WEBVTT - This Week at the Supreme Court

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<v Speaker 1>This is Bloomberg Law with June Grossel from Bloomberg Radio.

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<v Speaker 2>The Supreme Court's conservatives appear poised to give the president

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<v Speaker 2>control over dozens of independent federal agencies. At oral arguments

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<v Speaker 2>on Monday, they suggested they will allow President Trump to

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<v Speaker 2>fire Rebecca Kelly Slaughter from the Federal Trade Commission, despite

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<v Speaker 2>a law that says commissioners can only be fired for

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<v Speaker 2>specific reasons. The liberal justices, like Sonya so to Mayor

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<v Speaker 2>and Elena Kagan, expressed alarm at giving the president such

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<v Speaker 2>unchecked authority over agencies that overlook crucial areas like nuclear energy,

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<v Speaker 2>consumer products safety, and labor relations.

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<v Speaker 3>You're asking us to destroy the structure of government and

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<v Speaker 3>to take away from Congress its ability to protect its

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<v Speaker 3>idea that the government is better structured with some agencies

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<v Speaker 3>that are independent.

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<v Speaker 4>So the result of what you want is that the

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<v Speaker 4>president is going to have massive, unchecked, uncontrolled power not

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<v Speaker 4>only to do traditional execution but to make law.

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<v Speaker 2>But the conservative justice is, like Brett Kavanaugh and Neil Gorsuch, say,

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<v Speaker 2>the real concern is Congress's creation of agencies that exercise

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<v Speaker 2>executive power but can't be held accountable.

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<v Speaker 5>Independent agencies are not accountable to the people. They're not elected,

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<v Speaker 5>as Congress and the President are and are exercising massive

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<v Speaker 5>power over individual liberty and billion dollar industries, whether it's

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<v Speaker 5>the FCC or the FTC or whatever it might be.

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<v Speaker 6>Tomorrow, we could have the Labor Commission, the Education Commission,

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<v Speaker 6>the Environmental Commission, and rather than Departments of Interior and

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<v Speaker 6>so forth.

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<v Speaker 2>In allowing the president to fire the heads of independent agencies,

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<v Speaker 2>the court would be overturning a ninety year old president

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<v Speaker 2>called Humphreys executor that protects their independence. My guest is

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<v Speaker 2>constitutional law expert William Traynor, a professor at Georgetown Law

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<v Speaker 2>Bill tell us about the issues in Rebecca Slaughter's case

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<v Speaker 2>against Trump for firing her.

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<v Speaker 7>The issue before the screen Court is that Congress puts

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<v Speaker 7>the limits on when the president and fire the heads

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<v Speaker 7>of independent agencies. So an independent agency is like the

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<v Speaker 7>Federal Trade Commission or the Federal Reserve. So really, since

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<v Speaker 7>the start of the Constitution, Congress has imposed limits on

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<v Speaker 7>when the president can fired these people. The question in

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<v Speaker 7>the case is whether that's unconstitutional, Whether the president can

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<v Speaker 7>fire the head of an independent agency for any reason,

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<v Speaker 7>even if Congress has said they can only fire them,

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<v Speaker 7>you know, if they're engaged in bad behavior. So this

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<v Speaker 7>is a very big deal. So much of a government

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<v Speaker 7>structure that protects people in different ways or regulates the

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<v Speaker 7>economy is done through independent agencies. Congress has wanted to

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<v Speaker 7>insulate them from total executive control, and the Supreme Court

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<v Speaker 7>is deciding right now whether, in fact, the president has

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<v Speaker 7>the kind of control that comes with being able to

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<v Speaker 7>fire the leaders of the agencies.

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<v Speaker 2>In these oral arguments, you often hear the Supreme Court

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<v Speaker 2>justices say, well, that's a job for Congress. You know,

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<v Speaker 2>that's not something that we should be interfering in. So

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<v Speaker 2>why are they interfering here where Congress has set up

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<v Speaker 2>these agencies and the rules.

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<v Speaker 7>That's a great question. There had been so many times

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<v Speaker 7>in which the Court is saying, this is a political matter,

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<v Speaker 7>we shouldn't be deciding. But at the same time, the

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<v Speaker 7>conservative justices of the Court are very dedicated to what's

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<v Speaker 7>called the unitary executive theory, which means that the president

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<v Speaker 7>is in total charge of the executive branch. So what

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<v Speaker 7>they're saying here is Congress doesn't get to be involved.

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<v Speaker 7>The president is in total charge of the executive branch,

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<v Speaker 7>including what have historically been things like the independent agencies.

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<v Speaker 7>That is kind of one of the core commitments that

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<v Speaker 7>has really been at the basis of what Keef Justice

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<v Speaker 7>Roberts has thought really going back to when he was

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<v Speaker 7>a young attorney, and that's the same thing for most

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<v Speaker 7>of the members of the whole conservative wing.

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<v Speaker 2>What kind of concerns did the conservative justices express during

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<v Speaker 2>the oral arguments about this ninety year old President Humphrey's executor.

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<v Speaker 7>There are two things that we're seeing the conservative wing

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<v Speaker 7>of the Court struggle with. One is they want the

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<v Speaker 7>Federal Reserve to continue to be independent. They don't want

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<v Speaker 7>the president to be able to fire somebody on the

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<v Speaker 7>Federal Reserve. And they don't want that because you know,

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<v Speaker 7>that would be terrible for the economy. If the Federal

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<v Speaker 7>Reserve is setting interest rates just in order to help

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<v Speaker 7>the president rather than to help the economy, that would

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<v Speaker 7>be a disaster, be a disaster for the market, the

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<v Speaker 7>disaster for the economy as a whole. So the conservative

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<v Speaker 7>wing of the Court i think wants to overturn Humphrey's executor,

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<v Speaker 7>but they're trying to come up with some rationale in

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<v Speaker 7>which they can say the president can fire somebody on

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<v Speaker 7>the FTC, but he can't fire somebody on the Federal Reserve.

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<v Speaker 7>And they're going to be looking at the Federal Reserve

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<v Speaker 7>later in the term. That's a big concern for them.

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<v Speaker 7>So I think that animates all of the conservative justices

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<v Speaker 7>of the Court. I think also, you know, what I'm

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<v Speaker 7>hearing with the Chief Justices, what he's trying to do

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<v Speaker 7>is to come up with some way in which there's

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<v Speaker 7>some agencies where Congress can in fact limit the president's

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<v Speaker 7>ability to fire people. And he's thinking about, you know,

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<v Speaker 7>are the ones that are essentially kind of judicial in

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<v Speaker 7>their function, and you know, that may be an area

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<v Speaker 7>in which Congress can establish requirements or when the prison

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<v Speaker 7>can terminate somebody, but that's not the Federal Trade Commission.

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<v Speaker 7>Federal Trade Commission is not making the judicial decisions, you know,

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<v Speaker 7>it's very much deciding executive type rules. So I think

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<v Speaker 7>we're seeing two things on the conservative wing of the Court.

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<v Speaker 7>One is they're trying to come up with some way

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<v Speaker 7>in which they can say the President can fire somebody

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<v Speaker 7>the FDC, but not at the FED. And I think

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<v Speaker 7>the Chief is trying to come up with some way

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<v Speaker 7>in which there's some type of agencies in which the

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<v Speaker 7>president can be limited by Congress, but those would be

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<v Speaker 7>ones that are really deciding kind of fuzzi judicial matters,

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<v Speaker 7>not the FDC.

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<v Speaker 2>The liberals painted a dire picture of what would happen

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<v Speaker 2>if Trump wins here. Just as Soto Mayor said to

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<v Speaker 2>the Solicitor General, you're asking us to destroy the structure

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<v Speaker 2>of government. Do you think it's that serious.

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<v Speaker 7>I think that's absolutely right. You know, we have had

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<v Speaker 7>independent agencies which largely exists to protect peace with limited power,

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<v Speaker 7>you know, and they've been in place really for one

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<v Speaker 7>hundred years. And the idea is that these should be

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<v Speaker 7>basically bipartisan or apolitical. They should not just be tools

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<v Speaker 7>of the president. So what the court is considering right

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<v Speaker 7>now is whether that whole kind of structure gets got it.

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<v Speaker 7>So the stakes on this are huge.

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<v Speaker 2>Well, President Trump wasn't specifically mentioned by name, two of

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<v Speaker 2>the liberal justices, Elina Kagan and Katanji Brown Jackson, did

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<v Speaker 2>make broad references to his firing of experts and dismantling

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<v Speaker 2>of the Department of Education.

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<v Speaker 4>That the more realistic danger here is that we'll have

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<v Speaker 4>an education department, as authorized by Congress by law that

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<v Speaker 4>won't have any employees in it.

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<v Speaker 8>Having a president come in and fire all the scientists

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<v Speaker 8>and the doctors and the economists and the PhDs and

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<v Speaker 8>replacing them with loyalists and people who don't know anything

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<v Speaker 8>is actually not in the best interest of the citizens

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<v Speaker 8>of the United States.

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<v Speaker 7>You know, what we're seeing right now is that in

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<v Speaker 7>the Trump administration, you know, the independent agencies and all

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<v Speaker 7>of the government washtoogs, there's an attempt to politicize them

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<v Speaker 7>in a way that you know, we've never seen before.

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<v Speaker 7>So the stakes are very different, and they're much higher.

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<v Speaker 7>If Humphrey's executor has been overturned in President bush forty

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<v Speaker 7>threes administration, the stakes would have been very different because

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<v Speaker 7>President Bush was not focused on making independent agencies kind

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<v Speaker 7>of the tool for his politics. But that's what we're

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<v Speaker 7>seeing with President Trump, and that's why the stakes are

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<v Speaker 7>so high. They've always been big, but in this administration,

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<v Speaker 7>where there's such an attempt to kind of move away

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<v Speaker 7>from scientific expertise and neutral decision making to control every

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<v Speaker 7>part of the executive branch, the stakes are huge. And

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<v Speaker 7>that's really part of what those three liberal justices we're questioning.

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<v Speaker 7>You know, the other thing that they really are focusing

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<v Speaker 7>in an honor. First of all, it's very very hard

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<v Speaker 7>to come up with some line where you can say,

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<v Speaker 7>Congress can limit the president's ability to fire the heads

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<v Speaker 7>of the sec they can't fire at will the heads

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<v Speaker 7>of the set. And I can't think of any kind

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<v Speaker 7>of coherent way to distinguish those two cases. And that's

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<v Speaker 7>one of the things that the liberals were pressing on.

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<v Speaker 7>You know, I think they're also pressing on the history.

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<v Speaker 7>If you look at the constitutions, the text of the

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<v Speaker 7>constitutions doesn't say that the president gets to fire people

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<v Speaker 7>in the executive rection. It doesn't deal with removal at all.

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<v Speaker 7>So there's not a text that really helps the conservative

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<v Speaker 7>way of the Court and Congress really, starting in the

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<v Speaker 7>Washington administration, limited the president's ability to fire people running

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<v Speaker 7>agencies kind of what was analogous to modern agencies at

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<v Speaker 7>the time. So I think what the liberals on the

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<v Speaker 7>Court are focusing on are the text, the original understanding,

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<v Speaker 7>as well as the huge consequences of essentially giving the

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<v Speaker 7>president the power to politicize all of the dependent agencies.

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<v Speaker 2>I wonder what happens when there is a democratic president.

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<v Speaker 2>Do the conservatives then try to limit the ruling they're

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<v Speaker 2>expected to make.

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<v Speaker 5>Here.

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<v Speaker 7>You know, one of the reasons why I think that

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<v Speaker 7>the Court should not overturn Humphrey's Executor is to the

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<v Speaker 7>extent that you have any kind of political terms, you're

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<v Speaker 7>giving a democratic president the power to do exactly what

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<v Speaker 7>President Trump is doing, to politicize every independent agency in

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<v Speaker 7>the way that that president wants, you know. And then

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<v Speaker 7>how does a conservative court say, well, you know, Humphrey

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<v Speaker 7>Executors is back. Once you establish a rule, you know,

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<v Speaker 7>it applies to everybody. And that's something that they really

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<v Speaker 7>have to think true because of the long term consequences,

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<v Speaker 7>because I don't think they would feel comfortable, you know,

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<v Speaker 7>with limiting a democratic president after they allow President Trump

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<v Speaker 7>to fire people whenever he wants.

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<v Speaker 2>So then you think this is the end of Humphrey's executs.

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<v Speaker 7>Yeah, I think they will completely overrule Humphrey's Executor. I

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<v Speaker 7>think the one question for me is whether the Chief

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<v Speaker 7>comes up with some limiting principle in which if there

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<v Speaker 7>are you know, quasi judicial independent agencies, then Congress can

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<v Speaker 7>put limitations on the president's ability to fire. But you know,

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<v Speaker 7>the basic point is I think they're going to overturn

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<v Speaker 7>Humphrey's executive So I think what the Court will try

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<v Speaker 7>to do is to say the president can't fire Jerome Power,

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<v Speaker 7>can't fire at least a cook. But you know, I

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<v Speaker 7>don't think that that is a coherent approach, you know,

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<v Speaker 7>because I think it would be based on history, but

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<v Speaker 7>the history doesn't support it.

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<v Speaker 2>Well. We often see some strained interpretations of history from

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<v Speaker 2>this court. Thanks so much, Bill. That's Georgetown law professor

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<v Speaker 2>William Trainor coming up next. The Court grapples with caps

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<v Speaker 2>on campaign spending. I'm June Grosso and you're listening to Bloomberg.

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<v Speaker 2>The Supreme Court is considering a Republican led effort to

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<v Speaker 2>erase yet another campaign finance regulation, this time the federal

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<v Speaker 2>caps that limit how much political parties can spend in

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<v Speaker 2>coordination with candidates. It's the latest in a line of

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<v Speaker 2>cases where the conservative majority has upended congressionally enacted limits

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<v Speaker 2>on raising and spending money to influence elections, and two

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<v Speaker 2>hours of arguments on Tuesday showed the entrenched divisions between

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<v Speaker 2>the liberal and conservative justices over campaign finance restrictions. Liberal

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<v Speaker 2>Justice Sonya Sotomayor said that every time the Court interferes

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<v Speaker 2>weakening campaign finance rules, it makes matters worse. While conservative

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<v Speaker 2>Justice Brett Kavanaugh said that spending limits have hurt political

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<v Speaker 2>parties in an era of unlimited spending by other organizations.

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<v Speaker 3>You're telling us that Citizens United and McCutcheon ended up

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<v Speaker 3>yes in ample find the voice of corporations, but diminishing

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<v Speaker 3>another voice, that of the party. Now you want to

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<v Speaker 3>now tinker some more and try to raise the voice

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<v Speaker 3>of one party. Our tinkering causes more harm than it

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<v Speaker 3>does good.

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<v Speaker 5>That's the real source of the disadvantage. Right, you can

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<v Speaker 5>give huge money to the outside group, but you can't

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<v Speaker 5>give huge money of the party. So the parties are

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<v Speaker 5>very much weakened compared to the outside groups.

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<v Speaker 2>Chief Justice John Roberts, a potentially pivotal vote, said he

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<v Speaker 2>didn't see much difference between contribution limits, which the Court

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<v Speaker 2>has long upheld, and the caps on coordinated expenditures.

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<v Speaker 6>It seems to me that that's kind of a fiction that, oh,

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<v Speaker 6>you know, they're just coordinating expenditures, they're not making direct contributions.

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<v Speaker 3>I don't know in substance what the difference is.

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<v Speaker 2>Doing away with the caps would overturn a quarter century

0:13:55.320 --> 0:13:58.680
<v Speaker 2>old precedent. In the same week, the court appears ready

0:13:58.720 --> 0:14:02.560
<v Speaker 2>to overturn an ninety year old president and allow President

0:14:02.600 --> 0:14:06.440
<v Speaker 2>Trump to fire the heads of independent agencies. Joining me

0:14:06.520 --> 0:14:10.360
<v Speaker 2>is an expert on campaign finance reform, Richard Brofald, a

0:14:10.440 --> 0:14:14.000
<v Speaker 2>professor at Columbia Law School. Rich Well, you start by

0:14:14.040 --> 0:14:18.760
<v Speaker 2>explaining the federal caps on spending by political parties in

0:14:18.840 --> 0:14:20.359
<v Speaker 2>coordination with candidates.

0:14:20.880 --> 0:14:23.440
<v Speaker 1>So the Federal Russian Campaign Act, going back to the

0:14:23.600 --> 0:14:27.200
<v Speaker 1>nineteen seventies when it was enacted in the aftermath of Artegate,

0:14:27.440 --> 0:14:31.640
<v Speaker 1>places limits on donations to candidates, and it also places

0:14:31.680 --> 0:14:34.800
<v Speaker 1>limits on donations to parties. It does something else, It

0:14:34.840 --> 0:14:38.480
<v Speaker 1>places limits on how much parties can give to candidates,

0:14:38.760 --> 0:14:41.840
<v Speaker 1>on the theory that donors, once they max out on

0:14:41.880 --> 0:14:43.840
<v Speaker 1>how much the donor can give directly to a candidate,

0:14:43.960 --> 0:14:46.040
<v Speaker 1>will then just give to a party to chanting the

0:14:46.080 --> 0:14:48.040
<v Speaker 1>money to a candidate. So there's a limit on how

0:14:48.120 --> 0:14:50.080
<v Speaker 1>much the parties can give to their candidates. And that

0:14:50.120 --> 0:14:52.560
<v Speaker 1>comes up in two ways. One is a literal limit

0:14:52.600 --> 0:14:56.040
<v Speaker 1>on contributions actually writing a check, but the parties are

0:14:56.080 --> 0:14:59.800
<v Speaker 1>also allowed to engage in their own spending in support

0:14:59.840 --> 0:15:03.560
<v Speaker 1>of candidates, and that's called coordinated expenditures. In other words,

0:15:03.560 --> 0:15:05.800
<v Speaker 1>the party does the spending, they don't give the candidate

0:15:05.840 --> 0:15:08.480
<v Speaker 1>a check, but they do spending to promote the candidate.

0:15:08.600 --> 0:15:11.120
<v Speaker 1>Parties are allowed to do that, but the law places

0:15:11.240 --> 0:15:15.400
<v Speaker 1>a limit on how much money they can spend supporting candidates.

0:15:15.800 --> 0:15:18.360
<v Speaker 1>And again for the same idea that if there is

0:15:18.400 --> 0:15:21.400
<v Speaker 1>no limit on how much they could support candidates through spending.

0:15:21.880 --> 0:15:24.400
<v Speaker 1>Once again, donors who once they max out on the

0:15:24.440 --> 0:15:26.760
<v Speaker 1>direct donation to the candidate would then just give to

0:15:26.800 --> 0:15:29.360
<v Speaker 1>the parties and the parties could then use that money

0:15:29.400 --> 0:15:32.680
<v Speaker 1>to basically support their candidates. But parties are allowed to

0:15:32.720 --> 0:15:34.880
<v Speaker 1>do this in a way that other organizations are not.

0:15:35.160 --> 0:15:38.000
<v Speaker 1>Packs are not allowed to coordinate at all with candidates,

0:15:38.320 --> 0:15:42.200
<v Speaker 1>so parties get this extra permission to support the candidates directly,

0:15:42.600 --> 0:15:45.000
<v Speaker 1>but with a cap on it, and it varies from

0:15:45.040 --> 0:15:47.760
<v Speaker 1>state to state based on the population of the state.

0:15:48.040 --> 0:15:49.840
<v Speaker 9>And what's going on in this case is.

0:15:49.800 --> 0:15:53.480
<v Speaker 1>The National Republican Senate Campaign Committee and JD. Vance, who

0:15:53.800 --> 0:15:56.400
<v Speaker 1>this case began was a Senator and a congressman from

0:15:56.400 --> 0:15:59.760
<v Speaker 1>Ohio has since retired, have all brought suit challenging this

0:15:59.840 --> 0:16:03.720
<v Speaker 1>limit on the ability of parties to coordinate their spending

0:16:03.760 --> 0:16:05.200
<v Speaker 1>with candidates.

0:16:04.880 --> 0:16:07.120
<v Speaker 2>And there's a longstanding precedent here.

0:16:07.720 --> 0:16:09.240
<v Speaker 9>Almost twenty five years ago.

0:16:09.320 --> 0:16:12.120
<v Speaker 1>The Supreme Court upheld this limit in a case called

0:16:12.200 --> 0:16:14.720
<v Speaker 1>Colorado Republican Sided in two thousand and one, and the

0:16:14.800 --> 0:16:18.240
<v Speaker 1>Court said yes, because of the danger of conduits a

0:16:18.320 --> 0:16:22.360
<v Speaker 1>party serving as conduits for donor support, these limits make

0:16:22.400 --> 0:16:25.160
<v Speaker 1>sense and are constitutional. Well, the Supreme Court is being

0:16:25.160 --> 0:16:28.280
<v Speaker 1>asked basically now, is to overturn that decision.

0:16:28.560 --> 0:16:32.120
<v Speaker 2>One of the concerns of the liberal justices was that

0:16:32.320 --> 0:16:36.080
<v Speaker 2>lifting the limits on party spending would lead to quid

0:16:36.120 --> 0:16:41.160
<v Speaker 2>pro quo bribery, so wealthy donors could bypass the individual

0:16:41.280 --> 0:16:44.920
<v Speaker 2>contribution limits by donating through parties instead.

0:16:45.440 --> 0:16:47.080
<v Speaker 1>I mean, that is the major concern of the liberal

0:16:47.200 --> 0:16:51.120
<v Speaker 1>justices and of a call the campaign finance reform community

0:16:51.360 --> 0:16:54.600
<v Speaker 1>as a whole, is that this will put another hole

0:16:54.920 --> 0:16:57.680
<v Speaker 1>in the campaign finance laws and make it easier for

0:16:57.880 --> 0:17:01.280
<v Speaker 1>wealthy donors to channel money to candidates. There's still limits

0:17:01.320 --> 0:17:04.280
<v Speaker 1>on their ability to give directly, but this would enable

0:17:04.320 --> 0:17:06.680
<v Speaker 1>them to give through the parties and so that money

0:17:06.680 --> 0:17:07.679
<v Speaker 1>would still get to candidate.

0:17:07.760 --> 0:17:09.520
<v Speaker 9>So yeah, that is the core concern.

0:17:09.880 --> 0:17:12.480
<v Speaker 1>A second concern is, depending on how the Court writes

0:17:12.520 --> 0:17:15.639
<v Speaker 1>this decision, it could be the green light for further

0:17:15.800 --> 0:17:19.320
<v Speaker 1>challenges to other aspects of the campaign finance laws, depending

0:17:19.359 --> 0:17:20.399
<v Speaker 1>on exactly how.

0:17:20.280 --> 0:17:20.840
<v Speaker 9>They write this.

0:17:21.400 --> 0:17:25.040
<v Speaker 1>So it's both upfront making it easier to channel money

0:17:25.080 --> 0:17:28.919
<v Speaker 1>from donors to candidates, and also yet one more case

0:17:29.359 --> 0:17:33.480
<v Speaker 1>eroding Congress's ability to place limits on campaign money.

0:17:33.720 --> 0:17:39.000
<v Speaker 2>The Administration and the Republican's argument centers on free speech

0:17:39.080 --> 0:17:45.000
<v Speaker 2>right as these campaign finance cases since Citizens United have done.

0:17:45.359 --> 0:17:47.960
<v Speaker 1>The essential argument is that this is a limit on

0:17:47.960 --> 0:17:50.240
<v Speaker 1>the ability of parties to speak, and that you don't

0:17:50.240 --> 0:17:54.840
<v Speaker 1>need it. That the combination of disclosure laws, anti bribery laws,

0:17:55.040 --> 0:17:59.000
<v Speaker 1>and limits on literally earmarking that's the term, that's use

0:17:59.240 --> 0:18:01.800
<v Speaker 1>a donation that our donor gives to a party to

0:18:01.840 --> 0:18:04.320
<v Speaker 1>be used for a candidate, that that's enough. That those

0:18:04.359 --> 0:18:08.240
<v Speaker 1>three things banning bribes, requiring disclosure, and saying that when

0:18:08.240 --> 0:18:11.120
<v Speaker 1>a donor gives a party a donation, they can't literally

0:18:11.160 --> 0:18:13.360
<v Speaker 1>say this is going to candidate so and so, that

0:18:13.359 --> 0:18:15.919
<v Speaker 1>that's enough, and that to go beyond that is to

0:18:15.960 --> 0:18:18.840
<v Speaker 1>constrain the ability of parties as free speech actors, as

0:18:18.840 --> 0:18:21.360
<v Speaker 1>First Amendment actors, to participate in political process.

0:18:21.840 --> 0:18:25.040
<v Speaker 2>Just as Brett Kavanaugh said, you can give huge money

0:18:25.080 --> 0:18:27.359
<v Speaker 2>to the outside group, but you can't give huge money

0:18:27.359 --> 0:18:30.040
<v Speaker 2>to the party, and so the parties are very much

0:18:30.119 --> 0:18:32.760
<v Speaker 2>weakened compared to the outside group.

0:18:32.560 --> 0:18:33.800
<v Speaker 9>See talking about super PACs.

0:18:33.840 --> 0:18:36.119
<v Speaker 1>And indeed, that is an argument that many people have

0:18:36.240 --> 0:18:38.680
<v Speaker 1>raised who don't like this law, including people who might

0:18:38.760 --> 0:18:41.680
<v Speaker 1>liberals or reformers. They say this law might have made

0:18:41.800 --> 0:18:44.280
<v Speaker 1>some sense when it was first adopted, but given the

0:18:44.320 --> 0:18:47.679
<v Speaker 1>proliferation of super PACs and other outside groups, we'd be

0:18:47.760 --> 0:18:50.119
<v Speaker 1>better off if parties actually had a bigger voice, that

0:18:50.240 --> 0:18:54.280
<v Speaker 1>parties can play a coordination function, that parties maybe can

0:18:54.280 --> 0:18:57.439
<v Speaker 1>be a little less extreme than some outside groups, that

0:18:57.520 --> 0:18:59.719
<v Speaker 1>parties have more of an interest in governance rather than

0:18:59.760 --> 0:19:02.320
<v Speaker 1>being single issue and that actually if we could start

0:19:02.400 --> 0:19:05.439
<v Speaker 1>roll over now that the outside groups have kind of

0:19:05.480 --> 0:19:08.960
<v Speaker 1>unlimited voice, that anything that strengthens the parties is actually

0:19:09.000 --> 0:19:11.160
<v Speaker 1>a good thing, and that you see many people who

0:19:11.160 --> 0:19:14.320
<v Speaker 1>are not conservatives who are taking that position, who are

0:19:14.359 --> 0:19:17.520
<v Speaker 1>not First Amendment absolutists, but think that in fact, the

0:19:17.640 --> 0:19:20.720
<v Speaker 1>campaign financ system has gotten unbalanced and it would actually

0:19:20.760 --> 0:19:22.840
<v Speaker 1>be good to strengthen the role of parties.

0:19:22.520 --> 0:19:23.280
<v Speaker 9>And this could do that.

0:19:24.119 --> 0:19:28.240
<v Speaker 2>There was also an argument about standing made by those

0:19:28.400 --> 0:19:32.879
<v Speaker 2>defending the caps that JD. Vance, who's no longer a

0:19:32.920 --> 0:19:36.400
<v Speaker 2>Senate candidate, doesn't have a stake in the case and

0:19:36.480 --> 0:19:39.480
<v Speaker 2>thus there's no standing. And then there was a lot

0:19:39.480 --> 0:19:43.720
<v Speaker 2>of discussion about, well, is he going to run for president?

0:19:44.119 --> 0:19:46.879
<v Speaker 2>I don't think this standing argument is going anywhere, but

0:19:46.920 --> 0:19:48.919
<v Speaker 2>it's interesting, so tell us about it.

0:19:49.280 --> 0:19:52.119
<v Speaker 1>So Ramond Martinez was the man appointed by the court

0:19:52.160 --> 0:19:54.760
<v Speaker 1>to defend the law when the government declined to do so,

0:19:55.040 --> 0:19:57.760
<v Speaker 1>and he opened by saying, this case is a big deal.

0:19:57.840 --> 0:19:59.960
<v Speaker 1>You know, anytime you're being asked to overturn a president

0:20:00.160 --> 0:20:02.440
<v Speaker 1>that's twenty five years old, should be very hesitant, and

0:20:02.560 --> 0:20:04.480
<v Speaker 1>you should make sure that this is a case that's

0:20:04.560 --> 0:20:08.399
<v Speaker 1>jurisdictionally sound, and he basically said it's not. So this

0:20:08.520 --> 0:20:12.160
<v Speaker 1>case was brought by some individuals JD. Vance and Congressman

0:20:12.280 --> 0:20:15.040
<v Speaker 1>Cheveaux from Ohio, and also by the National.

0:20:14.880 --> 0:20:16.080
<v Speaker 9>Republican Senate Committee.

0:20:16.119 --> 0:20:18.520
<v Speaker 1>With respect to the two individuals, one of them is

0:20:18.520 --> 0:20:20.680
<v Speaker 1>actually retired and no longer in politics, So that gets

0:20:20.680 --> 0:20:23.720
<v Speaker 1>it down to Vance. And Vance has pretty clearly said

0:20:24.119 --> 0:20:26.400
<v Speaker 1>I don't know if I'm running, or more than point,

0:20:26.480 --> 0:20:28.800
<v Speaker 1>I don't currently have a plan to run, saying I

0:20:28.880 --> 0:20:32.400
<v Speaker 1>might run, I might not run. So mister Martinez's argument was, well,

0:20:32.480 --> 0:20:34.800
<v Speaker 1>this case isn't right. We don't know if he's running,

0:20:34.920 --> 0:20:38.080
<v Speaker 1>so there's no candidate here to bring it, and therefore

0:20:38.160 --> 0:20:41.240
<v Speaker 1>there's no plaintiff. He's not a good plaintiff because whether

0:20:41.280 --> 0:20:43.320
<v Speaker 1>he's going to run a speculative. He doesn't clearly have

0:20:43.359 --> 0:20:46.240
<v Speaker 1>a stake in this case. So there were some back

0:20:46.280 --> 0:20:49.120
<v Speaker 1>and forth on that, but it does seem unlikely. Well,

0:20:49.240 --> 0:20:51.600
<v Speaker 1>you never know what the Supreme Court, but almost all

0:20:51.640 --> 0:20:54.320
<v Speaker 1>of the oral argument was really focused on the merits

0:20:54.320 --> 0:20:54.800
<v Speaker 1>of the case.

0:20:55.040 --> 0:20:57.000
<v Speaker 2>It doesn't seem as clear as in other cases. But

0:20:57.119 --> 0:21:00.840
<v Speaker 2>can you tell where the justices are on this? Gorsuch

0:21:00.840 --> 0:21:02.080
<v Speaker 2>didn't even ask a question.

0:21:02.440 --> 0:21:05.719
<v Speaker 1>It's worth pointing out that in every single campaign finance

0:21:05.880 --> 0:21:09.840
<v Speaker 1>case the Court has taken since Chief Justice Roberts became

0:21:09.920 --> 0:21:13.359
<v Speaker 1>Chief Justice and Justice Alito joined the court, the attack

0:21:13.440 --> 0:21:15.160
<v Speaker 1>on campaign finance law has won.

0:21:15.400 --> 0:21:16.640
<v Speaker 9>That's about eight cases.

0:21:16.760 --> 0:21:19.080
<v Speaker 1>And turn it around and there's not been a single

0:21:19.119 --> 0:21:21.720
<v Speaker 1>case that the Supreme Court has taken since two thousand

0:21:21.760 --> 0:21:24.119
<v Speaker 1>and five on campaign finance law where the law was

0:21:24.240 --> 0:21:26.240
<v Speaker 1>the state. That's all I think I need to say

0:21:26.240 --> 0:21:26.600
<v Speaker 1>about that.

0:21:27.040 --> 0:21:30.280
<v Speaker 2>Yes, Rich, that about says it all. So in light

0:21:30.359 --> 0:21:34.520
<v Speaker 2>of that, there were also questions about what's next. Justice

0:21:34.560 --> 0:21:39.960
<v Speaker 2>Katanji Brown Jackson basically asked the Republican's lawyer, former Solicitor

0:21:40.080 --> 0:21:45.359
<v Speaker 2>General Nol Francisco, if these caps on coordinated expenditures go down,

0:21:45.760 --> 0:21:48.560
<v Speaker 2>what's next the caps on contribution limits?

0:21:48.880 --> 0:21:52.199
<v Speaker 8>In McCutcheon, your clients filed a brief saying that the

0:21:52.200 --> 0:21:55.840
<v Speaker 8>sky wouldn't fall if the court struck down aggregate limits

0:21:56.400 --> 0:21:59.960
<v Speaker 8>because we still have coordinated expended truths. And now here

0:22:00.119 --> 0:22:04.160
<v Speaker 8>we are today with your clients saying no more coordinate

0:22:04.240 --> 0:22:09.120
<v Speaker 8>expenditure limits. And so I'm wondering if, and I think

0:22:09.200 --> 0:22:13.360
<v Speaker 8>others have sort of raised that concern as well, we're

0:22:13.359 --> 0:22:16.000
<v Speaker 8>going to be back here with the other kinds of

0:22:16.080 --> 0:22:19.120
<v Speaker 8>limits you with you making the same kinds of arguments.

0:22:19.240 --> 0:22:23.040
<v Speaker 10>Well, your honor, I think different limits are on stronger

0:22:23.040 --> 0:22:26.240
<v Speaker 10>footing than others. I am not going to say that

0:22:26.320 --> 0:22:28.360
<v Speaker 10>my clients are not going to come back and try

0:22:28.400 --> 0:22:31.000
<v Speaker 10>to challenge other limitations.

0:22:31.040 --> 0:22:33.920
<v Speaker 1>And indeed, it's the lawyer for people who are defending

0:22:33.960 --> 0:22:35.880
<v Speaker 1>this law, which I should say is not the government.

0:22:35.880 --> 0:22:38.840
<v Speaker 1>This is a federal statute. Well, the Trump administration will

0:22:38.840 --> 0:22:40.720
<v Speaker 1>not defend it. In fact, they'e actually joined in the

0:22:40.760 --> 0:22:43.920
<v Speaker 1>attack on it. So the statue was being defended by

0:22:43.960 --> 0:22:46.240
<v Speaker 1>two lawyers. One was a lawyer pointed about the Court

0:22:46.400 --> 0:22:49.040
<v Speaker 1>to speak for the statute, in addition the lawyer for

0:22:49.080 --> 0:22:52.640
<v Speaker 1>the Democratic organizations, and they both argue that basically this

0:22:52.720 --> 0:22:54.280
<v Speaker 1>is the bait and switch that's been going on in

0:22:54.320 --> 0:22:57.160
<v Speaker 1>campaign finance law for a long time. Someone says, well,

0:22:57.200 --> 0:23:00.320
<v Speaker 1>given changes in the law, this particular restriction does make

0:23:00.359 --> 0:23:03.439
<v Speaker 1>any sense, so you should strike it down. And then

0:23:03.440 --> 0:23:05.080
<v Speaker 1>they come along and say, well, now you've struck down

0:23:05.119 --> 0:23:07.520
<v Speaker 1>this one, the next restriction doesn't make any sense either,

0:23:07.560 --> 0:23:09.640
<v Speaker 1>so strike that down. And there seems to be kind

0:23:09.640 --> 0:23:12.119
<v Speaker 1>of a salami tactic aspect to this. A number of

0:23:12.119 --> 0:23:15.800
<v Speaker 1>the justices are very very skeptical, more than skeptical about

0:23:15.800 --> 0:23:18.840
<v Speaker 1>the constitutionality of the contribution restrictions. They don't have to

0:23:18.840 --> 0:23:21.919
<v Speaker 1>decide that in this case, but the Court has traditionally

0:23:21.960 --> 0:23:27.240
<v Speaker 1>treated coordinated expenditures as the constitutional equivalent of contributions. If

0:23:27.240 --> 0:23:30.200
<v Speaker 1>they're going to start protecting coordinated expenditures more saying that

0:23:30.240 --> 0:23:33.680
<v Speaker 1>they're more protected from limitation, it's not a big leap

0:23:33.880 --> 0:23:35.800
<v Speaker 1>to say that. That kind of thinking would also apply

0:23:35.840 --> 0:23:37.080
<v Speaker 1>to the contribution restrictions.

0:23:37.359 --> 0:23:41.840
<v Speaker 2>Finally, if by chance, the Court were to uphold the

0:23:41.880 --> 0:23:45.320
<v Speaker 2>spending caps, would you be surprised, fall off your chair?

0:23:45.440 --> 0:23:48.119
<v Speaker 2>Surprised or mmm, that's interesting.

0:23:48.240 --> 0:23:52.080
<v Speaker 9>Surprised, Well, probably fall off my chair.

0:23:52.840 --> 0:23:55.680
<v Speaker 1>I mean when the Court upheld this law in twentsand

0:23:55.680 --> 0:23:57.240
<v Speaker 1>and one, it was a five to four vote them.

0:23:57.840 --> 0:24:00.520
<v Speaker 1>And in terms of just the carmentary this Supreme Court,

0:24:00.640 --> 0:24:03.040
<v Speaker 1>I'm not sure if Justice Barrett has written on a

0:24:03.240 --> 0:24:06.840
<v Speaker 1>big campaign finance case, but all the other Conservatives have

0:24:06.960 --> 0:24:09.800
<v Speaker 1>and they've been rather consistently skeptical campaign finance.

0:24:10.280 --> 0:24:12.359
<v Speaker 2>The record you cid it does seem to indicate that

0:24:12.480 --> 0:24:15.480
<v Speaker 2>this cap is the next to go. Always great to

0:24:15.520 --> 0:24:19.119
<v Speaker 2>have you on, rich That's Professor Richard Braflt. Of Columbia

0:24:19.200 --> 0:24:22.359
<v Speaker 2>Law School. Coming up next on the Bloomberg Law Show.

0:24:22.720 --> 0:24:27.760
<v Speaker 2>Will investment funds be facing more lawsuits by activist investors?

0:24:28.320 --> 0:24:30.960
<v Speaker 2>Remember you can always get the latest legal news by

0:24:30.960 --> 0:24:34.480
<v Speaker 2>listening to our Bloomberg Law podcast wherever you get your

0:24:34.520 --> 0:24:38.399
<v Speaker 2>favorite podcasts. I'm June Grasso when this is Bloomberg.

0:24:39.920 --> 0:24:42.560
<v Speaker 5>I think this case is extremely close. I'll just put

0:24:43.520 --> 0:24:45.560
<v Speaker 5>cards out there on that.

0:24:45.800 --> 0:24:50.479
<v Speaker 2>And that deduction by Justice Brett Cavanaugh seemed correct because

0:24:50.560 --> 0:24:54.800
<v Speaker 2>Wednesday's eighty minute oral argument at the Supreme Court didn't

0:24:54.840 --> 0:24:59.280
<v Speaker 2>give a clear indication about the likely outcome. Wall Street

0:24:59.359 --> 0:25:02.520
<v Speaker 2>is watching the case over whether to allow investors to

0:25:02.640 --> 0:25:06.439
<v Speaker 2>broadly use an eighty five year old law to sue

0:25:06.480 --> 0:25:10.400
<v Speaker 2>funds over their management decisions. A lower court had allowed

0:25:10.480 --> 0:25:15.000
<v Speaker 2>activist investors led by SABA Capital Master Fund to sue

0:25:15.040 --> 0:25:19.959
<v Speaker 2>eleven closed end funds, including some affiliated with FS Credit

0:25:20.000 --> 0:25:24.600
<v Speaker 2>Opportunities and Blackrock. Justice Sonya Soto Mayor pointed to the

0:25:24.680 --> 0:25:28.400
<v Speaker 2>legislative history of the Investment Company Act to show that

0:25:28.480 --> 0:25:31.679
<v Speaker 2>Congress intended to allow private rights of action.

0:25:32.440 --> 0:25:35.879
<v Speaker 3>I know that many of my colleagues don't believe in

0:25:35.960 --> 0:25:40.479
<v Speaker 3>statutory history, but here we have both a House and

0:25:40.520 --> 0:25:44.760
<v Speaker 3>a Senate reports, a company, the nineteen eighty amendments to

0:25:44.800 --> 0:25:48.600
<v Speaker 3>the ICA, and in both the House and the Senate

0:25:48.680 --> 0:25:54.000
<v Speaker 3>reports it says that quote, private rights of action for

0:25:54.160 --> 0:25:58.840
<v Speaker 3>violations of the federal securities laws are a necessary adjunct

0:25:58.840 --> 0:26:01.840
<v Speaker 3>to the secs and for enforcement efforts.

0:26:02.160 --> 0:26:05.800
<v Speaker 2>But in recent decades, the Supreme Court has avoided finding

0:26:05.920 --> 0:26:10.800
<v Speaker 2>private rights of action unless Congress expressly authorizes them in

0:26:10.840 --> 0:26:15.560
<v Speaker 2>a statute. And Conservative Justice Neil Gorsich was critical of

0:26:15.640 --> 0:26:18.520
<v Speaker 2>allowing so called implied rights of action.

0:26:19.119 --> 0:26:23.040
<v Speaker 6>Pretty disastrous for our system of government, where the people

0:26:23.080 --> 0:26:26.680
<v Speaker 6>are supposed to write the laws that govern them, not judges.

0:26:27.480 --> 0:26:31.879
<v Speaker 2>The Trump administration is backing the mutual funds. Joining me

0:26:31.960 --> 0:26:35.840
<v Speaker 2>is securities law expert James Park, a professor at UCLA

0:26:35.920 --> 0:26:38.960
<v Speaker 2>Law School. Jim tell us about this legal fight.

0:26:39.440 --> 0:26:42.040
<v Speaker 11>Start sort of from the beginning. You have a hedge

0:26:42.040 --> 0:26:45.720
<v Speaker 11>fund SABA Capital, and one of its strategies is it

0:26:46.040 --> 0:26:50.000
<v Speaker 11>buys stock in mutual funds, mutual funds that are closed

0:26:50.040 --> 0:26:52.919
<v Speaker 11>and did which means that they have stock trading in

0:26:53.000 --> 0:26:56.800
<v Speaker 11>secondary markets. And the ideavia on the strategy is you

0:26:56.840 --> 0:27:00.879
<v Speaker 11>buy a substantial stake and you influence the governance of

0:27:00.920 --> 0:27:03.439
<v Speaker 11>the fund. You might think that it has poor governance,

0:27:03.480 --> 0:27:06.320
<v Speaker 11>and then that should increase the price of the stock.

0:27:06.400 --> 0:27:10.600
<v Speaker 11>That's what activist stock investors typically do, and then you

0:27:10.640 --> 0:27:13.480
<v Speaker 11>hopefully sell at a profit. And so they did this

0:27:13.680 --> 0:27:17.520
<v Speaker 11>for a number of mutual funds, and the funds basically

0:27:18.000 --> 0:27:20.600
<v Speaker 11>tried to take away their right to vote. There was

0:27:20.600 --> 0:27:22.840
<v Speaker 11>a state law in the state where they were formed

0:27:22.880 --> 0:27:25.440
<v Speaker 11>which said that you know, if you pass a resolution,

0:27:25.640 --> 0:27:28.920
<v Speaker 11>you can take away a shareholder's right to vote unless

0:27:29.080 --> 0:27:32.800
<v Speaker 11>a majority of the other shareholders basically give it back.

0:27:32.920 --> 0:27:35.360
<v Speaker 11>And this is, you know, almost a takeover defense sort

0:27:35.359 --> 0:27:38.440
<v Speaker 11>of thing. It reduces their influence on the company's governance.

0:27:38.600 --> 0:27:42.440
<v Speaker 11>And so what SABA Capital is arguing is that that

0:27:42.560 --> 0:27:46.119
<v Speaker 11>violates a law, a federal law called the Investment Company Act,

0:27:46.160 --> 0:27:49.119
<v Speaker 11>which is passed in nineteen forty, which is meant to

0:27:49.160 --> 0:27:53.320
<v Speaker 11>regulate mutual funds. The Investment Company Act basically says that

0:27:53.520 --> 0:27:56.840
<v Speaker 11>shareholders are supposed to have votes proportionate to the number

0:27:56.840 --> 0:28:00.040
<v Speaker 11>of shares that they own. And so what SABA the

0:28:00.080 --> 0:28:03.160
<v Speaker 11>Capital was arguing is that we have a private right

0:28:03.160 --> 0:28:06.320
<v Speaker 11>of action to sue and the remedy should be recision,

0:28:06.440 --> 0:28:09.040
<v Speaker 11>which means basically, we get our money back. And so

0:28:09.119 --> 0:28:12.000
<v Speaker 11>there's a question as to whether the Investment Company Act

0:28:12.080 --> 0:28:16.159
<v Speaker 11>authorizes a lawsuit like this, because the language does not

0:28:16.280 --> 0:28:20.440
<v Speaker 11>come out and say in a very straightforward way that

0:28:20.640 --> 0:28:22.679
<v Speaker 11>you have the right to sue for violations of the

0:28:22.720 --> 0:28:25.159
<v Speaker 11>Investment Company Act. And so the only way you can

0:28:25.200 --> 0:28:26.880
<v Speaker 11>say they have a right to sue is to say

0:28:26.880 --> 0:28:30.000
<v Speaker 11>there's something called an implied remedy here, sort of an

0:28:30.400 --> 0:28:33.840
<v Speaker 11>implicit right to sue that the Court can basically say

0:28:34.160 --> 0:28:35.760
<v Speaker 11>is evident from the law.

0:28:36.240 --> 0:28:40.280
<v Speaker 2>The Second Circuit Court of Appeals, which handles a lot

0:28:40.320 --> 0:28:44.280
<v Speaker 2>of these kind of financial cases and is well respected,

0:28:44.640 --> 0:28:46.640
<v Speaker 2>do it allow a private right of action?

0:28:47.280 --> 0:28:47.760
<v Speaker 9>They did.

0:28:47.920 --> 0:28:51.200
<v Speaker 11>They basically did in a different case. And Judge Laval,

0:28:51.400 --> 0:28:55.280
<v Speaker 11>who is a very prominent, respected Second Circuit judge, said

0:28:55.280 --> 0:28:59.760
<v Speaker 11>that the statute has language that can be read to

0:29:00.000 --> 0:29:05.760
<v Speaker 11>indicate that Congress intended for private parties to be able

0:29:05.800 --> 0:29:09.080
<v Speaker 11>to bring suit for recision when there is a violation

0:29:09.480 --> 0:29:13.080
<v Speaker 11>of the Investment Company Act, and he mainly based his

0:29:13.240 --> 0:29:16.400
<v Speaker 11>argument on the text. The text of the law says,

0:29:16.960 --> 0:29:21.160
<v Speaker 11>you know, if you hihilated the Investment Company Act, then

0:29:21.360 --> 0:29:24.680
<v Speaker 11>the various agreement that you entered into with the mutual

0:29:24.760 --> 0:29:29.120
<v Speaker 11>fund is unenforceable. It talks about, you know, in certain circumstances,

0:29:29.520 --> 0:29:32.760
<v Speaker 11>recision should not be denied by a party if the

0:29:32.800 --> 0:29:36.320
<v Speaker 11>benefit of recision outweighs some of the downsides. So there

0:29:36.360 --> 0:29:41.720
<v Speaker 11>is language that indicates that Congress might have envisioned these

0:29:41.760 --> 0:29:45.840
<v Speaker 11>private lawsuits happening, but it's not set in a straightforward way,

0:29:45.920 --> 0:29:48.760
<v Speaker 11>and I think that's what made the question ambiguous. And

0:29:48.800 --> 0:29:51.400
<v Speaker 11>in fact, the Third Circuit and a number of other

0:29:51.440 --> 0:29:54.600
<v Speaker 11>circuits have held the opposite and said that there is

0:29:54.760 --> 0:29:58.920
<v Speaker 11>not an implied right to sue under the Investment Company Act,

0:29:59.080 --> 0:30:03.160
<v Speaker 11>and Meeting Court generally has not favored these implicit rights,

0:30:03.200 --> 0:30:06.960
<v Speaker 11>which are not straightforward in the text of the statute.

0:30:07.200 --> 0:30:11.240
<v Speaker 2>And what were the concerns of the justices about allowing

0:30:11.280 --> 0:30:12.520
<v Speaker 2>a private right of action?

0:30:13.200 --> 0:30:15.000
<v Speaker 11>There were, you know, a number of concerns, and they

0:30:15.120 --> 0:30:19.600
<v Speaker 11>mostly focused on the statutory interpretation argument as opposed to

0:30:19.640 --> 0:30:23.560
<v Speaker 11>broader policy concerns. And you know, I think that they

0:30:23.640 --> 0:30:29.280
<v Speaker 11>were concerned that the language was not completely straightforward and

0:30:29.320 --> 0:30:33.040
<v Speaker 11>that there were some really difficult issues of interpreting what

0:30:33.080 --> 0:30:36.360
<v Speaker 11>the statute meant. Justice Kavanaugh went so far as to

0:30:36.400 --> 0:30:38.479
<v Speaker 11>say this was a very close case, that there were

0:30:38.480 --> 0:30:41.800
<v Speaker 11>good arguments on both sides. Some of the more liberal

0:30:42.000 --> 0:30:45.640
<v Speaker 11>justices pointed to the legislative history, and the legislative history

0:30:45.720 --> 0:30:48.720
<v Speaker 11>actually indicates that Congress thought that there would be an

0:30:48.760 --> 0:30:52.440
<v Speaker 11>implied right of action, And there were some reports senate

0:30:52.480 --> 0:30:55.960
<v Speaker 11>in house reports which said that the envisioned investors could sue.

0:30:56.120 --> 0:30:58.520
<v Speaker 11>But a lot of the more conservative justices, as you

0:30:58.560 --> 0:31:01.960
<v Speaker 11>may know, they don't really like to look at legislative history.

0:31:01.960 --> 0:31:04.240
<v Speaker 11>They like to look at the text of the statute,

0:31:04.240 --> 0:31:06.920
<v Speaker 11>and so a lot of the oral argument was puzzling

0:31:07.080 --> 0:31:10.880
<v Speaker 11>through how we read this language. That's basically what the

0:31:11.040 --> 0:31:13.120
<v Speaker 11>argument was mainly about.

0:31:13.240 --> 0:31:16.840
<v Speaker 2>I thought it was interesting that Justice Sodomayor prefaced her

0:31:16.880 --> 0:31:21.160
<v Speaker 2>remarks about the statutory history by saying, I know many

0:31:21.200 --> 0:31:25.560
<v Speaker 2>of my colleagues don't believe in statutory history. She also

0:31:25.600 --> 0:31:30.160
<v Speaker 2>referred to these private lawsuits as being in conjunction with

0:31:30.320 --> 0:31:35.000
<v Speaker 2>the SEC's enforcement efforts. But if you have private investors

0:31:35.080 --> 0:31:40.240
<v Speaker 2>bringing their own lawsuits, does that interfere with the SEC's

0:31:40.400 --> 0:31:41.800
<v Speaker 2>enforcement plans.

0:31:42.160 --> 0:31:46.280
<v Speaker 11>Definitely. The mutual fund industry has taken the position that

0:31:46.640 --> 0:31:49.560
<v Speaker 11>the statute is meant to be enforced by the SEC

0:31:49.880 --> 0:31:53.120
<v Speaker 11>rather than private plaintiffs, and that the SEC can come

0:31:53.120 --> 0:31:55.640
<v Speaker 11>in if there's a violation of the Investment Company Act

0:31:55.720 --> 0:32:00.440
<v Speaker 11>and bring various enforcement actions. And you know, I think

0:32:00.440 --> 0:32:03.680
<v Speaker 11>the response to that is the SEC has limited resources.

0:32:03.680 --> 0:32:05.680
<v Speaker 11>There are a lot of these mutual funds out there,

0:32:05.720 --> 0:32:10.080
<v Speaker 11>a lot of potential violations, and having private attorney generals

0:32:10.080 --> 0:32:12.200
<v Speaker 11>who are able to bring these suits maybe a more

0:32:12.200 --> 0:32:17.080
<v Speaker 11>effective way of enforcing these provisions. That was not really

0:32:17.160 --> 0:32:20.280
<v Speaker 11>discussed much in the oral argument. I think that argument

0:32:20.320 --> 0:32:22.200
<v Speaker 11>has fallen a bit out of favor with the more

0:32:22.240 --> 0:32:27.480
<v Speaker 11>conservative justices, but definitely the mutual fund industry believes that

0:32:27.560 --> 0:32:31.040
<v Speaker 11>it's really the sec that should be bringing enforcement actions

0:32:31.080 --> 0:32:31.719
<v Speaker 11>in this space.

0:32:32.320 --> 0:32:36.240
<v Speaker 2>What about suing in state court rather than federal court.

0:32:36.360 --> 0:32:38.960
<v Speaker 2>Here's what Justice Kavanaugh said, So.

0:32:38.880 --> 0:32:41.400
<v Speaker 5>It's a federal court state court issue. As I see it,

0:32:41.640 --> 0:32:43.640
<v Speaker 5>like this is going to happen. It's just going to

0:32:43.680 --> 0:32:45.280
<v Speaker 5>happen in federal court or state court.

0:32:45.520 --> 0:32:49.840
<v Speaker 11>There is also a lot of discussion about that possibility

0:32:50.160 --> 0:32:54.960
<v Speaker 11>that maybe what the statute means is that the contract

0:32:55.320 --> 0:32:58.840
<v Speaker 11>is unenforceable if there's a violation of the Investment Company Act,

0:32:59.400 --> 0:33:02.720
<v Speaker 11>and so then there would be litigation in state court

0:33:02.960 --> 0:33:06.320
<v Speaker 11>about the enforceability of the contract, And so that was

0:33:06.360 --> 0:33:10.200
<v Speaker 11>seen as a possibility. Have there ever been suits like that.

0:33:10.400 --> 0:33:12.560
<v Speaker 11>I don't know, and I think there would be a

0:33:12.600 --> 0:33:16.720
<v Speaker 11>little bit complicated, you know, especially the types of theories

0:33:16.760 --> 0:33:20.200
<v Speaker 11>that you might want to bring. Federal courts may have

0:33:20.240 --> 0:33:22.880
<v Speaker 11>a bit of an advantage over state courts in hearing

0:33:22.960 --> 0:33:26.080
<v Speaker 11>these types of issues, and so it would be a

0:33:26.080 --> 0:33:29.360
<v Speaker 11>bit awkward to say that these claims would mainly be

0:33:29.480 --> 0:33:32.760
<v Speaker 11>brought in state court as opposed to Federal Court if

0:33:32.760 --> 0:33:34.840
<v Speaker 11>you want to have this be an effective remedy in

0:33:34.880 --> 0:33:35.560
<v Speaker 11>my view.

0:33:35.720 --> 0:33:39.080
<v Speaker 2>Jim, can you give us a sort of simplistic explanation

0:33:39.480 --> 0:33:42.600
<v Speaker 2>of the position of each side here on the merits

0:33:42.600 --> 0:33:43.160
<v Speaker 2>of the case.

0:33:43.920 --> 0:33:47.640
<v Speaker 11>On one side, the investors might argue, we need some remedy,

0:33:47.680 --> 0:33:50.680
<v Speaker 11>we need a clear remedy when there are violations, and

0:33:51.000 --> 0:33:54.320
<v Speaker 11>you know, recision is a pretty powerful remedy under the

0:33:54.360 --> 0:33:57.440
<v Speaker 11>Investment Company Act, which was meant to regulate mutual funds.

0:33:57.800 --> 0:33:59.680
<v Speaker 11>On the other hand, I think what the mutual fund

0:33:59.720 --> 0:34:01.960
<v Speaker 11>in as worried about is that you're going to get

0:34:01.960 --> 0:34:05.240
<v Speaker 11>a flood of lawsuits and that that might actually be

0:34:05.320 --> 0:34:09.640
<v Speaker 11>bad for most investors in the mutual fund because only

0:34:09.680 --> 0:34:12.560
<v Speaker 11>a few investors might be interested, insuing, I'm only a

0:34:12.600 --> 0:34:17.080
<v Speaker 11>few investors may be pursuing an activist strategy with the fund,

0:34:17.760 --> 0:34:21.680
<v Speaker 11>and so the other investors may not be all that interested,

0:34:21.960 --> 0:34:25.800
<v Speaker 11>and it's costly to defend these lawsuits, and those costs

0:34:25.840 --> 0:34:29.520
<v Speaker 11>come out of the pockets of the other mutual fund shareholders.

0:34:30.000 --> 0:34:32.279
<v Speaker 2>It was hard to read the argument, although it did

0:34:32.320 --> 0:34:36.560
<v Speaker 2>seem like the liberal justices and perhaps the Chief Justice

0:34:36.800 --> 0:34:42.160
<v Speaker 2>and Justice Kavanaugh, might favor allowing the private lawsuits. But

0:34:42.239 --> 0:34:43.120
<v Speaker 2>what was your take?

0:34:43.800 --> 0:34:46.960
<v Speaker 11>It's close. I mean, my guess is I actually think

0:34:47.000 --> 0:34:49.520
<v Speaker 11>that they will find that there is a right of

0:34:49.560 --> 0:34:52.839
<v Speaker 11>action based upon the text of the statute. I think

0:34:52.880 --> 0:34:56.759
<v Speaker 11>there is enough in the text of the statute to

0:34:57.040 --> 0:35:00.480
<v Speaker 11>persuade at least some of the conservative justices. Is that

0:35:00.800 --> 0:35:04.120
<v Speaker 11>Congress intended for there to be a private right of

0:35:04.160 --> 0:35:08.080
<v Speaker 11>action for recision, I think the more liberal justices will

0:35:08.120 --> 0:35:11.680
<v Speaker 11>be persuaded by both the text, the legislative history, and

0:35:11.840 --> 0:35:15.160
<v Speaker 11>policy considerations. So I think they'll need to get a

0:35:15.200 --> 0:35:18.960
<v Speaker 11>couple of the Republican justices to decide with them, which

0:35:19.040 --> 0:35:21.359
<v Speaker 11>I think is very possible. It's not a sure thing,

0:35:21.520 --> 0:35:24.560
<v Speaker 11>but just my sense of the argument. If I felt

0:35:24.600 --> 0:35:26.560
<v Speaker 11>like Saba Capital might have had a bit of a

0:35:26.600 --> 0:35:29.360
<v Speaker 11>better argument in terms of the text on the statutory

0:35:29.360 --> 0:35:30.680
<v Speaker 11>interpretation issue.

0:35:30.760 --> 0:35:33.239
<v Speaker 2>And do you think that it's the correct decision to

0:35:33.360 --> 0:35:34.960
<v Speaker 2>allow the private investors to.

0:35:34.920 --> 0:35:38.799
<v Speaker 11>Sue As a policy matter, I think the risk that

0:35:38.800 --> 0:35:41.160
<v Speaker 11>it's going to lead to a flood of lawsuits may

0:35:41.239 --> 0:35:44.360
<v Speaker 11>be low. We'll have to see though. And my colleague

0:35:44.360 --> 0:35:47.480
<v Speaker 11>at UCLA for non Restreppo, actually has a study that

0:35:47.520 --> 0:35:50.160
<v Speaker 11>he just completed that looked at what happened after the

0:35:50.200 --> 0:35:53.680
<v Speaker 11>second Circuit allowed these lawsuits, and he didn't find a

0:35:53.719 --> 0:35:56.480
<v Speaker 11>flood of cases, and he didn't find a big impact

0:35:56.480 --> 0:35:59.480
<v Speaker 11>on the mutual fund industry. These are preliminary results, he

0:35:59.560 --> 0:36:01.800
<v Speaker 11>tells me, and so he may, you know, find something

0:36:01.800 --> 0:36:04.879
<v Speaker 11>different as he delves into the data. My sense is that,

0:36:05.000 --> 0:36:06.759
<v Speaker 11>you know, SABA Capital is a little bit of an

0:36:06.760 --> 0:36:11.240
<v Speaker 11>outlier in terms of pursuing a strategy like this. Most

0:36:11.280 --> 0:36:17.000
<v Speaker 11>activist funds are targeting public corporations rather than mutual funds. Now,

0:36:17.000 --> 0:36:18.879
<v Speaker 11>it might be that if you know you have more

0:36:18.960 --> 0:36:21.680
<v Speaker 11>rights and more leverage, that more funds may get into

0:36:21.719 --> 0:36:24.880
<v Speaker 11>this space. But it is a strategy that does require

0:36:24.920 --> 0:36:28.280
<v Speaker 11>you to make a pretty substantial investment in the mutual

0:36:28.320 --> 0:36:31.360
<v Speaker 11>funds so that you have significant votes. And it's a

0:36:31.400 --> 0:36:34.480
<v Speaker 11>little bit different than some of the shareholder lawsuits we

0:36:34.520 --> 0:36:38.080
<v Speaker 11>see with public companies, which have been criticized because you know,

0:36:38.120 --> 0:36:40.960
<v Speaker 11>you have plainers who own only a few shares who

0:36:40.960 --> 0:36:44.080
<v Speaker 11>have a right to bring a private action represented by

0:36:44.080 --> 0:36:47.399
<v Speaker 11>an attorney in a class action, and so that might

0:36:47.480 --> 0:36:50.920
<v Speaker 11>be the reason we see a lot of litigation in

0:36:50.960 --> 0:36:53.600
<v Speaker 11>the public company space. I don't know if that will

0:36:53.640 --> 0:36:58.319
<v Speaker 11>necessarily be true with respect to mutual funds. And you know,

0:36:58.360 --> 0:36:59.879
<v Speaker 11>the other thing to keep in mind is the imply

0:37:00.160 --> 0:37:03.080
<v Speaker 11>right of action is also just for recision, which means

0:37:03.320 --> 0:37:05.920
<v Speaker 11>the remedy as you get your money back, as opposed

0:37:05.960 --> 0:37:08.920
<v Speaker 11>to damages. That may also have some impact on the

0:37:08.960 --> 0:37:12.120
<v Speaker 11>incentives of plaintiffs to bring a lot of lawsuits for

0:37:12.200 --> 0:37:14.320
<v Speaker 11>violations of the Investment company Acts.

0:37:14.800 --> 0:37:18.440
<v Speaker 2>What's an investor lawsuit without damages? Thanks so much, Jim.

0:37:18.600 --> 0:37:22.520
<v Speaker 2>That's Professor James Park of UCLA Law School. And that's

0:37:22.560 --> 0:37:25.200
<v Speaker 2>it for this edition of The Bloomberg Law Show. Remember

0:37:25.200 --> 0:37:27.319
<v Speaker 2>you can always get the latest legal news on our

0:37:27.320 --> 0:37:31.480
<v Speaker 2>Bloomberg Law Podcast. You can find them on Apple Podcasts, Spotify,

0:37:31.680 --> 0:37:36.720
<v Speaker 2>and at www dot Bloomberg dot com, slash podcast, Slash Law,

0:37:37.120 --> 0:37:39.680
<v Speaker 2>and remember to tune into The Bloomberg Law Show every

0:37:39.760 --> 0:37:43.640
<v Speaker 2>weeknight at ten pm Wall Street Time. I'm June Grosso

0:37:43.800 --> 0:37:45.400
<v Speaker 2>and you're listening to Bloomberg