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

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Speaker 2: The foreign money, the corporate money, the bribery, the years

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Speaker 2: of concealment is a grave breach of the public's trust.

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Speaker 3: Public office is a privilege.

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Speaker 4: We aalize that Mayor Adams abused that privilege and broke

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Speaker 4: the law.

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Speaker 1: Manhattan US Attorney Damian Williams announced the first criminal charges

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Speaker 1: ever against a city mayor of New York City on Thursday,

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Speaker 1: after unsealing a fifty seven page indictment charging Mayor Eric

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Speaker 1: Adams with a decade long trail of corruption. The indictment

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Speaker 1: accuses Adams of accepting illegal campaign contributions and more than

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Speaker 1: one hundred thousand dollars worth of luxury travel and other

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Speaker 1: perks from Turkish officials and business people in exchange for

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Speaker 1: favors that included helping Turkey get Fire Department approvals to

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Speaker 1: open a new diplomatic tower in Manhattan despite concerns about

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Speaker 1: its fire safety system. Adams denied any wrongdoing and struck

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Speaker 1: a defiant tone, vowing to remain in office.

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Speaker 5: My day to day will not change.

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Speaker 6: I will continue to do the job for eight point

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Speaker 6: three million New York officers that I was elected to do.

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Speaker 1: Joining me is Richard Brofald, a professor Columbia Law School

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Speaker 1: and an expert on state and local government law. Which

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Speaker 1: the indictment charges Adams with bribery, wire fraud, conspiracy, and

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Speaker 1: soliciting campaign contributions from foreign nationals. What struck you most

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Speaker 1: about it?

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Speaker 7: I think the level of fact that the government has

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Speaker 7: put in the indictment means that at least some of

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Speaker 7: the counts terified counts. My sense that at least four

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Speaker 7: of them are pretty straightforward, and if the government is

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Speaker 7: able to prove in court the facts that they're alleging

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Speaker 7: in the indictment, it would be very hard to defend

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Speaker 7: against them.

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Speaker 1: What are the four that straightforward?

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Speaker 7: So they are the two that are about foreign campaign contributions,

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Speaker 7: you know, one for the twenty twenty one campaign and

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Speaker 7: one for the twenty twenty five campaign. That is flat

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Speaker 7: out illegal and in fact, when you actually get to

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Speaker 7: the count obviously there's a long factual backdrop, but those

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Speaker 7: counts are like two paragraphs long. It's extremely shortened to

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Speaker 7: the point. And if they can show that he kind

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Speaker 7: of intentionally and with his team his associates worked with

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Speaker 7: foreign donors knowing they were foreign donors to get them

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Speaker 7: to contribute to his campaign. That's pretty close to open

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Speaker 7: and shut if the facts prove out. And the other

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Speaker 7: the other two that are pretty close. Those two just

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Speaker 7: serve very powerful. Is the federal funds Riberry loads the

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Speaker 7: ones that basically charge him with bilking the New York

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Speaker 7: City Matching Funds program through various ways again getting the

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Speaker 7: foreign donations, but also other donations where they broke them

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Speaker 7: down and the persuaded the donors to use straw donors

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Speaker 7: so that larger donations were funneled through smaller donors so

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Speaker 7: that they were matchable under the New York City Matching

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Speaker 7: Funds program. That also is in they can prove that

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Speaker 7: that does seem like a straightforward effort on the part

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Speaker 7: of the mayor to for the City of New York.

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Speaker 7: And you know that's what the federal funds bribery thing is.

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Speaker 7: You know, is he in effect using this for his

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Speaker 7: own benefit. So they certainly have laid out a set

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Speaker 7: of facts that if they can prove them, are pretty strong.

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Speaker 7: There are no gold bars in this one, like him Mendez,

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Speaker 7: but they've laid out a lot in.

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Speaker 1: A lot of detail Williams also spoke about how Adams

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Speaker 1: failed to disclose this free and discounted travel. Where does

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Speaker 1: that fit in.

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Speaker 7: That's a good question because I think a lot of

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Speaker 7: what they describe in course are violations of New York

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Speaker 7: City conflex of interest law, which is not a violation

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Speaker 7: of federal law. I mean, the failer to disclose all

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Speaker 7: of these things violated city law. They're giving that as

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Speaker 7: all background, but they're not charging him per se for

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Speaker 7: not disclosing, because that's not a federal violation. I think

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Speaker 7: it goes to the idea that he was hiding it,

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Speaker 7: that he knew that he was getting these benefits, and

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Speaker 7: that there was something improper about the benefits that he

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Speaker 7: was getting, and that he was getting them in order

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Speaker 7: to subsequently influence of official actions. So to me, it's

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Speaker 7: more maybe guilty conscience that he was covering his tracks,

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Speaker 7: because even receiving benefits from these Turkish interests don't necessarily

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Speaker 7: violate federal they might have violate a New York City

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Speaker 7: conflicts law, and I think they were using it to

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Speaker 7: show that this is part of a broader scheme to

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Speaker 7: get money from these Turkish interests, either just sports campaign

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Speaker 7: and or in exchange for him multimately doing them favors

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Speaker 7: official favors.

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Speaker 1: There are also allegations about cover up, including that he

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Speaker 1: created a fake paper trail to disguise some of the

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Speaker 1: travel and perks. They say, it's always the cover up.

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Speaker 7: Of course, the idea that it wasn't just sloppy, wasn't

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Speaker 7: just unintentional, that this was all part of a conscious plan.

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Speaker 1: The business is circumventing the city's ban on corporate contributions.

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Speaker 1: How has that been to a federal.

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Speaker 7: Again, it's I think part of this idea that he

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Speaker 7: was using the wires, because they says all technically wire

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Speaker 7: fraud to defraud in New York City, because again he

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Speaker 7: was taking those corporate contributions, turning them into individual contributions

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Speaker 7: and matching them. So in effect, this was again part

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Speaker 7: of a scheme to use the wires to defraud New

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Speaker 7: York City, and New York City received federal funds. That's

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Speaker 7: why it's federal program bribery at US Code six sixty six.

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Speaker 7: I mean, the foreign donations are clearly illegal under federal law,

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Speaker 7: the domestic corporate ones, no. But what they're saying is

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Speaker 7: that he was engaged in a scheme to defraud New

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Speaker 7: York City, because it's not so much that he got

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Speaker 7: the donations as he was leveraging the donations to kid

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Speaker 7: matching fund money, and that's tax payer dollars.

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Speaker 1: Adams was arraigned on Friday and pleaded not guilty, and

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Speaker 1: we got a hint of the defense from his high

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Speaker 1: profile lawyer, Alex Spiro, who's represented Elon Musk, jay Z

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Speaker 1: and Alec Baldwin, among others.

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Speaker 2: There are no emails, text messages, or any corroboration whatsoever

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Speaker 2: that the mayor knew about anything having to do with

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Speaker 2: these campaign donations. The entire body of evidence is one

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Speaker 2: staffer that says there was a conversation. What you have

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Speaker 2: not learned is that that staffer has lied.

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Speaker 1: Now that's just a defense lawy's public take on the indictment.

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Speaker 1: But perhaps the defense will center on I didn't know

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Speaker 1: what my staffers were doing.

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Speaker 7: I didn't know. I mean, somewhere along the lines of

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Speaker 7: these are my staff I didn't know what they were doing.

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Speaker 7: Hard to say I didn't know this was illegal, and

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Speaker 7: it could be a I didn't know this was happening,

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Speaker 7: And certainly I think it's probably the strongest defenses if

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Speaker 7: there are already with the in some sense that taking

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Speaker 7: all of these Turkish benefits really, you know, didn't violate

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Speaker 7: any federal law. The government is going to have to

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Speaker 7: link up all the benefits he got to the fact

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Speaker 7: that he took them knowing they were intending to influence

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Speaker 7: him in official actions. That's the bribery standard, that he

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Speaker 7: knew that he was being influenced, that he took them

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Speaker 7: knowing they were intended to influence his official actions. Frankly,

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Speaker 7: that may be a challenge for the last count. I

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Speaker 7: haven't really spoken about the last count until now, and

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Speaker 7: that's the straightforward bribery that he took these things. He

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Speaker 7: took all these benefits in exchange for basically pressuring the

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Speaker 7: fire department to accelerate the approval of that building. The

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Speaker 7: challenge there is that he was taking benefits for years

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Speaker 7: and years before, so I think the government is going

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Speaker 7: to have to kind of link up all of the

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Speaker 7: free travel on the free hotel rooms that he got

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Speaker 7: and connect that to the fact that he then did

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Speaker 7: this favor for the Turkish government.

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Speaker 1: And that's what struck me that there was really only

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Speaker 1: one major favor that he allegedly did after supposedly years

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Speaker 1: and years of taking the travel benefits.

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Speaker 7: I think that's going to be the hardest count because

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Speaker 7: you've got the quid and you've got the quo, but

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Speaker 7: do you have the pro you have the linkage. Whereas

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Speaker 7: I think the easiest counts of the foreign funds because

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Speaker 7: to me, if they made a payments and he knew

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Speaker 7: about it and it was involved in making that happen,

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Speaker 7: that's all you need to show for the foreign funds

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Speaker 7: and for the matching funds, it's pretty close. If he

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Speaker 7: knew where he was directing his team to work with

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Speaker 7: these donors to break up their donations into smaller ones

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Speaker 7: in funnel them through employees so that they were all matchable.

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Speaker 7: That's also, you know, a violation of the city law.

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Speaker 7: It connects up with the federal law that makes it

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Speaker 7: a crime basically to the fraud a government that's receiving

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Speaker 7: federal funds.

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Speaker 1: Rich The Supreme Court has been narrowing the scope of

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Speaker 1: anti corruption laws for more than a decade. Would that

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Speaker 1: line of decisions affect this case?

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Speaker 7: Yeah, I mean I think that's a legitimate point. So

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Speaker 7: one thing, those will not affect the foreign campaign contributions. Well,

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Speaker 7: I think those are the ones that's going to be

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Speaker 7: the hardest term to fight. That should not affect the

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Speaker 7: foreign campaign contributions. For the others, they do require either

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Speaker 7: the showing of an official action, and you know, that's

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Speaker 7: the question of whether or not pressuring the fire Department

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Speaker 7: was an official action. It may be in that it

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Speaker 7: was trying to affect a government's decision and he was

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Speaker 7: making phone calls to do that, but that's going to

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Speaker 7: be the issue there will be if he take an

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Speaker 7: official action and was it sufficiently tightly linked up to

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Speaker 7: the benefits he received. That one, I think is going

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Speaker 7: to be tricky, And even the first one about the

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Speaker 7: scheming to get the matching funds again is going to

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Speaker 7: have to show that he was kind of showing that

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Speaker 7: he would be influence in some way by these supportive people.

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Speaker 7: So that's what I'm saying. I think the most straightforward

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Speaker 7: is the accepting of foreign funds first campaign, the foreign

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Speaker 7: campaign contributions.

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Speaker 1: And I think it was on the last day of

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Speaker 1: the term that the Supreme Court came down with that

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Speaker 1: controversial opinion six to three, with the conservatives of course

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Speaker 1: and the majority basically finding that the federal law that

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Speaker 1: prescribes bribes to state and local officials. Doesn't make it

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Speaker 1: a crime for those officials to accept gratuities for their

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Speaker 1: past acts.

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Speaker 7: Snyder, Yes, bribe, so on about right illegal gratuities, but

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Speaker 7: that he hadn't been charged with taking a bribe, so

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Speaker 7: that's not the same thing. They are charging bribery here.

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Speaker 7: The problem in that case is the way the government

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Speaker 7: framed what the man did. Is first he did the

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Speaker 7: favors for the private companies, and then he went to

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Speaker 7: them and said, you know, give me a no show job.

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Speaker 7: Is something like that, The government didn't charge bribery. The

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Speaker 7: government basically charged accepting an illegal gift. Here they're charging bribery.

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Speaker 1: You never know what the Supreme Court would do. He

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Speaker 1: could get convicted below, and the Supreme Court could say,

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Speaker 1: wait a second. There are plenty of those cases, including

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Speaker 1: former Virginia Governor Bob McDonald, the Bridgegate cases.

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Speaker 7: Yeah, and the Supreme Court has rejected many many corruption convictions.

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Speaker 1: Is there a reason why?

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Speaker 7: It's hard to say? I mean, one argument is these

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Speaker 7: are all involved state and local officials, and maybe the

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Speaker 7: Supreme Court is a little nervous about federalizing the state

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Speaker 7: and local misconduct. Maybe they think it should be better

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Speaker 7: handled by local das. I don't know, And sometimes there's

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Speaker 7: a sort of a First Amendment element, but which I

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Speaker 7: think is pretty thin about. You know, people are trying

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Speaker 7: to influence government all the time. We don't want to

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Speaker 7: make it a crime to be a lobbyist, for example.

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Speaker 7: But I think a lot of their concerns are federalism concern.

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Speaker 1: There are lots of calls for Adams to resign, but

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Speaker 1: New York Governor kathycl she has the power to remove him.

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Speaker 7: The governor can remove him. The governor has authority under

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Speaker 7: state load to remove the mayor. SDR when he was governor,

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Speaker 7: came very close to removing Mayor Walker, who resigned while

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Speaker 7: he was subject to the procedure for removal. The state

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Speaker 7: law says very little about the grounds for removal. It

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Speaker 7: gives a little bit more on the process, a little

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Speaker 7: bit of due process that the governor would have to

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Speaker 7: afford the mayor in terms of, you know, the charges

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Speaker 7: against him and being able to present a defense. But yes,

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Speaker 7: state law most definitely, very vaguely, definitely does authorize the

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Speaker 7: governor to remove the mayor.

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Speaker 1: So many ramifications and the US Attorney just about promise

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Speaker 1: there would be more prosecutions. Thanks so much, rich That's

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Speaker 1: Professor Richard Rflt of Columbia Law School coming up next.

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Speaker 1: Coinbase and the SEC face off in court. I'm June Grass.

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Speaker 1: When you're listening to Bloomberg Cryptocurrency Exchange. Coinbase and the

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Speaker 1: Securities and Exchange Commission faced on off in the Third

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Speaker 1: Circuit Court of Appeals this week, as Coinbase is trying

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Speaker 1: to force the SEC to create new rules that would

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Speaker 1: govern digital assets. Appellate Judges Thomas Ambro and Stefanos Phoebus

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Speaker 1: question the SEC's refusal to engage in rule making and

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Speaker 1: its approach of regulating by enforcement.

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Speaker 8: It almost looks as if to an outside observer, as

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Speaker 8: if you're going after the platforms in a way that

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Speaker 8: will crush the industry without really getting into rulemaking.

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Speaker 4: It is true that this case is not directly about

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Speaker 4: due process, but there are some serious notice concerns with

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Speaker 4: we might hit you with serious civil penalties, but we

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Speaker 4: won't tell you what will trigger the civil penalties.

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Speaker 1: Although Judge Ambro did acknowledge how new the field is.

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Speaker 9: In this area, which is you know, since two thousand

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Speaker 9: and eight, two thousand and nine, it is so new.

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Speaker 9: I can see why a lot of regulators are or

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Speaker 9: people considering regulation are saying we better go slow on

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Speaker 9: this one.

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Speaker 8: This is a new world.

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Speaker 1: And Judge Biebis asked Coinbase, as attorney Eugene Scalia, what's

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Speaker 1: the endgame here?

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Speaker 6: Eranor we are asking now that they be ordered to

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Speaker 6: proceed directly to a rule making. We think they have

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Speaker 6: had more than enough opportunity to answer Coinbas's workability concerns

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Speaker 6: extraordinary remedy.

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Speaker 4: What would we say has to be in such a rule?

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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 how this ended

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Speaker 1: up before the Third Circuit Court of Appeals in Philadelphia.

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Speaker 5: Coinbase filed a petition with the SEC asking it to

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Speaker 5: write rules relating to crypto, and the SEC denied that petition,

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Speaker 5: and so Coinbase filed the lawsuit saying that the denial

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Speaker 5: was arbitrary and capricious. That's a standard that's typically applied

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Speaker 5: in administrative law. And the district court initially denied that petition,

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Speaker 5: and now it was appealed to the Third Circuit Court

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Speaker 5: of Appeals and they heard the oral argument on it.

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Speaker 1: The lawyer for Coinbase Eugene Scalia, and I have to

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Speaker 1: say he did sound a little like his father, the

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Speaker 1: late Justice Antonin Scalia.

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Speaker 7: Uh that right.

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Speaker 1: Wow. So he told the three judge panel that the

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Speaker 1: SEC had provided no explanation for denying the request for rulemaking,

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Speaker 1: and Coinbase is complaining about the SEC's regulation by enforcement.

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Speaker 5: I think their main argument is that the SEC has

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Speaker 5: publicly said to various crypto organizations come in and register,

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Speaker 5: and their argument is that this is disingenuous because there

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Speaker 5: is no real practical, pragmatic way for these associations to

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Speaker 5: register and provide disclosure. And this reflects the decentralized nature

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Speaker 5: of blockchain projects, where you are essentially creating a network

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Speaker 5: community that runs itself without any central manager that is

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Speaker 5: in charge. And unlike a corporation where you have a

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Speaker 5: corporate entity and a centralized management team that can collect

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Speaker 5: disclosure about the corporation, put it into SEC filings and

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Speaker 5: file it in theory, you do not have that with

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Speaker 5: crypto projects. And their argument is that you know, these

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Speaker 5: crypto projects associations cannot come in and register because there

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Speaker 5: is no central issuer that can provide disclosure. And until

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Speaker 5: we have a set of rules that tells us how

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Speaker 5: this works. We simply cannot move forward.

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Speaker 1: Is it often that agencies are asked in quarter anywhere

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Speaker 1: to make rules because usually you think the less rules,

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Speaker 1: the better for those who are being regulated.

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Speaker 5: It's true, and it's just an interesting example where the

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Speaker 5: industry is demanding a certain amount of certainty, and because

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Speaker 5: this is a industry that is still emerging, is on

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Speaker 5: the border in terms of legality. I think that coinbase

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Speaker 5: and others in the industry believe that a set of

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Speaker 5: rules or a statute would confer a certain amount of

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Speaker 5: legitimacy on crypto because if you regulate it, it must

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Speaker 5: be permissible. In some instances. There are certainly cases where

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Speaker 5: you see corporations in the industry asking for more specificity

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Speaker 5: with respect to administrative rules. That is something that we

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Speaker 5: do see from time to time. Whether or not that

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Speaker 5: happens in a formal petition for rulemaking, I think that

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Speaker 5: is much less common and that this is an unusual case.

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Speaker 1: Let's talk about the SEC's position and the how we test.

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Speaker 1: They're saying, basically, look, we don't need to make any

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Speaker 1: new rules. We have rules here.

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Speaker 5: That's their argument is that we have an established legal framework.

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Speaker 5: We have the Securities active nineteen teen thirty three. We

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Speaker 5: have how we test that says that investment contracts that

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Speaker 5: securities in certain circumstances. We have shown you through various

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Speaker 5: administrative releases and enforcement actions how we think to how

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Speaker 5: we test applies to crypto and in some circumstances they

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Speaker 5: are security. When something is a security, we have a

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Speaker 5: set procedure where you have to file a registration statement

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Speaker 5: if you want to sell those securities to the general public.

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Speaker 5: If you are in exchange that has securities trading on it,

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Speaker 5: you also have to register with us as well. And

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Speaker 5: I think they would say, you know, you want this

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Speaker 5: to be this centralized organization where no one is in charge.

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Speaker 5: But the reality is that there is usually a central

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Speaker 5: group of individuals who basically start these crypto projects. They

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Speaker 5: are developing the code, they develop the applications, They reach

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Speaker 5: out to investors, they promote it, they promise high returns,

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Speaker 5: They keep, you know, a lot of crypto for themselves.

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Speaker 5: Of the price of the crypto goes up, they make

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Speaker 5: a lot of money. Kind of like a controlling shareholder

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Speaker 5: or insider of the organization. You know, those organizers could

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Speaker 5: certainly provide disclosure. They could, you know, certainly be responsible

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Speaker 5: for filing a registration statement, and that has not happened,

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Speaker 5: and I think that's what they would argue.

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Speaker 3: In response.

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Speaker 1: A couple of the judges did acknowledge that this was

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Speaker 1: a new area and maybe you'd want to proceed slowly,

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Speaker 1: But then you had some sort of accusations against the SEC.

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Speaker 1: One judge said that it looks like you're going after

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Speaker 1: platforms in a way that would crush the industry without

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Speaker 1: getting into rulemaking, and another said, it's not that you're

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Speaker 1: not interested in the area, it's just that you're interested

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Speaker 1: in picking off wrongs without giving higher level guidance. It's

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Speaker 1: hard to measure which way it's going, but it did

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Speaker 1: seem like they had a lot of hard questions for

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Speaker 1: the SEC.

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Speaker 5: I suspect it's very possible, and it's maybe probable that

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Speaker 5: these questions reflect a certain skepticism about the SEC's position.

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Speaker 5: And you know, the idea that the SEC is crushing

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Speaker 5: the crypto industry is probably accurate to some extent. Now,

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Speaker 5: the SEC would say, well, the reason we are closely

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Speaker 5: regulating this industry and preventing the schemes from flourishing and

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Speaker 5: selling and distributing crypto to a lot of members of

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Speaker 5: the public is because we're concerned that a lot of

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Speaker 5: these projects are fraught and that investors are going to

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Speaker 5: lose a lot of money, and if we don't keep

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Speaker 5: an eye on it, we're going to be blamed. People

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Speaker 5: are going to ask us, you know, what were you doing,

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Speaker 5: And given past experience with you know, FTX for example,

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Speaker 5: and some of the other scandals that we've seen, there

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Speaker 5: is probably good reason to be very careful about allowing

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Speaker 5: wide scale distributions of crypto to public investors in the

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Speaker 5: United States. So I think that the judges, though, you know,

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Speaker 5: I think that probably reflects a sincere questioning of the

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Speaker 5: SEC and its regulatory approach. It has moved sometimes in

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Speaker 5: contradictory ways, in ways that are ambiguous, and you've seen

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Speaker 5: some shifts in their policy where sometimes they are open

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Speaker 5: to passing rules, other times, you know, they seem to

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Speaker 5: not be open to that, and so they have kind

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Speaker 5: of shifted their position here and there. The SEC would say, well,

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Speaker 5: this reflects the difficulty of keeping up with this innovative

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Speaker 5: technology and understanding exactly what's going on. And we were

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Speaker 5: very careful at first. We didn't crush it right from

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Speaker 5: the beginning because we just wanted to see how it

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Speaker 5: would evolve, and over time with experience, we now understand

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Speaker 5: there are some real problems in dangers. There have not

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Speaker 5: been a whole lot of useful applications of crypto that

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Speaker 5: we know of, other than its use as a currency

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Speaker 5: to make transfers of money that would not be permitted

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Speaker 5: under other federal regulations like banking law, and that's sort

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Speaker 5: of the main thing that it has been used for.

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Speaker 5: So I think that you know, the questions do reflect

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Speaker 5: a general frustration at the SEC, and maybe you know

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Speaker 5: the reality, I think that the SEC is not interested

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Speaker 5: in creating an easy path for these crypto firms to flourish.

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Speaker 5: I think that is probably accurate.

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Speaker 1: So do you think that that's the reason why they're

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Speaker 1: not making rules, because it seems pretty clear under Gary

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Speaker 1: Gensler that they consider digital assets as securities.

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Speaker 5: It's complicated. I think that there are a lot of

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Speaker 5: really difficult issues here, and there are no clear answers

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Speaker 5: as to what sorts of regulations you would pass, and

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Speaker 5: a lot of the sort of issue of whether a

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Speaker 5: digital asset is a security or not is very fact

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Speaker 5: intensive so you know, to give an example, sometimes crypto

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Speaker 5: is purchased for consumptive reasons. I want this digital coin

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Speaker 5: because it gives me access to this service. Sometimes it's

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Speaker 5: purchased because I want to make money, because I'm speculating,

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Speaker 5: I'm investing in this network. And if it's investment, it's

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Speaker 5: more likely to be a security. If it's more for

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Speaker 5: consumptive means, then that's less likely to be a security.

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Speaker 5: How do you write a rule that tells us when

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Speaker 5: something is more of a consumptive purchase in something that

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Speaker 5: is for investment. It is very difficult to do so,

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Speaker 5: and you know that I think is part of the

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Speaker 5: reason why the SEC is wary about getting into this

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Speaker 5: process of trying to draw these distinctions. It would much

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Speaker 5: rather look at these situations case by case and bring

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Speaker 5: an enforcement action and maybe litigate it before a judge,

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Speaker 5: as opposed to trying to answer some you know, questions

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Speaker 5: that may not be answerable. And I think that's a

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Speaker 5: reason why they are not essentially writing these rules. And

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Speaker 5: I do think that FTX and the Crypto winter, as

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Speaker 5: they say, is something that has really affected the SEC's

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Speaker 5: view of crypto. And if you write rules that permit

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Speaker 5: crypto firms to sell widely to the public and there

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Speaker 5: are significant frauds, then the SEC will get blamed for

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Speaker 5: that too, So it may not be in their interest

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Speaker 5: to go forward with extensive rules.

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Speaker 1: So at one point, one of the judges said to

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Speaker 1: Coinbase's attorney, well, what rule would we tell them to make?

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Speaker 1: I mean, do they have to say specifically or just

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Speaker 1: say SEC engage in rule making on crypto.

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Speaker 5: Well, I don't think the Third Circuit at this stage

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Speaker 5: would order the SDC to engage in rule making. I

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Speaker 5: think probably the best possible result for Coinbase, which I

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Speaker 5: think is feasible, is that the Third Circuit will say

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Speaker 5: that your denial was arbitrary and capricious because it didn't

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Speaker 5: explain enough as to why you are not making rules.

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Speaker 5: And so I think the SEC will still get a chance,

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Speaker 5: even if it loses this case, to articulate the reasons

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Speaker 5: for denying coinbases petition. But I think just the procedural

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Speaker 5: setting of this particular appeal is not one where even

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Speaker 5: if the SEC loses, they're going to be writing rules

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Speaker 5: on crypto, you know, a month after the decision comes out.

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Speaker 5: I think what happened is that they would look at

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Speaker 5: the petition again and they might deny it again but

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Speaker 5: give more extensive reasons. That's one possibility. On the other end,

440
00:24:10,119 --> 00:24:12,600
Speaker 5: maybe they will change their mind. It's certainly possible that

441
00:24:12,640 --> 00:24:14,560
Speaker 5: they could change their mind and say, hey, we will

442
00:24:14,560 --> 00:24:17,240
Speaker 5: write rules. But I would be surprised if they did that.

443
00:24:17,440 --> 00:24:22,040
Speaker 5: So we're a long ways from the SEC being required

444
00:24:22,119 --> 00:24:25,359
Speaker 5: to write rules relating to crypto and.

445
00:24:25,280 --> 00:24:28,960
Speaker 1: So we'll keep seeing this being litigated, especially at the

446
00:24:29,000 --> 00:24:32,919
Speaker 1: district court level. Thanks so much, Jim. That's Professor James

447
00:24:32,960 --> 00:24:36,720
Speaker 1: Park of UCLA Law School. Coming up next, Jay and

448
00:24:36,840 --> 00:24:40,879
Speaker 1: Jay tries bankruptcy for a third time. I'm June Grosse.

449
00:24:40,960 --> 00:24:44,960
Speaker 1: When you're listening to Bloomberg. Johnson and Johnson first file

450
00:24:45,040 --> 00:24:49,600
Speaker 1: for bankruptcy in North Carolina, then in New Jersey. Both

451
00:24:49,720 --> 00:24:53,720
Speaker 1: cases were dismissed. Will the third time in Texas be

452
00:24:53,840 --> 00:24:57,200
Speaker 1: the charm? Jay and Jay is trying to resolve tens

453
00:24:57,200 --> 00:25:00,600
Speaker 1: of thousands of lawsuits that allege it's t HEUK based

454
00:25:00,640 --> 00:25:04,000
Speaker 1: baby powder caused cancer, and it says it has the

455
00:25:04,000 --> 00:25:07,800
Speaker 1: support of eighty three percent of claimants for a roughly

456
00:25:07,960 --> 00:25:12,040
Speaker 1: eight billion dollar settlement, but lawyers for claimants who oppose

457
00:25:12,119 --> 00:25:17,119
Speaker 1: the settlement are asking Houston bankruptcy judge Christopher Lopez to

458
00:25:17,240 --> 00:25:20,480
Speaker 1: transfer the case back to New Jersey. Joining me is

459
00:25:20,520 --> 00:25:24,240
Speaker 1: Anthony Casey, a business and corporate bankruptcy professor at the

460
00:25:24,359 --> 00:25:28,200
Speaker 1: University of Chicago Law School. Tony tell us why Jay

461
00:25:28,200 --> 00:25:31,480
Speaker 1: and Jay ran into trouble with its bankruptcies.

462
00:25:32,000 --> 00:25:36,400
Speaker 3: So this goes back to twenty twenty one. Johnson and Johnson,

463
00:25:37,040 --> 00:25:41,600
Speaker 3: their consumer subsidiary, had been the defendant in suits alleging

464
00:25:41,840 --> 00:25:46,800
Speaker 3: ovarian cancers Theliomo being caused by mostly their baby products line,

465
00:25:46,840 --> 00:25:49,639
Speaker 3: although there's some other products involved containing calc and so

466
00:25:50,040 --> 00:25:53,760
Speaker 3: there was a bad judgment around that time, and this

467
00:25:53,960 --> 00:25:57,560
Speaker 3: leads to the decision in twenty twenty one to file

468
00:25:57,920 --> 00:26:00,680
Speaker 3: an entity into bankruptcy. And this is and people start

469
00:26:00,680 --> 00:26:03,159
Speaker 3: talking about the Texas two step. Now, the allegation is

470
00:26:03,160 --> 00:26:07,080
Speaker 3: that there's asbestos in the product, and so what they

471
00:26:07,119 --> 00:26:09,920
Speaker 3: looked to as a precedent where a few other companies

472
00:26:09,920 --> 00:26:13,520
Speaker 3: had filed what had become majoratively known is Texas two steps.

473
00:26:13,720 --> 00:26:16,800
Speaker 3: The idea of the Texas two step is step one.

474
00:26:17,400 --> 00:26:22,199
Speaker 3: You divide the defendant entity into two entities, one that

475
00:26:22,320 --> 00:26:25,719
Speaker 3: houses the kind of ongoing business and one that houses

476
00:26:25,760 --> 00:26:30,760
Speaker 3: the liabilities. Step two, you put the liability company into bankruptcy,

477
00:26:30,760 --> 00:26:33,320
Speaker 3: and if you describe it that way, a lot of

478
00:26:33,359 --> 00:26:35,159
Speaker 3: people get worked up and say, oh, look, that's a

479
00:26:35,200 --> 00:26:38,280
Speaker 3: fraud and transfer. Everyone kind of skips over. There's an

480
00:26:38,280 --> 00:26:41,880
Speaker 3: intermediate step, which is you also include a funding agreement,

481
00:26:41,920 --> 00:26:45,480
Speaker 3: and the funding agreement says when the entity goes into bankruptcy,

482
00:26:45,720 --> 00:26:49,600
Speaker 3: the new asset company guarantees to make available the value

483
00:26:49,600 --> 00:26:53,080
Speaker 3: of the assets that were available before the division. They said.

484
00:26:53,080 --> 00:26:55,720
Speaker 3: This kind of majorably became known as the Texas two step.

485
00:26:55,880 --> 00:26:58,400
Speaker 3: Where did that come from? Well, the statute under which

486
00:26:58,440 --> 00:27:00,560
Speaker 3: you divide the company in the first step is a

487
00:27:00,640 --> 00:27:05,639
Speaker 3: Texas divisional merger statute. So Johnson and Johnson, really Johnson

488
00:27:05,640 --> 00:27:09,920
Speaker 3: and Johnson Consumer NK JJCI was called that company does

489
00:27:10,000 --> 00:27:13,919
Speaker 3: the divisional merger creates the new JJCI and the LTL

490
00:27:14,560 --> 00:27:18,520
Speaker 3: LTL files in the Western District of North Carolina. There's

491
00:27:18,560 --> 00:27:21,760
Speaker 3: a funding agreement that says all of the assets that

492
00:27:21,800 --> 00:27:25,639
Speaker 3: were available before the division are still available, the value

493
00:27:25,680 --> 00:27:28,960
Speaker 3: of those are available and guaranteed for whatever liabilities end up,

494
00:27:29,040 --> 00:27:32,360
Speaker 3: and in case those assets lose value, the parent company

495
00:27:32,440 --> 00:27:36,000
Speaker 3: J and J guarantees to make good on any change

496
00:27:36,040 --> 00:27:38,680
Speaker 3: in value. That was bankruptcy number one.

497
00:27:39,320 --> 00:27:43,400
Speaker 1: So that was transferred to New Jersey, where the bankruptcy

498
00:27:43,520 --> 00:27:47,399
Speaker 1: judge refused to dismiss the case, but tell us what

499
00:27:47,480 --> 00:27:50,000
Speaker 1: happened When that was appeal to the Third Circuit.

500
00:27:50,320 --> 00:27:54,879
Speaker 3: The Third Circuit says, no, you should have dismissed the case.

501
00:27:55,600 --> 00:27:58,760
Speaker 3: Nothing to do with the Texas two step other than

502
00:27:59,040 --> 00:28:02,840
Speaker 3: the funding agreement provided value. And the Third Circuit says,

503
00:28:02,880 --> 00:28:05,760
Speaker 3: there's too much money available here for you to claim

504
00:28:05,760 --> 00:28:08,800
Speaker 3: that you need to be in bankruptcy. You're too solvent,

505
00:28:08,920 --> 00:28:12,960
Speaker 3: you're not in immediate financial distress. So that case gets dismissed.

506
00:28:13,000 --> 00:28:16,760
Speaker 3: A couple hours after the dismissal becomes effective, you have

507
00:28:17,080 --> 00:28:20,560
Speaker 3: attempt to and a file bankruptcy again, and this time

508
00:28:20,680 --> 00:28:22,880
Speaker 3: in the district of New Jersey. So what they do

509
00:28:23,280 --> 00:28:26,800
Speaker 3: following kind of the logic of that Third Circuit opinion

510
00:28:27,119 --> 00:28:30,240
Speaker 3: is they reduce the amount of money available, but they

511
00:28:30,280 --> 00:28:32,840
Speaker 3: maintain enough so that we're still a solvent entity so

512
00:28:32,880 --> 00:28:35,360
Speaker 3: that we're not going to underpay creditors. Is the way

513
00:28:35,400 --> 00:28:38,200
Speaker 3: that they the second letter framed it, and they file

514
00:28:38,280 --> 00:28:41,280
Speaker 3: bankruptcy again, and this time in the District of New Jersey.

515
00:28:41,440 --> 00:28:44,239
Speaker 3: This time the bankruptcy judge says, well, i'm looking at

516
00:28:44,240 --> 00:28:46,840
Speaker 3: the opinion before I'm looking at what you did. There's

517
00:28:46,880 --> 00:28:51,040
Speaker 3: still enough money available that you're not close enough to

518
00:28:51,080 --> 00:28:53,840
Speaker 3: financial distress, So I'm going to have to dismiss this case.

519
00:28:54,120 --> 00:28:56,800
Speaker 3: That goes on appeal to the Third Circuit. The Third

520
00:28:56,800 --> 00:28:57,960
Speaker 3: Circuit says that's right.

521
00:28:58,160 --> 00:29:04,560
Speaker 1: Affirms filed the next bankruptcy outside the third Circuit, which

522
00:29:04,600 --> 00:29:08,040
Speaker 1: is the only circuit that has that financial distress rule,

523
00:29:08,600 --> 00:29:10,959
Speaker 1: and also changed its strategy.

524
00:29:11,360 --> 00:29:16,320
Speaker 3: So in the third round, Johnson and Johnson's announced, rather

525
00:29:16,400 --> 00:29:19,479
Speaker 3: than file bankruptcy and then see what happens, we're going

526
00:29:19,560 --> 00:29:22,400
Speaker 3: to get the vote first. We're going to go out

527
00:29:22,600 --> 00:29:25,719
Speaker 3: to all the claimants and try to build a settlement. Now,

528
00:29:25,760 --> 00:29:27,560
Speaker 3: the goal of the first two bankruptcies was to be

529
00:29:27,640 --> 00:29:30,120
Speaker 3: in bankruptcy and then build a settlement that creates a

530
00:29:30,160 --> 00:29:34,800
Speaker 3: fund that allows claimants both past and future to come

531
00:29:34,840 --> 00:29:37,360
Speaker 3: and collect against that fund. This time around, they're like, well,

532
00:29:37,440 --> 00:29:39,760
Speaker 3: let's get everyone on board on the fund first. So

533
00:29:39,800 --> 00:29:42,240
Speaker 3: they do what it's called a prepackaged bankruptcy. So we're

534
00:29:42,240 --> 00:29:44,840
Speaker 3: going to get a vote of all the potential claimants

535
00:29:44,960 --> 00:29:47,040
Speaker 3: and we've got to get a supermajority to get a

536
00:29:47,080 --> 00:29:50,880
Speaker 3: settlement through. Now, during that time, they apparently determined that

537
00:29:51,160 --> 00:29:54,640
Speaker 3: they were going to use bankruptcy to settle the ovarian

538
00:29:54,720 --> 00:29:58,000
Speaker 3: cancer tout claims, but not them as athelioma claim so

539
00:29:58,040 --> 00:30:01,000
Speaker 3: they separate those off. We have a vote among the

540
00:30:01,080 --> 00:30:04,880
Speaker 3: ovarian cancer claimants over the summer, and they now say

541
00:30:04,920 --> 00:30:08,280
Speaker 3: they have roughly eighty three percent of the potential claimants

542
00:30:08,520 --> 00:30:11,960
Speaker 3: voting for a settlement, and the settlement was kind of

543
00:30:12,040 --> 00:30:14,120
Speaker 3: laid out here. If you vote for this, here's the

544
00:30:14,160 --> 00:30:17,240
Speaker 3: plan we're going to put before the bankruptcy court while

545
00:30:17,320 --> 00:30:19,720
Speaker 3: a vote when we go in Are you on board

546
00:30:19,720 --> 00:30:23,320
Speaker 3: with this? So what they did then was another divisional merger,

547
00:30:23,640 --> 00:30:26,560
Speaker 3: a file in Texas, this time with the vote in place,

548
00:30:26,840 --> 00:30:30,040
Speaker 3: the plan drafted in line, hoping to get the kind

549
00:30:30,040 --> 00:30:32,560
Speaker 3: of approval through the Texas Bankruptcy Court.

550
00:30:32,720 --> 00:30:36,600
Speaker 1: So the opponents of this, some of the lawyers representing claimants,

551
00:30:37,120 --> 00:30:40,520
Speaker 1: say that JJ is trying to game the system because

552
00:30:40,520 --> 00:30:44,280
Speaker 1: it's trying to get bankruptcy protections that are meant for

553
00:30:44,400 --> 00:30:47,520
Speaker 1: companies that can afford to pay their debts. Do you

554
00:30:47,520 --> 00:30:48,120
Speaker 1: agree with that?

555
00:30:48,320 --> 00:30:48,920
Speaker 7: I mean no.

556
00:30:49,280 --> 00:30:52,160
Speaker 3: So this has been the debate from the beginning with

557
00:30:52,480 --> 00:30:55,720
Speaker 3: the question of whether or not bankruptcy is the right

558
00:30:55,760 --> 00:30:58,480
Speaker 3: place for mass tort claims to be resolved, whether or

559
00:30:58,520 --> 00:31:01,960
Speaker 3: not the Texas two step is a positive or negative. Now,

560
00:31:02,160 --> 00:31:05,200
Speaker 3: one thing to note is that Chapter eleven corporate bankruptcy

561
00:31:05,360 --> 00:31:10,000
Speaker 3: has always been a tool for resolving collective action problems

562
00:31:10,040 --> 00:31:13,960
Speaker 3: among creditors where their actions could destroy value. And the

563
00:31:14,120 --> 00:31:16,960
Speaker 3: way that they can destroy value is you ultimately get

564
00:31:16,960 --> 00:31:19,280
Speaker 3: a race to the courthouse. And so if you think

565
00:31:19,320 --> 00:31:22,000
Speaker 3: about any of these mass work cases, you've got tens

566
00:31:22,000 --> 00:31:24,320
Speaker 3: of thousands of claimants. Some of them are going to

567
00:31:24,400 --> 00:31:26,560
Speaker 3: get a zero recovery, some of them are going to

568
00:31:26,600 --> 00:31:29,640
Speaker 3: get a billion dollar recovery. And what happens is that

569
00:31:29,760 --> 00:31:33,120
Speaker 3: we don't know when these claims, particularly asbestos, will end,

570
00:31:33,200 --> 00:31:36,320
Speaker 3: because asbestos shows up years later, and so you have

571
00:31:36,360 --> 00:31:40,760
Speaker 3: a decade long future of litigation that's costing. You know,

572
00:31:40,760 --> 00:31:42,240
Speaker 3: at one point, I think they said it was costing

573
00:31:42,280 --> 00:31:44,520
Speaker 3: a billion dollars a year to litigate these cases, and

574
00:31:44,560 --> 00:31:48,640
Speaker 3: that's destroying value. Now, the third circuitance first opinion said, look,

575
00:31:48,760 --> 00:31:51,200
Speaker 3: you're Johnson and Johnson. There's enough money for this to

576
00:31:51,240 --> 00:31:54,880
Speaker 3: go on for quite some time without it causing any problem. Now,

577
00:31:55,080 --> 00:31:57,000
Speaker 3: that won't always be true, right if you have one

578
00:31:57,040 --> 00:32:00,440
Speaker 3: hundred thousand claims that are worth millions of dollars each,

579
00:32:00,520 --> 00:32:03,040
Speaker 3: deble bankrupt any company in the world. And what's really

580
00:32:03,080 --> 00:32:06,920
Speaker 3: going on is stakeholders are losing value in the current

581
00:32:07,080 --> 00:32:10,960
Speaker 3: world because there's just endless litigation. If money runs out,

582
00:32:11,280 --> 00:32:14,000
Speaker 3: it'll be the case that the first to come win

583
00:32:14,280 --> 00:32:18,120
Speaker 3: and the later to come lose. And bankruptcy has the

584
00:32:18,120 --> 00:32:21,640
Speaker 3: only mechanism in our legal system that can get parties

585
00:32:21,720 --> 00:32:25,320
Speaker 3: to a global resolution that says, here's the money available,

586
00:32:25,880 --> 00:32:29,720
Speaker 3: let's stop destroying value. And that benefits the debtor, but

587
00:32:29,760 --> 00:32:32,680
Speaker 3: it also benefits the creditors because it gets the money

588
00:32:32,800 --> 00:32:36,400
Speaker 3: put aside and available sooner rather than later. So, if

589
00:32:36,440 --> 00:32:39,720
Speaker 3: you're one of the current eighty thousand claimants or so,

590
00:32:40,280 --> 00:32:42,640
Speaker 3: when is your trial going to happen? When is your

591
00:32:42,680 --> 00:32:45,080
Speaker 3: settlement going to happen? Outside of bankruptcy? And if you're

592
00:32:45,120 --> 00:32:47,240
Speaker 3: someone who doesn't even know that they're sick yet, you know,

593
00:32:47,400 --> 00:32:50,280
Speaker 3: the timing of when the value gets put aside for

594
00:32:50,320 --> 00:32:54,200
Speaker 3: you is years or decades away. So bankruptcy, the way

595
00:32:54,240 --> 00:32:56,800
Speaker 3: I look at it, is intended to solve those kinds

596
00:32:56,800 --> 00:32:57,400
Speaker 3: of problems.

597
00:32:57,480 --> 00:33:01,520
Speaker 1: The attorneys for the tel claimants who oppose the latest

598
00:33:01,800 --> 00:33:05,720
Speaker 1: settlement proposal are trying to get it transferred out of Texas,

599
00:33:06,200 --> 00:33:10,520
Speaker 1: and the Justice Department's Bankruptcy monitor of the US Trustees

600
00:33:10,680 --> 00:33:14,720
Speaker 1: Office had filed in New Jersey to get it transferred

601
00:33:14,840 --> 00:33:15,160
Speaker 1: to that.

602
00:33:15,240 --> 00:33:18,920
Speaker 3: State, and that already failed. Right, so the New Jersey motion,

603
00:33:19,520 --> 00:33:22,880
Speaker 3: I didn't quite understand why you're trying to file it there.

604
00:33:22,960 --> 00:33:26,360
Speaker 3: There's lots of legal problems with trying to get the

605
00:33:26,400 --> 00:33:31,360
Speaker 3: New Jersey court to take the case from Texas. Partly,

606
00:33:31,680 --> 00:33:34,440
Speaker 3: there is a bankruptcy rule that says if a debtor

607
00:33:34,480 --> 00:33:38,240
Speaker 3: with a pending case files it somewhere else, the court

608
00:33:38,240 --> 00:33:40,440
Speaker 3: with the pending petition can bring it in. But the

609
00:33:40,480 --> 00:33:43,320
Speaker 3: New Jersey court dismissed the case. Right, there's no petition

610
00:33:43,360 --> 00:33:46,400
Speaker 3: pending there, So one, it's not clear the court could

611
00:33:46,440 --> 00:33:49,760
Speaker 3: take it. But two, the court had the discretion not to,

612
00:33:50,040 --> 00:33:53,080
Speaker 3: and it already denied that motion saying, you know, for now,

613
00:33:53,080 --> 00:33:55,160
Speaker 3: I'm not taking the case, okay. So then the right

614
00:33:55,200 --> 00:33:57,680
Speaker 3: place to bring a venue transfer motion is in the

615
00:33:57,720 --> 00:33:59,920
Speaker 3: court where the case that you want transferred is penn

616
00:34:00,360 --> 00:34:03,280
Speaker 3: That's what the statute says. That would be the Texas court,

617
00:34:03,520 --> 00:34:06,400
Speaker 3: But what's the argument for transferring it? So where should

618
00:34:06,400 --> 00:34:09,600
Speaker 3: this case be? The New Jersey case has been dismissed.

619
00:34:09,840 --> 00:34:13,560
Speaker 3: Texas actually is the first and obvious place to file

620
00:34:14,040 --> 00:34:18,160
Speaker 3: for a company that has used the Texas Statute to

621
00:34:18,200 --> 00:34:21,400
Speaker 3: structure itself in this way where we simplify the bankruptcy

622
00:34:21,480 --> 00:34:25,719
Speaker 3: and think about it the simplification, the mesothelioma claimants aren't

623
00:34:25,800 --> 00:34:29,960
Speaker 3: voting for a bankruptcy settlement. The ovarian claimants are, and

624
00:34:30,160 --> 00:34:33,360
Speaker 3: so the value of the separation, just to use an example,

625
00:34:33,440 --> 00:34:36,080
Speaker 3: is we're going to put the ovarian claimants into the

626
00:34:36,080 --> 00:34:39,319
Speaker 3: bankruptcy process, which overwhelming they voted in favor of, and

627
00:34:39,320 --> 00:34:41,839
Speaker 3: we're not going to put the mesothelial my claimants. We're

628
00:34:41,840 --> 00:34:44,239
Speaker 3: also not going to put all the other creditors of

629
00:34:44,280 --> 00:34:47,279
Speaker 3: the operations of the business. We're not going to have

630
00:34:47,400 --> 00:34:49,640
Speaker 3: them subject to the bankruptcy and we're not going to

631
00:34:49,680 --> 00:34:52,400
Speaker 3: have them able to step in and make objections. So

632
00:34:52,440 --> 00:34:55,239
Speaker 3: we're really simplifying so that the only way that a

633
00:34:55,440 --> 00:34:59,719
Speaker 3: plan gets confirmed in the Texas bankruptcy is if there

634
00:34:59,800 --> 00:35:02,640
Speaker 3: is a valid vote of a supermajority of these claimants.

635
00:35:02,800 --> 00:35:05,880
Speaker 3: No one else can affect that. It's really just about

636
00:35:05,920 --> 00:35:09,120
Speaker 3: whether or not they want this settlement, and that's the

637
00:35:09,120 --> 00:35:12,360
Speaker 3: simplification that the Texas two step allows.

638
00:35:13,160 --> 00:35:15,879
Speaker 1: I can understand why the lawyers who want to try

639
00:35:15,920 --> 00:35:20,319
Speaker 1: their cases want the bankruptcy case moved out of Texas,

640
00:35:20,680 --> 00:35:24,680
Speaker 1: but why the bankruptcy trustee want it moved to New Jersey.

641
00:35:24,840 --> 00:35:29,240
Speaker 3: So I think the Trustees Office has taken a negative

642
00:35:29,320 --> 00:35:34,759
Speaker 3: view of a lot of the mass TOWRT bankruptcy structures.

643
00:35:34,920 --> 00:35:37,400
Speaker 3: Maybe there is a view that you need to truly

644
00:35:37,440 --> 00:35:40,440
Speaker 3: be insolvent, you know, this is partly why they appealed

645
00:35:40,560 --> 00:35:43,239
Speaker 3: to the Supreme Court in the Purdue case. They had

646
00:35:43,239 --> 00:35:45,799
Speaker 3: a policy view that you're not supposed to use third

647
00:35:45,800 --> 00:35:49,280
Speaker 3: party releases in master bankruptcy cases. I'm a little surprised

648
00:35:49,320 --> 00:35:51,920
Speaker 3: in their motion in New Jersey because the office tends

649
00:35:51,920 --> 00:35:54,520
Speaker 3: to be kind of textualless and formalists, and if you

650
00:35:54,560 --> 00:35:56,759
Speaker 3: look at the rule, I don't see how the New

651
00:35:56,840 --> 00:35:59,600
Speaker 3: Jersey Court had the power, and so they were asking

652
00:35:59,640 --> 00:36:02,480
Speaker 3: it to do something I think that would be not

653
00:36:02,640 --> 00:36:05,040
Speaker 3: formalist beyond the power of the statute, which is not

654
00:36:05,120 --> 00:36:06,960
Speaker 3: the way I normally think of their positions.

655
00:36:07,120 --> 00:36:07,799
Speaker 7: That said, I.

656
00:36:07,840 --> 00:36:10,840
Speaker 3: Think that they view themselves as the watchdog of bankruptcy process,

657
00:36:10,840 --> 00:36:13,000
Speaker 3: which I think is a good thing. But they have

658
00:36:13,040 --> 00:36:16,160
Speaker 3: a view that what large companies are doing to reach

659
00:36:16,239 --> 00:36:19,640
Speaker 3: mass towards settlements and bankruptcy is problematic. I think that's

660
00:36:19,640 --> 00:36:23,200
Speaker 3: an incorrect view, but I think that's what's driving this.

661
00:36:23,800 --> 00:36:27,040
Speaker 3: Their views are put out there even when they conflict

662
00:36:27,080 --> 00:36:29,200
Speaker 3: with the majority views of the claimants. And that was

663
00:36:29,200 --> 00:36:31,520
Speaker 3: true in Purdue for sure, and it seems to be

664
00:36:31,600 --> 00:36:34,000
Speaker 3: true here as well. They're just like, but this is

665
00:36:34,080 --> 00:36:35,960
Speaker 3: the way it should be done, and that's why they

666
00:36:36,040 --> 00:36:38,200
Speaker 3: want it in New Jersey. Means the claimants are everywhere,

667
00:36:38,239 --> 00:36:40,800
Speaker 3: so it's not clear, like why New Jersey is better

668
00:36:40,840 --> 00:36:43,600
Speaker 3: for a claimant than anywhere else. Now, maybe their view

669
00:36:43,719 --> 00:36:46,480
Speaker 3: is you've already been dismissed in New Jersey. You should

670
00:36:46,640 --> 00:36:50,520
Speaker 3: stay there. You shouldn't be able to try to change things. Companies,

671
00:36:50,800 --> 00:36:53,480
Speaker 3: circumstances change over time. So how long do they think

672
00:36:53,520 --> 00:36:56,160
Speaker 3: they're bound by the fact that they had a ruling

673
00:36:56,160 --> 00:36:58,440
Speaker 3: in one court at one time? Like, are they bound

674
00:36:58,480 --> 00:37:01,359
Speaker 3: into infinity to never find anywhere ever? Again? That can't

675
00:37:01,360 --> 00:37:03,719
Speaker 3: be right. So I'm not totally sure the theory that

676
00:37:03,760 --> 00:37:06,480
Speaker 3: the Trustee's office has, but it seems to be that

677
00:37:06,560 --> 00:37:08,960
Speaker 3: they don't like what's going on in a kind of

678
00:37:09,120 --> 00:37:09,920
Speaker 3: a vague.

679
00:37:09,640 --> 00:37:14,200
Speaker 1: Sense, and there'll be basically nothing going on until October eleventh,

680
00:37:14,280 --> 00:37:17,760
Speaker 1: while Judge Lopez considers whether the bankruptcy will move forward

681
00:37:18,080 --> 00:37:21,480
Speaker 1: in Houston. Thanks Tony Best, Professor Anthony Casey of the

682
00:37:21,560 --> 00:37:24,680
Speaker 1: University of Chicago Law School, and that's it for this

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00:37:24,840 --> 00:37:27,960
Speaker 1: edition of the Bloomberg Law Podcast. Remember you can always

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00:37:27,960 --> 00:37:30,719
Speaker 1: get the latest legal news by subscribing and listening to

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00:37:30,760 --> 00:37:34,920
Speaker 1: the show on Apple Podcasts, Spotify, and at Bloomberg dot com,

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00:37:34,960 --> 00:37:39,200
Speaker 1: Slash podcast, Slash Law. I'm June Grosso and this is

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00:37:39,239 --> 00:37:39,799
Speaker 1: Bloomberg