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

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Speaker 2: Delaware's Supreme Court is going to address the fallout from

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Speaker 2: a trial judge's rejection of Elon Musk's blockbuster pay package,

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Speaker 2: a corporate law overhaul in the state that took effect

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Speaker 2: in March that narrowed the definition of controlling stockholder, making

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Speaker 2: it easier to avoid scrutiny of potentially conflicted transactions. The

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Speaker 2: High Court will decide the constitutionality of that law, as Musk,

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Speaker 2: meta CEO Mark Zuckerberg, and other corporate leaders publicly discussed

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Speaker 2: moving their companies from Delaware to Texas and Nevada. My

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Speaker 2: guest is business law professor Eric Talley of Columbia Law School.

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Speaker 2: So Eric, Delaware Supreme Court is going to decide the

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Speaker 2: constitutionality of SB twenty one.

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Speaker 3: What is SB twenty one.

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Speaker 1: See was a legislative reform that, by historical standards, rocketed

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Speaker 1: through the Delaware General Assembly back in February and March

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Speaker 1: of this year. And substantively, what it did was it

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Speaker 1: basically intervened to push back and on some level to

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Speaker 1: overturn some of the decisions that had been made by

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Speaker 1: Delaware's Chancery court. It's much vaunted corporate law court that

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Speaker 1: deal with how do you sort of judge actions that

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Speaker 1: are taken by someone who is a controller of a

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Speaker 1: company and might be actions that are kind of self

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Speaker 1: serving or have a conflict of interest. So probably the

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Speaker 1: most famous of these was Elon Musk's first compensation package,

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Speaker 1: which was famously overturned by Delaware Chancery Court judge Kathleen

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Speaker 1: McCormick in early of twenty twenty four. There were some

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Speaker 1: other cases that also involved controllers that were, you know,

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Speaker 1: basically litigating a transaction that had a conflict of interest

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Speaker 1: that lost. And that's what this set of reforms did,

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Speaker 1: and it did into it. The first is it basically said,

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Speaker 1: it's much harder for stockholders to challenge various types of

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Speaker 1: conflicts involving that controller, and the traditional protections that had

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Speaker 1: been put up that would allow stockholders an easier rout

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Speaker 1: into court, those were going to get sort of heightened

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Speaker 1: a little bit and the wall was going to be

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Speaker 1: higher to surmount to get into court. And another related

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Speaker 1: reform was that the typical way that some of these

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Speaker 1: stockholders would bring a case against any corporate fiduciary is

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Speaker 1: to use historical rights that they have to get the

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Speaker 1: books and records of the corporation, and that's kind of

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Speaker 1: how they figure out what's going to go into their complaint.

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Speaker 1: And this is a long standing stockholder right. There was

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Speaker 1: a statute that allowed pretty easy access to those things,

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Speaker 1: and that statute itself got amped up to make it

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Speaker 1: harder to get access. So both of these big reforms

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Speaker 1: were a large reform that were pretty much in a

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Speaker 1: pro controller probe defendant direction, and probably as controversially, they

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Speaker 1: not only were so called prospective in nature, but they

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Speaker 1: also applied to any historical cases that involved some conflict

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Speaker 1: of interest a year ago, for example, in which the

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Speaker 1: case hadn't been brought in court yet, so it had

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Speaker 1: this retroactive application as well.

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Speaker 2: Plaintiffs are challenging the law on two constitutional grounds. Explain

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Speaker 2: those challenges.

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Speaker 1: The first is that it was an overreach by the

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Speaker 1: Delaware General Assembly to have a retroactive application of law.

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Speaker 1: The idea is, hey, listen, everyone knew what the rules

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Speaker 1: of the road were when they were acting back in

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Speaker 1: the pre SB twenty one days, and they either complied

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Speaker 1: or they didn't. But to suddenly say the rules of

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Speaker 1: the road have now changed, and we're going to use

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Speaker 1: the new rules to assess prior conduct seemed a little

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Speaker 1: bit off the rails, at least according to the plaintiffs

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Speaker 1: that are challenging this case. And then the second, which

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Speaker 1: in some ways is much more historical, has to do

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Speaker 1: with the fact that what the Delaware Assembly basically did

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Speaker 1: in overturning these chancery court opinions. If you read the

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Speaker 1: text of the statute, it basically says that under certain circumstances,

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Speaker 1: we're not even going to allow the Delaware Court of

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Speaker 1: Chancery to exercise its legal or equitable powers over certain

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Speaker 1: of these cases. And that is an interesting wording because

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Speaker 1: there's some old cases in Delaware, but says, if the

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Speaker 1: Delaware General Assembly tries to limit the equitable jurisdiction of

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Speaker 1: the Court of Chancery, it is a court of equity

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Speaker 1: after all. That's on constitutional under the Delaware Constitution, at

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Speaker 1: least if it's trying to do things that caused the

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Speaker 1: Court of Chancery to have fewer powers than it had

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Speaker 1: in and get this to back in seventeen ninety two,

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Speaker 1: back when the original Constitution was drafted. So those are

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Speaker 1: effectively the two constitutional challenges that the retroactive effect was unconstitutional,

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Speaker 1: and that the handcuffing of the Delaware chance Re Court

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Speaker 1: and the walling off of its ability to exercise equitable

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Speaker 1: powers was also unconstitutional under the Delaware Constitution.

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Speaker 2: Did the Delaware Supreme Court fast track this case?

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Speaker 1: Well, everything about SB twenty one has been fast tracked.

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Speaker 1: So one of the things that that's interesting about the

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Speaker 1: legislation itself is that, you know, corporate law is a

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Speaker 1: pretty technocratic enterprise, and a lot of times, in fact,

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Speaker 1: during the last quarter century, every time that the law

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Speaker 1: has been amended, it's gone through this what's known as

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Speaker 1: the Delaware Council, and it's part of the Date Bar Association,

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Speaker 1: and it's got a bunch of defendant side attorneys and

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Speaker 1: plaintive side attorneys and transactional attorneys and former judges and

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Speaker 1: made debate these things. This particular set of provisions bypassed

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Speaker 1: that Council, went straight into the Assembly, and within a

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Speaker 1: month pretty much had been passed by both houses of

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Speaker 1: the Assembly and signed in to law by the governor.

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Speaker 1: So it was already being fast tracked on the legislative basis.

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Speaker 1: The plaintiff in this case, a company called clearway. Well,

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Speaker 1: the shareholders of that company filed suit shortly thereafter, complaining

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Speaker 1: of conduct that predated all these statutes. And so the

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Speaker 1: plaintiff attorney said, hey, these things are unconstitutional, they shouldn't

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Speaker 1: apply to us, and we want to challenge the constitutionality

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Speaker 1: of the amendments. That is above the pay grade of

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Speaker 1: any of the judges in the Delaware Chancery Court, and

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Speaker 1: which Chancellor basically said, I'm going to just certify this

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Speaker 1: question the Delaware Supreme Court. It had made so much

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Speaker 1: news it really would have been shocking to me June

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Speaker 1: had the Delaware Supreme Court decided they were going to

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Speaker 1: sit on it for ten months or a year, they

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Speaker 1: pretty much had to say, Okay, we're going to take

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Speaker 1: briefing on this reform and we're going to hear argument

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Speaker 1: before year's end so that we can add some clarity

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Speaker 1: to exactly what is Delaware law going forward.

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Speaker 2: So, was this rush to pass the law and then

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Speaker 2: you know, to litigate it. Is it because Delaware fears

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Speaker 2: losing corporations to Texas or Nevada?

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Speaker 1: It certainly had an anxiety vibe to issue. So after,

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Speaker 1: you know, right after the original opinion on Elon Musk's

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Speaker 1: compensation package came out, he took to Twitter, which of

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Speaker 1: course is his right since he owns the company, and said,

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Speaker 1: never incorporate your company in the state of Delaware. And

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Speaker 1: he followed up with several other you know, sort of

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Speaker 1: Delaware hating Delaware rage type of tweets. And you know,

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Speaker 1: mister Musk is a pretty influential person, knows a lot

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Speaker 1: of people, and so all of his friends and associates

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Speaker 1: and prospective associates started saying, wow, I wonder whether he's

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Speaker 1: onto something, started asking their own corporate counsel, should we

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Speaker 1: reincorporate rate outside of Delaware? And my sense is that

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Speaker 1: those questions at least started to really pick up velocity

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Speaker 1: after he started to tweet rage a little bit against

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Speaker 1: the state of Delaware. It never really picked up a

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Speaker 1: huge sense of momentum in terms of actual reincorporations. It

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Speaker 1: was more like a handful of companies decided to reincorporate,

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Speaker 1: and some transactional lawyers reported I would assume truthfully that oh,

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Speaker 1: they were being inundated with questions about it. But when

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Speaker 1: the rubber hit the road, there wasn't an awful lot

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Speaker 1: of empirical support for a rushout of Delaware, though. That

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Speaker 1: clearly was the vibe that was animating both the governor

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Speaker 1: and the General Assembly, and in their view, they just

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Speaker 1: needed to do something, and something quickly to preempt what

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Speaker 1: they had at least become convinced was going to be

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Speaker 1: a mass exodus out of Delaware. Since the statute was passed,

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Speaker 1: you know, it's been constitutionally challenged. Its official status, I

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Speaker 1: guess is still being kicked around a little bit. There

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Speaker 1: really hasn't been that big of an upswelling of companies

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Speaker 1: that have left Delaware to incorporate in Nevada or Texas,

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Speaker 1: which are the two biggest states. You know, you can

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Speaker 1: definitely see a handful of companies that have done so,

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Speaker 1: but it's not been like a gigantic rush. It may

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Speaker 1: actually have picked up even a little bit compared to

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Speaker 1: where it was before the reform. Interestingly enough, a couple

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Speaker 1: of the companies that have reincorporated out of Delaware since

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Speaker 1: the reform said that they were doing so because these

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Speaker 1: new reforms had so many words in them and they

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Speaker 1: were so complicated. They just wanted to sit that dance out.

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Speaker 1: They didn't want to have to bear the risk of

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Speaker 1: figuring out how this new statute was going to get

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Speaker 1: interpreted over the years. So it's been a really interesting

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Speaker 1: debate amongst people who are corporate law nerds, and I

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Speaker 1: unfortunately include myself in that club, June, and maybe you

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Speaker 1: as well. But it really has been kind of an

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Speaker 1: interesting thing to see how this plays out. I think

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Speaker 1: a lot of people, you know, if you ask them

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Speaker 1: two years ago, would have told you, oh, you know,

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Speaker 1: this race, this dance off between different states to attract incorporations,

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Speaker 1: it's not a real thing. Delaware won it seventy five

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Speaker 1: years ago and it's not going to let go of

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Speaker 1: its winning margins. I think that a lot of people,

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Speaker 1: including myself, think, well, you know what, at least the

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Speaker 1: discussion about, you know, effective competition amongst other types of

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Speaker 1: states or other jurisdictions has now become a real thing.

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Speaker 1: You hear it on a regular basis. So it probably

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Speaker 1: is the case that Delaware is more vulnerable than it

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Speaker 1: was two years ago. Where people might differ is whether

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Speaker 1: the vulnerability is due to the cases like the musk

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Speaker 1: compensation case, or is it due to the fact that

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Speaker 1: the Assembly was putting together a slapdash set of statutes

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Speaker 1: that no one knows exactly they're going to work, right,

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Speaker 1: and it might be a combination of both things.

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Speaker 2: Was there another law that had an overhaul because of

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Speaker 2: an unpopular chance re court ruling?

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Speaker 1: There is, interestingly enough, about six months before this SB

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Speaker 1: twenty one reform, there was another reform in around August

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Speaker 1: of twenty twenty four. Now that was a case that

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Speaker 1: itself was responding to a different case, a case involving

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Speaker 1: the Molus Corporation and some side contracts that its founder,

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Speaker 1: Ken Molis had reached with the company that protected him

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Speaker 1: against a whole bunch of different fiduciary duty allegations. The

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Speaker 1: judge in that case basically said, you know, you might

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Speaker 1: be able to do these things, but you can't do

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Speaker 1: it in a side contract. You got to do it

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Speaker 1: in the corporate charter or the bylaws, and basically invalidated

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Speaker 1: those side contracts. And so the twenty twenty four reforms

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Speaker 1: were another, you know, essentially a legislative overturning of a

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Speaker 1: different case. This Molus case came about around the same

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Speaker 1: time as the Musk case came out, and you know,

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Speaker 1: at the time it was quite controversial, but it did

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Speaker 1: go through the Comptle, and it had the sort of

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Speaker 1: the ordinary schedule in being passed. It didn't sort of

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Speaker 1: have this kind of fire alarm exit rush that SB

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Speaker 1: twenty one had. And while people were you know, I guess,

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Speaker 1: busy clutching their pearls over this twenty twenty four reform,

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Speaker 1: which is called SB three thirteen if you're interested in

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Speaker 1: the alphabet soup, suddenly this SB twenty one thing comes

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Speaker 1: along and steals everyone's attention from it. But you are

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Speaker 1: correct that that twenty twenty four reform is still in

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Speaker 1: the mix, and it has some interesting interaction effects with

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Speaker 1: SB twenty one because it basically says, look, regardless of

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Speaker 1: what Delaware is doing in its corporate code, it is

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Speaker 1: now possible to enter into a side contract that might

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Speaker 1: allow you to get around most of the Delaware corporate code.

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Speaker 1: In fact, I've just written an academic paper with my

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Speaker 1: colleague Dorothy Lund that basically says, you know what, Delaware

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Speaker 1: may actually prevail in its first place position in this

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Speaker 1: race because it is basically empowered a bunch of corporations,

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Speaker 1: if they don't like what was happening to Delaware, just

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Speaker 1: to go private and just privatize their entire governance structure

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Speaker 1: coming up next.

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Speaker 2: But is it a bad look for Delaware? You're listening

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Speaker 2: to Bloomberg. In response to a trial judge's rejection of

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Speaker 2: Elon Musk's blockbuster pay package, Delaware's legislature passed a corporate

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Speaker 2: law overhaul SB twenty one narrowed the definition of controlling stockholder,

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Speaker 2: making it easier to avoid scrutiny of potentially conflicted transactions. Now,

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Speaker 2: Delaware's highest court will decide the constitutionality of that law.

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Speaker 2: I've been talking to Eric Tally, an expert in business

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Speaker 2: law and a professor at Columbia Law School. Eric, is

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Speaker 2: it a bad look that the legislature changes the law

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Speaker 2: to make it friendlier to corporations so those core operations

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Speaker 2: don't leave the state.

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Speaker 3: It seems like a bad look to me.

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Speaker 1: Well, there are aspects of that are a bad look.

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Speaker 1: I do want to defend the enterprise of Delaware in

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Speaker 1: trying to keep the franchise alive.

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Speaker 3: Right.

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Speaker 1: The secret sauce of Delaware for a long time was, Hey, look,

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Speaker 1: we're a small state. We don't have a lot of

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Speaker 1: like operating industries in our state that are going to

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Speaker 1: capture our general assembly. So we can basically focus on,

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Speaker 1: you know, trying to formulate the best possible operating corporate

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Speaker 1: law that is possible, and in fact, Delaware benefits quite

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Speaker 1: a bit from that because it's a small state. In

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Speaker 1: corporation fees alone, you know, probably pave half the roads

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Speaker 1: in Delaware, so they really do benefit from the revenues

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Speaker 1: that are raised. On the other hand, in this particular instance,

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Speaker 1: the fact that it was so procedurally irregular, the fact

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Speaker 1: that it really seemed even though the you know, the

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Speaker 1: governor and the state legislators deny this, it seems pretty

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Speaker 1: obvious that the pressure initially was coming from Elon Musk

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Speaker 1: himself and attempting to change law by himself. And the

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Speaker 1: fact that it rocketed through the Delaware legislature incredibly fast,

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Speaker 1: with very few opportunities for critics to, you know, to

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Speaker 1: raise their concerns or to voice their concerns. One of

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Speaker 1: my colleagues testified in front the General Assembly and was

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Speaker 1: literally shouted down and was told to leave the lectern

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Speaker 1: So it really is kind of an interesting moment for Delaware.

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Speaker 1: I don't think the look has been particularly good with Delaware,

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Speaker 1: and that's in some ways one of the dangers is

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Speaker 1: that you can fail to compensate for things that may

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Speaker 1: be emerging problems in the state, but you can also overcompensate.

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Speaker 1: And you know, to add even another complicating factor. The

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Speaker 1: two big cases that were being you know, sort of

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Speaker 1: responded to with these reforms, the Molus case and the

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Speaker 1: Elon Musk case, they still had not at that point

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Speaker 1: gotten to even an appeal before the Delaware Supreme Court.

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Speaker 1: They were still active live cases in the Delaware Assemble

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Speaker 1: was effectively responding to a trial court opinion. If you know,

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Speaker 1: there's a chance a trial court opinion makes a mistake,

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Speaker 1: and sometimes they do. The usual root is okay, appeal

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Speaker 1: it and see what the Delar's Supreme Court does with it.

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Speaker 1: And only then would you want to step in and say, okay,

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Speaker 1: we still don't like what the Delar's Preme Court is

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Speaker 1: going to do, and so we're going to change the law.

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Speaker 1: And so there really was a bit of a rushed

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Speaker 1: kind of atmosphere to this entire ordeal, and I think

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Speaker 1: on some level that probably caused the urgency to escalate.

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Speaker 1: As opposed to the signal that I suspect the governor

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Speaker 1: was trying to send, which is now we're going to

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Speaker 1: move really really quickly to you know, to put this

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Speaker 1: fire out, and putting the fire out, they may have

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Speaker 1: started inadvertently three or four other fires.

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Speaker 2: I mean, it's it's expensive to incorporate in a different state,

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Speaker 2: isn't it?

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Speaker 3: To move states?

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Speaker 1: It can be in a lot of these states. In

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Speaker 1: Nevada and Texas, the expense is actually lower than in Delaware,

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Speaker 1: and Delaware has you know, doesn't charge a ton. The

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Speaker 1: most you're going to pay in an annual franchise tax

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Speaker 1: is like two hundred and fifty thousand dollars, which is peanuts.

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Speaker 1: And it's smaller if you're not a big company. So

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Speaker 1: it really is a scale business. It's not a Delaware

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Speaker 1: does not make all its money from three or four companies.

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Speaker 1: It makes it from the millions of companies that are

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Speaker 1: incorporated there and pay annual franchise taxes. And that's been

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Speaker 1: their entire design. One thing that's kind of interesting about

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Speaker 1: this new competition from Texas and kind of a pre

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Speaker 1: existing but newly invigorated competition from Nevada is that it's

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Speaker 1: not really clear that they are in this game to

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Speaker 1: make money. It seems like they're more in this game

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Speaker 1: almost to rejoin where are you incorporated and where are

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Speaker 1: you doing business? The folks at Texas say, oh, yeah,

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Speaker 1: we want people to incorporate in Texas because we want

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Speaker 1: their factories to be in Texas. And that's kind of

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Speaker 1: a quaint approach, at least by historical standards, because the

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Speaker 1: big innovation that Delaware introduced to the world is you

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Speaker 1: don't have to do any business in Delaware to be

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Speaker 1: incorporated there, and what they specialize in is incorporate law.

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Speaker 1: So some of the most recent competition I think has

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Speaker 1: been hard for Delaware to match up to because it

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Speaker 1: seems to be not about making money, and a lot

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Speaker 1: of these states seem to be interested in kind of

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Speaker 1: keeping the cost down of incorporating. Now, if you're going

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Speaker 1: to reincorporate and you're a public company, that's a very

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Speaker 1: costly process. You've got to put it out in front

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Speaker 1: of the stockholders, you've got to solicit their votes, you

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Speaker 1: have to have long disclosures, and there's a fair amount

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Speaker 1: of rigmarole that goes into trying to figure out how

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Speaker 1: am I going to reincorporate in a different state.

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Speaker 2: So now, as far as SB twenty one, do you

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Speaker 2: think it's unlikely that the Delaware Court will find it unconstitutional.

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Speaker 1: This is a really interesting issue. So the case from

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Speaker 1: which a lot of this comes is a case from

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Speaker 1: the nineteen fifties actually, and that case itself was a

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Speaker 1: controversial case when it first came down. It hasn't really

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Speaker 1: been tested very much, and so I think probably, you know,

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Speaker 1: if are replacing odds, I'd say the chances are probably

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Speaker 1: that the Delaware Supreme Court is going to find a

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Speaker 1: way to either uphold the statute or say, okay, look,

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Speaker 1: technically the statute is not constitutional, but if you put

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Speaker 1: in a small fix to it, like make it an

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Speaker 1: opt in statute or something like that, it would be constitutional.

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Speaker 1: We'll see what happens. But it's interesting that it's had

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Speaker 1: the kind of legs that it has, and in some

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Speaker 1: ways not surprising because really the whole sort of you know,

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Speaker 1: last seven or eight months in corporate law has kind

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Speaker 1: of forced us back into this kind of existential moment

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Speaker 1: of trying to figure out, you know, what is valuable

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Speaker 1: in corporate law and what is it.

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Speaker 3: Do you think we'll see a decision soon on this.

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Speaker 1: We'll see where this goes. My guess is we're probably

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Speaker 1: going to have to wait till the beginning of the

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Speaker 1: new year to see a judgment from the from the

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Speaker 1: Delaware Supreme Court, but they may move relatively quickly given

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Speaker 1: the state involved.

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Speaker 2: Before I let you go, I want to get your

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Speaker 2: input on something totally different.

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Speaker 3: Open Ai is laying the.

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Speaker 2: Groundwork for an IPO that could value the company at

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Speaker 2: one trillion dollars.

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Speaker 1: You can't see me, but I've got my little Austin

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Speaker 1: Powers pinky up against the corner of my mouth for

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Speaker 1: one trillion dollars. So so yeah, so this is this

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Speaker 1: has been a long brewing situation with open ai. You know.

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Speaker 1: When the company began, uh, it had a unique structure, right,

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Speaker 1: and I think some of the founders were quite worried about,

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Speaker 1: you know, the general intelligence of artificial decision makers and

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Speaker 1: whether that caused a risk and so uh they deliberately

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Speaker 1: built into the original structure of open ai what is

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Speaker 1: essentially a ceiling on how profitable it could be for

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Speaker 1: its investors. It was a company and owned by a

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Speaker 1: nonprofit foundation, and it basically said that if you're an

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Speaker 1: investor in the for profit company, as soon as you've

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Speaker 1: made back one hundred times your investment, you don't get

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Speaker 1: anything more, all right, And so that that seemed at

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Speaker 1: the time like one hundred times by investment, that's great,

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Speaker 1: well open ai. Open ai is shot well past that

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Speaker 1: now and and that creates a problem, particularly given that

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Speaker 1: it is sitting side by side with a bunch of

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Speaker 1: other generative AI companies that are investing heavily in improving

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Speaker 1: their project. The only way that you can kind of,

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Speaker 1: you know, do that and stay in competition is to

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Speaker 1: try to figure out a way to raise more money.

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Speaker 1: But when the existing investors have already hit their one

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Speaker 1: hundred times cap, there's no easy way to do it.

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Speaker 1: So open ai was in a clearly a conundrum in

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Speaker 1: you know, the highly competitive environment it now finds itself

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Speaker 1: and it's still the market leader, but you know, a

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Speaker 1: bunch of these other big players didn't have a hand

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Speaker 1: tied behind their back, and so there's been a longstanding,

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Speaker 1: you know, kind of internal debate and discussions that been

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Speaker 1: taking place across the board on how and whether open

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Speaker 1: ai could be transitioned to a place where it'll have,

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Speaker 1: you know, better ability to raise money from outside investors,

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Speaker 1: but still have some controls in place that were pretty

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Speaker 1: much envisioned by the founders that set up open ai

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Speaker 1: to begin with, and so under that existing structure, it's

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Speaker 1: not going to be easy to raise money from anyone,

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Speaker 1: including an IPO, and so they kind of felt that

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Speaker 1: they had to somehow transition to something different, and that's

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Speaker 1: what they've done. They are a Delaware company and they

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Speaker 1: have basically announced that they have transitioned into something known

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Speaker 1: as a public benefit corporation. And these are relatively new

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Speaker 1: structures that basically say you can be a for profit

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Speaker 1: company and have kind of a do good goal at

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Speaker 1: the same time. And Delaware opened up its own statutes

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Speaker 1: to allow these types of companies in about ten fifteen

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Speaker 1: years ago. There haven't been that many takers, quite frankly June,

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Speaker 1: particularly in the in the publicly traded company space, but

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Speaker 1: there are some and so open Ai basically said, well,

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Speaker 1: if we did that, then through that conversion, we could

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Speaker 1: get rid of this one hundred times your investment cap

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Speaker 1: that's been you know, tying our hands. We could still

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Speaker 1: make the foundation, the nonprofit, a big player in the

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Speaker 1: post conversion company. And they have basically you know what,

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Speaker 1: It's been reported that the foundation is going to have

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Speaker 1: a significant amount of stock in the company and is

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Speaker 1: also going to have special rights to fire board members

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Speaker 1: if they don't like what the board members are doing.

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Speaker 1: That is a non trivial amount of control. But by

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Speaker 1: the same token, the handcuffs are now off the ability

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Speaker 1: of investors to to generate a return, and so that

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Speaker 1: has absolutely sowed the seeds for a possible public offering

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Speaker 1: of Open AI. And you know, it's still early days,

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Speaker 1: so we don't know when that's going to occur, what

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Speaker 1: it's going to look like, but it seems pretty clear

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Speaker 1: that if they were going to do a type of

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Speaker 1: a public offering of their stock ownership, this was the

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Speaker 1: type of move that they had to make. And so

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Speaker 1: that's kind of where things are pointing right now. Because

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Speaker 1: Opening is not a publicly traded company, they have not

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Speaker 1: made all kinds of long disclosures about exactly what those

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Speaker 1: different levers of control are. That will happen eventually if

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Speaker 1: they file paperwork for having an initial public offering, but

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Speaker 1: it hasn't happened yet, and you'll be.

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Speaker 3: The one we call when they do.

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Speaker 2: Thanks so much, Eric, as always, that's Professor Eric Talley

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Speaker 2: of Columbia Law School. The federal judiciary hasn't had defurlough's

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Speaker 2: staff during a shutdown in three decades until now. For

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Speaker 2: the first two and a half weeks of the shutdown,

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Speaker 2: the Judiciary tampt into other sources of funding to keep

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Speaker 2: the courts fully functioning.

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Speaker 3: And to keep keep employees paid.

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Speaker 2: But that money has now run out and the federal

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Speaker 2: district courts are using different strategies to manage staffing and caseloads.

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Speaker 2: Joining me is Bloomberg Law reporters Suzanne Monnac So, Suzanne,

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Speaker 2: the federal courts have run out of money.

437
00:25:16,880 --> 00:25:20,160
Speaker 4: Yes, the Judiciary ran out of funds in mid October.

438
00:25:20,320 --> 00:25:22,440
Speaker 4: This was the first time that the Judiciary had been

439
00:25:22,480 --> 00:25:25,679
Speaker 4: required to do shutdown related furloughs of their employees in

440
00:25:25,760 --> 00:25:28,240
Speaker 4: thirty years. And that's just because they didn't have the

441
00:25:28,240 --> 00:25:31,000
Speaker 4: reserves that they've had in the past. They've said underfunding

442
00:25:31,040 --> 00:25:34,600
Speaker 4: by Congress. So we have now entering multiple weeks of

443
00:25:34,640 --> 00:25:38,600
Speaker 4: a shutdown and the Judiciary employees, if this continues, are

444
00:25:38,640 --> 00:25:41,119
Speaker 4: going to see their first miss paycheck this coming Friday.

445
00:25:41,800 --> 00:25:46,399
Speaker 2: Before the Judiciary was able to prevent these furloughs and

446
00:25:46,840 --> 00:25:51,000
Speaker 2: court closures during a shutdown, why weren't they able to

447
00:25:51,080 --> 00:25:51,600
Speaker 2: this time?

448
00:25:51,880 --> 00:25:54,040
Speaker 4: The Judiciary has in the past had the reserves to

449
00:25:54,080 --> 00:25:57,359
Speaker 4: float payroll during shutdowns, and for example, it managed to

450
00:25:57,400 --> 00:26:00,440
Speaker 4: avoid having to furlough any employees during the five weeks

451
00:26:00,480 --> 00:26:04,160
Speaker 4: shut down during President Donald Trump's first term. But Judiciary

452
00:26:04,160 --> 00:26:07,680
Speaker 4: employees have blamed the furloughs that they've had to have

453
00:26:07,760 --> 00:26:10,320
Speaker 4: quite a bit sooner this year on tighter margins. They've

454
00:26:10,480 --> 00:26:13,600
Speaker 4: gotten flat funding from Congress the last few years, and

455
00:26:13,640 --> 00:26:16,359
Speaker 4: that's effectively a cut due to inflation. So they've just

456
00:26:16,400 --> 00:26:18,840
Speaker 4: said that this has given them less cushion. So while

457
00:26:18,840 --> 00:26:21,359
Speaker 4: of course federal workers stop getting paid October first, at

458
00:26:21,400 --> 00:26:24,359
Speaker 4: the start of the fiscal year, the judiciary had just

459
00:26:24,440 --> 00:26:27,760
Speaker 4: two weeks of additional funding to keep themselves going, but

460
00:26:27,800 --> 00:26:31,040
Speaker 4: then after that they haven't had the ability to continue

461
00:26:31,040 --> 00:26:31,800
Speaker 4: paying employees.

462
00:26:32,160 --> 00:26:35,199
Speaker 2: So the federal district courts are handling the lack of

463
00:26:35,280 --> 00:26:39,119
Speaker 2: funds in different ways. For example, some are having the

464
00:26:39,160 --> 00:26:42,000
Speaker 2: courts close for a day tell us about some of

465
00:26:42,040 --> 00:26:43,240
Speaker 2: the measures they're taking.

466
00:26:43,600 --> 00:26:46,600
Speaker 4: That's right, federal courts across the country. The federal districts,

467
00:26:46,600 --> 00:26:50,000
Speaker 4: i should say, do really operate quite independently. So while

468
00:26:50,000 --> 00:26:52,680
Speaker 4: we're seeing both furloughs kind of on the administrative side

469
00:26:52,720 --> 00:26:56,480
Speaker 4: of the judiciary in Washington. We're also seeing different responses,

470
00:26:56,560 --> 00:27:00,760
Speaker 4: really varying by every single district in the country. Federal courts,

471
00:27:00,760 --> 00:27:04,600
Speaker 4: as you mentioned, have been closing or limiting services on Fridays.

472
00:27:04,680 --> 00:27:07,480
Speaker 4: For example, the Middle District of Alabama has said that

473
00:27:07,520 --> 00:27:10,920
Speaker 4: its courthouses will be closed and its employees furloughed every

474
00:27:10,920 --> 00:27:14,480
Speaker 4: Friday while this continues. The Federal Court House in Connecticut

475
00:27:14,520 --> 00:27:18,399
Speaker 4: will be furlowing its clerk's office staff on Fridays. And

476
00:27:18,520 --> 00:27:20,560
Speaker 4: we're also just seeing a number of courts putting out

477
00:27:20,600 --> 00:27:22,880
Speaker 4: notices that they're going to be suspending things like travel

478
00:27:23,160 --> 00:27:27,080
Speaker 4: training programs, and of course many are postponing civil trials

479
00:27:27,080 --> 00:27:30,160
Speaker 4: that involve the Justice Department. As Low's lawyers are also

480
00:27:30,200 --> 00:27:31,159
Speaker 4: not getting paid.

481
00:27:31,040 --> 00:27:33,640
Speaker 2: We should just mention that judges get paid because it's

482
00:27:33,640 --> 00:27:37,719
Speaker 2: required under the constitution. How are they deciding which workers

483
00:27:38,040 --> 00:27:41,280
Speaker 2: to furlough and which to keep on the job without pay.

484
00:27:41,800 --> 00:27:44,520
Speaker 4: There seems to be some discretion and making those decisions.

485
00:27:44,800 --> 00:27:47,440
Speaker 4: There is a course shutdown guidance under the Anti Deficiency

486
00:27:47,440 --> 00:27:50,159
Speaker 4: Act which the judiciary is operating under in terms of

487
00:27:50,160 --> 00:27:54,080
Speaker 4: how to identify who is essential and who is not essential. Activities,

488
00:27:54,160 --> 00:27:58,679
Speaker 4: for example, include criminal cases, so those cases must continue

489
00:27:58,720 --> 00:28:02,359
Speaker 4: during shutdowns because they involve liberty of people, and so,

490
00:28:02,960 --> 00:28:06,560
Speaker 4: for example, the federal defenders are generally classifying their employees

491
00:28:06,640 --> 00:28:09,760
Speaker 4: as essential since they handle those cases. And of course,

492
00:28:09,760 --> 00:28:12,440
Speaker 4: since courts have to continue those cases, we are seeing

493
00:28:12,480 --> 00:28:15,320
Speaker 4: a lot of court staff being deemed essential and having

494
00:28:15,400 --> 00:28:18,919
Speaker 4: to continue to work, hopefully for back pay later. And

495
00:28:19,000 --> 00:28:20,680
Speaker 4: so I just think that it's one of those things

496
00:28:20,680 --> 00:28:23,200
Speaker 4: where courts do have to continue operating during a shutdown.

497
00:28:23,240 --> 00:28:25,119
Speaker 4: So even though they have run out of money, I

498
00:28:25,160 --> 00:28:27,480
Speaker 4: think the furloughs are still going to remain somewhat limited

499
00:28:27,480 --> 00:28:29,399
Speaker 4: since they do have to be able to continue to

500
00:28:29,400 --> 00:28:32,199
Speaker 4: process cases in some capacity. And some civil cases are

501
00:28:32,240 --> 00:28:35,080
Speaker 4: continuing as well if the judge considers them important enough

502
00:28:35,080 --> 00:28:35,479
Speaker 4: to do so.

503
00:28:35,800 --> 00:28:37,879
Speaker 2: Yeah, I was going to say that a lot of

504
00:28:37,920 --> 00:28:43,880
Speaker 2: the cases involving Trump administration policies are continuing. For example,

505
00:28:43,960 --> 00:28:47,360
Speaker 2: we have those two cases over the funding of snap benefits.

506
00:28:48,000 --> 00:28:50,160
Speaker 4: If a judge tells the Justice Department, I know, you

507
00:28:50,200 --> 00:28:52,560
Speaker 4: do have to continue showing up and continuing this case,

508
00:28:52,880 --> 00:28:55,360
Speaker 4: then the Justice Department has to do so. Guidance that

509
00:28:55,440 --> 00:28:58,120
Speaker 4: DJ had given was to generally request a pause in

510
00:28:58,160 --> 00:29:01,120
Speaker 4: a case in a civil case where they felt it

511
00:29:01,160 --> 00:29:03,400
Speaker 4: was appropriate to do so during the shutdown. But if

512
00:29:03,440 --> 00:29:06,120
Speaker 4: the judge says, no, I disagree, we're too far into this,

513
00:29:06,160 --> 00:29:08,280
Speaker 4: I want to continue, then those lawyers do have to

514
00:29:08,280 --> 00:29:10,720
Speaker 4: continue without pay. So really we're out of point where

515
00:29:10,760 --> 00:29:12,800
Speaker 4: the judge is like the only person getting paid in

516
00:29:12,880 --> 00:29:15,680
Speaker 4: a courtroom as their staff's not getting paid. Any type

517
00:29:15,680 --> 00:29:18,520
Speaker 4: of federal government lawyers are not getting paid. Federal defenders

518
00:29:18,560 --> 00:29:20,800
Speaker 4: are not getting paid in a criminal case. So really

519
00:29:20,800 --> 00:29:23,280
Speaker 4: it's just the private attorneys in civil cases that are

520
00:29:23,280 --> 00:29:25,200
Speaker 4: getting paid for their work at this point in the courtroom.

521
00:29:25,480 --> 00:29:28,080
Speaker 2: So let's talk about the cash crunch how it affects

522
00:29:28,240 --> 00:29:32,920
Speaker 2: criminal cases. So federal public defenders are not being paid

523
00:29:33,000 --> 00:29:34,280
Speaker 2: right at this point.

524
00:29:34,360 --> 00:29:34,920
Speaker 5: That's correct.

525
00:29:35,040 --> 00:29:37,120
Speaker 4: They did receive a paycheck in October from their work

526
00:29:37,160 --> 00:29:38,840
Speaker 4: for the first two weeks of the month that there

527
00:29:38,880 --> 00:29:42,120
Speaker 4: was funding for, so they really haven't actually felt the

528
00:29:42,120 --> 00:29:45,760
Speaker 4: crunch yet in terms of the paycheck suspension, but they're

529
00:29:45,760 --> 00:29:47,640
Speaker 4: going to feel that this Friday if this shutdown is

530
00:29:47,640 --> 00:29:48,120
Speaker 4: still going.

531
00:29:48,560 --> 00:29:54,040
Speaker 2: So federal public defenders rely on CJA panel attorneys to

532
00:29:54,120 --> 00:29:58,720
Speaker 2: take clients in cases involving multiple defendants, etc. Tell us

533
00:29:58,760 --> 00:30:02,600
Speaker 2: about what's been happening those attorneys even before the shutdown.

534
00:30:03,560 --> 00:30:07,280
Speaker 4: Yes, here the shutdown is really exacerbated an existing underfunding

535
00:30:07,360 --> 00:30:11,000
Speaker 4: problem for criminal defense CJA or the Criminal Justice Act

536
00:30:11,000 --> 00:30:14,000
Speaker 4: Panel attorneys. These are private attorneys who take on cases

537
00:30:14,000 --> 00:30:17,560
Speaker 4: for indigen defendants where federal defenders cannot. Oftentimes that might

538
00:30:17,600 --> 00:30:20,560
Speaker 4: be a multi defendant case where the defenders are representing

539
00:30:20,560 --> 00:30:22,640
Speaker 4: one of the defendants but then would have a conflict

540
00:30:22,640 --> 00:30:25,600
Speaker 4: of interest in representing other ones. There, for example, a

541
00:30:25,640 --> 00:30:27,520
Speaker 4: CJA panel lawyer would get tapped.

542
00:30:27,280 --> 00:30:27,760
Speaker 5: To step in.

543
00:30:28,240 --> 00:30:31,280
Speaker 4: Funding for that panel actually ran out earlier this summer,

544
00:30:31,320 --> 00:30:34,120
Speaker 4: back in July, and so they actually haven't been paid

545
00:30:34,520 --> 00:30:37,120
Speaker 4: for about four months now. They had hoped to be

546
00:30:37,200 --> 00:30:40,280
Speaker 4: reimbursed for their work during that several months period on

547
00:30:40,320 --> 00:30:43,200
Speaker 4: October first, when new funding came in, but of course

548
00:30:43,200 --> 00:30:45,560
Speaker 4: that isn't what happened, and the shutdown has continued.

549
00:30:45,880 --> 00:30:47,440
Speaker 5: So they've been now floading their own.

550
00:30:47,240 --> 00:30:49,720
Speaker 4: Expenses, as I said, for about four months, and that's

551
00:30:49,800 --> 00:30:52,800
Speaker 4: including expert witnesses that they might want to bring on.

552
00:30:53,520 --> 00:30:56,560
Speaker 4: Forensic investigators, those types of people who might be testifying

553
00:30:56,560 --> 00:30:59,920
Speaker 4: in a case examining mobile cell phone or computer data

554
00:31:00,040 --> 00:31:03,320
Speaker 4: in the case. Those people are also fronting their own expenses. Now,

555
00:31:03,360 --> 00:31:05,959
Speaker 4: of course, federal defenders who were previously getting paid I've

556
00:31:06,000 --> 00:31:08,840
Speaker 4: now joined them and not getting paid. So we're really

557
00:31:08,880 --> 00:31:13,200
Speaker 4: seeing a pretty significant underfunding for criminal defense in that space.

558
00:31:13,720 --> 00:31:19,400
Speaker 2: So some lawyers have made motions to have cases dismissed

559
00:31:20,040 --> 00:31:23,040
Speaker 2: because of this situation. I mean you wrote about one

560
00:31:23,120 --> 00:31:26,240
Speaker 2: lawyer wrote, you prosecute, you pay, you don't pay, you

561
00:31:26,280 --> 00:31:31,360
Speaker 2: don't prosecute, complaint, indictment dismissed with prejudice. There are a

562
00:31:31,360 --> 00:31:35,080
Speaker 2: lot of lawyers trying to have cases dismissed because of this.

563
00:31:36,040 --> 00:31:38,680
Speaker 4: We're certainly seeing them across this country. I've probably seen

564
00:31:38,720 --> 00:31:40,640
Speaker 4: close to a dozen at this point, though of course

565
00:31:40,640 --> 00:31:44,200
Speaker 4: there may be more. We've seen more success with request

566
00:31:44,240 --> 00:31:45,240
Speaker 4: to postpone cases.

567
00:31:45,320 --> 00:31:46,840
Speaker 5: Judges seem a little bit more willing.

568
00:31:47,000 --> 00:31:49,680
Speaker 4: If the defendant who might be in prison is willing

569
00:31:49,680 --> 00:31:51,480
Speaker 4: to postpone their case, I think the judge is a

570
00:31:51,520 --> 00:31:53,560
Speaker 4: little bit more willing to do that. I have yet

571
00:31:53,600 --> 00:31:57,880
Speaker 4: to see if case fully dismissed for a constitutional violation

572
00:31:57,960 --> 00:32:00,160
Speaker 4: as a result of this underfunding. The six and and

573
00:32:00,160 --> 00:32:03,000
Speaker 4: My guarantees a right to counsel even if you cannot

574
00:32:03,080 --> 00:32:05,280
Speaker 4: for an attorney, and so that's where we're seeing some

575
00:32:05,320 --> 00:32:07,800
Speaker 4: of these arguments being brought under that by nature, the

576
00:32:07,840 --> 00:32:10,280
Speaker 4: fact that the government hasn't funded criminal defense, and as

577
00:32:10,320 --> 00:32:13,200
Speaker 4: long as it hasn't would create a constitutional violation.

578
00:32:13,680 --> 00:32:15,400
Speaker 5: Waiting to see if we.

579
00:32:15,360 --> 00:32:17,760
Speaker 4: See a judge become receptive to that argument and decide

580
00:32:17,800 --> 00:32:20,160
Speaker 4: to fully toss the case. There's a number of motions

581
00:32:20,160 --> 00:32:22,320
Speaker 4: that we're keeping an eye on in that respect, and

582
00:32:22,360 --> 00:32:25,200
Speaker 4: I think they're only going to continue and proliferate as

583
00:32:25,200 --> 00:32:28,400
Speaker 4: criminal defense lawyers are sharing templates with each other and

584
00:32:28,440 --> 00:32:30,640
Speaker 4: sharing the motions if they filed, and what they've had

585
00:32:30,680 --> 00:32:32,080
Speaker 4: success or not success with.

586
00:32:32,400 --> 00:32:34,400
Speaker 2: And what's happening at the Supreme Court.

587
00:32:34,720 --> 00:32:37,160
Speaker 4: So the Supreme Court has actually also run out of funding,

588
00:32:37,200 --> 00:32:39,440
Speaker 4: and their spokesperson has said that they'll need to make

589
00:32:39,480 --> 00:32:43,400
Speaker 4: some changes to its operations, including by closing the building

590
00:32:43,440 --> 00:32:46,200
Speaker 4: to the public and some capacity, but keeping it open

591
00:32:46,280 --> 00:32:49,160
Speaker 4: for official business, which means that the justices will continue

592
00:32:49,160 --> 00:32:50,480
Speaker 4: to hear and decide cases.

593
00:32:51,080 --> 00:32:53,840
Speaker 2: So now let's talk a little bit about Lindsay Halligan.

594
00:32:54,160 --> 00:32:56,440
Speaker 2: First of all, tell us who Lindsay Halligan is.

595
00:32:56,880 --> 00:33:00,960
Speaker 4: Lindsay Halligan was previously Trump's personal attorney, and she has

596
00:33:01,000 --> 00:33:04,080
Speaker 4: been appointed the interim US attorney for the Eastern District

597
00:33:04,120 --> 00:33:06,960
Speaker 4: of Virginia based just outside of Washington, DC, and she

598
00:33:07,120 --> 00:33:10,480
Speaker 4: is leading the criminal charges against New York Attorney General

599
00:33:10,560 --> 00:33:14,280
Speaker 4: Latitia James and former FBI Director James Comey that we've

600
00:33:14,280 --> 00:33:17,600
Speaker 4: seen last month or so. She's also come under scrutinized

601
00:33:17,600 --> 00:33:20,000
Speaker 4: by the public and within those cases for the way

602
00:33:20,000 --> 00:33:23,080
Speaker 4: in which she was appointed. We're seeing those defendants make

603
00:33:23,200 --> 00:33:27,240
Speaker 4: arguments in court that she was invalidly serving as interim

604
00:33:27,280 --> 00:33:29,800
Speaker 4: US attorney when those indictments against them were filed.

605
00:33:30,160 --> 00:33:35,040
Speaker 2: Well, she was hastily installed after the prior interim US

606
00:33:35,120 --> 00:33:39,200
Speaker 2: attorney refused to bring indictments against some of those on

607
00:33:39,320 --> 00:33:40,720
Speaker 2: Trump's enemies lists.

608
00:33:41,120 --> 00:33:41,520
Speaker 5: That's right.

609
00:33:41,600 --> 00:33:43,800
Speaker 4: She came to the office after a little bit of turnover.

610
00:33:44,400 --> 00:33:46,760
Speaker 4: We had seen the Biden appointed US attorney for that

611
00:33:46,800 --> 00:33:50,120
Speaker 4: office resign as is typical, and a new person, Eric Seibert,

612
00:33:50,160 --> 00:33:52,520
Speaker 4: was brought in. He'd served as an interim term and

613
00:33:52,520 --> 00:33:55,080
Speaker 4: then has had his term renewed by the Federal District Court,

614
00:33:55,480 --> 00:33:59,360
Speaker 4: as is the law regarding US attorney appointments. But then

615
00:33:59,440 --> 00:34:02,000
Speaker 4: he was pushed out after the Trump administration told him

616
00:34:02,000 --> 00:34:05,120
Speaker 4: he'd be removed for not bringing mortgage fraud charges against

617
00:34:05,200 --> 00:34:08,520
Speaker 4: Letitia James, even though prosecutors in his office had found

618
00:34:08,560 --> 00:34:09,200
Speaker 4: that there wasn't.

619
00:34:09,080 --> 00:34:10,640
Speaker 5: Enough evidence for that.

620
00:34:10,640 --> 00:34:13,839
Speaker 4: That's when we saw Lindsay Halligan, Trump's former attorney, who

621
00:34:13,960 --> 00:34:16,640
Speaker 4: has never been a prosecutor before, be brought in and

622
00:34:16,719 --> 00:34:18,440
Speaker 4: she was willing to sign on to that indictment, both

623
00:34:18,440 --> 00:34:21,520
Speaker 4: against Letitia James as well as against James Comey, who's

624
00:34:21,560 --> 00:34:23,800
Speaker 4: been accused of making a false statement to Congress.

625
00:34:24,480 --> 00:34:28,439
Speaker 2: After her appointment was attacked in court papers by both

626
00:34:28,520 --> 00:34:33,000
Speaker 2: Comy and James, US Attorney Pam Bondy has given her

627
00:34:33,040 --> 00:34:33,720
Speaker 2: a new title.

628
00:34:34,239 --> 00:34:34,680
Speaker 5: That's correct.

629
00:34:34,719 --> 00:34:36,600
Speaker 4: We're seeing a little bit of maneuvering here on the

630
00:34:36,640 --> 00:34:39,040
Speaker 4: part of the Trump administration to try to shore Halligan

631
00:34:39,120 --> 00:34:41,920
Speaker 4: up against some of these claims of having been improperly serving.

632
00:34:42,520 --> 00:34:46,120
Speaker 4: So we saw just last night court filing where Attorney

633
00:34:46,200 --> 00:34:49,600
Speaker 4: General Pam Bondy has signed an order on October thirty first.

634
00:34:49,440 --> 00:34:50,839
Speaker 5: But she's backdating. It's a fact.

635
00:34:50,880 --> 00:34:54,320
Speaker 4: She's saying it's taking effector retroactively to when Lindsay Halligan

636
00:34:54,400 --> 00:34:56,960
Speaker 4: took office in September, to add a new title for

637
00:34:57,000 --> 00:35:00,160
Speaker 4: her that she is the Special Attorney. And this is

638
00:35:00,280 --> 00:35:03,120
Speaker 4: essentially an effort to try to shore her up against

639
00:35:03,160 --> 00:35:05,640
Speaker 4: these claims that she might have been invalidly serving at

640
00:35:05,680 --> 00:35:08,160
Speaker 4: the time that the indictments against James Cove and Letitia

641
00:35:08,280 --> 00:35:12,719
Speaker 4: James were filed. She's calling it ratifying essentially her appointment

642
00:35:12,760 --> 00:35:15,560
Speaker 4: as US attorney and claiming that she had the authority

643
00:35:15,640 --> 00:35:17,600
Speaker 4: to issue those indictments when those.

644
00:35:17,480 --> 00:35:18,360
Speaker 5: People were charged.

645
00:35:19,080 --> 00:35:20,799
Speaker 4: And this is really part of a broader pattern of

646
00:35:20,800 --> 00:35:23,800
Speaker 4: maneuvering that we're seeing at US attorney's offices across the country,

647
00:35:24,160 --> 00:35:27,759
Speaker 4: particularly in states with two Democratic senators. US attorneys go

648
00:35:27,840 --> 00:35:30,799
Speaker 4: through the nomination process in the Senate, and senators do

649
00:35:30,960 --> 00:35:34,800
Speaker 4: have veto power under the blue slit process over those nominees,

650
00:35:34,880 --> 00:35:37,359
Speaker 4: and so we're seeing in states like Virginia that has

651
00:35:37,400 --> 00:35:41,040
Speaker 4: two Democratic senators, California, and New York where the Trump

652
00:35:41,040 --> 00:35:43,919
Speaker 4: administration doesn't want to have to come up to deal

653
00:35:43,960 --> 00:35:46,920
Speaker 4: with Congress about this, so instead they're kind of taking

654
00:35:47,160 --> 00:35:49,759
Speaker 4: creative interpretations of some of the vacancy laws to try

655
00:35:49,760 --> 00:35:52,080
Speaker 4: to get people in that they want in acting her

656
00:35:52,120 --> 00:35:54,839
Speaker 4: in her own capacities and using things like making them

657
00:35:54,880 --> 00:35:57,600
Speaker 4: the second in command at the office, thus allowing them

658
00:35:57,640 --> 00:36:00,360
Speaker 4: to have all of the powers as the first command

659
00:36:00,360 --> 00:36:02,680
Speaker 4: if that spot is vacant, those types of maneuvering, and

660
00:36:02,719 --> 00:36:05,040
Speaker 4: so that's just what we're seeing here, and it's something

661
00:36:05,040 --> 00:36:06,479
Speaker 4: we've seen across the country as well.

662
00:36:06,800 --> 00:36:08,960
Speaker 3: Though it's quite inventive.

663
00:36:09,239 --> 00:36:12,800
Speaker 2: We'd all like to be able to say this is retroactive.

664
00:36:12,960 --> 00:36:17,000
Speaker 2: My mistake doesn't count because I'm now retroactively correcting it.

665
00:36:17,440 --> 00:36:20,480
Speaker 2: But I doubt that a court is going to allow

666
00:36:20,520 --> 00:36:22,839
Speaker 2: her to say, oh, by the way, you.

667
00:36:22,800 --> 00:36:24,320
Speaker 5: Know, well, certainly you have to see.

668
00:36:24,719 --> 00:36:28,200
Speaker 4: The Justice Department is arguing that Halligan was wildly serving regardless,

669
00:36:28,239 --> 00:36:30,879
Speaker 4: and they've sort of portrayed this as well, just in case,

670
00:36:30,880 --> 00:36:33,840
Speaker 4: we're doing this extra thing to make our case even stronger.

671
00:36:33,840 --> 00:36:35,839
Speaker 4: But we think we have a strong case regardless. That's

672
00:36:35,880 --> 00:36:38,400
Speaker 4: essentially what their argument has been. There'll be a hearing

673
00:36:38,440 --> 00:36:41,600
Speaker 4: in this in both criminal cases in about two weeks

674
00:36:41,719 --> 00:36:44,600
Speaker 4: or in November thirteenth. So interesting to see how the

675
00:36:44,680 --> 00:36:45,640
Speaker 4: judge receives.

676
00:36:45,360 --> 00:36:50,360
Speaker 2: US Federal judges in other jurisdictions have ruled against the

677
00:36:50,400 --> 00:36:55,719
Speaker 2: Trump administration in similar cases. Thanks so much, Suzanne. That's

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00:36:55,760 --> 00:36:59,400
Speaker 2: Bloomberg Law reporter Suzanne Monyac And that's it for this

679
00:36:59,560 --> 00:37:02,320
Speaker 2: edition of the Bloomberg Law Show. Remember you can always

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00:37:02,320 --> 00:37:05,279
Speaker 2: get the latest legal news on our Bloomberg Law podcasts.

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00:37:05,520 --> 00:37:08,560
Speaker 2: You can find them on Apple Podcasts, Spotify, and at

682
00:37:08,719 --> 00:37:13,759
Speaker 2: www dot bloomberg dot com, slash podcast slash Law, and

683
00:37:13,800 --> 00:37:16,880
Speaker 2: remember to tune into The Bloomberg Law Show every weeknight

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00:37:16,960 --> 00:37:20,400
Speaker 2: at ten pm Wall Street Time. I'm June Grosso and

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00:37:20,480 --> 00:37:21,960
Speaker 2: you're listening to Bloomberg