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

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Speaker 1: There's been a lot of speculation that in a second term,

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Speaker 1: Donald Trump could create a Supreme Court with a Trump

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Speaker 1: appointed majority that could serve for decades. After all, Trump

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Speaker 1: appointed three Supreme Court justices in his first term that

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Speaker 1: gave the Court a super conservative majority. Joining me is

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Speaker 1: constitutional law expert David super, a professor at Georgetown Law. David,

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Speaker 1: There's a lot of speculation that one or two of

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Speaker 1: the oldest justices, the super conservatives actually seventy six year

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Speaker 1: old Clarence Thomas and seventy four year old Samuel Alito,

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Speaker 1: could retire and give Trump a chance to put younger

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Speaker 1: conservatives on the court. Do you think that's likely.

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Speaker 2: I'm not sure that it is. They both show every

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Speaker 2: sign of their jobs. Progressives don't like how they're doing

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Speaker 2: their jobs, but their opinions remain sharp. When they choose

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Speaker 2: to speak from the bench, they make sense, So I

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Speaker 2: can certainly imagine them feeling like they want to keep

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Speaker 2: doing this well.

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Speaker 1: Thomas, The New York Times reported that he once told

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Speaker 1: a former clerk that he intended to stay on the

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Speaker 1: bench until twenty thirty four. The liberals made my life

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Speaker 1: miserable for forty three years, and I'm going to make

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Speaker 1: their lives miserable for forty three years. So we have

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Speaker 1: some time yet before he considers retiring, I suppose. On

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Speaker 1: the liberal side, there have also been renewed calls for

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Speaker 1: seventy year old Justice Sonya Soto Mayord to retire before

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Speaker 1: January so President Biden and the Democratic controlled Senate can

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Speaker 1: quickly confirm a successor. I don't know about quickly, but

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Speaker 1: that whole scenario seems unlikely to me.

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Speaker 2: Yeah, I can't imagine that she would do that, and

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Speaker 2: I think it would be a foolish move. Try. There

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Speaker 2: was talk about their good Marshal retiring after Jimmy Carter

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Speaker 2: lost for reelection, and I think cooler heads prevailed there

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Speaker 2: and recognized that that couldn't be done in a snap. Now.

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Speaker 2: I can't imagine that Senator Mansion or Senator Cinema would

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Speaker 2: be okay with this sort of a process at this point,

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Speaker 2: and without them you can't do anything.

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Speaker 1: As far as future judicial appointments, there have been reports

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Speaker 1: that Trump complained about his first term appointees being too

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Speaker 1: independent and not being loyal enough to him, and you know,

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Speaker 1: reportedly has fallen out with the Federalist Society, which basically

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Speaker 1: chose his judicial appointments during his first term. So what

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Speaker 1: do you expect from Trump as far as future judicial appointments.

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Speaker 2: I think he's not especially focused personally on the courts.

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Speaker 2: He's not a lawyer. He's never shown a lot of

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Speaker 2: interest in it. So my suspicion is that he will

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Speaker 2: go back to the federal of Society, perhaps not give

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Speaker 2: them as celebrated and formal a role in the process,

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Speaker 2: but that we will basically be getting more said sock judges.

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Speaker 1: And more ideologues. It seems like even the judges that

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Speaker 1: he did appoint were ideologues more than respected jurists.

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Speaker 2: He appointed arrange some of his appointments are splendid judges,

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Speaker 2: some of them are skilled ideologs, and some of them

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Speaker 2: are rather lost. I'm guessing the new round rule will

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Speaker 2: include some in each of those piles.

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Speaker 1: Now, the Biden administration has taken positions in certain cases

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Speaker 1: before the Supreme Court, and we can anticipate that the

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Speaker 1: Trump administration has opposing views and will want to back

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Speaker 1: out of those positions. How often does it happen that

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Speaker 1: new administration changes positions in cases before the Court.

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Speaker 2: It's become more more and more frequent over time. Once

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Speaker 2: upon a time, it was considered shocking enough that the

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Speaker 2: Supreme Court would appoint a lawyer to argue the case

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Speaker 2: as friend of the Court representing the position of the

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Speaker 2: prior administration. These days, there's less of that. I think

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Speaker 2: it is understood by the justices that this is what

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Speaker 2: happens in a society where views on law have become

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Speaker 2: very polarized.

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Speaker 1: So now some areas where there might be a change.

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Speaker 1: Transgender rights is probably one of them. Now the transgender

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Speaker 1: rights case arguments are scheduled for December fourth, so well

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Speaker 1: before inauguration day. I mean, what happens in a.

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Speaker 2: Case like that, Well, the Trump administration has a couple

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Speaker 2: of options. One is that they can ask the court

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Speaker 2: to reopen it to allow supplemental briefing. Whether the Court

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Speaker 2: would be inclined to slow itself down to allow that

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Speaker 2: is debatable. Second, they can simply declare that their allegiance

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Speaker 2: are on the other side and rely on the briefs

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Speaker 2: that we're opposing what the Biden administration advocated. They can

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Speaker 2: also express the intent to take executive action to reverse

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Speaker 2: federal regulations, but that can't be done instantly. The court

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Speaker 2: could decide the case and let them take their own

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Speaker 2: action through due course, or the court could suspend the

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Speaker 2: case to give them time to act. Or the court

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Speaker 2: could decide not to issue a ruling because it expects

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Speaker 2: the issue to go away.

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Speaker 1: The federal government already argued a case over ghost guns

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Speaker 1: to keep regulations for ghost guns on the books, so

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Speaker 1: that's already been argued, fully briefed, and argued. Now it's

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Speaker 1: anticipated that the Trump administration might oppose those regulations. What

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Speaker 1: happens there? Do they just pull their regulations or.

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Speaker 2: Well, you can't just pull the regulation. The Administrative Procedure

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Speaker 2: Act and the Supreme Court have been very clear that

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Speaker 2: you have to go through the same procedure to remove

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Speaker 2: regulations that you did to create them. So it would

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Speaker 2: take a certain amount of time, probably a year, even

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Speaker 2: if they move very quickly to get rid of those regulations.

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Speaker 2: This is a case where the conservative legal agenda has

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Speaker 2: a somewhat ironic impact in that a year ago, the

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Speaker 2: administration changing its views on how the statute should be

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Speaker 2: interpreted would be entitled a considerable weight. But today, because

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Speaker 2: the Supreme Court got rid of Chevron. The administration is

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Speaker 2: not entiled to any difference anyway. So one can well

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Speaker 2: imagine the Court saying, we really don't care if you've

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Speaker 2: changed your position, really.

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Speaker 1: Just ignoring Trump, the Trump administration. I mean, has the

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Speaker 1: Court done that before.

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Speaker 2: Well, we're very early in the post Chevron world. There

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Speaker 2: always was deference. The administration's position mattered a great deal.

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Speaker 2: But the Court went at great lengths last spring to

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Speaker 2: tell us that Congress did not intend administration views to

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Speaker 2: get any special weight in interpreting laws. And on that basis,

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Speaker 2: one could well imagine the Court simply going ahead and

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Speaker 2: deciding the case and saying that the administration wants to

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Speaker 2: go through the procedures to remove the regulations, they're free

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Speaker 2: to do so. But what the administration might or might

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Speaker 2: not try to do or succeed in doing in the

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Speaker 2: future doesn't stop the Court from deciding the case in

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Speaker 2: front of it.

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Speaker 1: Yeah, I'm wondering if, as you mentioned, we saw the

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Speaker 1: Chevron doctrine being thrown out and the Court's conservatives have

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Speaker 1: been basically reining in federal agencies, do you think that

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Speaker 1: we'll still see that kind of aggressive attack on regulatory

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Speaker 1: agencies by the Court in a Trump administration which may

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Speaker 1: be using agencies to affect some of these broad changes.

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Speaker 2: I think different justices will have a different view. Chief

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Speaker 2: Justice Roberts has very little patients for sloppy, incompetent agency work,

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Speaker 2: whichever ideology the agency has, and when presented with dishonest

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Speaker 2: or incompetent agency actions in the first Trump administration, did

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Speaker 2: not hesitate to strike it down, So I would expect

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Speaker 2: he would be continued inclined to look closely at agencies

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Speaker 2: and whether they're dotting their eyes and crossing their t's.

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Speaker 2: Some of the other justices probably will feel that a

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Speaker 2: lower level of scrutiny should be applied to deregulatory actions

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Speaker 2: than was applied to regulatory actions.

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Speaker 1: Some disputes coming up involve the EPA whether fights over

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Speaker 1: certain clean air regulations can be heard by circuit courts.

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Speaker 1: I mean, what happens there. Does the Trump administration just

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Speaker 1: pull those cases or how would they handle.

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Speaker 2: Those That's harder to know because that's an issue of

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Speaker 2: process that has implications that go far beyond the current

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Speaker 2: or next administrations. So one could imagine that the Trump administration,

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Speaker 2: although its view on the ultimate merits, may be different,

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Speaker 2: might not feel that that's a high priority to expend

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Speaker 2: its credibility with the Court by switching positions, and may

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Speaker 2: see some benefit to staying out of it or not

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Speaker 2: disrupting what the Biden administration did.

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Speaker 1: Have you heard any rumors about who might be the

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Speaker 1: solicitor General?

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Speaker 2: I have not.

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Speaker 1: I have not either, and I can't believe that because

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Speaker 1: I've heard rumors about many other high level positions that

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Speaker 1: will have to be filled.

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Speaker 2: I think that the new administration is going to want

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Speaker 2: someone competent and credible, and so what you hear, at

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Speaker 2: least what I hear about various other positions are people

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Speaker 2: who may not be especially skilled or especially respected, but

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Speaker 2: are very close with Trump circles and with the former president.

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Speaker 2: I would expect the new solicitor General would be an

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Speaker 2: extremely conservative lawyer, but not necessarily someone who Trump knows.

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Speaker 1: It's always a pleasure to talk to you, David, Thanks

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Speaker 1: so much for being on the show. That's Professor David

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Speaker 1: super of Georgetown Law. Metta's Facebook is trying to get

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Speaker 1: out of a shareholder lawsuit accusing it of fraud for

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Speaker 1: misleading investors about a known risk from the massive Cambridge

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Speaker 1: Analytica data breach. In twenty fifteen, the justices seemed divided

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Speaker 1: about how much information public companies must disclose about potential

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Speaker 1: investment risks, including past events. It led to hypotheticals from

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Speaker 1: Chief Justice John Roberts slip and fall case to Justice

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Speaker 1: Samuel Alito's trash from space.

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Speaker 3: For example, if you're leaving my house and I say

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Speaker 3: you might slip on the steps, you wouldn't say, well,

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Speaker 3: that's never happened before. Your inference would be that has happened,

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Speaker 3: and that's why I'm giving you the warning. And if

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Speaker 3: there was a fire and it was caused by the

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Speaker 3: fact that the factory was hit by a piece of

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Speaker 3: space junk that fell out of the sky, the fact

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Speaker 3: that that happened.

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Speaker 2: Doesn't really tell you much more about the probability that

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Speaker 2: you're going to have another fire based on objects falling

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Speaker 2: out of space.

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Speaker 1: Joining me is securities law expert James Park, a professor

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Speaker 1: at UCLA Law School, Jim tell Us about the shareholder's

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Speaker 1: lawsuit at the heart of this case.

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Speaker 3: It's a securities class action brought under sec Rule ten

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Speaker 3: B five, which typically applies to misrepresentations material misrepresentations made

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Speaker 3: by companies that relate to their securities. And so this

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Speaker 3: is a lawsuit class action brought on behalf of investors

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Speaker 3: of Facebook. Now it's meta course, but Facebook, as with

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Speaker 3: other public companies, issues periodic disclosures the form ten K

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Speaker 3: on a yearly basis. The ten ques, and these sec

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Speaker 3: disclosures typically have a lot of disclosures about risk which

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Speaker 3: are required by the SEC And so the idea behind

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Speaker 3: these risk disclosures is that your warning investors, this is

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Speaker 3: the risk of investing in Facebook stock. And one of

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Speaker 3: those risk disclosures basically said that there could be a

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Speaker 3: risk of unauthorized access to user data that could damage Facebook.

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Speaker 3: That was essentially what the risk is closure said. And

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Speaker 3: the reason why the planiffs are saying this is maturely

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Speaker 3: misleading is that at the time Facebook made this statement,

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Speaker 3: it knew about a fairly large breach by a political

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Speaker 3: consulting firm called Cambridge Analytica of user data. And so

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Speaker 3: what the plantiffs are arguing is that you said that

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Speaker 3: unauthorized access could be a risk when you knew there

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Speaker 3: was a very significant unauthorized access at the time you

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Speaker 3: issued that risk disclosure. That's essentially what the securities class

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Speaker 3: action is dependent on.

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Speaker 1: Outside of the validity of the issues here. The FTC's

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Speaker 1: investigation led to this record five billion dollars civil penalty

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Speaker 1: against Facebook, and Facebook reached a two hundred and seventy

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Speaker 1: five million dollar class action settlement with users over the

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Speaker 1: privacy breach last year. Why do you think this hasn't

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Speaker 1: been settled.

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Speaker 3: It's a good question, and I think that maybe one

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Speaker 3: reason is that Facebook is often facing securities class actions

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Speaker 3: and it does not want to be perceived as a

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Speaker 3: company that settled lawsuits that arise out of disclosure violations.

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Speaker 3: They may believe they have a strong case with respect

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Speaker 3: to this particular allegation. Their argument's not a material misstatement

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Speaker 3: because you know, there's a risk of this happening. And

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Speaker 3: the argument, as I understand it, is that, Okay, they

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Speaker 3: knew that there was a breach, they didn't know how

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Speaker 3: big the impact would be on a huge company like Facebook,

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Speaker 3: And you know, I think that's essentially the argument is that, well,

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Speaker 3: we knew that there had been a breach, but we

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Speaker 3: didn't know it was going to result in this later

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Speaker 3: penalty and all this reputational harm, and so our disclosure

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Speaker 3: that there's this risk that and unauthorized actions could affect

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Speaker 3: our market value was mostly accurate according to Facebook, and

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Speaker 3: so I think they believe they have a good case here.

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Speaker 1: So let's talk about the argument. And there were a

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Speaker 1: lot of strange hypotheticals thrown around. What were the concerns

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Speaker 1: of the justices?

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Speaker 3: I think one concern is that companies issue a lot

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Speaker 3: of risk disclosures about many different things, and some of

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Speaker 3: those things actually happen, you know, and so you might say, Okay,

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Speaker 3: there's a risk of bad publicity, just generally media coverage,

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Speaker 3: and you know, at the same time you issue this,

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Speaker 3: there may be a lot of various events that are

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Speaker 3: putting you in a bad life. And so I think,

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Speaker 3: you know, one of the concerns that the justices are

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Speaker 3: grappling with is that if we say there's liability in

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Speaker 3: this case, so that mean that for almost every type

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Speaker 3: of risk disclosure that is being issued, that a lawsuit

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Speaker 3: could come up if you phrase things in the wrong way,

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Speaker 3: if you know, there's something that happens relating to that risk,

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Speaker 3: and so there may be too much liability there, and

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Speaker 3: you know the effect of that may be that companies

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Speaker 3: will just issue very very vague risk disclosures that don't

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Speaker 3: say anything. They may not issue risk disclosures at all. Right,

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Speaker 3: if I make you liable for a misleading risk disclosure,

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Speaker 3: then maybe I won't issue that risk disclosure at all

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Speaker 3: in the future. I think that's a concern, and I

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Speaker 3: think they're also just concerned that the rule seems to

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Speaker 3: be unclear here and it's tough for companies to navigate.

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Speaker 3: You know, what you have to disclose and when you

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Speaker 3: have to disclose it. And you know, there's a concern

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Speaker 3: here that we don't want to create a general duty

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Speaker 3: to update everything in these disclosures, because there's so much

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Speaker 3: in any any SEC disclosure that it may be impossible

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Speaker 3: to you know, constantly update every single aspect of it.

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Speaker 1: Is the question how much to disclose of the past

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Speaker 1: in the present, you know, if you don't think the

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Speaker 1: past is going to affect the future. I mean, what's

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Speaker 1: the exact issue.

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Speaker 3: I think what Facebook would say is these are primarily

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Speaker 3: forward looking statements. They are predictions, and so they're not

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Speaker 3: really meant to guarantee every single thing about past event.

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Speaker 3: I think that they're saying that we're making no guarantee

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Speaker 3: that there has been no unauthorized access to user accounts.

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Speaker 3: And in fact, I think they would say, of course,

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Speaker 3: of course there have been some abuses of Facebook privacy policies,

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Speaker 3: and everyone would know that at the time the risk

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Speaker 3: disclosure had been made. And I think Facebook is making

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Speaker 3: a fairly subtle argument here, which was to say that

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Speaker 3: it's true that we knew that there was an unauthorized

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Speaker 3: access by Cambridge Analytica. What we didn't know is that

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Speaker 3: it would affect our business so much. We had no

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Speaker 3: way of knowing that, and essentially we have no way

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Speaker 3: of essentially predicting the future. And essentially this risk disclosure,

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Speaker 3: we disclosed this and we didn't know. We just didn't

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Speaker 3: know that there was an event that would eventually cause

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Speaker 3: significant economic damage to Facebook. We made no implicit representation

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Speaker 3: about the past in this particular disclosure. It's more of

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Speaker 3: a forward looking disclosure.

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Speaker 1: In this case a hypothetical from Justice Kagan. A lot

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Speaker 1: of the justices kept coming back to it, and that

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Speaker 1: is a company discloses a risk of fire but doesn't

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Speaker 1: disclose that there had recently been a fire that destroyed

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Speaker 1: fifty percent of the plant.

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Speaker 3: Yes, that's a great hypothetical, and I think it pushes

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Speaker 3: back upon sort of Facebook statement that these statements do

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Speaker 3: not make implicit representations about past events, because implicit in

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Speaker 3: the risk of a fire in a building is that

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Speaker 3: the building is still there. I think that's one implicit recognition,

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Speaker 3: and I think there's also a recognition that there's not

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Speaker 3: a known high risk of the building burning down. And

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Speaker 3: I think that investors will want to know if there's

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Speaker 3: a very very high risk that the building is so

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Speaker 3: unsafe that we know it's very likely that it would

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Speaker 3: burn down. What she's arguing here is that, you know,

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Speaker 3: we should be requiring companies when they make these risk

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Speaker 3: disclosures to also speak completely and disclose risks that they

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Speaker 3: know about that they can calculate with some reasonable assurance.

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Speaker 3: And that's where Justice Kagan may come out at the

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Speaker 3: end of the day.

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Speaker 1: You mentioned before the regulations, and well, just as Kavanaugh said,

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Speaker 1: why can't the SEC just write a rig? Why does

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Speaker 1: the judiciary have to walk the plank on this and

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Speaker 1: answer the question when the SEC could do it? And

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Speaker 1: the Chief Justice and Justice Amy Coney Barrett seem to

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Speaker 1: agree with that. I mean, why can't they SEC write

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Speaker 1: a regulation?

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Speaker 3: They could, but it's difficult to write good regulations, and

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Speaker 3: I think that the more general the regulation is, the

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Speaker 3: easier it is for the SCC. That's one reason the

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Speaker 3: SEC is not adding more specificity. It's also easier though,

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Speaker 3: I think for public companies, right, the more specific you

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Speaker 3: write the regulations, and you know the company is going

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Speaker 3: to have to dig out all of this specific information

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Speaker 3: and that could be overly burdensome. And so sometimes corporations

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Speaker 3: want fairly vague disclosure requirements that they have some discretion

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Speaker 3: to comply with. And that's the whole idea behind principles

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Speaker 3: based regulation, which a lot of you know, what you

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Speaker 3: might think of as conservative individuals, have advocated for SEC regulation.

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Speaker 3: But I think Justice Kavanaugh has a good point, which

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Speaker 3: is that you know, if you are leaving this to

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Speaker 3: lawsuits to define, then you know courts, which are not

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Speaker 3: experts in these matters, have to make these very difficult,

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Speaker 3: complicated determinations of what should be disclosed. It also give

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Speaker 3: a sense of regulation by enforcement, where lawsuits are being

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Speaker 3: used to regulate companies after the fact, and that's a

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Speaker 3: running theme about both lawsuits by private litigants as well

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Speaker 3: as lawsuits by the Securities and Exchange Commissions. So he

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Speaker 3: asked a very good question, but I think that there

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Speaker 3: are some pressures that make it difficult for the SEC

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Speaker 3: to specify completely what the disclosures does look like. And

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Speaker 3: so what we have is a very imperfect system where

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Speaker 3: you know, these issues get fleshed out in lawsuits, and

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Speaker 3: often the lawsuits are settled, so we never even actually

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Speaker 3: resolved what was required. So, you know, the requirements of

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Speaker 3: disclosure for public companies, there's not clear guidances. It's a

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Speaker 3: lot of discretion, it's a lot of judgment that is

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Speaker 3: required in order to craft good disclosures. And I think

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Speaker 3: there's you know, some resentment by public corporations that you

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Speaker 3: have private enforcers who have a monetary incentive to sue

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Speaker 3: whenever they find something wrong in a company's disclosures. And

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Speaker 3: you know, you have to pay a lot of money

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Speaker 3: sometimes to settle these lawsuits because you don't want to

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Speaker 3: risk them going to trial. Now, you know. One point

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Speaker 3: I would add, though, is that in addition to this

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Speaker 3: private class action, the SEC brought a case against Facebook

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Speaker 3: for I believe essentially it's the same disclosure, and they

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Speaker 3: alleged that they were materially misleading, and Facebook actually settled

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Speaker 3: that case for one hundred million dollars. So this is

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Speaker 3: not a lawsuit that was brought only by private planets.

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Speaker 3: The SEC also has been asserting and pushing this particular

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Speaker 3: theory as well.

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Speaker 1: Coming up next, how might the Justice is rule here?

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Speaker 1: This is Bloomberg. I've been talking to Professor James Park

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Speaker 1: of UCLA Law School about oral arguments before the Supreme

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Speaker 1: Court this week in Facebook's attempt to get out of

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Speaker 1: a shareholder lawsuit accusing it of fraud for misleading investors

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Speaker 1: about a known risk from the massive Cambridge Analytic data

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Speaker 1: breach in twenty fifteen. Something that Justice Gorsech said resonated

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Speaker 1: with me. He suggested that reasonable investors were well aware

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Speaker 1: of the risk of data breaches at large companies, including

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Speaker 1: by foreign governments.

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Speaker 3: I think China probably has all of our FBI files,

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Speaker 3: you know, I mean, data breaches are part of our

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Speaker 3: lives these days. There are data breaches. But I think

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Speaker 3: what the plaintiffs would say is that the Cambridge Analytical

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Speaker 3: breach was an extraordinary one. I'm involving millions of different customers,

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Speaker 3: and you know, I believe the data was used for

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Speaker 3: political purposes. And you know, not every data breach results

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Speaker 3: in a five billion dollar fine by the Federal Trade Commission.

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Speaker 3: And so, you know, certainly we're generally aware there could

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Speaker 3: be data breaches, but you could argue the investors assume

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Speaker 3: most companies are managing them pretty well and they're not

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Speaker 3: going to affect the stock price significantly, but this one did. Now,

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Speaker 3: what Facebook is saying, though, is that, you know, we

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Speaker 3: knew about the breach at the time we made this

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Speaker 3: risk disclosure, but it wasn't quite clear it was going

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Speaker 3: to have this big impact. That was still unclear, and

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Speaker 3: you know, we warned about that risk, but we didn't know.

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Speaker 3: We didn't know that the stock price would be affected

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Speaker 3: as much as it ultimately was. When the scandal broke

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Speaker 3: more widely and regulators reacted, and that, you know, it

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Speaker 3: became something that hurt Facebook's reputation. That aspect of it

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Speaker 3: we didn't know at the time the risk disclosure was issued.

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Speaker 1: Do you have any feel from the oral organ about

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Speaker 1: how they might rule.

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Speaker 3: I think it'll be a very fact specific decision. I

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Speaker 3: think that the court understands that this is a really,

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Speaker 3: really hard issue and the Supreme Court is not qualified

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Speaker 3: to write very detailed disclosure rules, and so I think

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Speaker 3: they will try to limit the case to its fact.

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Speaker 3: It's a tough one. It's really tough to predict which

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Speaker 3: way they're going to go. I suspect maybe a majority

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Speaker 3: will side with Facebook. You know that this is a

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Speaker 3: case where sure they knew there was a breach, but

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Speaker 3: they didn't know it would impact the company's business as

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Speaker 3: much as it did, and therefore the risk disclosure was

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Speaker 3: not materially misleading. Now, you know, if they had known

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Speaker 3: about the breach and they knew that it was as

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Speaker 3: impactful as it would be, then that would be a

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Speaker 3: different story. Now it's possible, though, some of the justices

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Speaker 3: will buy the plantif's response, you know, the planets. Basically

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Speaker 3: their response is that, Okay, you must have known that,

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Speaker 3: given the size of the breach, that it was going

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Speaker 3: to really affect your reputation at the time you made

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Speaker 3: that statement, and therefore the risk disclosure was misleading. What

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Speaker 3: you should have done when you wrote the disclosure was acknowledged, Hey,

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Speaker 3: we have this very very unprecedented significant reach of millions

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Speaker 3: and millions of users of data. That's the disclosure you

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Speaker 3: should have written. Now, that does seem to be kind

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Speaker 3: of second guessing from the disclosure with twenty twenty hind

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Speaker 3: sight and Facebook would say it's not fair for every

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Speaker 3: single little disclosure in one hundred page document to potentially

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Speaker 3: be second guests by a planif's attorney who has the

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Speaker 3: incentive to question it. But I think it's going to

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Speaker 3: be a close one. I think it could be a

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Speaker 3: close one, and I think there could be some disagreement.

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Speaker 3: But what I am confident of is it's going to

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Speaker 3: be a fairly backed specific decision, a.

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Speaker 1: Split between the conservatives and the liberals.

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Speaker 3: Somewhat, although some of the conservatives I wasn't quite sure

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Speaker 3: which way they were going. And you know, Justice Thomas

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Speaker 3: starts out and ask some questions that I thought were

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Speaker 3: leaning a little bit towards the plaintiffs. So it is

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Speaker 3: it is a little bit hard to say, I'm you know,

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Speaker 3: Justice Tavanaugh's question is more just about why are we

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Speaker 3: even deciding this in the first place. I don't know

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Speaker 3: what that means for how he would actually believe the

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Speaker 3: case should come out. You know, I do think the

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Speaker 3: liberal justices probably seem to be mostly sympathetic to the question.

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Speaker 3: And you know, Justice Alito has thought a lot about

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Speaker 3: these issues. He decided a few cases when he was

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Speaker 3: on the Third Circuit decision on Burlington Cope factories that

440
00:27:51,280 --> 00:27:55,600
Speaker 3: basically grappled with this duty of updating disclosures. So he's

441
00:27:55,600 --> 00:27:59,440
Speaker 3: thought about this for many years. I tend to believe Alido,

442
00:28:00,040 --> 00:28:03,480
Speaker 3: based on the Burlington Code Factory's decision, would be less

443
00:28:03,520 --> 00:28:07,119
Speaker 3: inclined to say that those disclosures were misleading. But I

444
00:28:07,160 --> 00:28:10,359
Speaker 3: could be wrong on that. It's hard for me to say,

445
00:28:10,880 --> 00:28:14,480
Speaker 3: but I think you could see some coalescing that might

446
00:28:14,680 --> 00:28:18,119
Speaker 3: break down under conservative and liberal sort of life.

447
00:28:18,400 --> 00:28:22,199
Speaker 1: But you think that whatever decision, it'll be fact specific,

448
00:28:22,280 --> 00:28:25,200
Speaker 1: so it won't have so much impact on other companies

449
00:28:25,280 --> 00:28:27,320
Speaker 1: disclosures or am I overstating that.

450
00:28:27,800 --> 00:28:31,560
Speaker 3: I think that's right, and even the defendants. Facebook's is

451
00:28:31,720 --> 00:28:36,000
Speaker 3: very careful to stay that there will be some circumstances

452
00:28:36,800 --> 00:28:40,920
Speaker 3: where a risk disclosure is misleading, like when you know

453
00:28:41,120 --> 00:28:45,480
Speaker 3: for a certainty that the risk has actualized. My understanding

454
00:28:45,520 --> 00:28:49,400
Speaker 3: of Facebook's position is that would be materially misleading, and

455
00:28:49,440 --> 00:28:53,520
Speaker 3: so I think that is a situation you find quite

456
00:28:53,560 --> 00:28:56,680
Speaker 3: often these days. That's a theory that's asserted a lot

457
00:28:56,720 --> 00:29:00,680
Speaker 3: against companies. I think that they could write an decision

458
00:29:00,720 --> 00:29:05,760
Speaker 3: where you could say in these circumstances, you knew that

459
00:29:05,920 --> 00:29:08,320
Speaker 3: part of the risk can happen, but not all of

460
00:29:08,360 --> 00:29:11,440
Speaker 3: the risks could happened. I think that might be what

461
00:29:11,520 --> 00:29:14,800
Speaker 3: the Supreme Court could could do in this case if

462
00:29:14,800 --> 00:29:18,480
Speaker 3: it wanted to rule in favor of Facebook, and that

463
00:29:18,600 --> 00:29:21,760
Speaker 3: could affect though that could affect other cases because there

464
00:29:21,800 --> 00:29:25,160
Speaker 3: may be other cases that are like that, and also

465
00:29:25,280 --> 00:29:27,320
Speaker 3: there will often be the question of well, does our

466
00:29:27,600 --> 00:29:31,040
Speaker 3: case fall into this back pattern or is it something else.

467
00:29:31,280 --> 00:29:35,120
Speaker 3: So I think it could have a substantial effect on

468
00:29:35,640 --> 00:29:38,880
Speaker 3: the way these cases are litigated, but I don't think

469
00:29:38,920 --> 00:29:44,240
Speaker 3: it will completely immunize risk disclosures from scrutiny under Rule

470
00:29:44,280 --> 00:29:44,960
Speaker 3: ten D five.

471
00:29:45,880 --> 00:29:48,520
Speaker 1: Switching topics for just a moment, I do have a

472
00:29:48,600 --> 00:29:54,320
Speaker 1: question for you about crypto and the sec The crypto industry,

473
00:29:54,600 --> 00:29:59,360
Speaker 1: you know, poured millions of dollars into presidential and congressional races,

474
00:29:59,360 --> 00:30:02,520
Speaker 1: and Donald Trump has said that on day one he's

475
00:30:02,560 --> 00:30:07,120
Speaker 1: going to fire Gary Gensler. Do you see he has

476
00:30:07,160 --> 00:30:09,320
Speaker 1: a lot of firing to do on day one. So

477
00:30:09,560 --> 00:30:13,000
Speaker 1: do you think the crypto industry is going to benefit

478
00:30:13,600 --> 00:30:17,200
Speaker 1: from Gensler's departure and Trump administration?

479
00:30:17,560 --> 00:30:20,480
Speaker 3: I think so. I'm not sure how much they will benefit.

480
00:30:20,640 --> 00:30:23,720
Speaker 3: It's not quite clear to me what the SEC will

481
00:30:23,760 --> 00:30:28,080
Speaker 3: do even under a Trump administration. I'm not sure whether

482
00:30:28,120 --> 00:30:34,760
Speaker 3: it's possible to write rules that would balance investor protection

483
00:30:35,040 --> 00:30:39,440
Speaker 3: and what the crypto industry is seeking. Is it possible

484
00:30:39,480 --> 00:30:41,760
Speaker 3: that the crypto industry could get some sort of broad

485
00:30:42,800 --> 00:30:47,920
Speaker 3: community from the requirements of the SEC. Possibly. I think

486
00:30:47,960 --> 00:30:52,120
Speaker 3: that would probably have to go through Congress, and the

487
00:30:52,120 --> 00:30:55,560
Speaker 3: crypto industry has had a good amount of influence there.

488
00:30:55,640 --> 00:30:59,760
Speaker 3: But you know, Congress is self interested, and if they

489
00:30:59,760 --> 00:31:05,040
Speaker 3: were to path that sort of broad community from registration,

490
00:31:06,440 --> 00:31:09,640
Speaker 3: if the crypto industry collapses, if a lot of investors

491
00:31:09,640 --> 00:31:12,240
Speaker 3: lose a lot of money, they know exactly who to

492
00:31:12,320 --> 00:31:18,440
Speaker 3: point it, and so I'm not sure politically that Congress

493
00:31:18,480 --> 00:31:22,960
Speaker 3: will go in that direction. Could Trump appoint somebody who

494
00:31:24,360 --> 00:31:28,760
Speaker 3: will lessen the SEC's enforcement. I think that's probably the

495
00:31:28,800 --> 00:31:33,240
Speaker 3: most likely option there. It is difficult, though, I think

496
00:31:33,360 --> 00:31:37,520
Speaker 3: for enforcement to justify completely dropping cases you know that

497
00:31:37,560 --> 00:31:41,120
Speaker 3: are being litigated and are still being litigated against companies

498
00:31:41,240 --> 00:31:45,600
Speaker 3: like coinbase, And if it takes that somewhat drastic step,

499
00:31:46,520 --> 00:31:50,240
Speaker 3: then you know, we have someone to blame if investors

500
00:31:50,240 --> 00:31:53,640
Speaker 3: lose a lot of money. So I'm not exactly sure

501
00:31:53,800 --> 00:31:58,360
Speaker 3: what's going to happen on day one or the days

502
00:31:58,400 --> 00:32:03,600
Speaker 3: afterwards with a prompt SCC, but certainly Trump will try

503
00:32:03,640 --> 00:32:06,520
Speaker 3: to do some things that at least appear to be

504
00:32:06,640 --> 00:32:11,080
Speaker 3: favorable to the crypto industry. But I also think he's

505
00:32:11,080 --> 00:32:16,040
Speaker 3: going to engage in some self interested calculus, and he

506
00:32:16,760 --> 00:32:21,440
Speaker 3: understands that he could be blamed if there are significant losses.

507
00:32:21,760 --> 00:32:24,320
Speaker 3: I think he will balance those different things, and it'll

508
00:32:24,360 --> 00:32:27,239
Speaker 3: be interesting to see what happens on day one and

509
00:32:27,360 --> 00:32:28,480
Speaker 3: the days afterwards.

510
00:32:28,520 --> 00:32:30,840
Speaker 1: There will certainly be a lot of things to watch.

511
00:32:31,480 --> 00:32:33,680
Speaker 1: It's always great to have you on this show, Jim,

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00:32:33,760 --> 00:32:37,640
Speaker 1: thanks so much. That's Professor James Park of UCLA Law School.

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Speaker 1: And that's it for this edition of the Bloomberg Law Podcast.

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00:32:41,040 --> 00:32:43,400
Speaker 1: Remember you can always get the latest legal news by

515
00:32:43,440 --> 00:32:47,280
Speaker 1: subscribing and listening to the show on Apple Podcasts, Spotify,

516
00:32:47,560 --> 00:32:51,400
Speaker 1: and at Bloomberg dot com, Slash podcast, Slash Law. I'm

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00:32:51,480 --> 00:32:53,920
Speaker 1: June Grosso, and this is Bloomberg