Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio.
Speaker 1: Will the FTC try to stop the largest packaged food
Speaker 1: deal in years? Mars, known for its candy like m
Speaker 1: and Ms, Milky Ways, Skittles, Twigs and on and on,
Speaker 1: wants to buy cheese at maker Kelenova for nearly thirty
Speaker 1: six billion dollars. But will FTC chair Lena Kahn's views
Speaker 1: about a chocolate oligopoly lead to a challenge to the deal?
Speaker 1: Joining me is Bloomberg Anti trust reporter Leon Nylan Leah
Speaker 1: tell us how Lena Kahan had a problem with the
Speaker 1: chocolate oligopoly about a decade.
Speaker 2: Ago before she became FTC chair and con worked for
Speaker 2: an advocacy group that focuses on anti chask to open markets,
Speaker 2: and she did a lot of research and writing sort
Speaker 2: of about consolidation within various industries and one of those
Speaker 2: a scud So. About ten years ago she wrote a
Speaker 2: story about how there had been a significant con coolidation
Speaker 2: within the candy industry, particularly chocolate candies, and how today
Speaker 2: there are only about three major chocolate companies That's Nestleie
Speaker 2: Mars and her Shee's. You know you have a couple
Speaker 2: other ones like Baro Rocho, which is an Italian company,
Speaker 2: but those are the big free So even though when
Speaker 2: you go to the bircery store you see like what
Speaker 2: looks like, you know, dozens of different brands, really most
Speaker 2: of those are owned by one of these free companies.
Speaker 2: And so she was lamenting a little bit. How when
Speaker 2: there is this kind of confolidation, there ends up being
Speaker 2: a little bit less innovation in market.
Speaker 1: See, now I would wish there was less innovation in
Speaker 1: candy so that I would not be so tempted. I
Speaker 1: never noticed that there was a lack of diversity in candy.
Speaker 1: So tell us about this proposed or possible Mars deal.
Speaker 2: Yeah, so Mars, which is primarily a candy company, is
Speaker 2: looking at buying Kelenova. Keelenova is a company that was
Speaker 2: spun out of Keellog to Kellogg, the cereal company decided
Speaker 2: to split up its business in between Kellogg the traditional
Speaker 2: cereal and like everything else it did, And so Keelenova
Speaker 2: is sort of the everything else. So it has pop tarts,
Speaker 2: it has cheese, it it has nutri grain bars, it
Speaker 2: has all of these other sort of like snack food
Speaker 2: and frozen items in packaged food, and so Mars would
Speaker 2: like to buy it because, as I said, primarily it
Speaker 2: is a candy company, but it would like to sort
Speaker 2: of get a little bit more into snack food. So
Speaker 2: they are looking at doing a thirty six billion dollars
Speaker 2: deal and it's really going to put Mars into one
Speaker 2: of the top packaged food companies in the world. So
Speaker 2: right now the top ones are Unilever, PepsiCo, and Nestlie
Speaker 2: and this would make Mars the number four, right behind
Speaker 2: those three. So the FTC is going to take a
Speaker 2: look at the dial because there's a lot of interest
Speaker 2: in food right now, particularly with all the inflation that's
Speaker 2: been going on. There's been some suggestions that the reason
Speaker 2: that food prices haven't come down as much is because
Speaker 2: there is so much consolidation in the industry that a
Speaker 2: lot of the food companies can sort of keep their
Speaker 2: prices high in a way that they would otherwise not
Speaker 2: be able to if there was more competition.
Speaker 1: They do compete in snack bars. Is the analysis going
Speaker 1: to depend on how they compete in snack bars or
Speaker 1: is it going to focus on their becoming then the
Speaker 1: fourth largest packaged food dealer. I mean, it really doesn't
Speaker 1: seem like there's a lot of overlap in what Mars
Speaker 1: and Kelenova do.
Speaker 2: Yeah, the biggest overlap is that you said in snack bars.
Speaker 2: So one of them owns Utri Grain and the other
Speaker 2: owns Matro's Bakery, And if you ever had those items,
Speaker 2: they're very similarly. You know, they have the fruit in
Speaker 2: the middle and then there's the grains on the outside.
Speaker 2: One of them also owns Hind Bars, you know, all
Speaker 2: those like nut and chocolate ones, and the other owns
Speaker 2: are expires, which they often have like fruit and that's
Speaker 2: mixed together into sort of a bar. But these are
Speaker 2: all sort of like the slightly healthier nack and or
Speaker 2: the real replacement type things that you might you know,
Speaker 2: grab when you're hungry. And so the FTC is definitely
Speaker 2: going to take a look at that. And you know,
Speaker 2: the traditional way that this would be resolved is that
Speaker 2: they would try and sell off one of these brands.
Speaker 2: They would keep one and they could sell off the other.
Speaker 2: This FTC has been a lot more reluctant to accept
Speaker 2: that kind of a deal. I mean, I am here
Speaker 2: in Portland because of the Kroger Albertson steal and that's
Speaker 2: exactly where they're challenging at Kroger and Auversons are saying,
Speaker 2: you know, we'll sell us some supermarkets, everything will be fine,
Speaker 2: and the FTC is like, eh, we're not really sure.
Speaker 2: So that may be a little bit harder in this case.
Speaker 1: How long does the FTC have before they have to
Speaker 1: make a decision in the Mars case.
Speaker 2: Yeah, so Mars and Kelenova just announced the steal a
Speaker 2: couple of weeks ago. They will file their initial paperwork
Speaker 2: pretty soon, and then the FEC will have thirty days
Speaker 2: to decide if it wants to do an in depth
Speaker 2: review that we call a second request. A lot of
Speaker 2: those people I spoke to said they believe that FPC
Speaker 2: is definitely going to do a second request here. Once
Speaker 2: it goes into the second request phase, that can take
Speaker 2: several months or maybe even up to a year for
Speaker 2: them to sort of make a decision about what they're
Speaker 2: going to do with the deal.
Speaker 1: So, speaking of Kroger Albertson's, I understand that the surgeon
Speaker 1: grocery prices played a big part in the opening statements
Speaker 1: at the trial.
Speaker 2: Yeah, you know, this is a merger between what the
Speaker 2: US calls the two largest traditional grocery stores, Kroger and Robertsons,
Speaker 2: and you know there's sort of one stop shop places
Speaker 2: where you go and you can get sort of all
Speaker 2: of the food you might need for a week. And
Speaker 2: they have alleged that both Kroger and Robertsons spend a
Speaker 2: lot of time thinking about how the other one prices,
Speaker 2: particularly on what they consider it to be consumer stables,
Speaker 2: which are things like milk, eggs, bananas, things along those
Speaker 2: lines that Americans purchased a lot, probably even weakly. So
Speaker 2: we have heard a lot about egg pricing in particular.
Speaker 2: You know, there's been a lot of up and down
Speaker 2: in egg pricing since the pandemic, in part because there's
Speaker 2: been a couple like bird flu outbreaks here in the US.
Speaker 2: But there has been some testimony that Albertson's and Kroger
Speaker 2: look to each other very significantly on how to price
Speaker 2: their eggs. They do weekly reports on what the other
Speaker 2: one is charging in the market, and they oftentimes, yeah,
Speaker 2: like adjust their pricing based on what either you know,
Speaker 2: Kroger or Albertson's just charging. The companies have argued that
Speaker 2: they don't compete with each other as much as the
Speaker 2: FTC claims that really their biggest competitors Walmart. Walmart obviously
Speaker 2: is one of the biggest food sellers in the United States.
Speaker 2: But you know, we've seen at this point dozens of
Speaker 2: documents in which Kroger and Albertsons refer to each other
Speaker 2: as either their primary competitor or their biggest competitor. And
Speaker 2: while they do look at Walmart for some pricing, it's
Speaker 2: pretty clear that they are very, very focused on the
Speaker 2: other traditional supermarkets.
Speaker 1: There was testimony at the trial about the company that
Speaker 1: would buy almost six hundred of the divested stores from
Speaker 1: Kroger and Albertson's CNS Grocery Wholesale.
Speaker 2: So in order to get the deal through, the companies
Speaker 2: knew that they competed directly in a lot of areas,
Speaker 2: and so they offered to sell five hundred and seventy
Speaker 2: nine stores to a company called CNS Grocery Coolesalers. So
Speaker 2: CNS is primarily a grocery holesaler. That means that they
Speaker 2: fiber products from the consumer packaged goods or from the farmers.
Speaker 2: They keep them in the warehouse, and then when the
Speaker 2: supermarket needs to stocket shelves, it orders from them and
Speaker 2: they send a truck to the serper market with all
Speaker 2: of the goods. So a lot of the bigger supermarkets
Speaker 2: like Kroger and Overritson sort of do this warehousing and
Speaker 2: distribution themselves, with smaller grocery chains to use wholesalers like CNS. So,
Speaker 2: as I said, CNS is primarily a wholesaler. It does
Speaker 2: operate twenty three grocery stores in upstate New York and Wisconsin,
Speaker 2: so buying five hundred and seventy nine stores would be
Speaker 2: like quite a significant change for this company, and they
Speaker 2: argue that they are really excited about this possibility, that
Speaker 2: they would really like to sort of diversify their company
Speaker 2: beyond just being a whole baler, and that it sort
Speaker 2: of makes sense for them, since they are so involved
Speaker 2: in groceries, to pick up grocery retailing. But the FEC
Speaker 2: argues that this is putting a lot of the risk
Speaker 2: onto consumers because if this divestiture package were to fail
Speaker 2: all of a sudden, there's not going to be as
Speaker 2: much grocery competition and a lot of places around the country,
Speaker 2: consumers would only have the option of the combined Kroger
Speaker 2: and Operts them.
Speaker 1: And CNS doesn't have a great record of keeping supermarkets
Speaker 1: that they buy.
Speaker 2: Yes, so historically, as I mentioned, CNS has played a
Speaker 2: little bit in the retail business. But what they would
Speaker 2: do is they would buy a couple grocery stores, primarily
Speaker 2: from other companies that were already their customers, and then
Speaker 2: they would keep them for a while and then sort
Speaker 2: of sell them off or sell them back to somebody else.
Speaker 2: So there was a period in time in the early
Speaker 2: mid two thousands when they had a couple hundred stores,
Speaker 2: but by twenty twelve they had completely exited the retail
Speaker 2: grocery industry. So for a long time they operated no
Speaker 2: grocery stores whatsoever. In about twenty twenty one, they sort
Speaker 2: of decided to get back into the retail business, and
Speaker 2: that's when they started acquiring a couple more stores, And
Speaker 2: as I said, they now operate just twenty three of
Speaker 2: them only in these two places in the country. Even
Speaker 2: though they are a big distributor, they also don't have
Speaker 2: any even of their distribution business in some areas of
Speaker 2: the country where they would be buying stores, So they
Speaker 2: don't do a lot of work right now in southern California,
Speaker 2: where they would be buying something like ninety something stores,
Speaker 2: and they don't do any real business in Colorado right now,
Speaker 2: where again they would be buying ninety something stores and
Speaker 2: taking over sort of the Safe Way brand in Colorado only.
Speaker 1: And this hearing is just to allow a judge to
Speaker 1: decide whether or not to issue a preliminary injunction against
Speaker 1: the deal.
Speaker 2: Yeah, so technically this is a preliminary injunction hearing. The
Speaker 2: judge is going to decide whether it's to block the
Speaker 2: deal from going through while the FTC move forward with
Speaker 2: a proceeding in it's in house court. The companies have
Speaker 2: already said that if the judge blocks the deal here,
Speaker 2: they're probably going to abandon because the deal has already
Speaker 2: now been pending for two years and they can't really
Speaker 2: keep waiting given all of the financing and things that
Speaker 2: are up in the air with this merger. So if
Speaker 2: she ends up ruling against them, they'll abandon the deal
Speaker 2: and sort of move forward with a new strategy.
Speaker 1: Do you know what other kinds of witnesses are going
Speaker 1: to testify?
Speaker 2: Yeah, we are almost done with the FTC's case, So
Speaker 2: we've heard from a lot of Koger and Albertson's sort
Speaker 2: of mid level managers in the various regions. We've heard
Speaker 2: actually a lot from various union officials because one of
Speaker 2: the interesting things about this case is the FTC has
Speaker 2: argued that it would produce competition for unionized labor because
Speaker 2: both Kroger and Albertsons have arge unionized work courses all
Speaker 2: of the people who work in the stores, and they
Speaker 2: argue that eliminating the competition between Kroger and Albertson's would
Speaker 2: lead to lower wages for their workers. The SEC is
Speaker 2: expected to finish up probably tomorrow morning, and then we're
Speaker 2: going to hear from the Kroger CEO and the Robertson CEO,
Speaker 2: who are going to talk a lot about, you know,
Speaker 2: why they want to steal some forward.
Speaker 1: It's very interesting because you have two of the issues
Speaker 1: in the presidential campaign, inflation and union jobs.
Speaker 2: The Harris campaign has already said that they oppose this merger,
Speaker 2: So we will see what happens.
Speaker 1: Thanks so much, Leah. That's Bloomberg Ante Trust reporter Leah Nylen.
Speaker 1: Coming up next on the Bloomberg Launch Show. Texas is
Speaker 1: making a long shot bid to become a business law
Speaker 1: center with a little help from Elon Musk i'm June Grosso.
Speaker 1: When you're listening to Bloomberg, there's no doubt that in
Speaker 1: the tiny state of Delaware is the world's per i'm
Speaker 1: ain in business court. The Delaware Court of Chancery, Delaware
Speaker 1: is the legal address for nearly three hundred thousand businesses
Speaker 1: like GM, Walmart and Goldman Sachs, and in a two
Speaker 1: century old commercial court, sits one chancellor, six vice chancellors,
Speaker 1: and three magistrates, considered the best judges in the business
Speaker 1: of judging business cases. Now into this picture comes an
Speaker 1: unlikely challenge from Texas. It's launching its own version of
Speaker 1: a business court without a designated courthouse or even designated courtrooms.
Speaker 1: Joining me is Bloomberg Texas legal reporter Madelin Meckelberg, who's
Speaker 1: investigated Texas's bid to become a business court hub. Madelin
Speaker 1: start by telling us about the Delaware Chancery Court.
Speaker 3: I think there is no question that the Chancery court
Speaker 3: is the pre eminent business court. And although it's the
Speaker 3: state and a small state court, it has global implications
Speaker 3: because so many businesses are incorporated in Delaware and have
Speaker 3: it set up so that litigation like shareholder actions go
Speaker 3: through the Chancery Court. There are decades and decades of
Speaker 3: precedent out of that court on really crucial business law cases,
Speaker 3: and those decisions, given the stature of this court, those
Speaker 3: decisions have impact felt across the whole country. I was
Speaker 3: speaking to a law professor at the University of Texas
Speaker 3: for this story, and he told me, is you're taking
Speaker 3: corporate law classes anywhere in the country. You're learning about
Speaker 3: Delaware law, whether you plan to practice in that court
Speaker 3: or not, because of the significance of the decisions that
Speaker 3: are coming out of the Chancery Court there, and.
Speaker 1: Also the court's ten officials. You know, the judges are
Speaker 1: experts in business law.
Speaker 3: That's exactly right. The idea is that these are people
Speaker 3: who come from really high profile corporate litigation practices already,
Speaker 3: they have a ton of experience and knowledge in this space,
Speaker 3: and they're appointed to serve twelve year terms in the court,
Speaker 3: and so they're really steeped in current issues of the day,
Speaker 3: and they have a reputation of being some of the
Speaker 3: top legal minds in the country.
Speaker 1: Now, Texas has made a concerted effort to attract businesses.
Speaker 1: Abbot is promoting the Texas miracle. What is that.
Speaker 2: That's a great question.
Speaker 3: Definitely, Texas has been working for a long time now
Speaker 3: to cementous reputation as a really business friendly state. I
Speaker 3: think the number changes, but there's something like fifty fortune
Speaker 3: five hundred companies that are headquartered here. But what Texas
Speaker 3: and Governor Abbott is talking about there is this idea
Speaker 3: that businesses can come to Texas and experience lower taxes,
Speaker 3: they can experience a really robust workforce. There's tons of
Speaker 3: physical space. Texas is a gin normalis state. So if
Speaker 3: you're looking for somewhere to set up a business, set
Speaker 3: up an operation, chances are we've got the land for
Speaker 3: you here. I think we're also have a reputation of
Speaker 3: having business friendly lawmakers who really are attuned to the
Speaker 3: issues of businesses and have shown a willingness to listen
Speaker 3: to what they're looking for when it comes to crafting
Speaker 3: regulations for the state. And so Abbott has been looking
Speaker 3: for ways to kind of expand on this reputation, add
Speaker 3: more to the arsenal things that Texas uses when it's
Speaker 3: trying to recruit companies to come to the states. And
Speaker 3: that's why we're chatting today. The latest development in that
Speaker 3: effort is the establishment of dedicated business courts here in Texas.
Speaker 1: Are they trying to become the next Delaware? Are they
Speaker 1: trying to directly compete with Delaware?
Speaker 3: So not necessarily, Texas is not the first state to
Speaker 3: attempt to create business courts. There's maybe twenty two other
Speaker 3: states that have some former fashion of specialty courts, and
Speaker 3: so on paper, the reason to pursue these courts is
Speaker 3: to set orate business cases from the regular docket, because
Speaker 3: right now a really complicated contract dispute or shareholder lawsuit
Speaker 3: is going to be decided alongside personal injury cases and
Speaker 3: family law disputes in state courts across Texas. And so
Speaker 3: what they're trying to do here is to create a
Speaker 3: similar system to Delaware, where you have specialty judges who
Speaker 3: have experience in business and corporate litigation who can help
Speaker 3: speed resolution of some of these cases that can tend
Speaker 3: to get stuck in the dockets. But I think, for
Speaker 3: reasons I'm sure we're going to talk about more, I
Speaker 3: think Texas's reputation just as a business friendly state, some
Speaker 3: of our more famous business residents here, it kind of
Speaker 3: gives Texas a bigger opportunity to go against Delaware, and
Speaker 3: so whether they're trying to or not, the way that
Speaker 3: the situation is playing out right now is that everyone's
Speaker 3: looking at Texas as maybe not a direct challenger to Delaware,
Speaker 3: but certainly an alternative to Delaware that could eventually kind
Speaker 3: of develop a similar reputation as a place to bring
Speaker 3: these kinds of.
Speaker 1: I think you are referencing perhaps Elon Musk, who I'm
Speaker 1: sure feels he's had a terrible time in the Delaware
Speaker 1: Chancery court and has been promoting Texas.
Speaker 3: That's exactly right. Elon Musk decided to shift the incorporation
Speaker 3: of Tesla and SpaceX to Texas. I think the final
Speaker 3: straw for him was when a judge in Delaware's Chancery
Speaker 3: court struck down his massive, massive fifty six billion dollar
Speaker 3: pay package that was approved by Tesla shareholders, and he said, guys,
Speaker 3: I'm going to Texas. He has a long history here
Speaker 3: of having his physical headquarters and office spaces here, but
Speaker 3: by moving the legal home of these companies here, he's
Speaker 3: kind of ensuring that these future spats involving shareholders and
Speaker 3: specifics of the business are going to be resolved in
Speaker 3: courts in Texas. Now, he hasn't said that he was
Speaker 3: coming here to specifically experience the business courts that we're
Speaker 3: setting up, but it's just the timing of it. He
Speaker 3: announced the decisions a few months ago, and Texas business
Speaker 3: courts just started operating this past weekend. So whether he
Speaker 3: wants to or not, I think he's going to be
Speaker 3: one of the early and most high profile cases that
Speaker 3: those courts see.
Speaker 1: So Chevron moved from California after one hundred and forty
Speaker 1: five years, you know, it was having problems with California's
Speaker 1: environmental policies and regulations. Are a lot of the corporations
Speaker 1: moving there trying to escape from states that are not
Speaker 1: as business friendly and going to Texas, which seems to
Speaker 1: have open arms out for business.
Speaker 3: I think that's certainly a factor for a lot of
Speaker 3: businesses that decide to come here. It's hard to imagine
Speaker 3: that being the only factor that they would make that
Speaker 3: decision based on, but certainly I think that's part of
Speaker 3: the idea of this Texas miracle, and part of the
Speaker 3: arsenal tools that Abbott uses to recruit businesses is this
Speaker 3: idea that yes, we are business friendly, we have business
Speaker 3: friendly judges here, and we have regulations that are friendly
Speaker 3: to business. Kind of all of the above, and I
Speaker 3: think that we're going to see a similar dynamic play
Speaker 3: out with these business courts where the judges in Texas
Speaker 3: are appointed by Abbot. I think a lot of people assume,
Speaker 3: probably correctly, that the judges share his similar ideology when
Speaker 3: it comes to business and when it comes to applying
Speaker 3: law in a maybe more conservative fashion. And so I
Speaker 3: think these courts will be an extension of what we've
Speaker 3: seen when it comes to presenting Texas as an alternative
Speaker 3: to some of these areas like California that are known
Speaker 3: for their more liberal policies.
Speaker 1: Let's say Governor Abbot said the judges have a litany
Speaker 1: of experience in streamlining resolutions of business disputes. Do they?
Speaker 1: I mean, it doesn't seem like you can really compare
Speaker 1: the judges in Texas to the judges in Delaware.
Speaker 3: Definitely not. I mean Delaware's judges. This court has decades
Speaker 3: and decades of precedent. They serve for twelve year terms.
Speaker 3: This Business Court is, as we're speaking today, about two
Speaker 3: to three days old. So I think it really remains
Speaker 3: to be seen how they're going to handle these cases.
Speaker 3: Judges yappoints were required to have ten years of experience
Speaker 3: in either complex corporate litigation or as a judge in Texas,
Speaker 3: So they definitely do have experience in this space, but
Speaker 3: none of them, as far as I'm aware, have experience
Speaker 3: as a judge in this kind of setting of handling
Speaker 3: these specific disputes in a business court setting. So I
Speaker 3: think it's going to be one of the things people
Speaker 3: are watching for is how quickly they can take a
Speaker 3: case from filing to resolution.
Speaker 1: And also Texas courts in a lot of instances are
Speaker 1: going to have to follow Delaware law because that's the
Speaker 1: only law on some of these issues.
Speaker 3: That's right. I mean, these are state courts, and so
Speaker 3: they're going to be referring to Texas corporate law in
Speaker 3: a lot of fashions. And so we do have precedent
Speaker 3: in terms of how corporate law has been applied in
Speaker 3: cases in the past, just in a re Daduller's state
Speaker 3: court room. But a lot of those applications we've seen
Speaker 3: previously are based on Delaware case law. That's kind of
Speaker 3: what I was saying earlier, this idea that the power
Speaker 3: of Delaware chancery court is these huge decisions that have
Speaker 3: significance that are being applied in other cases, and I
Speaker 3: don't think that's an exception here. I think what's different
Speaker 3: is perhaps how these judges might apply or interpret those
Speaker 3: statutes when it comes to specific cases. I think that's
Speaker 3: another thing that remains to be seen, is how far
Speaker 3: they'll be willing to deviate from what's kind of standard
Speaker 3: and expected in this space.
Speaker 1: Madlin, As you pointed out in your story, the terms
Speaker 1: are only for two years the judges terms, so that
Speaker 1: means that they may be leaving in the middle of
Speaker 1: a case. I mean, we all know how long legal
Speaker 1: cases take, yes.
Speaker 3: And basically all the lawyers I spoke to for this
Speaker 3: story said that would be amazing to have a case
Speaker 3: that wraps up in two years or less. But I
Speaker 3: think that's another thing that is Again, a lot of
Speaker 3: the conversation right now is a wait and see. It's
Speaker 3: hard to really understand how these courts are going to
Speaker 3: work until we see them start taking cases and start
Speaker 3: getting to that period where there might be turnover. Because
Speaker 3: the way that they've been set up under state law
Speaker 3: is that the judges can be reappointed to terms following this,
Speaker 3: so it's possible that the judges we have now their
Speaker 3: two years are up, how it renews them asks them
Speaker 3: to come back for two more years. But we just
Speaker 3: really don't know how it's going to work at best point,
Speaker 3: if that's something that's going to be understood to come
Speaker 3: for these judges or what. But as it stands right now,
Speaker 3: two years is definitely a short term. I think I
Speaker 3: mentioned Delaware judges serve for twelve years, and so that's
Speaker 3: one of the big differences between our system here and
Speaker 3: what they have in the Chancery Court.
Speaker 1: So they've been planning for more than a year. Are
Speaker 1: the courts located in one central building like in Delaware.
Speaker 3: No, that's another thing. Texas is a huge state and
Speaker 3: they're technically are I believe, eleven divisions that they hope
Speaker 3: someday will exist for the business Court. But what they've
Speaker 3: decided to do is start small. So they're opening five
Speaker 3: divisions over the biggest cities in the state, and that's Austin, Dallas,
Speaker 3: Fort Worth, Houston, and San Antonio. And that was one
Speaker 3: of the things we've been watching as this September first
Speaker 3: deadline for the courts to start operating has snuck up
Speaker 3: is where are these courts going to be located, how
Speaker 3: are they going to handle filings? Is it going to
Speaker 3: be electronic? A lot of those questions were unanswered, and
Speaker 3: even up until a few weeks before the courts were
Speaker 3: supposed to open, we were told they were still looking
Speaker 3: for leases for courtrooms within those different divisions, but they
Speaker 3: decided to kind of abandon that effort for now to
Speaker 3: find permanent physical space and judges will have offices within
Speaker 3: their division, but when they need a courtroom, the plan
Speaker 3: right now is to use available existing infrastructure from other
Speaker 3: state courts.
Speaker 1: What's the timeframe for determining whether or not this is
Speaker 1: a success. I mean it feels like they're opening without
Speaker 1: even having everything in place.
Speaker 3: It's brand new. I think it's going to be a
Speaker 3: few years before we really understand whether this was a
Speaker 3: successful experiment. I think an early first test is going
Speaker 3: to be, you know, can they take a case from
Speaker 3: start to finish? I think that sounds like a really
Speaker 3: low bar, but creating a completely new court system, almost
Speaker 3: from scratch, is a huge undertaking. The court themselves kind
Speaker 3: of told us that just because September first came on
Speaker 3: the calendar doesn't mean no preparations are finished, there's still
Speaker 3: a lot of work to do. They're still hiring staff,
Speaker 3: so it's not like what we're seeing today is what
Speaker 3: the courts are going to be looking like one year
Speaker 3: from now. They're still building up their internal infrastructure.
Speaker 2: So I think it's going to take at least two
Speaker 2: years for.
Speaker 3: A full judge's term to really understand kind of what
Speaker 3: the potential is for these courts. And then I think
Speaker 3: another big question is going to be whether Texas leaders
Speaker 3: see this as a worthwhile investment to continue put in
Speaker 3: money and resources towards growing these courts and supporting the
Speaker 3: existing courts they have.
Speaker 1: This is certainly an ambitious project that Texas is taking on,
Speaker 1: and I know you'll keep following and let us know
Speaker 1: how it's going. Thanks so much, Madeline. That's Madeline Meckelberg,
Speaker 1: Bloomberg Texas Legal Reporter, coming up next on the Bloomberg
Speaker 1: Launch Show. It was a busy summer for the Supreme
Speaker 1: Court as the justices had to handle what could be
Speaker 1: a record number of summer emergency applications. I'm Jim Grosso
Speaker 1: and you're listening to Bloomberg. In just about a month,
Speaker 1: the Supreme Court Justices will begin their new term on
Speaker 1: the first Monday in October. They left the Supreme Court
Speaker 1: for their summer vacation on July first, but the summer
Speaker 1: has been relatively busy for them. They've decided eleven emergency
Speaker 1: applications and they're on track to perhaps triple that before
Speaker 1: the new term starts. Why all these summer emergencies the
Speaker 1: applications here to explain is Bloomberg Law. Supreme Court reporter
Speaker 1: Lydia Wheeler. We used to hear about the emergency docket,
Speaker 1: the shadow docket in reference to death penalty cases. What
Speaker 1: kinds of cases are we seeing now?
Speaker 4: You're completely right. So the emergency docket, or what legal
Speaker 4: scholars are calling the shadow docket, was once primarily used
Speaker 4: for these last minute day requests and death penalty cases.
Speaker 4: As you mentioned, you know, basically death row inmates were
Speaker 4: coming to the court and saying, hey, stop my execution
Speaker 4: while I fight for a new sentence in court. Now
Speaker 4: the requests cover a much broader scope of issues I'm
Speaker 4: talking about. Now we're seeing often hot button issues like abortion,
Speaker 4: voting rights, even the power of federal regulators, you know,
Speaker 4: issues that are really dividing the nation. Politically, those are
Speaker 4: what's coming to the court on this emergency docket.
Speaker 1: Explain how the shadow docket is different from the merits
Speaker 1: docket in other words, you know, the truncated pers for
Speaker 1: filing briefs, et cetera.
Speaker 4: Right, So, the shadow docket is the name that legal
Speaker 4: scholars use when referring to the emergency docket, and they
Speaker 4: call it that because the court decides these requests through
Speaker 4: a truncated process without full briefing or oral arguments. The
Speaker 4: decisions are orders that are usually only a sentence long,
Speaker 4: and we never know kind of when they're going to
Speaker 4: come out. It's not like on a specific decision day.
Speaker 4: So there's that right now. They're happening over the summer
Speaker 4: when the court isn't even in its normal session, and
Speaker 4: unless there's a notable concurrence or a dissent, there's usually
Speaker 4: very little insight into the court's reasoning for why they're
Speaker 4: either blocking something or letting something take effect. We don't
Speaker 4: know what the vote count is. Usually you know which
Speaker 4: justices decided, you know for which side, So there's very
Speaker 4: little information, which is why you know, one legal scholar
Speaker 4: kind of coins the name shadow docket and why that
Speaker 4: term has kind of.
Speaker 1: Taken off, So now tell us about some of the
Speaker 1: decisions on the shadow doget that the Court has made
Speaker 1: this summer.
Speaker 4: Right, So, the Court recently rejected the Biden administration's requests
Speaker 4: to reinstate the Education Department's new rules that protect transgender
Speaker 4: students from discrimination in school nationwide. That was actually a
Speaker 4: rare one where we saw a partial dissent from four justices. Actually,
Speaker 4: Conservative Justice Neil Gorsitch joined the liberals, which is Justice
Speaker 4: so to Mayor Justice Pagan and Justice Jackson in saying
Speaker 4: that they would have let those rules take effects. Last week,
Speaker 4: we also saw the justices allow Arizona to enforce part
Speaker 4: of a state election law that will require voters to
Speaker 4: show proof of citizenship to vote. And it's unclear if
Speaker 4: that will again be blocked or if that will be
Speaker 4: a requirement likely during the twenty twenty four presidential elections.
Speaker 1: Lydia, we're watching to see whether the Court is going
Speaker 1: town decision or when the Court is going to hand
Speaker 1: down decisions in several different cases. Tell us the ones
Speaker 1: that we're waiting for.
Speaker 4: They still have more than a dozen applications still pending.
Speaker 4: I think at this point we're up to fifteen or
Speaker 4: sixteen now. You know, legal scholars told me they're really
Speaker 4: on track to triple the number of cases that they
Speaker 4: decide on the shadow dock at fifth summer. I'm personally
Speaker 4: waiting for one right now that has to do with
Speaker 4: family planning funding in Oklahoma. These are dollars that AHHS
Speaker 4: stripped from the state of Oklahoma because the state wouldn't
Speaker 4: agree to force its healthcare providers to offer abortion referrals.
Speaker 4: They said that that is a violation of their new
Speaker 4: abortion van well, a near total abortion ban that took
Speaker 4: effect after the Supreme Court two terms ago in twenty
Speaker 4: twenty two overturned the constitutional right to abortion and left
Speaker 4: that up to the state beside. You know, Georgetown law
Speaker 4: professor Steve Vladdock, he has been tracking these requests and
Speaker 4: he actually shared his data with us. You know, he
Speaker 4: said that the Court is on track to blow previous
Speaker 4: summers out of the water when it comes to the
Speaker 4: number of emergency actions that it's taking. You know, he
Speaker 4: said that that even includes the first summer of the
Speaker 4: COVID nineteen pandemic, when there were actual true emergencies that
Speaker 4: the Court was being asked to act on.
Speaker 1: You can understand why during COVID there was an optic
Speaker 1: in these applications, but why so many more emergency applications
Speaker 1: these days?
Speaker 4: Right, So this is actually something that the justices themselves
Speaker 4: have spoken to, and Justice Elena Kagan is really someone
Speaker 4: who kind of gave us the first understanding of why
Speaker 4: this is happening. You know, she said that, you know,
Speaker 4: in granting a number of these emergency requests that were
Speaker 4: brought to the Court during the Trump administration years ago,
Speaker 4: she said that the Court really encouraged people to kind
Speaker 4: of keep bringing these kinds of petitions for emergency relief.
Speaker 4: And so the Court basically kind of sent the signal like, hey,
Speaker 4: we're now open to these kind of requests. And now
Speaker 4: what we're seeing is we're really seeing a lot of
Speaker 4: these requests come from Republican led states and also industry
Speaker 4: groups that are looking to block Biden administration policies. Now,
Speaker 4: the concern here is that the Court, in acting so
Speaker 4: many times on these requests, that they're changing kind of
Speaker 4: what's considered a true emergency, and legal scholars that I
Speaker 4: spoke to actually so that that further undermines the Court's credibility.
Speaker 4: And you know, we know that the Court right now
Speaker 4: has very low public approval ratings due to their ongoing
Speaker 4: ethics issues and controversies, and also that of controversial decisions
Speaker 4: that the Court keeps releasing that are really split along
Speaker 4: ideological lines. You know, I'm thinking about last term the
Speaker 4: Court's decision on presidential immunity and also their decision to
Speaker 4: overturn the federal ban on bump stocks, which are those
Speaker 4: devices that allow guns to fire like machine gun.
Speaker 1: Are the justices complaining because they have to work during
Speaker 1: the summer more now, or are they complaining for other reasons?
Speaker 4: You know, they actually, oh, several of them have come
Speaker 4: out in public appearances and like lavent it that like,
Speaker 4: oh my gosh, this is way busier, you know. Justice
Speaker 4: Soda Mayor recently said, like I'm tired. You know, We're
Speaker 4: not used to working around the clock like this. And
Speaker 4: the number of requests that they're getting is a lot,
Speaker 4: you know. Justice Kavanaugh also said that it's challenging, you know,
Speaker 4: because the number of emergency applications that they're getting takes
Speaker 4: time away from the Court's merits docket. And now the
Speaker 4: merits docket is actually what they refer to as the
Speaker 4: normal process for the court, you know, hearing a case
Speaker 4: and deciding it. That happens during the course of their
Speaker 4: normal term, which begins the first Monday in October and
Speaker 4: traditionally runs until the end of June. Now they can
Speaker 4: go a little longer than that. We saw that unusually
Speaker 4: happy this summer where they ran into the first.
Speaker 2: Day of July.
Speaker 4: But usually they like to wrap everything up Spanda June
Speaker 4: and then they get a couple of months break with
Speaker 4: the occasional emergency request. But now they're just it seems
Speaker 4: like there's this flurry of activity, you know. Justice Clarence
Speaker 4: Thomas also commented on this. He said that the emergency
Speaker 4: process really short circuits the court's normal process for hearing disputes,
Speaker 4: and he said that it's not a quote thorough way
Speaker 4: of dealing with these issues. But Justice Kavanaugh and Justice
Speaker 4: Thomas really didn't offer any sort of solution. At least,
Speaker 4: nothing publicly was said about what the Court should be doing.
Speaker 4: As I mentioned, you know, Justice Kagan was really the
Speaker 4: only one who came kind of closest to that when
Speaker 4: she said, you know, hey, this phenomenon is kind of
Speaker 4: caused by us. We're granting these opinions and we're sending
Speaker 4: the signal that we're open to this kind of decision
Speaker 4: making and hey, send your stuff our way. So that
Speaker 4: seems to signal to me that like, one way that
Speaker 4: the Court could kind of avoid doing this, which we
Speaker 4: saw them do in past terms, is to take cases
Speaker 4: that come in on the emergency docket and move them
Speaker 4: over to the merits docket. The Court definitely has the
Speaker 4: power to do that.
Speaker 1: Yes, Justice Kagan is definitely the most outspoken or it
Speaker 1: reveals the most of the justices, it seems. And also
Speaker 1: she talked about, and you know, the Supreme Court has
Speaker 1: during oral arguments talked about how lower courts it's a
Speaker 1: problem that they're issuing these nationwide injunctions, but no one
Speaker 1: has done anything about this. So she said that they
Speaker 1: have to intervene then, right.
Speaker 4: That's so she said, sometimes like where we have to
Speaker 4: step in because as you mentioned, right, lower courts are
Speaker 4: you know, they'll get a dispute that comes to them.
Speaker 4: Instead of just blocking some sort of policy that impacts
Speaker 4: the party that's before them, these courts are taking it
Speaker 4: upon themselves to block a policy for the entire nation,
Speaker 4: to make it so that no one has to follow,
Speaker 4: you know, the new policy or new rules that the
Speaker 4: fide administration has put in place, or an administration has
Speaker 4: put in place. You know, this is not just a
Speaker 4: Republican tactic, I should say, you know that this has
Speaker 4: also been something that democratic state attorneys general have also pursued,
Speaker 4: you know, bringing these challenges against the administration and challenging
Speaker 4: those So not necessarily just something that red states are doing,
Speaker 4: but off the blue states have done in the past
Speaker 4: as well. But yeah, she said that, you know, sometimes
Speaker 4: we have to step in like there's no other choice.
Speaker 1: Are they expecting or are legal scholars expecting to see
Speaker 1: election cases on the shadow docket?
Speaker 4: Yeah, that's definitely something that could come as we get
Speaker 4: closer to the election, to see more of these disputes.
Speaker 4: That's something we're expecting to see that I would expect
Speaker 4: over the next several weeks maybe to see those coming
Speaker 4: to the court and definitely, you know, as they start
Speaker 4: at the beginning of their term, it's going to be
Speaker 4: very busy, lots to watch out for. So yeah, I guess,
Speaker 4: you know, stay tuned because there's definitely more to come
Speaker 4: in the shadow docket. This isn't an area where they
Speaker 4: are slowing, you know, the number of requests that are
Speaker 4: coming to them. They seem to be popping into my inbox,
Speaker 4: you know, from the Court's press office almost every day.
Speaker 4: So a lot of activity.
Speaker 1: And it was interesting. You talked to University of Virginia
Speaker 1: law prefer Yes who said that increasingly state attorneys and
Speaker 1: state solicitor generals are challenging federal laws in the courts.
Speaker 4: They are, Yeah, this is in kind of a new tactic.
Speaker 4: I talked with legal scholars who said that state attorneys
Speaker 4: generals and solicitor generals those are the attorneys that represent
Speaker 4: the states and their challenge before the Supreme Court. That
Speaker 4: they are really kind of acting like normal litigans now
Speaker 4: more so than ever, and that they're bringing these big
Speaker 4: actions and challenging the administration. You know. And what's interesting
Speaker 4: is I've done reporting in the past where you kind
Speaker 4: of do a lot of venue shopping, a lot of
Speaker 4: forum shopping, where they seek out particular parties they all
Speaker 4: kind of ban together in multi state litigation sometimes and
Speaker 4: they seek out their preferred court to file these challenges
Speaker 4: and to try to get a judge that will most
Speaker 4: likely rule in their favor. And sometimes there'll be different
Speaker 4: groups of states. You know, a couple of states will
Speaker 4: file in like Oklahoma, and a couple of states will
Speaker 4: file somewhere else. So it's like multiple challenges. We often
Speaker 4: see with these cases of national importance and challenges to
Speaker 4: administration policies. You'll see a tactic is to kind of
Speaker 4: the states try their hands in different courts and so
Speaker 4: you'll get competing rulings, and that often will make an
Speaker 4: issue more enticing for the Supreme Court. When lower courts
Speaker 4: have ruled in different ways on the same issue, and
Speaker 4: you have a split in the decision, meaning one court
Speaker 4: rules one way and another court rules another way, it
Speaker 4: almost forces the Supreme Court to kind of be the
Speaker 4: decider and step in and settle it.
Speaker 1: And that filing in two different jurisdictions and getting two
Speaker 1: different results is what Republican ags did in attacking Joe
Speaker 1: Biden's latest push to reduce student loan bills. And just
Speaker 1: last week, the Supreme Court turned down the Biden administration's
Speaker 1: request to lift a pause that one of the federal
Speaker 1: appeals courts imposed on the program. So that's a perfect
Speaker 1: example of what you were saying, Lydia, Thanks so much,
Speaker 1: so much. That's Bloomberg law. Supreme court reporter Lydia Wheeler.
Speaker 1: And that's it for this edition of the Bloomberg Law Podcast.
Speaker 1: Remember you can always get the latest legal news by
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Speaker 1: and at Bloomberg dot com, slash podcast, slash Law. I'm
Speaker 1: June Grosso, and this is Bloomberg