious injury to property.

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Speaker 2: Joining me is Jacqueline Thompson, Bloomberg law reporter who's been

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Speaker 2: following these cases. So, Jacqueline. In past, we rarely heard

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Speaker 2: about cases of judges misbehaving off the bench, but recently

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Speaker 2: there have been three cases of alleged misconduct by judges.

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Speaker 3: Tell us about them.

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Speaker 4: Right, So in these three instances, some of them are

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Speaker 4: getting a little more attention than others. There was recently

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Speaker 4: a lot of news about Judge Eleanor Ross in Atlanta,

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Speaker 4: who was subject to a private reprimand by the Eleventh

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Speaker 4: Circuit for various acts of misconduct, including having an extramarital

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Speaker 4: affair in her chambers in earshot of her law clerks.

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Speaker 4: And she also was found to attend a partisan political event,

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Speaker 4: which was Fulton County District Attorney Fannie Willis's election night

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Speaker 4: party in twenty twenty four, twenty twenty three. And that

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Speaker 4: you got a lot of attention for a number of reasons.

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Speaker 4: I mean, it's pretty salacious to say judge having sex

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Speaker 4: in the workplace, as well as the political element of it.

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Speaker 4: The other couple of examples we were looking at is

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Speaker 4: Judge Ryan Nelson on the Ninth Circuit. He is facing

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Speaker 4: some misdemeanor charges stemming from a parking lot altercation that

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Speaker 4: he had. Evidently another person made some comments about the

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Speaker 4: judges parking skills, and he did not take kindly to it,

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Speaker 4: according to a video obtained and published by the Idaho

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Speaker 4: State Journal. And he is due actually back in court tomorrow,

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Speaker 4: June eighteenth for a pre trial conference in that case.

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Speaker 5: And we will have a Bloomberglob reporter there.

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Speaker 4: To keep everyone updated on exactly what's going on there.

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Speaker 4: And you know, it sounds like there is a misconduct

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Speaker 4: inquiry started into him by the Ninth Circuit. The Chief

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Speaker 4: Judge Mary mcgheeah said that she has identified a complaint

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Speaker 4: against Judge Nelson. We may not know exactly what happens

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Speaker 4: next there, but you know, we at least know it.

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Speaker 4: It has gotten the attention of the Ninth Circuit. And

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Speaker 4: the last example is Judge Thomas Ludington. He is a

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Speaker 4: federal district judge for the Eastern District of Michigan. He

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Speaker 4: was charged with a drunken driving misdemeanor, pleaded no contests

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Speaker 4: to that, but is due to end up back in

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Speaker 4: court later this month after a probation officer alleged that

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Speaker 4: he did not comply with the terms of his probation,

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Speaker 4: which was his sentence for the underlying misdemeanor.

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Speaker 5: You know, Judge.

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Speaker 4: Lennington is facing a misconduct complaint, but we do not

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Speaker 4: know if the circuit that oversees him, which is the

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Speaker 4: US Court of Appeals for the Sixth Circuit, has started

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Speaker 4: any misconduct proceedings or an investigation into his behavior.

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Speaker 2: So just explain what happens how these misconduct allegations complaints

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Speaker 2: are handled in the judiciary.

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Speaker 4: Yeah, so typically these are proceedings that are handled by

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Speaker 4: the chief judge of a circuit. Someone can make a complaint,

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Speaker 4: or the chief judge can become independently aware of something

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Speaker 4: that took place involving a judge within that circuit and

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Speaker 4: then start an investigation or an inquiry based off of that.

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Speaker 4: The chief judge can either take initial steps on their own.

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Speaker 4: They can pull the subject judge to the side and say, hey,

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Speaker 4: did this happen? What's going on here? And sometimes that's

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Speaker 4: just enough and they can conclude a proceeding on that

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Speaker 4: basis alone if they feel like, hey, we've come to

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Speaker 4: a good solution here or I found no wrongdoing based

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Speaker 4: off of my limited inquiry is the term they use.

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Speaker 4: Other times they say, okay, it looks like there's a

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Speaker 4: little bit more that we need to dig into here.

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Speaker 5: And that's what happened with Judge Ross.

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Speaker 4: Chief Judge William Pryor of the Eleventh Circuit ordered the

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Speaker 4: creation of a special committee that then started investigating her behavior.

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Speaker 4: They retained counsel to dig into what exactly was happening there,

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Speaker 4: to conduct an investigation and interview her law clerks. So

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Speaker 4: there can be much more of a proceeding there but

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Speaker 4: we didn't find out about it until a more national

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Speaker 4: committee within the Federal Judiciary released its opinion affirming that

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Speaker 4: Judge Ross should be subject to a private reprimand for

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Speaker 4: her actions, and then we only knew it was Ross

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Speaker 4: after reporting identified her as the subject.

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Speaker 5: Judge.

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Speaker 2: So there has been criticism let's talk about Judge Ross

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Speaker 2: because a private reprimand which her name wouldn't even have

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Speaker 2: been disclosed Bloomberg Law hadn't found it or another reporter

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Speaker 2: hadn't found that out. And also she was supposed to

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Speaker 2: write apology letters to her clerks, but the first apology

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Speaker 2: letter wasn't even strong enough, and then she had to

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Speaker 2: write a second apology letter. I mean, that doesn't seem

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Speaker 2: like a penalty at all, a private reprimand.

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Speaker 4: You know, that's the feedback that we've gotten from some

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Speaker 4: experts in the space. And then also we're hearing from

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Speaker 4: some members of Congress their sort of displeasure with this

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Speaker 4: being the penalty for Judge Ross, saying they're going to

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Speaker 4: start taking matters.

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Speaker 5: Into their own hands.

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Speaker 4: Whether or not they have the political will power or

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Speaker 4: interests to do so is another question. But yeah, you know,

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Speaker 4: a private reprimand that would have meant that no one

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Speaker 4: knew who the judge was. No one would have known

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Speaker 4: if there were any potential conflicts of interests in their cases,

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Speaker 4: as the affair that she had was with a commander

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Speaker 4: in the Atlanta Police Department, which could lead to issues

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Speaker 4: in various cases. So we have a situation where Judge

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Speaker 4: Ross could have gone without being identified this entire time.

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Speaker 4: It was only until what you reference with the apology

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Speaker 4: letters took place that there was any acknowledgment that Judge

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Speaker 4: Ross was the subject judge as chief Judge prior made

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Speaker 4: his letters public, and then there was an acknowledgement also

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Speaker 4: in a recusal order that she issued the other day

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Speaker 4: where she said, I will not hear this case by

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Speaker 4: the Justice Department seeking Georgia voter rules as the undersigned

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Speaker 4: is what she referred to herself as was the subject

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Speaker 4: of this misconda complaint and I was found to do

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Speaker 4: X Y Z.

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Speaker 2: And with these kinds of incidents, the public may question

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Speaker 2: the judge's ability to make good judgment calls, and beyond

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Speaker 2: the individual judge, it tangs the judiciary as well.

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Speaker 5: Right.

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Speaker 4: Yeah, When I was speaking to former judges, a lot

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Speaker 4: of them said, look, when I'm and they've said this

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Speaker 4: to me over the years. They've said, you know, when

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Speaker 4: I'm not in court, I really feel like I have

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Speaker 4: to hold myself to a pretty high standard in terms

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Speaker 4: of my public behavior, who I'm associating with, what I'm

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Speaker 4: doing when I'm out in public. I just don't want

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Speaker 4: anything to come back that could undermine my reputation as

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Speaker 4: well as the integrity of the courts. And that's something

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Speaker 4: that I think a lot of judges think about on

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Speaker 4: a daily basis, and it's in the Canons and the

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Speaker 4: Code of Ethics for federal judges, that's something that they

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Speaker 4: have to do. They cannot participate in conduct that undermines

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Speaker 4: the integrity of the courts. So, you know, when you

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Speaker 4: have instances like this, it does start to raise questions

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Speaker 4: about these judges and whether this is an isolated incident

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Speaker 4: from them, whether it's part of a trend of conduct,

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Speaker 4: if they act like this behind closed doors with court staff,

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Speaker 4: things along those lines. So it starts to raise bigger

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Speaker 4: questions about the courts, And especially in this period of

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Speaker 4: time where we have judges truly under attack. We've seen

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Speaker 4: a spike in threats against them. We've seen the president

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Speaker 4: and his allies go after judges for rulings that they

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Speaker 4: don't agree with. We see articles of impeachment filed over

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Speaker 4: rulings and not overconduct. It's a period of time where

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Speaker 4: I think the courts would say, hey, please, it'd be

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Speaker 4: nice to not get negative attention right now, and yet

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Speaker 4: we're having these high profile instances that are casting sort

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Speaker 4: of a negative shadow over the courts.

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Speaker 2: It's hard to say what the judge's reactions are, but

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Speaker 2: it does seem like you had the instance where Judge

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Speaker 2: Ross didn't even write an apology letter that was strong enough,

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Speaker 2: and then you have and then you have Judge Ludington

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Speaker 2: who played no contest to a misdemeanor drunken driving charge,

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Speaker 2: and then a probation officer reports that he failed to

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Speaker 2: do a drug screen that was required during his first

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Speaker 2: week of probation. Now, if someone came before him and

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Speaker 2: had failed to comply with the terms of probation, they

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Speaker 2: might have their probation revoked and be thrown into jail.

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Speaker 2: It just seems like they're not taking this seriously, maybe

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Speaker 2: because they're confident that at most they'll get a slap

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Speaker 2: on the wrist.

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Speaker 4: And that's something that some people have brought up to

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Speaker 4: me as well is the fact that these judges have

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Speaker 4: so much power and they really can determine, you know,

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Speaker 4: the liberty of so many human beings.

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Speaker 5: And we think of criminal revocation hearings.

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Speaker 4: For example, if someone is and on probation violates the

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Speaker 4: terms of their probation, they end up back before a judge,

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Speaker 4: and sometimes a penalty for that is, hey, you're going

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Speaker 4: to prison at the end of this hearing. You're being

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Speaker 4: taken into custody by the marshals or you are given

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Speaker 4: a surrenderdy, and that's how this is going to go. So,

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Speaker 4: you know, there are questions about our judges being held

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Speaker 4: to the same standards at the litigants before them are

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Speaker 4: being held to buy those own judges.

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Speaker 2: And there is video of Judge Nilsen in that parking

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Speaker 2: lot confrontation.

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Speaker 4: Yes you can find it again for our journalism colleagues

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Speaker 4: over at the Idaho State Journal, and it shows the

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Speaker 4: judge parking in a way that does take up a

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Speaker 4: bit of three different spots, and you know, a guy

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Speaker 4: says something to the effect of learn how to park,

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Speaker 4: and it seems to have just set the judge off

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Speaker 4: in some sort of way or another.

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Speaker 5: You know, and it does raise interesting questions.

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Speaker 4: It's not like he yelled, hey, I'm a federal judge,

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Speaker 4: don't talk to me that way. He just yelled other

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Speaker 4: things and took the guy's glasses off, threw them on

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Speaker 4: the ground, stomped on them. And now he's facing a

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Speaker 4: misdemeanor charge of destroying property.

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Speaker 2: And have the courts taken any action against Judge Luddington,

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Speaker 2: I mean, he did plead no contest to drunken driving

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Speaker 2: and then allegedly violated the terms of his probation.

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Speaker 4: We have no indication of what's going on with the

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Speaker 4: Michigan judge Thomas Luddington. For Judge Ross, everything is fully

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Speaker 4: wrapped up on the Eleventh Circuit unless there is another

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Speaker 4: complaint over an unrelated instance of misconduct or a different

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Speaker 4: allegation of misconduct that wasn't previously considered. You know, the

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Speaker 4: court's role is sort of done there in terms of

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Speaker 4: any finding or penalty that could be issued against her.

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Speaker 4: But you know, there have been two members of Congress

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Speaker 4: to House Republicans from Georgia, which is where Judge Ross

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Speaker 4: is located, who have announced, you know, articles of impeachment

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Speaker 4: against her. So there's a possibility that the Republican controlled

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Speaker 4: House could take up those and you know, start considering

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Speaker 4: whether or not this meets to the bar of impeachment,

438
00:23:59,760 --> 00:24:03,520
Speaker 4: which is high crimes and misdemeanors, and then you know,

439
00:24:03,640 --> 00:24:06,280
Speaker 4: move to impeachure. And then if the Senate also has

440
00:24:06,320 --> 00:24:09,040
Speaker 4: the appetite for taking up a trials another question.

441
00:24:09,400 --> 00:24:12,080
Speaker 2: The rules are the rules made by the judiciary, right,

442
00:24:12,240 --> 00:24:16,240
Speaker 2: So it would take the judiciary to decide to strengthen

443
00:24:16,720 --> 00:24:17,480
Speaker 2: their rules.

444
00:24:18,000 --> 00:24:21,119
Speaker 4: It could take the judiciary, and it also could take Congress.

445
00:24:21,800 --> 00:24:25,880
Speaker 4: The judiciary operates under the Judicial Conduct and Disability Act,

446
00:24:25,920 --> 00:24:28,920
Speaker 4: which is a federal law, so Congress could go ahead

447
00:24:28,920 --> 00:24:32,040
Speaker 4: and amend that law requiring certain steps to be taken.

448
00:24:32,520 --> 00:24:35,680
Speaker 4: But you know, as long as the judiciary operates within

449
00:24:35,720 --> 00:24:39,000
Speaker 4: the confines of that law, I think there are opportunities

450
00:24:39,000 --> 00:24:42,280
Speaker 4: for the courts to implement and adopt reforms on its

451
00:24:42,280 --> 00:24:44,200
Speaker 4: own without Congress getting involved.

452
00:24:44,600 --> 00:24:47,000
Speaker 2: We'll talk again if there are any other developments in

453
00:24:47,040 --> 00:24:50,679
Speaker 2: these cases. Thanks so much, Jacqueline. That's Bloomberg Law reporter

454
00:24:50,840 --> 00:24:58,520
Speaker 2: Jacqueline Thompson. Activist investors will be looking for other ways

455
00:24:58,600 --> 00:25:02,160
Speaker 2: to get into court after the Supreme Court closed off

456
00:25:02,200 --> 00:25:05,919
Speaker 2: a major avenue to sue closed end funds. In a

457
00:25:06,000 --> 00:25:09,240
Speaker 2: six to three decision last week, the Court ruled that

458
00:25:09,480 --> 00:25:13,520
Speaker 2: private parties can't sue to enforce most provisions of an

459
00:25:13,560 --> 00:25:17,919
Speaker 2: eighty six year old federal statute, the nineteen forty Investment

460
00:25:18,000 --> 00:25:23,040
Speaker 2: Company Act. The justices said that power belongs exclusively to

461
00:25:23,119 --> 00:25:24,359
Speaker 2: the Securities.

462
00:25:23,840 --> 00:25:25,040
Speaker 3: And Exchange Commission.

463
00:25:25,400 --> 00:25:28,840
Speaker 2: The ruling reversed a federal appeals Court decision that had

464
00:25:28,880 --> 00:25:31,960
Speaker 2: said the law contained a so called private right of

465
00:25:32,040 --> 00:25:36,800
Speaker 2: action allowing investors to sue to rescind contracts made by

466
00:25:36,840 --> 00:25:40,280
Speaker 2: a fund. Joining me is securities law expert James Park,

467
00:25:40,400 --> 00:25:43,639
Speaker 2: a professor at UCLA Law School, Jim, Before we get

468
00:25:43,680 --> 00:25:47,080
Speaker 2: to the implications of the decision, explain what the Supreme

469
00:25:47,119 --> 00:25:48,720
Speaker 2: Court decided in this case.

470
00:25:49,240 --> 00:25:53,680
Speaker 6: The Supreme Court decided that the Investment Company Act does

471
00:25:53,720 --> 00:25:58,320
Speaker 6: not provide an implied positive action for recision. There are

472
00:25:58,320 --> 00:26:04,439
Speaker 6: a couple places where it expressly allows individual plaintiffs to

473
00:26:04,520 --> 00:26:08,320
Speaker 6: sue private plaintiffs. If you think that the mutual fund

474
00:26:08,359 --> 00:26:10,639
Speaker 6: is charging you excessive fees, you can sue for that.

475
00:26:11,400 --> 00:26:14,920
Speaker 6: If you think that they are profiting through various short

476
00:26:14,960 --> 00:26:17,840
Speaker 6: swing profits, you can sue for that. But you cannot

477
00:26:17,880 --> 00:26:22,880
Speaker 6: sue generally for the remedy of recision or anything else. Basically,

478
00:26:22,920 --> 00:26:25,920
Speaker 6: the plaintiff's loss to was dismissed because the statute does

479
00:26:25,960 --> 00:26:29,680
Speaker 6: not authorize the planeiff to bring a cause of action

480
00:26:29,920 --> 00:26:31,080
Speaker 6: for recision.

481
00:26:31,960 --> 00:26:36,120
Speaker 2: Why was this of six to three ruling down ideological lines?

482
00:26:36,880 --> 00:26:40,720
Speaker 6: You know, the decision is based upon the statute and

483
00:26:40,800 --> 00:26:46,000
Speaker 6: statutory interpretation, and so the majority, consisting of the more

484
00:26:46,040 --> 00:26:50,600
Speaker 6: conservative justices, refused to look at the legislative history, which

485
00:26:50,640 --> 00:26:54,840
Speaker 6: is consistent with their approach more generally. And so if

486
00:26:54,840 --> 00:26:57,080
Speaker 6: you have looked at the legislative history, there is some

487
00:26:57,160 --> 00:27:01,720
Speaker 6: evidence that Congress intended to create a private right of.

488
00:27:01,680 --> 00:27:05,840
Speaker 7: Action, but it's not in the text of the statue.

489
00:27:06,560 --> 00:27:09,920
Speaker 6: And the three justices in the minority looked at the

490
00:27:10,000 --> 00:27:12,600
Speaker 6: legislative history. They did not look just at the text.

491
00:27:12,720 --> 00:27:15,920
Speaker 6: And they are the more liberal justices. And so this

492
00:27:16,119 --> 00:27:19,280
Speaker 6: in some ways was not just a case about whether

493
00:27:19,359 --> 00:27:22,000
Speaker 6: or not we think it's a good idea for private

494
00:27:22,040 --> 00:27:25,360
Speaker 6: platiffs to sue, although it partly was about that. It's

495
00:27:25,400 --> 00:27:30,000
Speaker 6: about what did Congress intent through the legislative history, you know,

496
00:27:30,040 --> 00:27:32,440
Speaker 6: through the statute, and whether you look at legislative history

497
00:27:32,520 --> 00:27:34,720
Speaker 6: or not, and one group says yes, one group says no,

498
00:27:35,440 --> 00:27:38,719
Speaker 6: and that I think is what determined to some extent

499
00:27:38,800 --> 00:27:42,000
Speaker 6: the breakup of the of the votes. Now, certainly the

500
00:27:42,440 --> 00:27:45,800
Speaker 6: justices and the majority are probably also sympathetic to the

501
00:27:45,880 --> 00:27:50,879
Speaker 6: idea that we should very rarely ever create implied causes

502
00:27:50,920 --> 00:27:53,320
Speaker 6: of action. We should only look at the text of

503
00:27:53,359 --> 00:27:55,560
Speaker 6: the statute. So that's why we get a six y

504
00:27:55,640 --> 00:27:56,800
Speaker 6: three breakdown in this way.

505
00:27:57,040 --> 00:27:57,920
Speaker 3: Who loses here?

506
00:27:58,000 --> 00:28:01,639
Speaker 2: Is it activist investors that are are losing here.

507
00:28:02,000 --> 00:28:04,880
Speaker 6: And merely so because they're the ones who have been

508
00:28:05,240 --> 00:28:09,600
Speaker 6: bringing these types of lawsuits. It's not really the type

509
00:28:09,600 --> 00:28:14,280
Speaker 6: of lawsuit that is brought frequently by your ordinary retail investor.

510
00:28:14,760 --> 00:28:17,760
Speaker 6: These are activist investors who are paying attention to the

511
00:28:18,040 --> 00:28:21,760
Speaker 6: governance of these closed and funds, and they, you know,

512
00:28:22,000 --> 00:28:26,240
Speaker 6: are basically challenging the governance and the corporate governance practices

513
00:28:26,280 --> 00:28:30,240
Speaker 6: of these funds. And that is basically the plaintiffs suit

514
00:28:30,600 --> 00:28:33,119
Speaker 6: are sort of being barred now for bringing these lawsuits.

515
00:28:33,160 --> 00:28:36,600
Speaker 6: I don't think that retail investors have typically brought these cases,

516
00:28:36,600 --> 00:28:38,800
Speaker 6: although they could they could at some point do so.

517
00:28:39,000 --> 00:28:42,360
Speaker 6: And SABA Capital, which is the clain if in this

518
00:28:42,400 --> 00:28:44,560
Speaker 6: particular case, is brought a number of these against a

519
00:28:44,640 --> 00:28:47,760
Speaker 6: number of different mutual funds, so they in particular are

520
00:28:47,760 --> 00:28:49,160
Speaker 6: affected by this decision.

521
00:28:49,280 --> 00:28:53,240
Speaker 2: Boas Weinstein, the SABA Hedge Fund was on As you say,

522
00:28:53,240 --> 00:28:56,320
Speaker 2: the losing end of this ruling said that legal fights

523
00:28:56,360 --> 00:29:02,000
Speaker 2: against entrenched fund managers will continue pursue every avenue available

524
00:29:02,040 --> 00:29:05,880
Speaker 2: to defend shareholders' rights, including lawsuits under other provisions of

525
00:29:05,920 --> 00:29:09,160
Speaker 2: the forty Act and under state law. So what kind

526
00:29:09,160 --> 00:29:11,960
Speaker 2: of fights are we likely to see in the future

527
00:29:12,000 --> 00:29:13,880
Speaker 2: now that this avenue has been closed?

528
00:29:14,760 --> 00:29:17,880
Speaker 6: Pricky, I'm not really sure there is a clear avenue

529
00:29:18,280 --> 00:29:20,960
Speaker 6: to bring private rights of action under either federal or

530
00:29:20,960 --> 00:29:25,120
Speaker 6: state law. If you try to repackage the claim. You know,

531
00:29:25,200 --> 00:29:28,480
Speaker 6: I'm not sure what federal action there is. There could

532
00:29:28,480 --> 00:29:31,440
Speaker 6: be some theories you could assert. Under state law, you

533
00:29:31,480 --> 00:29:34,280
Speaker 6: can at leays bring a derivative lawsuit saying that the

534
00:29:34,280 --> 00:29:39,480
Speaker 6: corporate governance decisions violate the fiduciary duties of the directors,

535
00:29:39,960 --> 00:29:43,360
Speaker 6: but those often fay significant procedural hurdles, you know, demand

536
00:29:43,480 --> 00:29:47,200
Speaker 6: requirement and you know, sometimes a business judgment rule. So

537
00:29:47,360 --> 00:29:50,520
Speaker 6: I'm not really sure how viable those positive action are.

538
00:29:51,320 --> 00:29:54,000
Speaker 6: And you know, it's telling that they did rely upon

539
00:29:54,040 --> 00:29:56,600
Speaker 6: this particular provision, right, This is the provision that they

540
00:29:56,640 --> 00:29:59,480
Speaker 6: were bringing suit under, and that was their best option.

541
00:30:00,200 --> 00:30:02,200
Speaker 6: I don't know if there's an afia's second or third

542
00:30:02,320 --> 00:30:06,200
Speaker 6: choice for private planets to utilize in this situation.

543
00:30:06,760 --> 00:30:10,240
Speaker 2: The balls in the SEC's court. But is the SEC

544
00:30:10,520 --> 00:30:12,240
Speaker 2: likely to do anything.

545
00:30:12,400 --> 00:30:13,360
Speaker 7: Not this SEC?

546
00:30:13,560 --> 00:30:16,760
Speaker 6: I don't think that this SEC is really inclined to

547
00:30:17,040 --> 00:30:21,240
Speaker 6: spend resources to support activist hedge fund investors. But you

548
00:30:21,320 --> 00:30:24,239
Speaker 6: never know, right, I never want to prejudge what the

549
00:30:24,280 --> 00:30:26,440
Speaker 6: SEC is going to do in terms of its enforcement.

550
00:30:26,800 --> 00:30:28,280
Speaker 6: I'm sure they'll take a look at it, and I'm

551
00:30:28,280 --> 00:30:30,480
Speaker 6: sure they'll discuss it, but I think it is fairly

552
00:30:30,600 --> 00:30:34,200
Speaker 6: unlikely that they're going to bring a lawsuit, you know,

553
00:30:34,240 --> 00:30:37,280
Speaker 6: in a few years, though maybe there's a different SEC.

554
00:30:37,880 --> 00:30:40,160
Speaker 7: So if that's the case, then certainly they could.

555
00:30:39,960 --> 00:30:42,920
Speaker 6: Bring various enforcement cases and they they may be the

556
00:30:43,000 --> 00:30:47,280
Speaker 6: right actor to act in most of these situations. Although

557
00:30:47,280 --> 00:30:49,480
Speaker 6: it just strikes me as a little bit odd that

558
00:30:49,800 --> 00:30:53,880
Speaker 6: you have what seemed to be a state provision that

559
00:30:54,000 --> 00:30:57,520
Speaker 6: is inconsistent with federal law and nobody's challenging it.

560
00:30:58,120 --> 00:31:00,000
Speaker 7: Right. That just seems sort of odd to me, because,

561
00:31:00,040 --> 00:31:00,800
Speaker 7: as you.

562
00:31:00,680 --> 00:31:03,880
Speaker 6: Know, the Maryland law allows the board to take away

563
00:31:03,960 --> 00:31:10,000
Speaker 6: voting rights of certain large shareholders, and you know, that's

564
00:31:10,040 --> 00:31:12,440
Speaker 6: inconsistent with the Investment Company Act, which says that you

565
00:31:12,440 --> 00:31:15,160
Speaker 6: have to have equal voting rights for the shriffs. And

566
00:31:15,200 --> 00:31:18,080
Speaker 6: so I think that's, you know, something somebody should be

567
00:31:18,080 --> 00:31:20,680
Speaker 6: able to act upon, and it's so odd for the

568
00:31:20,720 --> 00:31:22,959
Speaker 6: sec to just kind of leave that hanging and not

569
00:31:23,040 --> 00:31:23,840
Speaker 6: intervene at all.

570
00:31:24,200 --> 00:31:26,880
Speaker 2: Are you saying that the Supreme Court decision was an

571
00:31:26,880 --> 00:31:28,440
Speaker 2: incorrect decision in your view?

572
00:31:28,920 --> 00:31:31,560
Speaker 6: I don't think it was necessarily incorrect because their job

573
00:31:31,680 --> 00:31:34,200
Speaker 6: was simply to interpret the law and that's what they

574
00:31:34,200 --> 00:31:38,360
Speaker 6: say the statute means. And so what their decision means

575
00:31:38,440 --> 00:31:42,640
Speaker 6: is that the private plaintiffs cannot bring a lawsuit or recision,

576
00:31:42,760 --> 00:31:45,240
Speaker 6: but the secs can bring an action saying that there's

577
00:31:45,280 --> 00:31:47,959
Speaker 6: a violation of the Investment Company Act, and they can

578
00:31:48,000 --> 00:31:50,120
Speaker 6: sue for recision or some other remedy.

579
00:31:50,480 --> 00:31:54,160
Speaker 2: So, will you explain the broader struggle in the closed

580
00:31:54,280 --> 00:31:59,960
Speaker 2: end fund industry between established boards and activists investors?

581
00:32:00,120 --> 00:32:03,640
Speaker 6: Always been some concern about the governance of mutual funds,

582
00:32:03,720 --> 00:32:07,600
Speaker 6: and particularly closed end funds. You know, mutual funds have

583
00:32:07,760 --> 00:32:11,680
Speaker 6: boards and you know there's always questions of how independent

584
00:32:11,760 --> 00:32:16,320
Speaker 6: are those boards from the fund managers who are making decisions,

585
00:32:17,000 --> 00:32:20,480
Speaker 6: And one view is that they're not very independent because

586
00:32:20,480 --> 00:32:24,880
Speaker 6: they're handpicked by you know, managers and so forth, and

587
00:32:24,920 --> 00:32:27,320
Speaker 6: so maybe there's a reason to be concerned and that

588
00:32:27,360 --> 00:32:30,560
Speaker 6: we can increase the value of the closed end fund

589
00:32:30,680 --> 00:32:34,080
Speaker 6: by allowing for this sort of activism. I think the

590
00:32:34,120 --> 00:32:38,400
Speaker 6: other view is that, well, you know, mutual funds, you

591
00:32:38,400 --> 00:32:40,600
Speaker 6: should give a lot of deference to the managers because

592
00:32:40,600 --> 00:32:43,840
Speaker 6: they are the experts, are the ones choosing the investments,

593
00:32:43,920 --> 00:32:48,000
Speaker 6: so there's no really good way to evaluate. And I

594
00:32:48,040 --> 00:32:51,080
Speaker 6: think they would say the activists are second guessing the

595
00:32:51,480 --> 00:32:54,680
Speaker 6: fund managers and these boards. That's essentially the main argument

596
00:32:54,720 --> 00:32:57,440
Speaker 6: that they're gonna be making is that, look, there's you know,

597
00:32:57,480 --> 00:32:59,480
Speaker 6: there's a lot of dispression you have as a manager

598
00:32:59,520 --> 00:33:02,440
Speaker 6: to choose what's a good investment, and the board is

599
00:33:02,480 --> 00:33:05,400
Speaker 6: typically going to defer to that in most cases. And

600
00:33:05,440 --> 00:33:08,440
Speaker 6: you're just coming in and you're making these you know,

601
00:33:08,800 --> 00:33:13,560
Speaker 6: Monday morning quarterback calls to basically, you know, enrich yourself

602
00:33:13,600 --> 00:33:15,959
Speaker 6: and say you're doing something and you're really just messing

603
00:33:16,000 --> 00:33:18,920
Speaker 6: things up. I think that's what the opponents of activism

604
00:33:19,080 --> 00:33:22,120
Speaker 6: would say, and you know, they're good arguments on both sides.

605
00:33:22,080 --> 00:33:27,560
Speaker 2: Jim, does the retail investor lose if the activist shareholders,

606
00:33:27,800 --> 00:33:30,720
Speaker 2: you know, can't sue like this, or are the activist

607
00:33:30,840 --> 00:33:35,040
Speaker 2: shareholders just you know, suing for the interests of huge

608
00:33:35,040 --> 00:33:36,240
Speaker 2: hedge funds or whatever.

609
00:33:36,680 --> 00:33:39,160
Speaker 7: They're definitely mainly in it for their own interests.

610
00:33:39,160 --> 00:33:42,080
Speaker 6: Of course, they have a financial interest because they have

611
00:33:42,120 --> 00:33:47,000
Speaker 6: significant states in these funds. But the retail investors can

612
00:33:47,120 --> 00:33:49,400
Speaker 6: come along for the ride, you know. I think if

613
00:33:49,440 --> 00:33:53,600
Speaker 6: they are improving the firm's value, that benefits the retail

614
00:33:53,640 --> 00:33:56,280
Speaker 6: investors who are not putting any work at all into it.

615
00:33:56,560 --> 00:33:58,040
Speaker 7: And so I think that's the argument.

616
00:33:58,280 --> 00:34:01,440
Speaker 6: The activist investors, acting through their self interest, are actually

617
00:34:01,480 --> 00:34:03,440
Speaker 6: helping these retail investors.

618
00:34:04,040 --> 00:34:07,080
Speaker 2: Any other possible avenues that we haven't discussed.

619
00:34:07,240 --> 00:34:12,839
Speaker 6: There is another possibility beyond sec action and maybe state

620
00:34:12,920 --> 00:34:16,600
Speaker 6: law derivative suits, and that's for Congress to amend the

621
00:34:16,640 --> 00:34:22,040
Speaker 6: statute to make it clear that in some circumstances, private

622
00:34:22,080 --> 00:34:25,319
Speaker 6: planeffs can bring a certain type of lawsuit and it

623
00:34:25,360 --> 00:34:27,919
Speaker 6: may not necessarily be for recision.

624
00:34:27,400 --> 00:34:28,960
Speaker 7: Which is kind of a harsh remedy.

625
00:34:29,000 --> 00:34:31,719
Speaker 6: Recision means you get your money back, which means the

626
00:34:31,760 --> 00:34:34,640
Speaker 6: mutual fund would have to liquidate some of its investments

627
00:34:34,719 --> 00:34:36,240
Speaker 6: perhaps and give the money back.

628
00:34:36,800 --> 00:34:37,840
Speaker 7: That's not always appealing.

629
00:34:37,920 --> 00:34:40,160
Speaker 6: But if there could be an action, for say a

630
00:34:40,239 --> 00:34:44,920
Speaker 6: declaratory relief or an injunction that essentially says you get

631
00:34:44,920 --> 00:34:48,960
Speaker 6: your voting rights back, then that strikes me as something

632
00:34:49,000 --> 00:34:52,239
Speaker 6: that could be a more reasonable type of remedy. And

633
00:34:52,280 --> 00:34:54,720
Speaker 6: to the extent that that's not allowed under the Supreme

634
00:34:54,800 --> 00:34:58,760
Speaker 6: Court's decision, Congress, when it's so inclined to do something,

635
00:34:59,360 --> 00:35:04,160
Speaker 6: could eventually amend the statue to make it clear that

636
00:35:04,520 --> 00:35:07,319
Speaker 6: some sort of private right of action is appropriate.

637
00:35:07,360 --> 00:35:09,640
Speaker 7: That's the other course that we might see in a

638
00:35:09,680 --> 00:35:10,320
Speaker 7: few years.

639
00:35:10,760 --> 00:35:13,640
Speaker 2: Thanks so much for joining me today, Jim Best, Professor

640
00:35:13,760 --> 00:35:15,920
Speaker 2: James Park of UCLA Law School.

641
00:35:16,120 --> 00:35:18,440
Speaker 3: And that's it for this edition of the Bloomberg Law Show.

642
00:35:18,760 --> 00:35:21,120
Speaker 2: Remember you can always get the latest legal news on

643
00:35:21,160 --> 00:35:25,440
Speaker 2: our Bloomberg Law Podcast. You can find them on Apple Podcasts, Spotify,

644
00:35:25,640 --> 00:35:30,680
Speaker 2: and at www dot Bloomberg dot com, slash podcast Slash Law,

645
00:35:31,080 --> 00:35:33,640
Speaker 2: and remember to tune into The Bloomberg Law Show every

646
00:35:33,719 --> 00:35:37,600
Speaker 2: weeknight at ten pm Wall Street Time. I'm June Grosso

647
00:35:37,760 --> 00:35:39,360
Speaker 2: and you're listening to Bloomberg