Speaker 1: Hello, and welcome to the Votes and Verdict podcast, hosted
Speaker 1: by the Litigation and Policy team at Bloomberg Intelligence, the
Speaker 1: investment research platform of Bloomberg LP. This podcast series examines
Speaker 1: the intersection of business policy and law, and today we'll
Speaker 1: be looking at the litigation and policy catalysts that we're
Speaker 1: watching in September twenty twenty three and that we think
Speaker 1: will impact companies across a number of different sectors. My
Speaker 1: name is Elliot Stein. I'm a senior litigation analyst covering
Speaker 1: litigation in the financial sector, and I'll be your host
Speaker 1: for today, August twenty ninth, twenty twenty three. If you
Speaker 1: have any questions about any of the matters that we're
Speaker 1: discussing on this episode, please don't hesitate to reach out
Speaker 1: to us at your convenience with questions. So we'll be
Speaker 1: discussing a hand full of sectors today. First, Jenrie, our
Speaker 1: senior anti trust analyst, will pleave you a pair of
Speaker 1: upcoming trials. First, you'll look at the Justice Department's trial
Speaker 1: against Google over its search business that starts September twelfth,
Speaker 1: happens to be my birthday, and so also look at
Speaker 1: a trial schedule to start the next day in the
Speaker 1: FTC's challenge to amjen Horizon m and A, though that
Speaker 1: case could settle before the trial even starts. Sticking with healthcare,
Speaker 1: Dwyane Wright, our senior healthcare policy analyst, will give us
Speaker 1: his thoughts on the government releasing a list of ten
Speaker 1: Medicare Part D drugs that will be subject to government
Speaker 1: price cuts under the Inflation Reduction Act. We'll then turn
Speaker 1: back to tech and we'll bring in Matt Shettenhelm, who
Speaker 1: covers TMT policy and litigation, and he'll be discussing an
Speaker 1: appeals court decision that he expects soon concerning whether New
Speaker 1: York can set its own broad Bay and rates. Holly Frome,
Speaker 1: who covers litigation and policy in the industrial sector, anticipates
Speaker 1: preliminary approval of three m's twelve point five billion dollars
Speaker 1: settlement in Pfast litigation, and she also expects an appeals
Speaker 1: court decision in three M Earplug litigation, though a pending
Speaker 1: settlement there could moot the appeals court ruling. We'll then
Speaker 1: turn to financials and we'll bring in Nathan Dean, our
Speaker 1: senior financials policy analyst, to discuss an SEC rule that
Speaker 1: was finalized last week that will require more disclosure from
Speaker 1: private funds. Nathan will also discuss President Biden's recent executive
Speaker 1: order that aims to curb investments in certain Chinese industries,
Speaker 1: and then sticking with financials some more, I'll close it
Speaker 1: out with some discussion of an upcoming oral argument in
Speaker 1: one of the remaining cases challenging the profit sweep of
Speaker 1: Fanny Freddie profits to the US Treasury. All of this
Speaker 1: research is available on the Bloomberg terminal at BI go
Speaker 1: And just a quick word about Bloomberg Intelligence for those
Speaker 1: who don't know. We are the investment research platform on
Speaker 1: the Bloomberg terminal, providing in depth research on industries, companies,
Speaker 1: and markets and deliverying key data from BI analysts in
Speaker 1: their given industries. All right, So with all that out
Speaker 1: of the way, let's get started with the actual content. Jen,
Speaker 1: Let's bring you in first to talk antitrust. I know
Speaker 1: you have a super busy fall with a lot of
Speaker 1: antitrust trials on deck, kicking off with this DOJ lawsuit
Speaker 1: against Google over its search business, and then the FTC
Speaker 1: has a trial against Angen and Horizon, though it looks
Speaker 1: like that case is settling. Do you want to come
Speaker 1: in and tell us about these cases.
Speaker 2: Sure, So starting with your birthday trial, Elliott, that Google trial,
Speaker 2: I think that will go forward on September twelfth. And
Speaker 2: this is a lawsuit in which the Department of Justice
Speaker 2: and a group of states sued Google. I'm going to
Speaker 2: call it Google because we're talking about Google Search rather
Speaker 2: than Alphabet, but it sued the company under federal monopolization
Speaker 2: laws for illegally monopolizing Internet search. Now, I always say
Speaker 2: illegally monopolized, because it's not illegal to have a monopoly position.
Speaker 2: But if a company in a monopoly position engages in
Speaker 2: conduct that excludes rivals in a way that harms competition
Speaker 2: and doesn't really have a legitimate pro competitive business justification
Speaker 2: to support it, and this is done in an effort
Speaker 2: to obtain or maintain the monopoly, well then they violated
Speaker 2: the law. And that's what the DOJ, States and states
Speaker 2: have alleged that Google does with respect to search. So
Speaker 2: how exactly does it do this? The allegation is that
Speaker 2: Google's entered multiple agreements in which it pays billions to
Speaker 2: be the default search engine on mobile and desktop devices.
Speaker 2: These are agreements with companies like Apple and OEMs and
Speaker 2: telecoms like Verizon, and the DOJ claims for years this
Speaker 2: has hampered the ability of any other search rival, like Being,
Speaker 2: for instance, to gain scale because to be a really
Speaker 2: good search engine, and the product needs data, and it
Speaker 2: gains data and learning the more searches that are done
Speaker 2: on it. So this has hampered innovation in increased advertising prices. Now,
Speaker 2: I think this is a really tricky case actually, because
Speaker 2: what the law generally holds is that a company can
Speaker 2: enter exclusive agreements with up to about forty percent of
Speaker 2: the available outlets before they've crossed the antitrust line. Because
Speaker 2: once you get tied up more than about forty percent,
Speaker 2: you really start to really foreclose the market from your
Speaker 2: rivals and they can't compete. But the issue here is
Speaker 2: that competitors aren't really foreclosed by Google's agreements because any
Speaker 2: user of any device can go in and change the
Speaker 2: default search. I'm sure some of us have done that.
Speaker 2: I know I do that, and Google hasn't done anything
Speaker 2: to prevent that. So the question here is going to
Speaker 2: be how sticky is that default position, and is this
Speaker 2: real foreclosure, and if it is, does it actually cause
Speaker 2: harm to a market? Since Google's actually quite popular in
Speaker 2: people like the product. So I think this is a
Speaker 2: really close trial because it's going to depend on what
Speaker 2: the evidence shows with respect to those two issues, and
Speaker 2: that remains to be seen. We've got one side that
Speaker 2: say they have evidence that default is sticky and meaningful,
Speaker 2: and we have the other side that says they have
Speaker 2: loads of evidence of rampant consumer switching. So we're gonna
Speaker 2: have to see what comes out at the trial. There's
Speaker 2: one fairly certain prediction I can make, though, and that
Speaker 2: is that if Google loses on liability, it's not going
Speaker 2: to be broken up. That's one of the remedies that
Speaker 2: DJ's requesting here. It is overkill and anti trust injunction
Speaker 2: has to be as nearly tailored as it can to
Speaker 2: fix and target the problem. So I think instead Google
Speaker 2: would be told something like it can't pay for default positions,
Speaker 2: or at least if it does, it has to let
Speaker 2: users know with some sort of communication that they can
Speaker 2: switch and how to do it, or something like that.
Speaker 2: I'm not really sure what it would look like, but
Speaker 2: at that point, the impact on Google will really depend
Speaker 2: on consumer behavior. And then you've got sort of chat
Speaker 2: GPT coming into the picture too that could also change
Speaker 2: a lot of things. Anyway, this trial is going to
Speaker 2: go through early November. I think it'll get a ruling
Speaker 2: in the first quarter, and I think if Google loses,
Speaker 2: it will appeal. And the other anti trust matter that's
Speaker 2: also supposed to go to trial in September, that's on
Speaker 2: the thirteenth. It may not because the settlement is in
Speaker 2: the works. I do think it's likely it's going to settle.
Speaker 2: This is a very different kind of case. It's the
Speaker 2: Federal Trade Commission's challenge to Amgen's acquisition of Horizon. These
Speaker 2: are two biopharma firms, and it's a really unusual lawsuit
Speaker 2: because usually mergers are challenged when they combine two companies
Speaker 2: that compete and the markets would become too concentrated, or
Speaker 2: the deal vertically integrates the buyer in a manner that
Speaker 2: would allow it to foreclose competitors. No merger has really
Speaker 2: been challenged for any other reason in around fifty years,
Speaker 2: but we have neither situation in this case. What the
Speaker 2: FTC says is that Amgen could harm the markets for
Speaker 2: two Horizon drugs that have monopoly position positions, one that
Speaker 2: treats thyroid die disease and one that treats chronic or
Speaker 2: factory gout because it would offer payers PBMs and insurance
Speaker 2: deep rebates for drug bundles that include Horizon drugs, and
Speaker 2: that will block potential entry of competitors to those drugs. Now,
Speaker 2: I think these allegations are really highly speculative. They assume
Speaker 2: new drugs are in development that'll get FDA approved, they'll
Speaker 2: be marketed, they assume they'll be substitutes for the Horizon drugs.
Speaker 2: The evidence doesn't really support that. It also assumes Amgen
Speaker 2: will bundle these two drugs, and it assumes if it does,
Speaker 2: it'll harm competition. So and also, by the way, there's
Speaker 2: no precedent that supports this theory except a few cases
Speaker 2: from the nineteen sixties that have since been rejected. And
Speaker 2: the last most important thing is that Amgen has promised
Speaker 2: to refrain from ever bundling the two drugs and it's
Speaker 2: willing to sign an agreement. So I give the FDC
Speaker 2: only about a five percent chance of winning if they
Speaker 2: actually go to trial here. And I think they understand
Speaker 2: that as well, because last Friday news broke that they
Speaker 2: are discussing a settlement. I suspect it'll be something in
Speaker 2: which Amgen agrees not to bundle the drugs, maybe not
Speaker 2: to bundle even other drugs that it already has, and
Speaker 2: at that point the deal will probably be able to
Speaker 2: close sometime in mid to late September, and I think
Speaker 2: that's probably the route that that will go. So with that,
Speaker 2: back to you, Elliott.
Speaker 1: Great, Thanks Jen. All Right, let's stick with healthcare and
Speaker 1: bring Dwayne in to talk drug pricing. Just this morning,
Speaker 1: the government released its initial list of ten Medicare drugs
Speaker 1: that will be subject to price negotiations under the Inflation
Speaker 1: Reduction Act. So Dwaine, you want to come in and
Speaker 1: tell us more about what happened this morning and what
Speaker 1: the process looks like going forward.
Speaker 3: Sure, thanks Elliott. This is the day that many of
Speaker 3: US health policy nerds have been waiting for, and companies
Speaker 3: manufacturers as well. Keep in mind what we're talking about.
Speaker 3: Inflation Reduction Act past last year includes three big healthcare pieces.
Speaker 3: On the prescription drug side ones the inflation rebate, capping
Speaker 3: price increases, the others a part de redesign and this
Speaker 3: piece which will set prices for those drugs that are
Speaker 3: high expenditure drugs, either those drugs with a list price
Speaker 3: but are used by a lot of people, or those
Speaker 3: drugs that have high price but maybe used by fewer people.
Speaker 3: And so the law requires CMS to look at many
Speaker 3: care spending or expenditures from June one, twenty twenty two
Speaker 3: to May thirty first of this year and come up
Speaker 3: with that list of products that are high expenditure but
Speaker 3: also don't have generic competitors, but are also so many
Speaker 3: years from FDA approval, And so CMS had until Friday,
Speaker 3: September first. They decided to go early to get as
Speaker 3: much press out of this before the Labor Day weekend.
Speaker 3: And the list itself is not a surprise, at least
Speaker 3: to us. Many of us had anticipated that Bristol Myers
Speaker 3: eloquists for blood clots, Chardians for diabetes, Genuvia also for
Speaker 3: diabetes would be on the list, largely because they have
Speaker 3: been consistently high expenditure drugs over the past couple of years.
Speaker 3: There was a bit of a surprise with Stillara from
Speaker 3: Johnson and Johnson. This is a Cronz disease crisis drug
Speaker 3: that we anticipate will have by a similar competition, but
Speaker 3: nevertheless is on the lists. So this is the first
Speaker 3: step identifying that list of drugs that will be subject
Speaker 3: to negotiations that will start October second, and this is
Speaker 3: assuming these companies agree to participate in the process. Now,
Speaker 3: if they do, this will then start a what will
Speaker 3: essentially be a eleventh month eleven month process where CMS
Speaker 3: will hold open forums or the public to participate to
Speaker 3: provide some feedback and input in terms of what the
Speaker 3: fair price should be for these drugs. CMS will have
Speaker 3: a meeting with the manufacturers of these drugs for each
Speaker 3: drug as well, and then we'll see an initial offer
Speaker 3: based on those meetings as well as other information supplied
Speaker 3: by the manufacturers and other stakeholders. We'll see that first
Speaker 3: offer from CMS February first. Manufacturers will then have an
Speaker 3: opportunity to accept the offer or counteroffer, and to the
Speaker 3: extent that there's a counter offer, we can see another
Speaker 3: two meetings between CMS and the manufacturers. This all culminates
Speaker 3: in the August first end of the negotiation process, and
Speaker 3: then September first of twenty twenty four, we'll see CMS
Speaker 3: really the quote unquote maximum fair price for these drugs,
Speaker 3: and this is again based off of conversations with manufacturers
Speaker 3: as well as other data including other types of drugs
Speaker 3: on the market, including the R and D that went
Speaker 3: into it, how much of that has been recouped, and
Speaker 3: then also the cost of manufacturing the drug. Then after
Speaker 3: that March of twenty twenty five, we'll see CMS provide
Speaker 3: their justification for the prices, and then January one, twenty
Speaker 3: twenty six, we will see these prices become effective for
Speaker 3: these drugs. So this is the first step in the process,
Speaker 3: and there's quite a few more steps to go. There's
Speaker 3: of course litigation happening while this process is unfolding, but
Speaker 3: by and large, there weren't any or should say, many
Speaker 3: surprises on this list, but it does set up a
Speaker 3: long eleven month process for CMS and rate setting. So
Speaker 3: with that, I will stop and turn it back to Elliott.
Speaker 1: Great, Thanks Dayne. All right, Matt, let's bring you in
Speaker 1: turn back to tech here. So this is an interesting
Speaker 1: issue you're going to be talking about. Can states like
Speaker 1: New York regulate broadband rates and set their own price caps?
Speaker 1: Obviously the industry is against it, and a key court
Speaker 1: ruling could provide clarity. You want to come in and
Speaker 1: tell us more.
Speaker 4: About that, Yeah, thanks Elliott. You know, from a legal
Speaker 4: and regulatory standpoint, broadband providers like Comcast and Verizon and
Speaker 4: AT and T have had a really nice five years
Speaker 4: because for a while while it looked like the federal
Speaker 4: government and the states were going to try to regulate
Speaker 4: their number one product, broadmand pretty aggressively, those efforts have
Speaker 4: mostly fizzled. At the federal level, the Trump FCC tore
Speaker 4: down its broadband rules, the Biden FCC hasn't been able
Speaker 4: to build them back up, And at the state level,
Speaker 4: things have mostly been quiet, in part because of this
Speaker 4: case which is pending at the Second Circuit about whether
Speaker 4: states like New York can step in and set the
Speaker 4: prices for broadband services now you know, and so both
Speaker 4: of those issues may be returning soon. But I'm going
Speaker 4: to focus on the state level issue because I think
Speaker 4: we could see a decision on New York's policy this month.
Speaker 4: So why does it matter? So if New York wins,
Speaker 4: it really does set an important precedent for other states
Speaker 4: that if they think of broadband providers overcharging or engaging
Speaker 4: in other practices they don't like, they can step in
Speaker 4: with their own state law mandates that could cost you know,
Speaker 4: the companies billions of dollars. Theoretically, this case is about
Speaker 4: New York setting the price of certain broadband products. And
Speaker 4: the case was argued in January, and so that means
Speaker 4: where we're some eight months later, now we're due for
Speaker 4: a decision any time. Who's favored in it. I view
Speaker 4: this as an extremely close case because it turns on
Speaker 4: a very murky legal doctrine, the idea of what's known
Speaker 4: as conflict or obstacle preemption. Preemption cases are pretty easy
Speaker 4: when the federal law is express, when it says, hey, states,
Speaker 4: you can't regulate here, that's easy for courts to deal with.
Speaker 4: This isn't one of those easy cases. It's a case
Speaker 4: of implied preemption where the federal law doesn't say states
Speaker 4: can act, but maybe it's implied because the federal law
Speaker 4: conflicts or is an obstacle to what's going on here.
Speaker 4: So in some judges are skeptical that such a thing
Speaker 4: as implied pre option exists at all. So that makes
Speaker 4: it a very close call. A Republican appointed lower court
Speaker 4: judge ruled for the companies here and block this New
Speaker 4: York law. This appeals being heard by two of three
Speaker 4: Democrat appointed judges Biden nominated judges, and for that reason,
Speaker 4: and based on the questions in January. I give a
Speaker 4: slight edge to the state to prevail here, but it's
Speaker 4: very important to watch this this play out because of
Speaker 4: the president it will set so we'll expect a decision
Speaker 4: you know, very likely in September, if not in the
Speaker 4: fourth quarter. With that, back to you, Elliott.
Speaker 1: Great, thanks Matt. All Right, Holly, let's bring you in
Speaker 1: to talk about a pair of three M cases. The
Speaker 1: first is three m's p Fast litigation, where you expect
Speaker 1: preliminary approval of a twelve point five billion dollars settlement.
Speaker 1: And the second is defective earplug litigation, which also looks
Speaker 1: to be settling, but in which you've been waiting for
Speaker 1: a key appeals court decision. Do you want to come
Speaker 1: in and tell us more about these cases?
Speaker 5: Sure, thanks Elliott. So three M proposed in June a
Speaker 5: ten to twelve point five billion dollars class deal to
Speaker 5: resolve water authority cases over alleged p Fast contamination and
Speaker 5: drinking water. The settlement would resolve all claims by water
Speaker 5: authorities that drinking water contained p Fast contamination. It provided
Speaker 5: for a roughly ten year payout. A bid for preliminary
Speaker 5: approval was filed in July, but a number of states
Speaker 5: filed emotion opposing approval or a letter opposing approval on
Speaker 5: several different grounds, which included that they felt the releases
Speaker 5: and identification obligations of water authorities were too broad. Yesterday,
Speaker 5: States filed a statement that they no longer formally opposed
Speaker 5: the deal after modifications were made. We saw something similar
Speaker 5: happen with another set of companies, Camors, DuPont and Qurteva,
Speaker 5: which were also named in lawsuits over p fast contamination.
Speaker 5: They announced a deal to resolved water authority cases for
Speaker 5: one point two billion dollars. The deal was ultimately revised
Speaker 5: after States had certain objections, and their revised deal after
Speaker 5: it was revised, was approved by the court on a
Speaker 5: relatively quick timetable. We think the same thing can happen here.
Speaker 5: We think three m's deal could obtain preliminary approval, possibly
Speaker 5: as early as three Q. And what then has to
Speaker 5: happen is notices have to be provided to potential class members.
Speaker 5: Class members who don't want to participate have to opt out,
Speaker 5: and that's when we can get an idea of how
Speaker 5: many entities decide to participate. The judge will schedule of
Speaker 5: final approval hearing objections will probably be made. We think
Speaker 5: a number of amenities will opt out, but ultimately the
Speaker 5: deal will obtain final approval and so. In other news,
Speaker 5: THREEM says it reached a six billion dollars deal to
Speaker 5: end more than two hundred and sixty thousand lawsuits over
Speaker 5: defective earplugs. We had said cases could settle for somewhere
Speaker 5: between four point five to nine point five billion, with
Speaker 5: a discrepancy based on the number of cases which would
Speaker 5: actually be pursued. Three AM had said over eighty five
Speaker 5: percent of claimants didn't have actual hearing loss number of
Speaker 5: legitimate claims was in dispute, but that settlement amount is
Speaker 5: within the range that we expected, so we think the
Speaker 5: deal will likely be signed on to you by the
Speaker 5: vast majority of plainifs. We also think THREEM will likely
Speaker 5: lose an appeal of the first bell Wether verdict that's
Speaker 5: pending before the Eleventh Circuit Court of Appeals, and that
Speaker 5: also is likely an impetus for settlement. Three AM may
Speaker 5: request a delay of that ruling pending finalization, but if
Speaker 5: you can't get a delay, we think they'll lose that appeal,
Speaker 5: and that is also coming probably coming in three Q
Speaker 5: And with that, I'll turn it back to you Elliott.
Speaker 1: Great, thanks Holly. All right, Nathan Dean, let's bring you in.
Speaker 1: When you come in and tell us more about the
Speaker 1: private funds rule that the SEC finalized last week. And
Speaker 1: also you can update us on President Biden's recent executive
Speaker 1: order aiming to curb investments in certain Chinese industries.
Speaker 6: Yeah, so let's start with the SEC. What the SEC is,
Speaker 6: They finalized a rule on disclosure requirements for private funds. Now,
Speaker 6: that may not sound all that interesting, but what this
Speaker 6: does is actually requires hedge funds, private equity funds, and
Speaker 6: a whole host of the other eighteen trillion dollar private
Speaker 6: fund industry to put out standardization or standardized disclosures that
Speaker 6: include things like costs, performance fees, expenses, and so forth.
Speaker 6: Like that. It also requires that if you are an
Speaker 6: investor in a private fund and you get a special
Speaker 6: deal for an early withdrawal or something to that effect,
Speaker 6: the fund itself then needs to give that special deal
Speaker 6: to everybody in the fund. The proposal is also designed
Speaker 6: to take out conflicts of interest. Now, normally a disclosure
Speaker 6: proposal or a disclosure rule isn't all that controversial, but
Speaker 6: this one is a little bit different. The reason being
Speaker 6: is is that a lot of the hedge funds, especially
Speaker 6: the big ones, already do this type of disclosure. Now
Speaker 6: they don't disclosure to the same extent the SEC wants
Speaker 6: it to. But the funds counter and say, look, we're
Speaker 6: already doing this, why should we spend more money. Because
Speaker 6: for the big firms like Carlisle and KKR and so forth,
Speaker 6: this probably isn't all that big of a cost expenditure.
Speaker 6: But for a lot of those smaller funds that are
Speaker 6: out there, this isn't something that they can take lightly.
Speaker 6: I mean, there's going to be a lot of compliance
Speaker 6: and legal and risk costs associated with that. The second
Speaker 6: thing is just disclosure. You're giving up more information and
Speaker 6: a lot of private funds are hence private, and you know,
Speaker 6: there's a lot of folks out there that like to
Speaker 6: try and re engineer or reverse what a hedge fund
Speaker 6: is doing and so forth like that, and the more
Speaker 6: information that is out there, the more information that other
Speaker 6: people get. So we do anticipate a lawsuit coming, at
Speaker 6: least given based off of comments from the industry, that
Speaker 6: lawsuit could come fairly quickly. Elliot can always tell you
Speaker 6: offline how the SEC is challenged these days in terms
Speaker 6: of lawsuits, so don't don't be surprised if that one
Speaker 6: comes out now when it comes to President Biden's executive
Speaker 6: order on China, earlier in August, he signed an executive
Speaker 6: order that would prohibit and or limit used investments in
Speaker 6: certain Chinese sectors. These sectors are quantum computing, artificial intelligence, semiconductors,
Speaker 6: and microelectronics. Now the prohibitions are for semiconductors, microelectronics, and
Speaker 6: quantum computing. The limitations are primarily for the artificial intelligence,
Speaker 6: at least that's my view based off of how the
Speaker 6: order was put out. There's two things to note though,
Speaker 6: as you're trying to dissect what this order means. One
Speaker 6: is that this order doesn't take effect day one. This
Speaker 6: order directs the Department of Treasury to issue a proposal,
Speaker 6: which they did on day one, that would then go
Speaker 6: and implement this. But proposals change, and so that proposal'll
Speaker 6: probably be finalized sometime in their first half of twenty
Speaker 6: twenty four, and then we'll go effective after that. But
Speaker 6: you know, presidents can always change their mind, especially when
Speaker 6: they're dealing with a trade partner. Is as important as China.
Speaker 6: The second other piece to note is that the US
Speaker 6: exposure to China is somewhat limited. From the hedge fund analysis,
Speaker 6: or at least the alternative asset manager analysis that we've
Speaker 6: been doing. Most of the big ones, at least the
Speaker 6: publicly traded ones have less than five percent exposure to
Speaker 6: Chinese assets and they've been very cautious on China over
Speaker 6: the last few years. This does nothing to impact supply chain.
Speaker 6: This is solely US investments in China, so overall we
Speaker 6: anticipate a very limited impact, but as with all things proposals,
Speaker 6: things could change within the next nine months. So Elliott,
Speaker 6: back to you.
Speaker 1: Great, thanks Nathan. All right, so I'll close things out
Speaker 1: with this Fanni Freddi litigation that is one of the
Speaker 1: few remaining lawsuits by Fanny Freddi invest there's challenging the
Speaker 1: sweep of profits to the US Treasury. We have appeal
Speaker 1: oral arguments on September eighth, following the trial court's November
Speaker 1: twenty twenty two ruling that dismissed the case. Shareholders are
Speaker 1: essentially asking the court to eliminate the government's roughly three
Speaker 1: hundred billion dollars liquidation preference in Fanni May and Freddie Mack,
Speaker 1: And the crux of the shareholders' argument is that the
Speaker 1: government would have ended its ownership stake in the companies
Speaker 1: during the Trump administration if President Trump had been allowed
Speaker 1: to remove the FHFA director prior to the Supreme Court
Speaker 1: ruling on that issue in twenty twenty one. We continue
Speaker 1: to give the government the edge in this case. We
Speaker 1: think they're eighty percent likely to win, either by winning
Speaker 1: this particular appeal or later on summary judgment if the
Speaker 1: appeals court winds up reversing the trial court's dismissal. At
Speaker 1: the end of the day, we think shareholders argument about
Speaker 1: what the Trump administration would have done in an alternative
Speaker 1: universe where there was no removal restriction, we think that's
Speaker 1: just too speculative to prevail. And we also think that
Speaker 1: a letter that President Trump wrote in November twenty twenty
Speaker 1: one saying that he would have fired mel Watt, the
Speaker 1: FHFA director, and he would have ended the sweep if
Speaker 1: he could have. We think that that letter, you know,
Speaker 1: it's really just designed for litigation, and we think that
Speaker 1: sort of undermines its intended effect. So we'll be watching
Speaker 1: that or argument on September eighth. We'll have an update
Speaker 1: after that. You know, with any tea leave reading that
Speaker 1: we can lean from the argument. But for now, I
Speaker 1: think we will wrap up this episode of Votes and Verdicts.
Speaker 1: As always, thank you for listening, and as a reminder,
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