WEBVTT - 3M, Drug Pricing, Google and Other Catalysts 0:00:10.920 --> 0:00:14.520 Hello, and welcome to the Votes and Verdict podcast, hosted 0:00:14.560 --> 0:00:18.000 by the Litigation and Policy team at Bloomberg Intelligence, the 0:00:18.000 --> 0:00:23.520 investment research platform of Bloomberg LP. This podcast series examines 0:00:23.560 --> 0:00:27.360 the intersection of business policy and law, and today we'll 0:00:27.360 --> 0:00:30.320 be looking at the litigation and policy catalysts that we're 0:00:30.360 --> 0:00:33.519 watching in September twenty twenty three and that we think 0:00:33.560 --> 0:00:37.680 will impact companies across a number of different sectors. My 0:00:37.800 --> 0:00:41.520 name is Elliot Stein. I'm a senior litigation analyst covering 0:00:41.600 --> 0:00:45.000 litigation in the financial sector, and I'll be your host 0:00:45.040 --> 0:00:48.800 for today, August twenty ninth, twenty twenty three. If you 0:00:48.840 --> 0:00:51.160 have any questions about any of the matters that we're 0:00:51.200 --> 0:00:54.840 discussing on this episode, please don't hesitate to reach out 0:00:54.880 --> 0:00:59.080 to us at your convenience with questions. So we'll be 0:00:59.160 --> 0:01:03.320 discussing a hand full of sectors today. First, Jenrie, our 0:01:03.440 --> 0:01:07.000 senior anti trust analyst, will pleave you a pair of 0:01:07.360 --> 0:01:11.240 upcoming trials. First, you'll look at the Justice Department's trial 0:01:11.319 --> 0:01:16.160 against Google over its search business that starts September twelfth, 0:01:16.360 --> 0:01:19.399 happens to be my birthday, and so also look at 0:01:19.440 --> 0:01:22.080 a trial schedule to start the next day in the 0:01:22.160 --> 0:01:26.720 FTC's challenge to amjen Horizon m and A, though that 0:01:26.840 --> 0:01:32.600 case could settle before the trial even starts. Sticking with healthcare, 0:01:32.760 --> 0:01:36.679 Dwyane Wright, our senior healthcare policy analyst, will give us 0:01:36.720 --> 0:01:39.440 his thoughts on the government releasing a list of ten 0:01:39.560 --> 0:01:42.920 Medicare Part D drugs that will be subject to government 0:01:42.959 --> 0:01:46.959 price cuts under the Inflation Reduction Act. We'll then turn 0:01:47.040 --> 0:01:49.280 back to tech and we'll bring in Matt Shettenhelm, who 0:01:49.280 --> 0:01:53.840 covers TMT policy and litigation, and he'll be discussing an 0:01:53.880 --> 0:01:58.160 appeals court decision that he expects soon concerning whether New 0:01:58.200 --> 0:02:02.360 York can set its own broad Bay and rates. Holly Frome, 0:02:02.400 --> 0:02:06.680 who covers litigation and policy in the industrial sector, anticipates 0:02:06.720 --> 0:02:11.519 preliminary approval of three m's twelve point five billion dollars 0:02:11.600 --> 0:02:15.919 settlement in Pfast litigation, and she also expects an appeals 0:02:15.960 --> 0:02:21.160 court decision in three M Earplug litigation, though a pending 0:02:21.240 --> 0:02:25.320 settlement there could moot the appeals court ruling. We'll then 0:02:25.400 --> 0:02:28.119 turn to financials and we'll bring in Nathan Dean, our 0:02:28.200 --> 0:02:32.320 senior financials policy analyst, to discuss an SEC rule that 0:02:32.400 --> 0:02:36.280 was finalized last week that will require more disclosure from 0:02:36.360 --> 0:02:41.639 private funds. Nathan will also discuss President Biden's recent executive 0:02:41.760 --> 0:02:46.280 order that aims to curb investments in certain Chinese industries, 0:02:47.240 --> 0:02:50.640 and then sticking with financials some more, I'll close it 0:02:50.680 --> 0:02:54.240 out with some discussion of an upcoming oral argument in 0:02:54.280 --> 0:02:59.240 one of the remaining cases challenging the profit sweep of 0:02:59.320 --> 0:03:03.720 Fanny Freddie profits to the US Treasury. All of this 0:03:03.800 --> 0:03:07.840 research is available on the Bloomberg terminal at BI go 0:03:08.800 --> 0:03:11.520 And just a quick word about Bloomberg Intelligence for those 0:03:11.520 --> 0:03:14.840 who don't know. We are the investment research platform on 0:03:14.960 --> 0:03:19.360 the Bloomberg terminal, providing in depth research on industries, companies, 0:03:19.400 --> 0:03:22.960 and markets and deliverying key data from BI analysts in 0:03:23.000 --> 0:03:25.960 their given industries. All right, So with all that out 0:03:26.000 --> 0:03:29.360 of the way, let's get started with the actual content. Jen, 0:03:29.520 --> 0:03:32.520 Let's bring you in first to talk antitrust. I know 0:03:32.560 --> 0:03:34.800 you have a super busy fall with a lot of 0:03:34.840 --> 0:03:38.880 antitrust trials on deck, kicking off with this DOJ lawsuit 0:03:38.920 --> 0:03:42.680 against Google over its search business, and then the FTC 0:03:42.840 --> 0:03:45.400 has a trial against Angen and Horizon, though it looks 0:03:45.480 --> 0:03:47.480 like that case is settling. Do you want to come 0:03:47.520 --> 0:03:49.040 in and tell us about these cases. 0:03:50.280 --> 0:03:54.640 Sure, So starting with your birthday trial, Elliott, that Google trial, 0:03:55.400 --> 0:03:57.800 I think that will go forward on September twelfth. And 0:03:58.000 --> 0:04:00.720 this is a lawsuit in which the Department of Justice 0:04:00.760 --> 0:04:03.000 and a group of states sued Google. I'm going to 0:04:03.000 --> 0:04:05.160 call it Google because we're talking about Google Search rather 0:04:05.200 --> 0:04:09.160 than Alphabet, but it sued the company under federal monopolization 0:04:09.280 --> 0:04:12.720 laws for illegally monopolizing Internet search. Now, I always say 0:04:12.760 --> 0:04:16.039 illegally monopolized, because it's not illegal to have a monopoly position. 0:04:16.520 --> 0:04:19.279 But if a company in a monopoly position engages in 0:04:19.360 --> 0:04:22.720 conduct that excludes rivals in a way that harms competition 0:04:22.800 --> 0:04:26.280 and doesn't really have a legitimate pro competitive business justification 0:04:26.360 --> 0:04:28.640 to support it, and this is done in an effort 0:04:28.680 --> 0:04:31.200 to obtain or maintain the monopoly, well then they violated 0:04:31.240 --> 0:04:33.599 the law. And that's what the DOJ, States and states 0:04:33.600 --> 0:04:37.240 have alleged that Google does with respect to search. So 0:04:37.279 --> 0:04:39.839 how exactly does it do this? The allegation is that 0:04:39.880 --> 0:04:43.400 Google's entered multiple agreements in which it pays billions to 0:04:43.480 --> 0:04:46.600 be the default search engine on mobile and desktop devices. 0:04:46.800 --> 0:04:49.640 These are agreements with companies like Apple and OEMs and 0:04:49.680 --> 0:04:53.279 telecoms like Verizon, and the DOJ claims for years this 0:04:53.360 --> 0:04:56.359 has hampered the ability of any other search rival, like Being, 0:04:56.560 --> 0:04:59.240 for instance, to gain scale because to be a really 0:04:59.279 --> 0:05:01.560 good search engine, and the product needs data, and it 0:05:01.600 --> 0:05:03.840 gains data and learning the more searches that are done 0:05:03.880 --> 0:05:08.240 on it. So this has hampered innovation in increased advertising prices. Now, 0:05:08.279 --> 0:05:10.880 I think this is a really tricky case actually, because 0:05:10.920 --> 0:05:14.040 what the law generally holds is that a company can 0:05:14.160 --> 0:05:17.039 enter exclusive agreements with up to about forty percent of 0:05:17.040 --> 0:05:20.400 the available outlets before they've crossed the antitrust line. Because 0:05:20.440 --> 0:05:23.000 once you get tied up more than about forty percent, 0:05:23.040 --> 0:05:25.520 you really start to really foreclose the market from your 0:05:25.640 --> 0:05:28.560 rivals and they can't compete. But the issue here is 0:05:28.560 --> 0:05:32.880 that competitors aren't really foreclosed by Google's agreements because any 0:05:32.960 --> 0:05:35.240 user of any device can go in and change the 0:05:35.240 --> 0:05:37.320 default search. I'm sure some of us have done that. 0:05:37.560 --> 0:05:40.240 I know I do that, and Google hasn't done anything 0:05:40.279 --> 0:05:42.159 to prevent that. So the question here is going to 0:05:42.160 --> 0:05:44.880 be how sticky is that default position, and is this 0:05:45.000 --> 0:05:47.839 real foreclosure, and if it is, does it actually cause 0:05:47.880 --> 0:05:50.560 harm to a market? Since Google's actually quite popular in 0:05:50.600 --> 0:05:52.800 people like the product. So I think this is a 0:05:52.839 --> 0:05:55.000 really close trial because it's going to depend on what 0:05:55.040 --> 0:05:57.920 the evidence shows with respect to those two issues, and 0:05:57.960 --> 0:06:00.240 that remains to be seen. We've got one side that 0:06:00.360 --> 0:06:03.120 say they have evidence that default is sticky and meaningful, 0:06:03.400 --> 0:06:05.000 and we have the other side that says they have 0:06:05.080 --> 0:06:07.960 loads of evidence of rampant consumer switching. So we're gonna 0:06:07.960 --> 0:06:10.880 have to see what comes out at the trial. There's 0:06:10.920 --> 0:06:13.560 one fairly certain prediction I can make, though, and that 0:06:13.720 --> 0:06:15.960 is that if Google loses on liability, it's not going 0:06:16.000 --> 0:06:18.080 to be broken up. That's one of the remedies that 0:06:18.160 --> 0:06:22.000 DJ's requesting here. It is overkill and anti trust injunction 0:06:22.120 --> 0:06:24.120 has to be as nearly tailored as it can to 0:06:24.200 --> 0:06:27.760 fix and target the problem. So I think instead Google 0:06:27.800 --> 0:06:31.440 would be told something like it can't pay for default positions, 0:06:31.560 --> 0:06:33.280 or at least if it does, it has to let 0:06:33.400 --> 0:06:36.560 users know with some sort of communication that they can 0:06:36.600 --> 0:06:39.000 switch and how to do it, or something like that. 0:06:39.080 --> 0:06:42.200 I'm not really sure what it would look like, but 0:06:42.279 --> 0:06:45.360 at that point, the impact on Google will really depend 0:06:45.400 --> 0:06:48.280 on consumer behavior. And then you've got sort of chat 0:06:48.279 --> 0:06:51.080 GPT coming into the picture too that could also change 0:06:51.080 --> 0:06:53.279 a lot of things. Anyway, this trial is going to 0:06:53.279 --> 0:06:55.599 go through early November. I think it'll get a ruling 0:06:55.640 --> 0:06:58.119 in the first quarter, and I think if Google loses, 0:06:58.160 --> 0:07:01.160 it will appeal. And the other anti trust matter that's 0:07:01.200 --> 0:07:03.360 also supposed to go to trial in September, that's on 0:07:03.400 --> 0:07:06.120 the thirteenth. It may not because the settlement is in 0:07:06.200 --> 0:07:08.480 the works. I do think it's likely it's going to settle. 0:07:08.720 --> 0:07:10.400 This is a very different kind of case. It's the 0:07:10.400 --> 0:07:14.040 Federal Trade Commission's challenge to Amgen's acquisition of Horizon. These 0:07:14.080 --> 0:07:17.040 are two biopharma firms, and it's a really unusual lawsuit 0:07:17.080 --> 0:07:20.480 because usually mergers are challenged when they combine two companies 0:07:20.480 --> 0:07:24.200 that compete and the markets would become too concentrated, or 0:07:24.240 --> 0:07:26.800 the deal vertically integrates the buyer in a manner that 0:07:26.880 --> 0:07:29.760 would allow it to foreclose competitors. No merger has really 0:07:29.800 --> 0:07:32.240 been challenged for any other reason in around fifty years, 0:07:32.320 --> 0:07:34.840 but we have neither situation in this case. What the 0:07:34.880 --> 0:07:37.520 FTC says is that Amgen could harm the markets for 0:07:37.560 --> 0:07:41.160 two Horizon drugs that have monopoly position positions, one that 0:07:41.160 --> 0:07:43.480 treats thyroid die disease and one that treats chronic or 0:07:43.520 --> 0:07:47.440 factory gout because it would offer payers PBMs and insurance 0:07:47.520 --> 0:07:50.640 deep rebates for drug bundles that include Horizon drugs, and 0:07:50.680 --> 0:07:54.120 that will block potential entry of competitors to those drugs. Now, 0:07:54.160 --> 0:07:57.240 I think these allegations are really highly speculative. They assume 0:07:57.280 --> 0:08:00.320 new drugs are in development that'll get FDA approved, they'll 0:08:00.360 --> 0:08:03.200 be marketed, they assume they'll be substitutes for the Horizon drugs. 0:08:03.560 --> 0:08:06.440 The evidence doesn't really support that. It also assumes Amgen 0:08:06.480 --> 0:08:08.960 will bundle these two drugs, and it assumes if it does, 0:08:09.000 --> 0:08:13.840 it'll harm competition. So and also, by the way, there's 0:08:13.840 --> 0:08:17.560 no precedent that supports this theory except a few cases 0:08:17.560 --> 0:08:20.840 from the nineteen sixties that have since been rejected. And 0:08:20.880 --> 0:08:23.400 the last most important thing is that Amgen has promised 0:08:23.400 --> 0:08:25.760 to refrain from ever bundling the two drugs and it's 0:08:25.800 --> 0:08:28.640 willing to sign an agreement. So I give the FDC 0:08:28.840 --> 0:08:30.960 only about a five percent chance of winning if they 0:08:31.000 --> 0:08:34.400 actually go to trial here. And I think they understand 0:08:34.400 --> 0:08:36.760 that as well, because last Friday news broke that they 0:08:36.800 --> 0:08:39.920 are discussing a settlement. I suspect it'll be something in 0:08:39.960 --> 0:08:42.920 which Amgen agrees not to bundle the drugs, maybe not 0:08:42.960 --> 0:08:45.840 to bundle even other drugs that it already has, and 0:08:45.920 --> 0:08:48.400 at that point the deal will probably be able to 0:08:48.400 --> 0:08:52.280 close sometime in mid to late September, and I think 0:08:52.280 --> 0:08:54.600 that's probably the route that that will go. So with that, 0:08:54.760 --> 0:08:55.559 back to you, Elliott. 0:08:57.240 --> 0:09:00.959 Great, Thanks Jen. All Right, let's stick with healthcare and 0:09:01.000 --> 0:09:06.079 bring Dwayne in to talk drug pricing. Just this morning, 0:09:06.400 --> 0:09:10.880 the government released its initial list of ten Medicare drugs 0:09:10.880 --> 0:09:13.920 that will be subject to price negotiations under the Inflation 0:09:14.040 --> 0:09:16.560 Reduction Act. So Dwaine, you want to come in and 0:09:16.600 --> 0:09:20.480 tell us more about what happened this morning and what 0:09:20.480 --> 0:09:22.120 the process looks like going forward. 0:09:23.120 --> 0:09:26.960 Sure, thanks Elliott. This is the day that many of 0:09:27.080 --> 0:09:32.400 US health policy nerds have been waiting for, and companies 0:09:32.920 --> 0:09:37.679 manufacturers as well. Keep in mind what we're talking about. 0:09:37.720 --> 0:09:43.600 Inflation Reduction Act past last year includes three big healthcare pieces. 0:09:43.640 --> 0:09:48.440 On the prescription drug side ones the inflation rebate, capping 0:09:48.600 --> 0:09:52.480 price increases, the others a part de redesign and this 0:09:52.600 --> 0:09:58.600 piece which will set prices for those drugs that are 0:09:58.880 --> 0:10:02.560 high expenditure drugs, either those drugs with a list price 0:10:03.040 --> 0:10:06.800 but are used by a lot of people, or those 0:10:06.880 --> 0:10:10.760 drugs that have high price but maybe used by fewer people. 0:10:11.880 --> 0:10:16.120 And so the law requires CMS to look at many 0:10:16.160 --> 0:10:20.720 care spending or expenditures from June one, twenty twenty two 0:10:21.000 --> 0:10:25.959 to May thirty first of this year and come up 0:10:26.000 --> 0:10:29.920 with that list of products that are high expenditure but 0:10:29.960 --> 0:10:35.120 also don't have generic competitors, but are also so many 0:10:35.240 --> 0:10:42.120 years from FDA approval, And so CMS had until Friday, 0:10:42.160 --> 0:10:45.000 September first. They decided to go early to get as 0:10:45.080 --> 0:10:48.160 much press out of this before the Labor Day weekend. 0:10:49.000 --> 0:10:52.040 And the list itself is not a surprise, at least 0:10:52.040 --> 0:10:56.640 to us. Many of us had anticipated that Bristol Myers 0:10:56.760 --> 0:11:04.120 eloquists for blood clots, Chardians for diabetes, Genuvia also for 0:11:04.200 --> 0:11:07.280 diabetes would be on the list, largely because they have 0:11:07.480 --> 0:11:13.080 been consistently high expenditure drugs over the past couple of years. 0:11:13.920 --> 0:11:16.920 There was a bit of a surprise with Stillara from 0:11:17.120 --> 0:11:21.000 Johnson and Johnson. This is a Cronz disease crisis drug 0:11:22.040 --> 0:11:25.720 that we anticipate will have by a similar competition, but 0:11:25.840 --> 0:11:30.720 nevertheless is on the lists. So this is the first 0:11:30.760 --> 0:11:34.640 step identifying that list of drugs that will be subject 0:11:34.679 --> 0:11:41.280 to negotiations that will start October second, and this is 0:11:41.320 --> 0:11:46.240 assuming these companies agree to participate in the process. Now, 0:11:46.320 --> 0:11:50.920 if they do, this will then start a what will 0:11:51.040 --> 0:11:57.040 essentially be a eleventh month eleven month process where CMS 0:11:57.080 --> 0:12:02.920 will hold open forums or the public to participate to 0:12:02.960 --> 0:12:06.840 provide some feedback and input in terms of what the 0:12:06.840 --> 0:12:10.640 fair price should be for these drugs. CMS will have 0:12:10.920 --> 0:12:14.840 a meeting with the manufacturers of these drugs for each 0:12:14.920 --> 0:12:18.680 drug as well, and then we'll see an initial offer 0:12:18.840 --> 0:12:23.479 based on those meetings as well as other information supplied 0:12:23.559 --> 0:12:29.000 by the manufacturers and other stakeholders. We'll see that first 0:12:29.400 --> 0:12:34.280 offer from CMS February first. Manufacturers will then have an 0:12:34.280 --> 0:12:38.840 opportunity to accept the offer or counteroffer, and to the 0:12:38.840 --> 0:12:42.760 extent that there's a counter offer, we can see another 0:12:42.840 --> 0:12:50.280 two meetings between CMS and the manufacturers. This all culminates 0:12:49.240 --> 0:12:54.640 in the August first end of the negotiation process, and 0:12:54.679 --> 0:12:59.319 then September first of twenty twenty four, we'll see CMS 0:12:59.679 --> 0:13:04.120 really the quote unquote maximum fair price for these drugs, 0:13:04.120 --> 0:13:07.719 and this is again based off of conversations with manufacturers 0:13:08.760 --> 0:13:12.520 as well as other data including other types of drugs 0:13:12.520 --> 0:13:16.880 on the market, including the R and D that went 0:13:16.920 --> 0:13:19.520 into it, how much of that has been recouped, and 0:13:19.559 --> 0:13:25.760 then also the cost of manufacturing the drug. Then after 0:13:25.800 --> 0:13:29.440 that March of twenty twenty five, we'll see CMS provide 0:13:29.480 --> 0:13:33.720 their justification for the prices, and then January one, twenty 0:13:33.720 --> 0:13:39.160 twenty six, we will see these prices become effective for 0:13:39.360 --> 0:13:44.360 these drugs. So this is the first step in the process, 0:13:45.640 --> 0:13:48.000 and there's quite a few more steps to go. There's 0:13:48.040 --> 0:13:53.920 of course litigation happening while this process is unfolding, but 0:13:54.040 --> 0:13:57.960 by and large, there weren't any or should say, many 0:13:58.080 --> 0:14:01.480 surprises on this list, but it does set up a 0:14:01.840 --> 0:14:06.200 long eleven month process for CMS and rate setting. So 0:14:07.120 --> 0:14:10.000 with that, I will stop and turn it back to Elliott. 0:14:11.280 --> 0:14:14.880 Great, Thanks Dayne. All right, Matt, let's bring you in 0:14:15.040 --> 0:14:18.520 turn back to tech here. So this is an interesting 0:14:18.520 --> 0:14:20.600 issue you're going to be talking about. Can states like 0:14:20.760 --> 0:14:24.600 New York regulate broadband rates and set their own price caps? 0:14:24.920 --> 0:14:28.120 Obviously the industry is against it, and a key court 0:14:28.200 --> 0:14:30.560 ruling could provide clarity. You want to come in and 0:14:30.600 --> 0:14:31.160 tell us more. 0:14:31.040 --> 0:14:34.200 About that, Yeah, thanks Elliott. You know, from a legal 0:14:34.200 --> 0:14:39.640 and regulatory standpoint, broadband providers like Comcast and Verizon and 0:14:39.720 --> 0:14:42.840 AT and T have had a really nice five years 0:14:42.880 --> 0:14:46.120 because for a while while it looked like the federal 0:14:46.160 --> 0:14:49.400 government and the states were going to try to regulate 0:14:49.680 --> 0:14:53.800 their number one product, broadmand pretty aggressively, those efforts have 0:14:54.600 --> 0:14:58.320 mostly fizzled. At the federal level, the Trump FCC tore 0:14:58.440 --> 0:15:03.000 down its broadband rules, the Biden FCC hasn't been able 0:15:03.000 --> 0:15:05.920 to build them back up, And at the state level, 0:15:05.960 --> 0:15:08.960 things have mostly been quiet, in part because of this 0:15:09.160 --> 0:15:12.720 case which is pending at the Second Circuit about whether 0:15:12.920 --> 0:15:16.880 states like New York can step in and set the 0:15:16.920 --> 0:15:22.240 prices for broadband services now you know, and so both 0:15:22.240 --> 0:15:24.520 of those issues may be returning soon. But I'm going 0:15:24.600 --> 0:15:28.560 to focus on the state level issue because I think 0:15:28.560 --> 0:15:33.280 we could see a decision on New York's policy this month. 0:15:33.840 --> 0:15:36.320 So why does it matter? So if New York wins, 0:15:36.360 --> 0:15:39.520 it really does set an important precedent for other states 0:15:39.600 --> 0:15:43.440 that if they think of broadband providers overcharging or engaging 0:15:43.440 --> 0:15:45.880 in other practices they don't like, they can step in 0:15:45.960 --> 0:15:49.880 with their own state law mandates that could cost you know, 0:15:49.960 --> 0:15:54.240 the companies billions of dollars. Theoretically, this case is about 0:15:54.320 --> 0:15:58.880 New York setting the price of certain broadband products. And 0:15:59.440 --> 0:16:03.320 the case was argued in January, and so that means 0:16:03.360 --> 0:16:05.720 where we're some eight months later, now we're due for 0:16:05.760 --> 0:16:09.920 a decision any time. Who's favored in it. I view 0:16:09.960 --> 0:16:12.960 this as an extremely close case because it turns on 0:16:13.040 --> 0:16:17.280 a very murky legal doctrine, the idea of what's known 0:16:17.280 --> 0:16:21.680 as conflict or obstacle preemption. Preemption cases are pretty easy 0:16:21.720 --> 0:16:25.840 when the federal law is express, when it says, hey, states, 0:16:25.880 --> 0:16:28.640 you can't regulate here, that's easy for courts to deal with. 0:16:29.080 --> 0:16:31.760 This isn't one of those easy cases. It's a case 0:16:31.800 --> 0:16:35.800 of implied preemption where the federal law doesn't say states 0:16:35.840 --> 0:16:39.000 can act, but maybe it's implied because the federal law 0:16:39.120 --> 0:16:44.720 conflicts or is an obstacle to what's going on here. 0:16:44.800 --> 0:16:47.840 So in some judges are skeptical that such a thing 0:16:47.880 --> 0:16:51.080 as implied pre option exists at all. So that makes 0:16:51.120 --> 0:16:55.160 it a very close call. A Republican appointed lower court 0:16:55.240 --> 0:16:58.160 judge ruled for the companies here and block this New 0:16:58.240 --> 0:17:02.200 York law. This appeals being heard by two of three 0:17:02.720 --> 0:17:07.560 Democrat appointed judges Biden nominated judges, and for that reason, 0:17:07.640 --> 0:17:10.359 and based on the questions in January. I give a 0:17:10.359 --> 0:17:15.040 slight edge to the state to prevail here, but it's 0:17:15.160 --> 0:17:18.439 very important to watch this this play out because of 0:17:18.440 --> 0:17:21.240 the president it will set so we'll expect a decision 0:17:21.560 --> 0:17:23.919 you know, very likely in September, if not in the 0:17:23.920 --> 0:17:26.760 fourth quarter. With that, back to you, Elliott. 0:17:27.320 --> 0:17:30.280 Great, thanks Matt. All Right, Holly, let's bring you in 0:17:30.320 --> 0:17:33.080 to talk about a pair of three M cases. The 0:17:33.119 --> 0:17:36.159 first is three m's p Fast litigation, where you expect 0:17:36.240 --> 0:17:39.720 preliminary approval of a twelve point five billion dollars settlement. 0:17:40.200 --> 0:17:44.480 And the second is defective earplug litigation, which also looks 0:17:44.520 --> 0:17:46.600 to be settling, but in which you've been waiting for 0:17:46.680 --> 0:17:49.159 a key appeals court decision. Do you want to come 0:17:49.160 --> 0:17:50.800 in and tell us more about these cases? 0:17:51.280 --> 0:17:55.040 Sure, thanks Elliott. So three M proposed in June a 0:17:55.160 --> 0:17:58.159 ten to twelve point five billion dollars class deal to 0:17:58.240 --> 0:18:02.159 resolve water authority cases over alleged p Fast contamination and 0:18:02.240 --> 0:18:05.760 drinking water. The settlement would resolve all claims by water 0:18:05.800 --> 0:18:10.840 authorities that drinking water contained p Fast contamination. It provided 0:18:10.880 --> 0:18:14.400 for a roughly ten year payout. A bid for preliminary 0:18:14.440 --> 0:18:17.440 approval was filed in July, but a number of states 0:18:17.440 --> 0:18:23.119 filed emotion opposing approval or a letter opposing approval on 0:18:23.200 --> 0:18:26.600 several different grounds, which included that they felt the releases 0:18:26.600 --> 0:18:31.000 and identification obligations of water authorities were too broad. Yesterday, 0:18:31.040 --> 0:18:33.800 States filed a statement that they no longer formally opposed 0:18:33.800 --> 0:18:37.880 the deal after modifications were made. We saw something similar 0:18:37.920 --> 0:18:41.160 happen with another set of companies, Camors, DuPont and Qurteva, 0:18:41.320 --> 0:18:44.120 which were also named in lawsuits over p fast contamination. 0:18:44.640 --> 0:18:47.080 They announced a deal to resolved water authority cases for 0:18:47.160 --> 0:18:51.080 one point two billion dollars. The deal was ultimately revised 0:18:51.160 --> 0:18:56.919 after States had certain objections, and their revised deal after 0:18:57.560 --> 0:19:00.280 it was revised, was approved by the court on a 0:19:00.320 --> 0:19:04.000 relatively quick timetable. We think the same thing can happen here. 0:19:04.359 --> 0:19:07.160 We think three m's deal could obtain preliminary approval, possibly 0:19:07.160 --> 0:19:09.719 as early as three Q. And what then has to 0:19:09.760 --> 0:19:13.120 happen is notices have to be provided to potential class members. 0:19:13.520 --> 0:19:16.240 Class members who don't want to participate have to opt out, 0:19:16.280 --> 0:19:18.399 and that's when we can get an idea of how 0:19:18.440 --> 0:19:23.159 many entities decide to participate. The judge will schedule of 0:19:23.240 --> 0:19:27.520 final approval hearing objections will probably be made. We think 0:19:27.560 --> 0:19:30.600 a number of amenities will opt out, but ultimately the 0:19:30.600 --> 0:19:35.680 deal will obtain final approval and so. In other news, 0:19:36.119 --> 0:19:39.359 THREEM says it reached a six billion dollars deal to 0:19:39.440 --> 0:19:41.720 end more than two hundred and sixty thousand lawsuits over 0:19:41.800 --> 0:19:47.240 defective earplugs. We had said cases could settle for somewhere 0:19:47.320 --> 0:19:50.119 between four point five to nine point five billion, with 0:19:50.200 --> 0:19:53.119 a discrepancy based on the number of cases which would 0:19:53.440 --> 0:19:56.960 actually be pursued. Three AM had said over eighty five 0:19:56.960 --> 0:20:00.320 percent of claimants didn't have actual hearing loss number of 0:20:00.440 --> 0:20:04.200 legitimate claims was in dispute, but that settlement amount is 0:20:04.240 --> 0:20:06.439 within the range that we expected, so we think the 0:20:06.480 --> 0:20:08.440 deal will likely be signed on to you by the 0:20:08.520 --> 0:20:12.200 vast majority of plainifs. We also think THREEM will likely 0:20:12.240 --> 0:20:14.440 lose an appeal of the first bell Wether verdict that's 0:20:14.440 --> 0:20:18.239 pending before the Eleventh Circuit Court of Appeals, and that 0:20:18.359 --> 0:20:21.520 also is likely an impetus for settlement. Three AM may 0:20:21.560 --> 0:20:24.880 request a delay of that ruling pending finalization, but if 0:20:24.880 --> 0:20:27.560 you can't get a delay, we think they'll lose that appeal, 0:20:27.600 --> 0:20:30.840 and that is also coming probably coming in three Q 0:20:31.520 --> 0:20:33.640 And with that, I'll turn it back to you Elliott. 0:20:36.920 --> 0:20:40.760 Great, thanks Holly. All right, Nathan Dean, let's bring you in. 0:20:41.480 --> 0:20:43.520 When you come in and tell us more about the 0:20:43.560 --> 0:20:46.480 private funds rule that the SEC finalized last week. And 0:20:46.800 --> 0:20:50.400 also you can update us on President Biden's recent executive 0:20:50.480 --> 0:20:53.960 order aiming to curb investments in certain Chinese industries. 0:20:54.320 --> 0:20:57.480 Yeah, so let's start with the SEC. What the SEC is, 0:20:57.480 --> 0:21:02.560 They finalized a rule on disclosure requirements for private funds. Now, 0:21:02.600 --> 0:21:04.920 that may not sound all that interesting, but what this 0:21:05.040 --> 0:21:09.000 does is actually requires hedge funds, private equity funds, and 0:21:09.080 --> 0:21:13.520 a whole host of the other eighteen trillion dollar private 0:21:13.560 --> 0:21:18.399 fund industry to put out standardization or standardized disclosures that 0:21:18.480 --> 0:21:24.879 include things like costs, performance fees, expenses, and so forth. 0:21:25.040 --> 0:21:28.520 Like that. It also requires that if you are an 0:21:28.600 --> 0:21:31.640 investor in a private fund and you get a special 0:21:31.720 --> 0:21:35.760 deal for an early withdrawal or something to that effect, 0:21:36.600 --> 0:21:39.800 the fund itself then needs to give that special deal 0:21:39.880 --> 0:21:45.800 to everybody in the fund. The proposal is also designed 0:21:45.800 --> 0:21:50.399 to take out conflicts of interest. Now, normally a disclosure 0:21:50.520 --> 0:21:53.720 proposal or a disclosure rule isn't all that controversial, but 0:21:53.800 --> 0:21:55.920 this one is a little bit different. The reason being 0:21:56.080 --> 0:22:00.240 is is that a lot of the hedge funds, especially 0:22:00.240 --> 0:22:03.679 the big ones, already do this type of disclosure. Now 0:22:03.720 --> 0:22:06.120 they don't disclosure to the same extent the SEC wants 0:22:06.119 --> 0:22:08.600 it to. But the funds counter and say, look, we're 0:22:08.600 --> 0:22:11.040 already doing this, why should we spend more money. Because 0:22:11.880 --> 0:22:14.800 for the big firms like Carlisle and KKR and so forth, 0:22:14.840 --> 0:22:18.199 this probably isn't all that big of a cost expenditure. 0:22:18.240 --> 0:22:20.080 But for a lot of those smaller funds that are 0:22:20.119 --> 0:22:23.399 out there, this isn't something that they can take lightly. 0:22:23.440 --> 0:22:25.200 I mean, there's going to be a lot of compliance 0:22:25.200 --> 0:22:28.639 and legal and risk costs associated with that. The second 0:22:28.640 --> 0:22:31.840 thing is just disclosure. You're giving up more information and 0:22:31.880 --> 0:22:35.320 a lot of private funds are hence private, and you know, 0:22:35.359 --> 0:22:37.000 there's a lot of folks out there that like to 0:22:37.040 --> 0:22:40.040 try and re engineer or reverse what a hedge fund 0:22:40.119 --> 0:22:42.000 is doing and so forth like that, and the more 0:22:42.040 --> 0:22:44.240 information that is out there, the more information that other 0:22:44.280 --> 0:22:48.159 people get. So we do anticipate a lawsuit coming, at 0:22:48.240 --> 0:22:51.359 least given based off of comments from the industry, that 0:22:51.440 --> 0:22:54.960 lawsuit could come fairly quickly. Elliot can always tell you 0:22:54.960 --> 0:22:58.600 offline how the SEC is challenged these days in terms 0:22:58.640 --> 0:23:01.119 of lawsuits, so don't don't be surprised if that one 0:23:01.200 --> 0:23:04.000 comes out now when it comes to President Biden's executive 0:23:04.119 --> 0:23:08.480 order on China, earlier in August, he signed an executive 0:23:08.560 --> 0:23:12.840 order that would prohibit and or limit used investments in 0:23:12.960 --> 0:23:22.080 certain Chinese sectors. These sectors are quantum computing, artificial intelligence, semiconductors, 0:23:22.160 --> 0:23:29.680 and microelectronics. Now the prohibitions are for semiconductors, microelectronics, and 0:23:29.800 --> 0:23:34.720 quantum computing. The limitations are primarily for the artificial intelligence, 0:23:34.720 --> 0:23:37.439 at least that's my view based off of how the 0:23:37.560 --> 0:23:41.399 order was put out. There's two things to note though, 0:23:41.440 --> 0:23:44.200 as you're trying to dissect what this order means. One 0:23:45.240 --> 0:23:48.639 is that this order doesn't take effect day one. This 0:23:48.840 --> 0:23:51.840 order directs the Department of Treasury to issue a proposal, 0:23:51.880 --> 0:23:55.159 which they did on day one, that would then go 0:23:55.200 --> 0:24:00.120 and implement this. But proposals change, and so that proposal'll 0:24:00.119 --> 0:24:02.800 probably be finalized sometime in their first half of twenty 0:24:02.840 --> 0:24:06.119 twenty four, and then we'll go effective after that. But 0:24:06.359 --> 0:24:09.000 you know, presidents can always change their mind, especially when 0:24:09.000 --> 0:24:12.280 they're dealing with a trade partner. Is as important as China. 0:24:12.760 --> 0:24:14.640 The second other piece to note is that the US 0:24:14.720 --> 0:24:19.120 exposure to China is somewhat limited. From the hedge fund analysis, 0:24:19.240 --> 0:24:21.920 or at least the alternative asset manager analysis that we've 0:24:21.960 --> 0:24:24.320