1 00:00:03,200 --> 00:00:08,000 Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio. 2 00:00:09,200 --> 00:00:10,200 Speaker 2: That's the real deal. 3 00:00:12,000 --> 00:00:13,080 Speaker 3: That's the real deal. 4 00:00:13,640 --> 00:00:17,800 Speaker 1: Donald Trump launched his Never Surrender high top sneakers at 5 00:00:17,800 --> 00:00:21,400 Speaker 1: sneaker Con last week, a limited edition selling for three 6 00:00:21,480 --> 00:00:22,880 Speaker 1: hundred and ninety nine dollars. 7 00:00:23,120 --> 00:00:23,240 Speaker 4: Here. 8 00:00:23,320 --> 00:00:25,360 Speaker 3: You know, I've wanted to do this for a long time. 9 00:00:25,440 --> 00:00:28,120 Speaker 3: I have some incredible people that work with me on things, 10 00:00:28,160 --> 00:00:31,160 Speaker 3: and they came up with this, and this is something 11 00:00:31,200 --> 00:00:34,680 Speaker 3: I've been talking about for twelve years, thirteen years, and 12 00:00:35,080 --> 00:00:36,919 Speaker 3: I think it's going to be a big success. 13 00:00:37,520 --> 00:00:40,440 Speaker 1: It didn't take long for the garish goal sneakers with 14 00:00:40,600 --> 00:00:43,680 Speaker 1: the stars and stripes designed around the ankle and a 15 00:00:43,760 --> 00:00:47,279 Speaker 1: huge letter T on the side to be mocked, including 16 00:00:47,320 --> 00:00:49,120 Speaker 1: a skit on Saturday Night Live. 17 00:00:49,520 --> 00:00:53,920 Speaker 3: In terms of basketball movie bestiche and with regard to shoes, 18 00:00:53,960 --> 00:00:56,960 Speaker 3: I think we've done a wonderful point man, Karen Trump. 19 00:00:57,400 --> 00:01:00,160 Speaker 1: But it's the bright red souls on the sneakers that 20 00:01:00,200 --> 00:01:04,759 Speaker 1: have lawyers talking. Is luxury brand Christian le Bouton, known 21 00:01:04,800 --> 00:01:09,400 Speaker 1: for its iconic red souls, going to sue for trademark infringement. 22 00:01:10,240 --> 00:01:13,160 Speaker 1: Joining me is Susan Scaffiti, director of the Fashion Law 23 00:01:13,240 --> 00:01:17,920 Speaker 1: Institute at Fordham Law School. So these never surrender high 24 00:01:17,959 --> 00:01:21,920 Speaker 1: top sneakers, which are gold Trump's favorite color apparently, but 25 00:01:22,040 --> 00:01:27,880 Speaker 1: with that bright red soul screams I'm a Christian Lubaton sneaker. 26 00:01:29,040 --> 00:01:33,279 Speaker 2: Yes it does. And I have a feeling that maybe 27 00:01:33,319 --> 00:01:35,560 Speaker 2: there were a few trademark lawyers who had a hand 28 00:01:35,640 --> 00:01:40,080 Speaker 2: in this shoe, because it screams Loboiton but then pulls 29 00:01:40,120 --> 00:01:42,679 Speaker 2: back a little bit says yes, I'm Lobaitont, but not 30 00:01:43,120 --> 00:01:48,240 Speaker 2: quite in part because the Lubatant trademark, as registered is 31 00:01:48,320 --> 00:01:52,040 Speaker 2: actually for women's shoes only. Also, you see the way 32 00:01:52,120 --> 00:01:55,560 Speaker 2: on the side of the Trump shoe the red outsole 33 00:01:55,800 --> 00:01:59,400 Speaker 2: bleeds up a little bit onto the white foxing along 34 00:01:59,440 --> 00:02:02,600 Speaker 2: the side of the shoe, And I think that's because 35 00:02:03,200 --> 00:02:08,000 Speaker 2: in the landmark lawsuit, when Law and Libaton were in 36 00:02:08,080 --> 00:02:10,919 Speaker 2: court together here in New York, the trademark ultimately ended 37 00:02:10,960 --> 00:02:14,040 Speaker 2: up being modified. Now that trademark was about an all 38 00:02:14,120 --> 00:02:17,120 Speaker 2: red shoe with a red upper and a red outsole. 39 00:02:17,200 --> 00:02:20,480 Speaker 2: That these the law had done. But the ultimate result 40 00:02:20,639 --> 00:02:25,839 Speaker 2: of that lawsuit was that the Libaton trademark was modified 41 00:02:26,240 --> 00:02:29,200 Speaker 2: so that there must be a contrast between the outsole 42 00:02:29,320 --> 00:02:32,920 Speaker 2: and the upper So maybe some clever trademark lawyers thought, well, 43 00:02:32,919 --> 00:02:34,959 Speaker 2: if the red bleeds over a little bit, we could 44 00:02:34,960 --> 00:02:38,360 Speaker 2: at least argue that there's not contrast, and we could 45 00:02:38,520 --> 00:02:42,840 Speaker 2: argue that the registration is technically for women's although that's 46 00:02:42,880 --> 00:02:46,280 Speaker 2: not really smart thinking, because of course there's a common 47 00:02:46,360 --> 00:02:49,400 Speaker 2: law trademark in the US, and since Libaton is so 48 00:02:49,520 --> 00:02:54,280 Speaker 2: associated with red soles on shoes, including now for men's, 49 00:02:54,320 --> 00:02:57,440 Speaker 2: including his own, even though at the time he originally 50 00:02:57,480 --> 00:02:59,760 Speaker 2: registered in the US he did very few men's I 51 00:02:59,800 --> 00:03:03,520 Speaker 2: think that Lebaton, if it cared to take action, would 52 00:03:03,520 --> 00:03:05,480 Speaker 2: in fact have a pretty good case. 53 00:03:05,680 --> 00:03:08,680 Speaker 1: And Nike might also be looking at these Trump sneakers. 54 00:03:09,280 --> 00:03:14,239 Speaker 2: Well, you know, lot Baton is the first glaring trademark reference, 55 00:03:14,360 --> 00:03:18,000 Speaker 2: shall we say, and a reference to luxury in those shoes. 56 00:03:18,200 --> 00:03:20,639 Speaker 2: But you know, the silhouette is an awful lot like 57 00:03:20,680 --> 00:03:24,360 Speaker 2: the Nike Air Force one Nudgewink Air Force one. So 58 00:03:24,400 --> 00:03:28,680 Speaker 2: there's a lot going on here. And while Nike does 59 00:03:28,760 --> 00:03:32,079 Speaker 2: have trade dress registration on some elements of the Air 60 00:03:32,120 --> 00:03:34,480 Speaker 2: Force one, including the Air Force one high tops that 61 00:03:34,560 --> 00:03:37,640 Speaker 2: these resemble, I again think there might have been a 62 00:03:37,640 --> 00:03:41,200 Speaker 2: trademark lawyer in the design room saying, you know, maybe 63 00:03:41,440 --> 00:03:44,360 Speaker 2: move those panels just a little bit. Maybe don't do 64 00:03:44,480 --> 00:03:48,240 Speaker 2: too many vertical lines down along the base of the 65 00:03:48,280 --> 00:03:50,800 Speaker 2: foxing at the bottom of the shoe, just before it 66 00:03:50,840 --> 00:03:53,720 Speaker 2: touches the ground. Maybe make sure you don't use the 67 00:03:54,080 --> 00:03:58,120 Speaker 2: wavy leather brackets that hold the islets for the shoelaces 68 00:03:58,160 --> 00:04:01,120 Speaker 2: that are so classic and stated with the Nike Air 69 00:04:01,120 --> 00:04:04,440 Speaker 2: Force one. And yet for a sneaker officionado looking at 70 00:04:04,440 --> 00:04:09,720 Speaker 2: that silhouette, it does have that reference, especially because the 71 00:04:09,760 --> 00:04:13,400 Speaker 2: flaglike imagery around the top. It also feels like a 72 00:04:13,440 --> 00:04:15,320 Speaker 2: reference to the band around the top of an air 73 00:04:15,360 --> 00:04:18,920 Speaker 2: Force one. So overall, I can't imagine that Nike would 74 00:04:18,920 --> 00:04:21,599 Speaker 2: be happy. They wouldn't necessarily have quite as strong a 75 00:04:21,720 --> 00:04:25,960 Speaker 2: trademark claim as le Baton. But I think that certainly 76 00:04:26,120 --> 00:04:28,960 Speaker 2: it crossed a desk at Nike, the desk in the 77 00:04:29,040 --> 00:04:29,679 Speaker 2: legal department. 78 00:04:29,839 --> 00:04:32,320 Speaker 1: The little difference is, let's say, the way the red 79 00:04:32,400 --> 00:04:35,839 Speaker 1: goes up the side. Do those little differences make that 80 00:04:36,000 --> 00:04:38,919 Speaker 1: much of a difference in a lawsuit because most people 81 00:04:39,440 --> 00:04:41,159 Speaker 1: just look, oh, it's got a red soul. 82 00:04:41,640 --> 00:04:43,880 Speaker 2: Well, it moves us from the realm of a straight 83 00:04:43,920 --> 00:04:47,520 Speaker 2: up counterfeit where we have something that is nearly rebxidentially 84 00:04:47,560 --> 00:04:52,159 Speaker 2: identical to the realm of potential infringement. But because there 85 00:04:52,320 --> 00:04:56,560 Speaker 2: is that generalized test in trademark, is there a likelihood 86 00:04:56,560 --> 00:05:00,320 Speaker 2: of consumer confusion? Might some consumers think that this was 87 00:05:00,360 --> 00:05:04,480 Speaker 2: a deal between Donald Trump and Nola Baton? That test 88 00:05:04,520 --> 00:05:07,280 Speaker 2: for consumer confusion is what we'll control. And I think 89 00:05:07,560 --> 00:05:10,160 Speaker 2: as consumer could absolutely be confused as to whether or 90 00:05:10,160 --> 00:05:12,960 Speaker 2: not this was a licensed product, or whether or not 91 00:05:13,000 --> 00:05:16,680 Speaker 2: perhaps even Lobaton was endorsing Trump, which of course could 92 00:05:16,720 --> 00:05:20,560 Speaker 2: be very controversial both for the company itself and for 93 00:05:20,800 --> 00:05:25,000 Speaker 2: the designer himself, but also for consumers who love their lubies. 94 00:05:25,480 --> 00:05:31,080 Speaker 1: Yeah, and apparently some social media users were commenting on Instagram. 95 00:05:31,960 --> 00:05:35,280 Speaker 1: One said, please, please please sue Donald Trump for infringing 96 00:05:35,320 --> 00:05:39,120 Speaker 1: on your Red Soul trademark. Another said, you licensed your 97 00:05:39,160 --> 00:05:42,159 Speaker 1: trademark red Soul? Do that wanna be blank? 98 00:05:42,600 --> 00:05:46,520 Speaker 2: It's a comment about licensing that is of more concern, right, 99 00:05:46,839 --> 00:05:50,640 Speaker 2: sue him? Does not show consumer confusion? Hey, how dare 100 00:05:50,680 --> 00:05:53,240 Speaker 2: you license to him? Is of more concern from a 101 00:05:53,279 --> 00:05:56,719 Speaker 2: legal perspective. And you know, there is an instance in 102 00:05:56,760 --> 00:05:59,920 Speaker 2: the past when Cristal Lutau went after a right wing 103 00:06:00,200 --> 00:06:04,680 Speaker 2: Belgian politician, a woman who was wearing his Red Soul regularly, 104 00:06:04,839 --> 00:06:10,280 Speaker 2: but most importantly for purposes of his complaint on posters 105 00:06:10,320 --> 00:06:15,160 Speaker 2: and ads that were targeting Muslim immigrants to Belgium, And 106 00:06:15,240 --> 00:06:18,280 Speaker 2: so in that case it was the actual Lobiton product 107 00:06:18,400 --> 00:06:21,560 Speaker 2: showing up in the inner political ads and in her 108 00:06:21,560 --> 00:06:24,880 Speaker 2: political statements, and so it was an even closer connection. 109 00:06:25,480 --> 00:06:29,240 Speaker 2: But still he seems to have been willing to wade 110 00:06:29,360 --> 00:06:32,719 Speaker 2: into a fight before in a casion which a politician 111 00:06:32,800 --> 00:06:36,200 Speaker 2: tried to associate with the Red Souls without his permission. 112 00:06:36,600 --> 00:06:39,840 Speaker 1: So that would be a business decision more whether or 113 00:06:39,920 --> 00:06:44,839 Speaker 1: not you want to go after Trump and possibly get 114 00:06:44,839 --> 00:06:48,320 Speaker 1: the backlash that people who go after Trump often do. 115 00:06:48,839 --> 00:06:51,560 Speaker 1: But on the other hand, do you want your shoes 116 00:06:51,680 --> 00:06:52,960 Speaker 1: associated with Trump? 117 00:06:53,920 --> 00:06:56,960 Speaker 2: Absolutely, At one level it's a trademark decision. You don't 118 00:06:57,000 --> 00:07:01,160 Speaker 2: want your Red Soul to just become a generic indicator 119 00:07:01,160 --> 00:07:04,520 Speaker 2: of luxury, a shorthand for a luxury product or a 120 00:07:04,520 --> 00:07:07,880 Speaker 2: designer product, and so from a trademark perspective, to avoid 121 00:07:07,920 --> 00:07:10,640 Speaker 2: becoming generic, you do have to engage in a certain 122 00:07:10,640 --> 00:07:13,160 Speaker 2: amount of policing. But yes, at the level of a 123 00:07:13,200 --> 00:07:16,600 Speaker 2: business decision, you have to decide do you dare offend 124 00:07:17,120 --> 00:07:21,160 Speaker 2: Trump supporters or are you more concerned about Trump opponents 125 00:07:21,200 --> 00:07:23,720 Speaker 2: some starting to boycott your shoe if they believe that 126 00:07:23,760 --> 00:07:27,679 Speaker 2: there's a connection. And there's the additional concern in terms 127 00:07:27,680 --> 00:07:30,640 Speaker 2: of a business decision of how much attention do you 128 00:07:30,720 --> 00:07:33,880 Speaker 2: want to draw to these sneakers that were apparently a 129 00:07:33,960 --> 00:07:37,040 Speaker 2: limited edition, one undone. If you think he might do 130 00:07:37,120 --> 00:07:40,640 Speaker 2: it again, maybe you're more likely to file a lawsuit 131 00:07:40,840 --> 00:07:43,040 Speaker 2: or at least send a season to this letter. But 132 00:07:43,200 --> 00:07:46,240 Speaker 2: if you think it might just be a quick hit 133 00:07:46,360 --> 00:07:49,640 Speaker 2: in the media and something that disappears in the public consciousness, 134 00:07:49,680 --> 00:07:52,880 Speaker 2: do you want to be the entity keeping those red 135 00:07:52,920 --> 00:07:58,120 Speaker 2: souls in the public consciousness? Therefore underscoring the association between 136 00:07:58,160 --> 00:07:59,920 Speaker 2: your brand and the politician. 137 00:08:00,960 --> 00:08:05,840 Speaker 1: What does Lubton lose if they don't sue over the sneakers? 138 00:08:06,560 --> 00:08:08,119 Speaker 1: Does their mark get watered down? 139 00:08:08,720 --> 00:08:11,360 Speaker 2: Sure, there's a potential for a dilution of the mark. 140 00:08:11,480 --> 00:08:13,920 Speaker 2: That is to say, now when we see a red soul, 141 00:08:14,040 --> 00:08:17,360 Speaker 2: we automatically think Leubatont or do we think what it 142 00:08:17,400 --> 00:08:19,720 Speaker 2: could be Libatont or it could be Trump? And that's 143 00:08:19,760 --> 00:08:23,280 Speaker 2: the key to dilution. So they worry about dilution of 144 00:08:23,320 --> 00:08:26,520 Speaker 2: the strength of that mark, and they worry about ultimately, 145 00:08:26,560 --> 00:08:28,960 Speaker 2: if they allow this one, then the next one and 146 00:08:29,000 --> 00:08:32,200 Speaker 2: the next one to happen, the red Soul mark actually 147 00:08:32,240 --> 00:08:36,040 Speaker 2: becoming generic and the mark actually dying. We refer to 148 00:08:36,120 --> 00:08:39,600 Speaker 2: the concept of genericide right. Becoming generic can kill a 149 00:08:39,640 --> 00:08:43,559 Speaker 2: mark because it's no longer serving as a source indicator 150 00:08:43,640 --> 00:08:47,480 Speaker 2: to consumers. It's no longer a red flag telling consumers, hey, 151 00:08:47,640 --> 00:08:50,680 Speaker 2: this is in the best possible way a red flag. 152 00:08:51,200 --> 00:08:54,000 Speaker 2: This is definitely a libatant because you see the red 153 00:08:54,040 --> 00:08:54,680 Speaker 2: Soul is. 154 00:08:54,760 --> 00:08:57,959 Speaker 1: Let's say Leubton does sue. Would it be for trademark 155 00:08:58,040 --> 00:09:00,120 Speaker 1: infringement or trademark. 156 00:09:00,880 --> 00:09:04,240 Speaker 2: It could be for both trademark infringement and trademark dilution. 157 00:09:05,160 --> 00:09:08,079 Speaker 1: And who do you think would have the better case 158 00:09:08,200 --> 00:09:10,440 Speaker 1: in court? I mean, is there a chance that Lebton 159 00:09:10,480 --> 00:09:11,040 Speaker 1: could lose. 160 00:09:11,440 --> 00:09:13,720 Speaker 2: There's always a chance. You never know what you're going 161 00:09:13,760 --> 00:09:16,840 Speaker 2: to get going into court. On the other hand, Lebton 162 00:09:16,920 --> 00:09:20,000 Speaker 2: has a very solid footprint with this trademark, and so 163 00:09:20,200 --> 00:09:23,640 Speaker 2: I think that in a kickboxing match with these shoes, 164 00:09:23,960 --> 00:09:25,959 Speaker 2: I would think that Lebiton may very well come out 165 00:09:26,000 --> 00:09:26,360 Speaker 2: on top. 166 00:09:27,280 --> 00:09:29,160 Speaker 1: I assume it also just does it want to be 167 00:09:29,200 --> 00:09:34,120 Speaker 1: associated with that garish, clunky gold sneaker in terms. 168 00:09:33,960 --> 00:09:37,480 Speaker 2: Of reputational concern, Yes, you absolutely don't want to be 169 00:09:37,520 --> 00:09:40,959 Speaker 2: associated with something that you find distasteful, not only because 170 00:09:41,000 --> 00:09:43,960 Speaker 2: of the individual it might be associated with, but because 171 00:09:43,960 --> 00:09:47,280 Speaker 2: of the style itself or lack thereof. They are indeed 172 00:09:48,000 --> 00:09:49,160 Speaker 2: quite quite dramatic. 173 00:09:49,280 --> 00:09:51,360 Speaker 1: You're so nice to put it that way, Susan. 174 00:09:53,120 --> 00:09:56,239 Speaker 2: Well, then there's a question of the quasi flag iconography 175 00:09:56,360 --> 00:10:00,959 Speaker 2: as well, which actually is an interesting problem because the 176 00:10:01,320 --> 00:10:05,120 Speaker 2: US has law on the books about disrespect or disparagement 177 00:10:05,200 --> 00:10:07,560 Speaker 2: of the flag. Technically, you're not supposed to use the 178 00:10:07,559 --> 00:10:11,160 Speaker 2: flag in advertising. In fact, the Trademark Office won't register 179 00:10:11,280 --> 00:10:14,880 Speaker 2: a trademark that include the flag. Now, obviously there's not 180 00:10:15,080 --> 00:10:17,559 Speaker 2: actually a flag on the shoes, just a nod to 181 00:10:17,640 --> 00:10:20,600 Speaker 2: the flag with a handful of stars and stripes. But 182 00:10:20,760 --> 00:10:25,360 Speaker 2: we're still even though First Amendment law has, oh my goodness, 183 00:10:25,400 --> 00:10:30,520 Speaker 2: in the last fifty years, prevented enforcement of any kind 184 00:10:30,520 --> 00:10:33,679 Speaker 2: of law that would hunalize anyone for putting a flag 185 00:10:33,720 --> 00:10:36,360 Speaker 2: on clothing or putting a flag on shoes where it 186 00:10:36,440 --> 00:10:41,120 Speaker 2: might be dirtied or damaged or otherwise disparaged Nevertheless, you're 187 00:10:41,120 --> 00:10:44,320 Speaker 2: walking a fine line when you decide to put a 188 00:10:44,360 --> 00:10:47,080 Speaker 2: flag or something that looks like a flag somewhere that 189 00:10:47,160 --> 00:10:49,120 Speaker 2: might be considered disrespectful. 190 00:10:49,880 --> 00:10:52,760 Speaker 1: So do you think that Lubaton will at least send 191 00:10:52,800 --> 00:10:54,240 Speaker 1: a cease and desist letter? 192 00:10:55,120 --> 00:10:55,760 Speaker 2: I would hope. 193 00:10:55,800 --> 00:10:55,959 Speaker 5: So. 194 00:10:56,360 --> 00:11:00,439 Speaker 2: Unfortunately, one of the concerns for Lebaitont is if we 195 00:11:00,720 --> 00:11:04,319 Speaker 2: Tellasen the season is this letter, it will immediately be posted. 196 00:11:04,760 --> 00:11:07,040 Speaker 2: And so it comes back to the question of do 197 00:11:07,080 --> 00:11:09,280 Speaker 2: we think Trump will do this again or do we 198 00:11:09,280 --> 00:11:12,040 Speaker 2: think Trump's licenseee will do this again? And how much 199 00:11:12,040 --> 00:11:14,120 Speaker 2: attention do we want to draw to this. If it 200 00:11:14,160 --> 00:11:16,280 Speaker 2: was indeed a want and done at Sneaker. 201 00:11:15,920 --> 00:11:20,840 Speaker 1: Con the company has left itself an out because purchasers 202 00:11:21,000 --> 00:11:24,840 Speaker 1: of the sneakers may not actually get red Soul sneakers 203 00:11:24,920 --> 00:11:27,920 Speaker 1: when their order arrives in July. On the website it 204 00:11:28,000 --> 00:11:31,680 Speaker 1: says the image is shown are for illustration purposes only 205 00:11:32,080 --> 00:11:35,280 Speaker 1: and may not be an exact representation of the product. 206 00:11:35,800 --> 00:11:37,800 Speaker 1: So that leaves them room to get rid of the 207 00:11:37,800 --> 00:11:38,600 Speaker 1: red Souls. 208 00:11:39,160 --> 00:11:41,600 Speaker 2: It does. Now if they were to do that, and 209 00:11:41,800 --> 00:11:45,040 Speaker 2: particularly they were forced to do that the illegal action, 210 00:11:45,480 --> 00:11:48,720 Speaker 2: I think some consumers would be upset because they're not 211 00:11:48,840 --> 00:11:51,640 Speaker 2: getting what was pictured and what was promised. That's not 212 00:11:51,800 --> 00:11:56,240 Speaker 2: a minor change, that's a significance stylistic change. But nevertheless, 213 00:11:56,280 --> 00:12:00,520 Speaker 2: they have indeed left themselves technically illegal. Out course, if 214 00:12:00,559 --> 00:12:03,880 Speaker 2: the purpose of these sneakers is in part to court 215 00:12:03,960 --> 00:12:08,679 Speaker 2: your audience, and to court the audience of sneakerheads, a young, male, 216 00:12:09,080 --> 00:12:13,920 Speaker 2: more urban audience, then you absolutely don't want to undermine 217 00:12:13,960 --> 00:12:18,360 Speaker 2: that essentially advertising or campaign effort by making your customer 218 00:12:18,400 --> 00:12:20,560 Speaker 2: to anger when they receive issues. You don't want lots 219 00:12:20,559 --> 00:12:24,040 Speaker 2: of negative publicity following on the initial. 220 00:12:23,679 --> 00:12:24,640 Speaker 6: Release of issue. 221 00:12:24,760 --> 00:12:27,920 Speaker 1: Thanks so much, Susan. It's always an enlightening and fun 222 00:12:28,000 --> 00:12:31,880 Speaker 1: conversation when you're on bringing fashion into the law. That's 223 00:12:31,880 --> 00:12:35,040 Speaker 1: Susan's graffiti. Professor at Fordham Loss and director of the 224 00:12:35,080 --> 00:12:39,000 Speaker 1: Fashion Law Institute. I'm June Grosso and you're listening to Bloomberg. 225 00:12:42,520 --> 00:12:47,240 Speaker 1: This is Bloomberg Law with June Grosso from Bloomberg Radio. 226 00:12:48,400 --> 00:12:51,360 Speaker 5: Let me try it again. Do you believe that minorities 227 00:12:52,080 --> 00:12:59,760 Speaker 5: in America today need special help to achieve to succeed? Again, Senator, 228 00:13:00,480 --> 00:13:03,560 Speaker 5: all persons, no matter what community they come from. Yes, sure, 229 00:13:03,559 --> 00:13:06,199 Speaker 5: but do you understand the question. Am I not being clear? 230 00:13:06,440 --> 00:13:06,480 Speaker 1: No? 231 00:13:06,559 --> 00:13:10,280 Speaker 5: I understand, yes, sir, okay, would you answer from make poisure? Well, Senator, 232 00:13:10,320 --> 00:13:12,280 Speaker 5: I'm stating again, so yes, sir. No. 233 00:13:12,400 --> 00:13:16,359 Speaker 1: It's pretty simple, but it's never really simple. When Republican 234 00:13:16,480 --> 00:13:20,520 Speaker 1: Senator John Kennedy is quizzing judicial nominees on the Senate 235 00:13:20,600 --> 00:13:24,840 Speaker 1: Judiciary Committee, the Louisiana senator manages to get inside the 236 00:13:24,880 --> 00:13:28,640 Speaker 1: heads of nominees, often tripping them up like no other 237 00:13:28,760 --> 00:13:32,800 Speaker 1: senator does. Joining me is Bloomberg Laws Tianna Headley, who's 238 00:13:32,800 --> 00:13:36,680 Speaker 1: written about shall we say Senator Kennedy's special way of 239 00:13:36,880 --> 00:13:41,800 Speaker 1: questioning nominees to the bench. How are Senator Kennedy's questions 240 00:13:41,960 --> 00:13:45,640 Speaker 1: or questioning different from that of other senators. 241 00:13:46,080 --> 00:13:48,880 Speaker 7: This is a committee of a lot of lawyers. There's 242 00:13:49,000 --> 00:13:52,520 Speaker 7: fifteen total on the committee and several others who've been 243 00:13:53,000 --> 00:13:57,560 Speaker 7: former law professors as well. But Senator Kennedy, both a 244 00:13:57,559 --> 00:14:02,360 Speaker 7: former law professor are still a lawyer, gets into nominees 245 00:14:02,480 --> 00:14:06,640 Speaker 7: has by asking sort of these, frankly on the spot, 246 00:14:06,880 --> 00:14:11,000 Speaker 7: very scary questions about the law, about core procedure, about 247 00:14:11,080 --> 00:14:14,960 Speaker 7: legal doctrine, and he's stummed quite a few nominees over 248 00:14:15,000 --> 00:14:15,440 Speaker 7: the years. 249 00:14:15,880 --> 00:14:18,360 Speaker 1: It's been called the Kennedy Quiz. 250 00:14:18,600 --> 00:14:22,160 Speaker 7: The Kennedy Quiz, the Kennedy six minute Bar Exam, as 251 00:14:22,320 --> 00:14:24,960 Speaker 7: Chairman Durbin has called it in the past. 252 00:14:25,160 --> 00:14:27,880 Speaker 1: And just tell us a little bit about Kennedy's background. 253 00:14:28,240 --> 00:14:32,479 Speaker 7: He was an adjunct law professor at Louisiana State University. 254 00:14:32,880 --> 00:14:37,320 Speaker 7: He graduated law school from the University of Virginia and 255 00:14:37,480 --> 00:14:41,800 Speaker 7: is an Oxford University graduate. And in these questions, he 256 00:14:41,920 --> 00:14:45,040 Speaker 7: can kind of see that he's not only drawn on 257 00:14:45,280 --> 00:14:49,800 Speaker 7: that sort of academic background from his law school and 258 00:14:49,880 --> 00:14:54,680 Speaker 7: legal education days, but also his experience teaching of Louisiana 259 00:14:54,720 --> 00:14:58,160 Speaker 7: State University posing questions that he told me in a 260 00:14:58,200 --> 00:15:01,680 Speaker 7: hallway interview that he would expect his students to know. 261 00:15:02,240 --> 00:15:05,640 Speaker 1: Do these questions cover the gamut like a bar exam 262 00:15:05,760 --> 00:15:09,200 Speaker 1: would or are they focused in specific areas? 263 00:15:09,640 --> 00:15:13,760 Speaker 7: It really runs the gamut where you can expect questions 264 00:15:13,800 --> 00:15:16,120 Speaker 7: such as, you know, what does the thirteenth Amendment do 265 00:15:16,520 --> 00:15:22,320 Speaker 7: so almost middle school physics class to you know, what's 266 00:15:22,320 --> 00:15:27,800 Speaker 7: the motion in lemony? About courtroom procedure? What's the Brady 267 00:15:27,880 --> 00:15:31,560 Speaker 7: motion right for you know, turning over evidence the favorable 268 00:15:31,600 --> 00:15:32,440 Speaker 7: to a defendant? 269 00:15:33,080 --> 00:15:37,520 Speaker 1: And last month did one nominee actually withdraw her name 270 00:15:37,600 --> 00:15:42,480 Speaker 1: from consideration for a federal trial court seat because of 271 00:15:42,520 --> 00:15:43,920 Speaker 1: a question he asked. 272 00:15:44,160 --> 00:15:48,040 Speaker 7: Yes, so, Charnette Bielkengrin, she was nominated for a trial 273 00:15:48,120 --> 00:15:53,200 Speaker 7: court seat in Washington State. What might sort of make 274 00:15:53,280 --> 00:15:53,840 Speaker 7: that connection? 275 00:15:54,080 --> 00:15:54,240 Speaker 6: Right? 276 00:15:54,400 --> 00:15:59,880 Speaker 7: That the controversy after her confirmation hearing in which she 277 00:16:00,240 --> 00:16:06,080 Speaker 7: was unable to define Articles five and two of the Constitution. 278 00:16:07,000 --> 00:16:11,760 Speaker 7: Once that hearing was over, there was huge backlash, most 279 00:16:11,800 --> 00:16:15,400 Speaker 7: of it sort of from conservatives to this Biden nominee, 280 00:16:15,760 --> 00:16:18,680 Speaker 7: saying that she if she can't even you know, define 281 00:16:18,760 --> 00:16:21,480 Speaker 7: articles of the constitution, like why would she make a 282 00:16:21,480 --> 00:16:24,920 Speaker 7: good judge basically? And you know, she ultimately was not 283 00:16:25,040 --> 00:16:29,240 Speaker 7: renominated in the new year and officially asked the White 284 00:16:29,320 --> 00:16:33,000 Speaker 7: House to withdraw her name from considerations for the judge ship. 285 00:16:33,440 --> 00:16:37,720 Speaker 1: There was a similar incident during the questioning of a 286 00:16:37,760 --> 00:16:41,440 Speaker 1: Trump nominee to the DC District Court, and I remember 287 00:16:41,480 --> 00:16:43,880 Speaker 1: that he withdrew his name too. Tell us about that. 288 00:16:44,240 --> 00:16:48,920 Speaker 7: Yes, So we're going all the way back to twenty seventeen. 289 00:16:49,360 --> 00:16:54,240 Speaker 7: So this is Matthew Peterson, the former Federal Election Commission chair, 290 00:16:54,880 --> 00:16:59,960 Speaker 7: who had very little sort of a practicing litigation background 291 00:17:00,080 --> 00:17:03,240 Speaker 7: to draw from as far as trying to answer questions 292 00:17:03,280 --> 00:17:07,639 Speaker 7: about you know, trials and just legal practice generally. You know, 293 00:17:07,720 --> 00:17:12,440 Speaker 7: he'd never tried a jury trial, either civil or criminal. 294 00:17:12,880 --> 00:17:15,960 Speaker 7: Couldn't define the dovert standard, if I'm saying that correctly, 295 00:17:16,320 --> 00:17:19,800 Speaker 7: couldn't define emotion in limity, as I said before. Really 296 00:17:19,840 --> 00:17:24,800 Speaker 7: it was a very awkward five minutes of questioning where 297 00:17:24,840 --> 00:17:28,919 Speaker 7: just time after time again he either admitted to his 298 00:17:29,840 --> 00:17:35,000 Speaker 7: lack of litigation experience or simply could not answer, you know, 299 00:17:35,119 --> 00:17:38,960 Speaker 7: basic questions that someone with trial experience would be able 300 00:17:39,000 --> 00:17:39,520 Speaker 7: to answer. 301 00:17:40,480 --> 00:17:45,760 Speaker 1: Nominees go through extensive preparations for these hearings. How much 302 00:17:45,840 --> 00:17:48,919 Speaker 1: are these Kennedy quizes now a part of that? 303 00:17:49,440 --> 00:17:54,000 Speaker 7: So as far as our understanding of what that prep 304 00:17:54,000 --> 00:17:56,399 Speaker 7: has looked like over the years. So Kennedy's joined the 305 00:17:56,400 --> 00:18:00,320 Speaker 7: state back in twenty seventeen, and so the nominee who 306 00:18:00,400 --> 00:18:02,560 Speaker 7: would have been sort of subject to these quizites have 307 00:18:02,680 --> 00:18:05,520 Speaker 7: been Trump and Biden nominees. I was able to talk 308 00:18:05,640 --> 00:18:10,160 Speaker 7: with some former Justice Department officials under the Trump administration 309 00:18:10,280 --> 00:18:13,119 Speaker 7: who were in charge of prepping nominees. They said to 310 00:18:13,160 --> 00:18:16,600 Speaker 7: me that they would sort of go over mock questions 311 00:18:16,640 --> 00:18:19,639 Speaker 7: that Senator Kennedy might have asked, you know, relating to 312 00:18:19,840 --> 00:18:24,200 Speaker 7: legal procedure, et cetera. A former official told me that 313 00:18:24,240 --> 00:18:28,400 Speaker 7: they would hold mock hearings in which staffers would portray 314 00:18:28,480 --> 00:18:32,720 Speaker 7: different senators, including Kennedy. I would really love to see 315 00:18:32,720 --> 00:18:38,640 Speaker 7: that Kennedy impression. But it's really trying to get these 316 00:18:38,680 --> 00:18:42,080 Speaker 7: nominees in this frame of mind of you answeringing on 317 00:18:42,200 --> 00:18:45,240 Speaker 7: the spot mini bar exams. I'll just add to that 318 00:18:45,280 --> 00:18:48,879 Speaker 7: too as well, that these officials did say that they 319 00:18:48,880 --> 00:18:52,199 Speaker 7: would sort of generally provide some form of practice for 320 00:18:52,280 --> 00:18:55,800 Speaker 7: the nominees. But ultimately, you know, it's what has that 321 00:18:56,040 --> 00:19:00,399 Speaker 7: person done in their professional career that has you know, 322 00:19:00,720 --> 00:19:03,760 Speaker 7: prepared them for that moment. Right, We're not going to 323 00:19:04,080 --> 00:19:06,919 Speaker 7: have you study for the bar exam again, but what 324 00:19:07,040 --> 00:19:09,080 Speaker 7: have you done in your career, what has been your 325 00:19:09,440 --> 00:19:13,640 Speaker 7: legal practice? Then that should in and of itself prepare 326 00:19:13,680 --> 00:19:16,359 Speaker 7: you for this moment. And you know, there's some debate 327 00:19:16,480 --> 00:19:20,560 Speaker 7: about whether if one does or does not do well 328 00:19:20,600 --> 00:19:23,639 Speaker 7: on these quizes, if that really reflects on the breath 329 00:19:23,680 --> 00:19:26,160 Speaker 7: of that person's professional experience. 330 00:19:26,520 --> 00:19:30,720 Speaker 1: But nominees from district court nominees to Supreme Court nominees 331 00:19:31,400 --> 00:19:36,919 Speaker 1: usually steer clear of making commitments to specific legal issues. 332 00:19:37,119 --> 00:19:39,840 Speaker 1: Does that annoy Kennedy? You know you'll hear a Supreme 333 00:19:39,840 --> 00:19:42,080 Speaker 1: Court nominee say, well, that may come before me. 334 00:19:42,960 --> 00:19:48,480 Speaker 7: Kennedy, much like any other senator, understands that they nominees 335 00:19:48,560 --> 00:19:51,080 Speaker 7: can't stay that they will rule this in this way 336 00:19:51,440 --> 00:19:55,080 Speaker 7: on any particular issue or case. There have been some 337 00:19:55,240 --> 00:19:59,359 Speaker 7: tense exchanges between nominees. In those exchanges, you'll say, I 338 00:19:59,400 --> 00:20:01,639 Speaker 7: know the White ho as coached you not to answer 339 00:20:01,680 --> 00:20:04,560 Speaker 7: my question, but I need to know how you think. 340 00:20:05,119 --> 00:20:09,399 Speaker 7: That's actually a statement that was reflected in one of 341 00:20:09,400 --> 00:20:13,000 Speaker 7: my conversations with a former Department of Justice official who 342 00:20:13,080 --> 00:20:16,480 Speaker 7: is in charge of proping nominees that Kennedy does indeed 343 00:20:16,640 --> 00:20:20,400 Speaker 7: want to understand how nominees think, how they how they 344 00:20:20,440 --> 00:20:24,439 Speaker 7: think through issues. He's not necessarily looking for commitments on 345 00:20:24,560 --> 00:20:28,520 Speaker 7: legal matters on cases that could come before a nominee. 346 00:20:28,520 --> 00:20:33,440 Speaker 7: But in this sort of socratic exchange that a law 347 00:20:33,480 --> 00:20:37,040 Speaker 7: professor might have with a student, where they're talking through 348 00:20:37,080 --> 00:20:40,360 Speaker 7: a legal issue or a legal doctrine, he does this 349 00:20:40,640 --> 00:20:44,359 Speaker 7: Department of Justice official with telling me he does want 350 00:20:44,800 --> 00:20:47,480 Speaker 7: an active exchange with a nominee. 351 00:20:48,080 --> 00:20:51,240 Speaker 1: It seems like he takes delight in his reputation as 352 00:20:51,280 --> 00:20:54,520 Speaker 1: a hard question or sort of like street cred on 353 00:20:54,640 --> 00:20:58,040 Speaker 1: the committee. He did an Instagram reel Tell me about that? 354 00:20:58,400 --> 00:21:03,320 Speaker 7: Yeah, so I believe. Back into December, on his Instagram page, 355 00:21:03,840 --> 00:21:07,640 Speaker 7: he posted a wheel that was almost a montage, if 356 00:21:07,680 --> 00:21:11,480 Speaker 7: you will, of some of his famous moments of questioning 357 00:21:11,560 --> 00:21:15,160 Speaker 7: Biden nominees over the earlier months of twenty twenty three, 358 00:21:15,800 --> 00:21:18,800 Speaker 7: where you have clips of him questioning at the time 359 00:21:18,880 --> 00:21:22,800 Speaker 7: nominee Cato Cruz for the District of Colorado, CHAROTL of 360 00:21:22,840 --> 00:21:26,760 Speaker 7: Bielkins Grant for the a trial court feat in Washington State, 361 00:21:27,359 --> 00:21:31,120 Speaker 7: And really these clips really showcase these nominees being frankly, 362 00:21:31,560 --> 00:21:35,360 Speaker 7: very stumped by these questions. And so I think that's 363 00:21:35,400 --> 00:21:38,399 Speaker 7: a pretty fair reading that he does take some delight 364 00:21:38,600 --> 00:21:42,159 Speaker 7: in this reputation that he has gained for being a 365 00:21:42,240 --> 00:21:44,119 Speaker 7: formidable questioner of nominees. 366 00:21:44,440 --> 00:21:46,600 Speaker 1: I don't know, formidable is the word. He just goes 367 00:21:46,640 --> 00:21:50,600 Speaker 1: in areas where other senators don't. And it seems to me, 368 00:21:51,040 --> 00:21:53,560 Speaker 1: having watched this for a while, that it's like a 369 00:21:53,600 --> 00:21:57,720 Speaker 1: game for him. And does the inability to answer one 370 00:21:57,920 --> 00:22:01,439 Speaker 1: legal question show that a nominee is not qualified for 371 00:22:01,520 --> 00:22:04,439 Speaker 1: the bench. I mean, even Supreme Court justices don't know 372 00:22:04,560 --> 00:22:07,280 Speaker 1: all the answers. That's one of the reasons they ask 373 00:22:07,400 --> 00:22:10,159 Speaker 1: all the questions they do in oral arguments. It just 374 00:22:10,200 --> 00:22:11,560 Speaker 1: seems like it's for show. 375 00:22:11,880 --> 00:22:15,280 Speaker 7: I think those are all incredibly fair points to make. 376 00:22:15,520 --> 00:22:20,320 Speaker 7: Right In talking with people for the story, one thing 377 00:22:20,400 --> 00:22:24,080 Speaker 7: that came up was just sort of the nature of 378 00:22:24,160 --> 00:22:27,840 Speaker 7: the questioning. Where you have someone sort of sitting down 379 00:22:27,960 --> 00:22:31,760 Speaker 7: in front of these really bright lights, in front of 380 00:22:31,840 --> 00:22:35,119 Speaker 7: some of the most powerful politicians in the country, and 381 00:22:35,400 --> 00:22:38,920 Speaker 7: all of a sudden, you're asked about this amendment that 382 00:22:39,040 --> 00:22:42,920 Speaker 7: you probably haven't thought of in a while, and you're 383 00:22:43,000 --> 00:22:45,719 Speaker 7: meant to sort of define it on the spot in 384 00:22:45,760 --> 00:22:48,480 Speaker 7: that moment. If you don't, you might end up in 385 00:22:48,480 --> 00:22:51,679 Speaker 7: a highlight rule on Kennedy's Instagram page. 386 00:22:51,960 --> 00:22:55,200 Speaker 1: You spoke to the Justice program director at the Alliance 387 00:22:55,240 --> 00:22:57,880 Speaker 1: for Justice, and I thought that what he told you 388 00:22:58,200 --> 00:23:00,639 Speaker 1: really hit home is he said that Kennedy doesn't seem 389 00:23:00,640 --> 00:23:04,879 Speaker 1: to recognize that judges have access to libraries, and you know, 390 00:23:05,000 --> 00:23:09,439 Speaker 1: these questions get briefed and they have law clerks. Did 391 00:23:09,560 --> 00:23:11,919 Speaker 1: other people that you spoke to and think that this 392 00:23:12,200 --> 00:23:16,720 Speaker 1: was not really the best way to approach these hearings. 393 00:23:17,240 --> 00:23:20,040 Speaker 7: Yes, for the most part, most of the sources I 394 00:23:20,160 --> 00:23:25,560 Speaker 7: spoke to highlighted the realities in their view, the realities 395 00:23:25,600 --> 00:23:28,520 Speaker 7: of what it means to be not just a judge, 396 00:23:28,520 --> 00:23:32,000 Speaker 7: but to practice the law generally, where it isn't just 397 00:23:32,400 --> 00:23:38,520 Speaker 7: recalling memorized quantum of the law that it is about research, 398 00:23:38,560 --> 00:23:42,600 Speaker 7: It is about looking through the legal questions being presented. 399 00:23:42,640 --> 00:23:45,600 Speaker 7: It is about, you know, going through case law that 400 00:23:45,640 --> 00:23:48,880 Speaker 7: you may or may not be familiar with. And all 401 00:23:48,960 --> 00:23:52,840 Speaker 7: of these very important decisions that judges make in the 402 00:23:52,880 --> 00:23:55,560 Speaker 7: course of legal practice and the course of their jobs 403 00:23:55,640 --> 00:23:59,399 Speaker 7: aren't necessarily made on the spot. They're made after countless 404 00:23:59,400 --> 00:24:04,159 Speaker 7: hours doing the research or analyzing legal issues, etc. So 405 00:24:04,640 --> 00:24:07,639 Speaker 7: I was just talking with some judge former and current 406 00:24:07,960 --> 00:24:11,320 Speaker 7: federal judges for a previous story that said, look, most 407 00:24:11,359 --> 00:24:13,679 Speaker 7: of these cases don't even go to trial, right, we 408 00:24:13,680 --> 00:24:16,639 Speaker 7: don't even have a bench trial or a jury trial. 409 00:24:17,000 --> 00:24:19,679 Speaker 7: Much of this is done in sort of these motions 410 00:24:19,720 --> 00:24:22,000 Speaker 7: that are made between parties. 411 00:24:21,920 --> 00:24:24,719 Speaker 1: A lot of motion practice in the federal courts. Well, 412 00:24:24,720 --> 00:24:28,760 Speaker 1: it's a really interesting article. Thanks so much, Tianna. That's 413 00:24:28,800 --> 00:24:30,800 Speaker 1: Tianna Headley of Bloomberg Law. 414 00:24:31,920 --> 00:24:34,160 Speaker 4: Yeah, I guess you're not giving me a whole lot 415 00:24:34,160 --> 00:24:36,960 Speaker 4: of comfort in this about how peculiar this would be. 416 00:24:37,040 --> 00:24:40,439 Speaker 4: That we could have different rules in different states. We 417 00:24:40,480 --> 00:24:44,159 Speaker 4: could have different rules depending on the time that the 418 00:24:44,240 --> 00:24:45,240 Speaker 4: challenge has brought. 419 00:24:47,200 --> 00:24:51,160 Speaker 8: What if other states have require two percent interest, and 420 00:24:51,200 --> 00:24:54,840 Speaker 8: the second Circuit says one thing, and the fifth Circuit 421 00:24:55,000 --> 00:24:58,159 Speaker 8: or the tenth Circuit or whatever says something else, and 422 00:24:58,160 --> 00:25:00,000 Speaker 8: then you have issues of collaterals. 423 00:25:00,040 --> 00:25:00,240 Speaker 5: Stop. 424 00:25:00,320 --> 00:25:03,720 Speaker 8: Well, it does seem like a complicated situation, but you 425 00:25:04,440 --> 00:25:07,080 Speaker 8: are able to assess the whole thing. So just explain 426 00:25:07,760 --> 00:25:11,160 Speaker 8: why this would not cause practical nightmares. 427 00:25:11,400 --> 00:25:14,960 Speaker 1: Yes, it did seem that many of the Supreme Court justices, 428 00:25:15,080 --> 00:25:19,280 Speaker 1: like Elena Kagan and Samuel Alito, were concerned about the 429 00:25:19,320 --> 00:25:22,919 Speaker 1: flood of factual disputes that might arise if the Court 430 00:25:23,000 --> 00:25:26,800 Speaker 1: reverses a Second Circuit decision finding that the National Bank 431 00:25:26,840 --> 00:25:31,240 Speaker 1: Act preempts New York law. The justices struggled to resolve 432 00:25:31,280 --> 00:25:34,600 Speaker 1: the conflict between the National Bank Act, a Civil War 433 00:25:34,680 --> 00:25:38,240 Speaker 1: era law protecting national banks, with a New York law 434 00:25:38,400 --> 00:25:42,080 Speaker 1: requiring all banks to pay at least two percent interest 435 00:25:42,160 --> 00:25:46,360 Speaker 1: on mortgage ESCRO accounts. The question is whether state policies 436 00:25:46,560 --> 00:25:51,159 Speaker 1: significantly interfere with the National Bank's operations. A few of 437 00:25:51,200 --> 00:25:54,919 Speaker 1: the justices seemed taken with the unusual fact that the 438 00:25:54,960 --> 00:25:58,880 Speaker 1: Biden administration was appearing in support of the New York 439 00:25:58,960 --> 00:26:02,240 Speaker 1: Bank customers who argued that the Bank of America is 440 00:26:02,400 --> 00:26:05,920 Speaker 1: obligated to pay interest on their escrow accounts. Neither the 441 00:26:06,000 --> 00:26:09,159 Speaker 1: Department of the Treasury nor the Office of the Controller 442 00:26:09,200 --> 00:26:13,240 Speaker 1: of the Currency joined the administration's brief, which argued that 443 00:26:13,280 --> 00:26:17,240 Speaker 1: the OCC had misinterpreted the dog Frank provision before the 444 00:26:17,320 --> 00:26:21,400 Speaker 1: Second Circuit Court of Appeals. Here's Justice Neil Gorsuch, Well. 445 00:26:21,480 --> 00:26:24,080 Speaker 5: You seem to have disavowed everything the OCC has done 446 00:26:24,119 --> 00:26:27,359 Speaker 5: since DoD Frank. What do we do with that? Joining me? 447 00:26:27,440 --> 00:26:30,760 Speaker 1: Is a bank regulation expert, joe Lynjak, a partner at 448 00:26:30,800 --> 00:26:34,080 Speaker 1: Dorsey and Whitney, tell us about the background of the case. 449 00:26:34,520 --> 00:26:36,920 Speaker 6: The background has to do with a statute that was 450 00:26:36,960 --> 00:26:41,719 Speaker 6: adopted as part of Dodd Frank, which limited the ability 451 00:26:42,080 --> 00:26:45,639 Speaker 6: to preempt state laws. It is about fifteen or sixteen 452 00:26:45,680 --> 00:26:50,080 Speaker 6: states around the country that require that a lender that 453 00:26:50,240 --> 00:26:53,399 Speaker 6: has an escrow account for a consumer customer has to 454 00:26:53,400 --> 00:26:56,679 Speaker 6: pay interest on the escrow funds. In New York and 455 00:26:56,760 --> 00:27:00,560 Speaker 6: actually in California it's two percent. And there was contrary 456 00:27:00,600 --> 00:27:05,560 Speaker 6: decisions in California and in New York saying a national 457 00:27:05,600 --> 00:27:08,240 Speaker 6: bank does or does not have to pay interest on 458 00:27:08,320 --> 00:27:12,080 Speaker 6: thees bros. And because there was a conflict between in 459 00:27:12,119 --> 00:27:15,280 Speaker 6: the Ninth Circuit and the Second Circuit, it went up 460 00:27:15,320 --> 00:27:18,800 Speaker 6: to the Supreme Court. And the dispute is whether or 461 00:27:18,880 --> 00:27:22,679 Speaker 6: not the application of this statue, which was amended in 462 00:27:22,760 --> 00:27:27,639 Speaker 6: dot Frank alters the ability to preempt consumer laws. 463 00:27:27,960 --> 00:27:30,800 Speaker 1: Do you want to take a stab at explaining preemption here? 464 00:27:31,440 --> 00:27:31,760 Speaker 5: All right? 465 00:27:31,800 --> 00:27:34,359 Speaker 1: So now why don't you tell us about preemption here? 466 00:27:34,720 --> 00:27:37,880 Speaker 6: Preemption is the ability of a national bank and other 467 00:27:38,000 --> 00:27:41,280 Speaker 6: types of federal charters such as a savings and loan 468 00:27:41,320 --> 00:27:44,840 Speaker 6: association not to have to follow. It actually goes back 469 00:27:44,880 --> 00:27:49,720 Speaker 6: to nineteen eighty two in the Deliquesta case, in which 470 00:27:49,800 --> 00:27:52,760 Speaker 6: the Supreme Court said, gee, we want to help the 471 00:27:52,800 --> 00:27:57,160 Speaker 6: federal savings and loans and state laws is preempted. Now. 472 00:27:57,359 --> 00:28:01,720 Speaker 6: What happened immediately after that is national banks said, hey, 473 00:28:01,760 --> 00:28:04,640 Speaker 6: I want a piece of this as well, and two 474 00:28:04,880 --> 00:28:09,520 Speaker 6: very prominent lawyers ended up creating a series of interpretations 475 00:28:09,560 --> 00:28:15,360 Speaker 6: and opinions that really buttressed federal preemption for national banks, 476 00:28:16,160 --> 00:28:20,720 Speaker 6: and that continued for about a decade until it was 477 00:28:20,920 --> 00:28:24,240 Speaker 6: cut back by the adoption of the statute, which is 478 00:28:24,480 --> 00:28:28,480 Speaker 6: Section twenty five B of the National Bank Act, which said, well, 479 00:28:28,560 --> 00:28:31,320 Speaker 6: there is preemption, but if you're dealing with the consumer 480 00:28:31,680 --> 00:28:35,159 Speaker 6: law in a state, you have to show that the 481 00:28:35,160 --> 00:28:39,480 Speaker 6: effect of that law prevents or interferes with the exercise 482 00:28:39,520 --> 00:28:43,160 Speaker 6: of the national bank's powers. And the essence of the 483 00:28:43,240 --> 00:28:46,800 Speaker 6: case was, Okay, what do those words mean? What is 484 00:28:46,840 --> 00:28:49,840 Speaker 6: the standard? Is it a legal standard or is it 485 00:28:49,880 --> 00:28:53,640 Speaker 6: a factual standard? And it really ended up being a 486 00:28:53,880 --> 00:28:57,920 Speaker 6: complex issue that the court kept coming back to trying 487 00:28:57,960 --> 00:29:00,640 Speaker 6: to figure out, you know, what are we doing situation, 488 00:29:00,960 --> 00:29:01,400 Speaker 6: Let's talk. 489 00:29:01,280 --> 00:29:04,760 Speaker 1: About what the justice's concerns seem to be. During the 490 00:29:04,920 --> 00:29:09,640 Speaker 1: oral arguments, just as Elena Kagan and Samuel Alito worried 491 00:29:09,680 --> 00:29:13,640 Speaker 1: that requiring courts to make these decisions on a statute 492 00:29:13,640 --> 00:29:18,440 Speaker 1: by statute basis would require a lot of evidentiary questions, 493 00:29:18,520 --> 00:29:22,160 Speaker 1: it would be fact laden. So Alito said, a district 494 00:29:22,240 --> 00:29:24,200 Speaker 1: judge is going to have a trial to determine the 495 00:29:24,200 --> 00:29:27,040 Speaker 1: effect of this on all national banks operating in New 496 00:29:27,120 --> 00:29:30,960 Speaker 1: York and ended by saying it could cause practical nightmares, 497 00:29:30,960 --> 00:29:32,640 Speaker 1: explain what their concerns are there. 498 00:29:33,360 --> 00:29:36,400 Speaker 6: One of the questions is is it simply a pure 499 00:29:36,480 --> 00:29:39,480 Speaker 6: matter of laws or a matter of fact, meaning you've 500 00:29:39,520 --> 00:29:43,080 Speaker 6: got to introduce to evidence. And Jakin said, well, does 501 00:29:43,080 --> 00:29:46,240 Speaker 6: that mean that we end up litigating in all fifty 502 00:29:46,280 --> 00:29:49,920 Speaker 6: states claiming that there is no preemption? And by the way, 503 00:29:50,160 --> 00:29:52,320 Speaker 6: if you do that, maybe you have be of aue 504 00:29:52,320 --> 00:29:54,080 Speaker 6: who's going to do a good job, but maybe you've 505 00:29:54,080 --> 00:29:56,240 Speaker 6: got a smaller bank that does not do such a 506 00:29:56,280 --> 00:30:00,320 Speaker 6: good job. Does the poor job then apply to every one? 507 00:30:00,800 --> 00:30:03,920 Speaker 6: Or do you just keep litigating and litigating all over again? 508 00:30:04,680 --> 00:30:07,760 Speaker 6: And she seemed to be indicating, and I think correctly so, 509 00:30:08,240 --> 00:30:10,720 Speaker 6: that this would be a very significant burden on the 510 00:30:10,800 --> 00:30:16,360 Speaker 6: courts to have to review factually what is taking place 511 00:30:16,360 --> 00:30:19,920 Speaker 6: and what the impact is of a particular state law 512 00:30:20,000 --> 00:30:23,600 Speaker 6: on a national bank. That kept coming up. In contrary 513 00:30:23,640 --> 00:30:27,959 Speaker 6: to that, Justice Alito said, well, one of the standards 514 00:30:27,960 --> 00:30:32,239 Speaker 6: here is that it has to significantly interfere with the 515 00:30:32,280 --> 00:30:36,360 Speaker 6: ability of a national bank to exercise its powers. And 516 00:30:36,520 --> 00:30:38,920 Speaker 6: the question was raised, well, wait a minute, this is 517 00:30:38,960 --> 00:30:42,760 Speaker 6: potentially a pricing issue in this case, because you've got 518 00:30:42,840 --> 00:30:47,800 Speaker 6: to pay interest on an escrow account. Isn't pricing automatically 519 00:30:47,920 --> 00:30:52,400 Speaker 6: significantly interfering with a national bank's powers that we're really 520 00:30:52,440 --> 00:30:55,640 Speaker 6: struggling with you, what do we do and what is 521 00:30:55,680 --> 00:30:56,880 Speaker 6: the rule we have to apply? 522 00:30:57,760 --> 00:31:02,400 Speaker 1: The lawyer for the petitioner New York Homeowners conceded that 523 00:31:02,520 --> 00:31:06,440 Speaker 1: Dodd Frank doesn't establish a bright line chest for determining 524 00:31:06,720 --> 00:31:09,800 Speaker 1: whether a state banking law pose is a significant problem 525 00:31:09,840 --> 00:31:12,400 Speaker 1: for national banks. What did he propose? 526 00:31:13,320 --> 00:31:15,920 Speaker 6: I would say that what they were proposing was somewhat 527 00:31:16,000 --> 00:31:20,000 Speaker 6: murky in nature. They were proposing more of a qualitative 528 00:31:20,400 --> 00:31:24,040 Speaker 6: standard as opposed to a quantitative standard. But that goes 529 00:31:24,080 --> 00:31:28,000 Speaker 6: towards the issue of do we have to submit evidence 530 00:31:28,160 --> 00:31:31,800 Speaker 6: in terms of challenging of the preemption issue? 531 00:31:32,160 --> 00:31:34,240 Speaker 1: And what was the argument from the Bank of America. 532 00:31:35,480 --> 00:31:40,280 Speaker 6: The argument for the Bank of America was actually very 533 00:31:40,280 --> 00:31:45,080 Speaker 6: straightforward in that the Bank of America was advocating that 534 00:31:45,840 --> 00:31:50,400 Speaker 6: the standard in that was put into the statute is 535 00:31:50,480 --> 00:31:54,680 Speaker 6: really a recitation of what currently was the rule as 536 00:31:54,720 --> 00:31:59,640 Speaker 6: announced in the Barnett Bank case, and that was attacked 537 00:32:00,040 --> 00:32:04,280 Speaker 6: were questioned by the court. And again here is where 538 00:32:04,280 --> 00:32:07,680 Speaker 6: the I think the concerns come in. On one hand, 539 00:32:08,080 --> 00:32:11,600 Speaker 6: if you adopted the Bank of America's rule, you would 540 00:32:11,880 --> 00:32:17,480 Speaker 6: always preempt, compare to the opposite side, where you would 541 00:32:17,560 --> 00:32:22,320 Speaker 6: very rarely preempt with the absence of guidance. And this 542 00:32:23,120 --> 00:32:26,720 Speaker 6: highly questionable standard which is now in the statute. I 543 00:32:26,720 --> 00:32:29,160 Speaker 6: think all members of the Court were very uncomfortable with 544 00:32:29,640 --> 00:32:32,560 Speaker 6: creating something at a whole closs that would then be 545 00:32:32,600 --> 00:32:34,080 Speaker 6: applied by the courts. 546 00:32:34,480 --> 00:32:36,880 Speaker 1: Something that you don't see often, at least in the 547 00:32:36,920 --> 00:32:40,600 Speaker 1: cases I coveredn't know about bank cases. The Biden administration was 548 00:32:40,640 --> 00:32:44,960 Speaker 1: supporting the petitioner homeowners. Neither the Department of the Treasury 549 00:32:45,080 --> 00:32:48,680 Speaker 1: nor the Office of the Controller of Currency join that brief, 550 00:32:49,000 --> 00:32:52,720 Speaker 1: And in its brief, the Biden administration said that the 551 00:32:52,760 --> 00:32:56,280 Speaker 1: OCC's brief supporting Bank of America and the Second Circuit 552 00:32:56,360 --> 00:33:00,800 Speaker 1: misinterpreted the Dodd Frank provision. Justice Neil course that said 553 00:33:01,280 --> 00:33:04,560 Speaker 1: to the Solicitor General, you seem to have disavowed everything 554 00:33:04,600 --> 00:33:08,240 Speaker 1: the OCC's done. Since God Frank, what do we do 555 00:33:08,400 --> 00:33:10,640 Speaker 1: with that? So what's going on there with the OCC? 556 00:33:11,240 --> 00:33:14,760 Speaker 6: Well, the OCC has always been, as I mentioned a 557 00:33:14,800 --> 00:33:18,320 Speaker 6: few moments ago, has always been a strong proponent of 558 00:33:18,560 --> 00:33:23,600 Speaker 6: preemption for national banks, and subsequent too to the passage 559 00:33:23,600 --> 00:33:28,000 Speaker 6: of the Dot Frank Act actually issued an interpretation indicating 560 00:33:28,000 --> 00:33:29,960 Speaker 6: how they would proceed in the future in light of 561 00:33:30,040 --> 00:33:35,440 Speaker 6: this new section twenty twenty five B, which effectively said 562 00:33:35,920 --> 00:33:38,040 Speaker 6: where to keep on doing what we've done in the past, 563 00:33:38,080 --> 00:33:42,640 Speaker 6: and we view twenty three B as basically codifying the 564 00:33:42,680 --> 00:33:45,600 Speaker 6: Barnett Bank case as we have interpreted it in the past. 565 00:33:45,920 --> 00:33:48,880 Speaker 6: The Department of Justice and the Biden administration took a 566 00:33:48,960 --> 00:33:54,600 Speaker 6: decidedly different view, saying that the Second Circuit applied the 567 00:33:54,600 --> 00:33:59,520 Speaker 6: wrong rule. You know, there's a disagreement between the banking agency, 568 00:33:59,600 --> 00:34:05,440 Speaker 6: THEOC that has the obligation of interpreting statutes, with the 569 00:34:05,480 --> 00:34:09,560 Speaker 6: Biden administration, which took more of I think a consumer 570 00:34:09,719 --> 00:34:13,040 Speaker 6: based political position contrary to CC. 571 00:34:14,080 --> 00:34:16,080 Speaker 1: So where do you think the court will go with 572 00:34:16,200 --> 00:34:16,800 Speaker 1: this case? 573 00:34:17,640 --> 00:34:23,239 Speaker 6: Well, the Department of Justice filed actually two briefs. At 574 00:34:23,280 --> 00:34:26,400 Speaker 6: the end, what they said was you could vacate the 575 00:34:26,480 --> 00:34:29,600 Speaker 6: case and send it back to the lower course because 576 00:34:30,000 --> 00:34:34,040 Speaker 6: they applied to an erroneous standard. In other words, duck 577 00:34:34,120 --> 00:34:37,719 Speaker 6: the issue and let the lower courts all around the 578 00:34:37,719 --> 00:34:42,160 Speaker 6: country develop the jurisprudence here in the manners that when 579 00:34:42,200 --> 00:34:45,759 Speaker 6: it comes back to the court, there's more meat, if 580 00:34:45,800 --> 00:34:48,320 Speaker 6: you will, on the bone to be able to better 581 00:34:48,400 --> 00:34:51,600 Speaker 6: handle this. And I think that that's reflective of the 582 00:34:51,640 --> 00:34:54,960 Speaker 6: fact that in the oral argument there was really skepticism 583 00:34:55,480 --> 00:34:58,919 Speaker 6: as to what do you really want us to do here, 584 00:34:59,040 --> 00:35:03,080 Speaker 6: because there's not a lot of support for a particular 585 00:35:03,160 --> 00:35:05,280 Speaker 6: rule as opposed to making it up out of whole class. 586 00:35:05,760 --> 00:35:08,520 Speaker 6: One of the things which I think has not necessarily 587 00:35:08,560 --> 00:35:15,080 Speaker 6: been addressed a lot is the effective preemption on state banks. Actually, 588 00:35:15,120 --> 00:35:20,279 Speaker 6: state banks frequently like preemption because what has arisen in 589 00:35:20,320 --> 00:35:23,759 Speaker 6: many states is something known as parody statutes, meaning that 590 00:35:24,280 --> 00:35:28,600 Speaker 6: if a national bank has a particular power, say, for example, preemption, 591 00:35:29,120 --> 00:35:32,759 Speaker 6: then the state bank regulator is able to grant the 592 00:35:32,800 --> 00:35:36,600 Speaker 6: same power or preempt state laws to the same extent 593 00:35:36,640 --> 00:35:38,640 Speaker 6: that a national bank has done. And that's been used 594 00:35:38,680 --> 00:35:43,080 Speaker 6: in many cases as a shield against overly zealous legislatures 595 00:35:43,680 --> 00:35:49,320 Speaker 6: who want to micromanage lending and deposit activities. It's something 596 00:35:49,360 --> 00:35:52,000 Speaker 6: which is kind of peculiar to the whole area, but 597 00:35:52,360 --> 00:35:55,200 Speaker 6: has frequently been used in a very useful manner by 598 00:35:55,360 --> 00:35:57,239 Speaker 6: state banks when you're dealing with legislation. 599 00:35:57,719 --> 00:36:00,279 Speaker 1: Thanks for being on the show. That's joe LYNYA act 600 00:36:00,560 --> 00:36:03,279 Speaker 1: of Dorsey and Whitney. And that's it for this edition 601 00:36:03,320 --> 00:36:05,960 Speaker 1: of The Bloomberg Law Show. Remember you can always get 602 00:36:06,000 --> 00:36:09,120 Speaker 1: the latest legal news on our Bloomberg Law podcasts. You 603 00:36:09,160 --> 00:36:13,279 Speaker 1: can find them on Apple Podcasts, Spotify, and at www 604 00:36:13,400 --> 00:36:17,680 Speaker 1: dot bloomberg dot com slash podcast Slash Law, And remember 605 00:36:17,719 --> 00:36:20,680 Speaker 1: to tune into The Bloomberg Law Show every weeknight at 606 00:36:20,680 --> 00:36:24,160 Speaker 1: ten pm Wall Street Time. I'm June Grosso and you're 607 00:36:24,239 --> 00:36:25,480 Speaker 1: listening to Bloomberg