1 00:00:03,200 --> 00:00:07,960 Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio. 2 00:00:10,640 --> 00:00:13,920 Speaker 1: The Supreme Court will take another look at Republican Senator 3 00:00:14,000 --> 00:00:18,280 Speaker 1: Ted Cruz's challenge to federal campaign finance rules that limit 4 00:00:18,360 --> 00:00:22,239 Speaker 1: the repayment of candidate loans to their campaigns. A three 5 00:00:22,320 --> 00:00:26,000 Speaker 1: judge District court panel found that federal rules dictating when 6 00:00:26,079 --> 00:00:28,440 Speaker 1: and how much a campaign can pay back to the 7 00:00:28,520 --> 00:00:32,800 Speaker 1: candidate violated the First Amendment, and the Federal Election Commission 8 00:00:32,880 --> 00:00:36,519 Speaker 1: is appealing that ruling. Joining me is campaign finance expert 9 00:00:36,600 --> 00:00:41,960 Speaker 1: Meredith mcgeehee. There's this federal law that places a two 10 00:00:42,240 --> 00:00:46,440 Speaker 1: limit on the repayment of personal loans. So Senator Cruz 11 00:00:46,880 --> 00:00:51,519 Speaker 1: basically lent his campaign two D sixty thousand dollars to 12 00:00:51,680 --> 00:00:55,760 Speaker 1: test the constitutionality of the law. Correct. The challenge here 13 00:00:56,040 --> 00:01:00,520 Speaker 1: is pretty straightforward, and it's really what Senator Cruise has 14 00:01:00,600 --> 00:01:04,039 Speaker 1: often done, which was trying to set up a situation 15 00:01:04,160 --> 00:01:07,280 Speaker 1: where they really wants to kind of pick off provision 16 00:01:07,360 --> 00:01:11,560 Speaker 1: by provision different parts of camp federal campaign silence law 17 00:01:11,640 --> 00:01:15,759 Speaker 1: that governed how members of Congress Canadas for Congress run 18 00:01:15,920 --> 00:01:19,319 Speaker 1: and how the president vice president run. It's always important 19 00:01:19,319 --> 00:01:23,680 Speaker 1: for member that this does not apply to state candidates 20 00:01:23,880 --> 00:01:26,759 Speaker 1: or local candidates. This is really a law that applies 21 00:01:26,800 --> 00:01:31,880 Speaker 1: to federal candidates. And Mr Cruz has long opposed any 22 00:01:31,920 --> 00:01:35,520 Speaker 1: restrictions on money in politics, so this is part of 23 00:01:35,560 --> 00:01:40,720 Speaker 1: his political legacy. Is there any reason why the law 24 00:01:40,880 --> 00:01:46,520 Speaker 1: placed the limit at two dollars? Is it sort of arbitrary? Well, 25 00:01:46,560 --> 00:01:49,440 Speaker 1: it was a decision that was made by Congress, which 26 00:01:49,560 --> 00:01:51,840 Speaker 1: the Supreme Court has often said they have the right 27 00:01:51,920 --> 00:01:55,560 Speaker 1: to do and make judgments said Okay, you can give 28 00:01:55,600 --> 00:01:59,520 Speaker 1: yourself a loan yourself some money to run for Congress 29 00:01:59,680 --> 00:02:02,440 Speaker 1: and and uh, you know, be able to pay it back. 30 00:02:02,560 --> 00:02:05,360 Speaker 1: But there is a danger here. There is a balance 31 00:02:06,640 --> 00:02:11,560 Speaker 1: between that ability has been and the contribution limits which 32 00:02:11,600 --> 00:02:15,480 Speaker 1: were enacted after water Date, which are meant to protect 33 00:02:15,720 --> 00:02:20,360 Speaker 1: against corruption and the appearance of corruption. And in this 34 00:02:20,520 --> 00:02:26,519 Speaker 1: particular case, this payback that we're talking about is potentially 35 00:02:26,600 --> 00:02:30,600 Speaker 1: some of the most corrupting money in politics because it 36 00:02:30,639 --> 00:02:35,400 Speaker 1: goes from a special interest donor right into the politicians pocket. 37 00:02:35,960 --> 00:02:39,440 Speaker 1: And for the special interests, there's no surer way to 38 00:02:39,600 --> 00:02:43,160 Speaker 1: buy access and influence, and with a contribution to adjust 39 00:02:43,200 --> 00:02:48,519 Speaker 1: elected or re elected officeholder who can legally pocket the money. 40 00:02:48,560 --> 00:02:52,239 Speaker 1: So This ranks up there in terms of getting gratitude 41 00:02:52,280 --> 00:02:56,880 Speaker 1: from a politician. Explain what the district court panel found. 42 00:02:58,600 --> 00:03:02,760 Speaker 1: What a district panel, uh decided this is three sudges 43 00:03:03,000 --> 00:03:05,399 Speaker 1: led by a trumpet pointee. I think there were two 44 00:03:05,400 --> 00:03:10,399 Speaker 1: trumpet pointees in one Obama pointee. And they decided that 45 00:03:10,480 --> 00:03:15,079 Speaker 1: this was a limit on an individual's ability to spend 46 00:03:15,080 --> 00:03:18,560 Speaker 1: as much money as they want to run for federal office. 47 00:03:19,240 --> 00:03:23,720 Speaker 1: The court has struck down limits on the ability to 48 00:03:23,760 --> 00:03:27,520 Speaker 1: spend your own money because they say you can't corrupt yourself. 49 00:03:28,280 --> 00:03:31,440 Speaker 1: But this is a different situation, and in my view, 50 00:03:31,600 --> 00:03:35,120 Speaker 1: the lower court got it wrong. They kept talking about 51 00:03:35,200 --> 00:03:38,480 Speaker 1: the Millionaires Amendment that was previously struck down that trying 52 00:03:38,520 --> 00:03:41,080 Speaker 1: to limit what people can spend of their own money. 53 00:03:41,280 --> 00:03:46,680 Speaker 1: This is precisiest situation where special interests are basically pointing 54 00:03:46,800 --> 00:03:51,360 Speaker 1: to a door opened its lashing beon light. It says, here, 55 00:03:51,920 --> 00:03:54,280 Speaker 1: give this, uh you know, you know the outcome of 56 00:03:54,280 --> 00:03:59,520 Speaker 1: the campaign, So to give this politicisan money and they're 57 00:03:59,520 --> 00:04:02,680 Speaker 1: gonna use to basically put it in the pocket and 58 00:04:02,680 --> 00:04:06,320 Speaker 1: repaid themselves. So it's a very different dynamic, and I 59 00:04:06,360 --> 00:04:08,560 Speaker 1: think the lower court got it wrong in trying to 60 00:04:08,600 --> 00:04:13,119 Speaker 1: make it similar to or through the lens of restrictions 61 00:04:13,160 --> 00:04:16,080 Speaker 1: on how much you can spend of your own money. 62 00:04:16,160 --> 00:04:20,200 Speaker 1: So the Biden administration urged the justices to take the case, 63 00:04:20,880 --> 00:04:23,680 Speaker 1: and they said in part that cruizes injury was self 64 00:04:23,800 --> 00:04:27,640 Speaker 1: inflicted because his campaign had more than two million dollars 65 00:04:27,640 --> 00:04:31,960 Speaker 1: on hand after the election and could have repaid him 66 00:04:32,000 --> 00:04:34,040 Speaker 1: with those funds as long as it did so within 67 00:04:34,279 --> 00:04:37,080 Speaker 1: twenty days. Does that affect the case that this is 68 00:04:37,279 --> 00:04:40,880 Speaker 1: self inflicted and that Ted Cruz wants to test the 69 00:04:40,920 --> 00:04:45,200 Speaker 1: constitutionality of the law, Well, it's clear that was the purpose. 70 00:04:45,240 --> 00:04:48,720 Speaker 1: I mean, this is set up by Senator Cruz to 71 00:04:49,000 --> 00:04:53,480 Speaker 1: test it and to get to the judges that are sympathetic. 72 00:04:53,640 --> 00:04:57,159 Speaker 1: And of course we've had in the last several years, 73 00:04:57,760 --> 00:05:00,440 Speaker 1: um the notion that we have kind of judges that 74 00:05:00,520 --> 00:05:03,840 Speaker 1: only apply the law in a very kind of even manner. 75 00:05:03,839 --> 00:05:06,680 Speaker 1: It has been challenged as more and more judges have 76 00:05:06,800 --> 00:05:11,440 Speaker 1: been appointed with eyes towards how they ideologically view things 77 00:05:11,480 --> 00:05:15,159 Speaker 1: like money in politics or abortion even. And so you know, 78 00:05:15,240 --> 00:05:20,320 Speaker 1: this is is decided by Republicans judges through a Republican lens, 79 00:05:20,880 --> 00:05:26,320 Speaker 1: and that lens is restrictions on money and the politics 80 00:05:26,320 --> 00:05:30,800 Speaker 1: are are unacceptable restrictions on speech. And there's in the 81 00:05:30,960 --> 00:05:34,560 Speaker 1: other lens, such is the more democratic lens in these days, 82 00:05:35,040 --> 00:05:40,120 Speaker 1: which is that restrictions on the spending of money, giving 83 00:05:40,160 --> 00:05:44,919 Speaker 1: money to other people, particularly contributing, has the potential for 84 00:05:44,960 --> 00:05:49,880 Speaker 1: corruption and the appearance of corruption. So there's a very clear, 85 00:05:50,279 --> 00:05:55,600 Speaker 1: decisive ideological split within the political parties, and that ideological 86 00:05:55,640 --> 00:05:59,960 Speaker 1: split is reflected in the judiciary. So the buying administration 87 00:06:00,040 --> 00:06:04,559 Speaker 1: and admitted that the loan repayment limit imposes at most 88 00:06:04,640 --> 00:06:07,679 Speaker 1: a modest burden on First Amendment rights, So it does 89 00:06:08,120 --> 00:06:10,640 Speaker 1: admit should it not have admitted that there is a 90 00:06:10,680 --> 00:06:14,159 Speaker 1: burden on First Amendment rights even if it's modest. Well, 91 00:06:14,160 --> 00:06:19,040 Speaker 1: when the Supreme Court originally decided the post Watergate decisions, 92 00:06:19,080 --> 00:06:22,680 Speaker 1: you know and duckly re palleo, they've always said there 93 00:06:22,760 --> 00:06:26,800 Speaker 1: is a balancing test. So you you know, the Congress 94 00:06:26,800 --> 00:06:29,839 Speaker 1: set contribution limits at a certain amount, and this you know, 95 00:06:29,880 --> 00:06:32,880 Speaker 1: it started out a thousand dollars for an election. Let's 96 00:06:32,920 --> 00:06:36,160 Speaker 1: say that was pretty arbitrary. It was just saying, what 97 00:06:36,200 --> 00:06:38,360 Speaker 1: do we think, you know, one thousand for the general 98 00:06:38,400 --> 00:06:41,159 Speaker 1: for the primary, one thousand for the general. Now the 99 00:06:41,200 --> 00:06:44,880 Speaker 1: Court has said if that limit is set too low, 100 00:06:45,600 --> 00:06:48,320 Speaker 1: courts have said, oh, a hundred dollars too low, you 101 00:06:48,360 --> 00:06:51,960 Speaker 1: really can't keep your message out. But they realize in 102 00:06:52,240 --> 00:06:55,599 Speaker 1: all the jurisprudence that has been in this area that 103 00:06:55,680 --> 00:06:58,160 Speaker 1: there is a ballasting test. You need to go out 104 00:06:58,160 --> 00:07:00,480 Speaker 1: and raise money to get your message out, given that 105 00:07:00,560 --> 00:07:04,400 Speaker 1: we have a privately finance system. But at some point 106 00:07:05,160 --> 00:07:08,599 Speaker 1: there is this danger of corruption and the appearance inbruption, 107 00:07:09,160 --> 00:07:13,880 Speaker 1: and so that number is a judgment for the politicians 108 00:07:14,000 --> 00:07:18,200 Speaker 1: making Congress and the Supreme Court since the nine had 109 00:07:18,240 --> 00:07:22,520 Speaker 1: been very very consistent on that reasoning. Yes, it's a 110 00:07:22,520 --> 00:07:25,960 Speaker 1: bit arbitrary, but we this is Congress's role to make 111 00:07:26,000 --> 00:07:30,320 Speaker 1: these arbitrary decisions as long as they're not crazy. Basically, 112 00:07:30,800 --> 00:07:34,440 Speaker 1: so it's you know, yeah, there's an arbitrary number, five 113 00:07:34,480 --> 00:07:37,880 Speaker 1: thousand dollars from a political actions committee. Well, that is 114 00:07:37,920 --> 00:07:41,120 Speaker 1: a number that the Congress decides on in its wisdom 115 00:07:41,480 --> 00:07:45,200 Speaker 1: untill five thousand and one dollars is viewed as corrupting. 116 00:07:46,120 --> 00:07:48,640 Speaker 1: So that is in the nature of law. It's like, 117 00:07:49,120 --> 00:07:50,480 Speaker 1: you know, it used to be in the days and 118 00:07:50,560 --> 00:07:55,280 Speaker 1: banks where it took out ten thousand dollars. Then you've 119 00:07:55,280 --> 00:07:58,280 Speaker 1: got a report to the Treasury. So if you were 120 00:07:58,320 --> 00:08:01,760 Speaker 1: through nine, I mean nine, you did not. So Congress 121 00:08:01,880 --> 00:08:06,560 Speaker 1: makes these kinds of decisions all the time. The question 122 00:08:06,600 --> 00:08:11,400 Speaker 1: here was very clearly that Senator Cruz believes that the 123 00:08:12,080 --> 00:08:17,240 Speaker 1: majority currently in the Supreme Court is sympathetic to his 124 00:08:17,320 --> 00:08:20,920 Speaker 1: view because the majority was appointed by a Republican president, 125 00:08:21,560 --> 00:08:24,640 Speaker 1: and so he wants to get these cases up before 126 00:08:24,720 --> 00:08:29,040 Speaker 1: that court with the expectation that they will agree with him. 127 00:08:29,560 --> 00:08:32,760 Speaker 1: A spokesman for Cruz called the court's decision to hear 128 00:08:32,800 --> 00:08:36,840 Speaker 1: the case great news and assert that the existing FEC 129 00:08:37,040 --> 00:08:41,000 Speaker 1: rules benefit incumbent politicians by making it harder for challenges 130 00:08:41,040 --> 00:08:44,240 Speaker 1: to run for office. Are they serious about that? Because 131 00:08:44,559 --> 00:08:48,199 Speaker 1: the court taking the case, it might be taking it 132 00:08:48,240 --> 00:08:52,720 Speaker 1: to reverse. I mean they won below, they won below. 133 00:08:52,800 --> 00:08:56,280 Speaker 1: Here's the here's the best. As I mentioned previously, the 134 00:08:56,360 --> 00:08:59,600 Speaker 1: best the Cruise is making is that there is now 135 00:08:59,640 --> 00:09:03,239 Speaker 1: a a majority on the Court that is more sympathetic 136 00:09:03,280 --> 00:09:06,120 Speaker 1: to his view of campaigns buying its law. And if 137 00:09:06,160 --> 00:09:08,160 Speaker 1: you look at what the court did, for example, in 138 00:09:08,200 --> 00:09:11,560 Speaker 1: the Citizens United case, they took a case that was 139 00:09:11,679 --> 00:09:15,440 Speaker 1: relatively narrow whether or not a movie made you know, 140 00:09:15,559 --> 00:09:19,720 Speaker 1: qualified as kind of an expenditure, and then they took 141 00:09:19,760 --> 00:09:24,199 Speaker 1: that case and suddenly decided their corporations had the right 142 00:09:24,280 --> 00:09:27,880 Speaker 1: topend treasury funds to influenced outcome of elections. So they 143 00:09:27,920 --> 00:09:31,640 Speaker 1: took a very narrow case, and that's something that court 144 00:09:32,040 --> 00:09:35,360 Speaker 1: usually don't do, which was not lived by the principle 145 00:09:35,480 --> 00:09:38,720 Speaker 1: of you know, the story decises that, you know, the 146 00:09:38,880 --> 00:09:42,880 Speaker 1: kind of prior decisions hold. They basically threw out prior 147 00:09:42,960 --> 00:09:47,000 Speaker 1: decisions and made new laws. And that's what I think 148 00:09:47,120 --> 00:09:50,400 Speaker 1: Mr Cruz is hoping uh they'll do in this case, 149 00:09:50,480 --> 00:09:53,960 Speaker 1: is they'll take something that is a relatively nearrow question 150 00:09:54,679 --> 00:09:59,400 Speaker 1: and they'll be even more expansive and perhaps even strike 151 00:09:59,520 --> 00:10:03,319 Speaker 1: down a contribution limit, which is something he's been asking 152 00:10:03,360 --> 00:10:07,480 Speaker 1: the Court to do in various and sundry ways since 153 00:10:07,520 --> 00:10:11,440 Speaker 1: he's been in office. So he's really making a bet 154 00:10:11,480 --> 00:10:14,480 Speaker 1: on on where the Supreme Court will end up. I 155 00:10:14,480 --> 00:10:17,960 Speaker 1: don't think he's assuming they will reverse. I think he's 156 00:10:17,960 --> 00:10:21,920 Speaker 1: assuming maybe more they may be more expansive. Do you 157 00:10:22,040 --> 00:10:25,840 Speaker 1: know how the newer justices who weren't on the Court 158 00:10:26,120 --> 00:10:28,720 Speaker 1: during Citizens United, do you know what their take on 159 00:10:28,920 --> 00:10:33,400 Speaker 1: campaign finance has been? Well, we don't know a lot 160 00:10:34,040 --> 00:10:36,520 Speaker 1: in terms of their records like, but we know some 161 00:10:37,160 --> 00:10:41,240 Speaker 1: We also probably know the most important thing is that 162 00:10:41,400 --> 00:10:47,240 Speaker 1: during the Trump presidency, the person in charge of vetting 163 00:10:47,440 --> 00:10:51,360 Speaker 1: judges that came into the Supreme Court or the Appellate 164 00:10:51,400 --> 00:10:54,440 Speaker 1: Court of the District Court was Don McGann, who used 165 00:10:54,440 --> 00:10:58,080 Speaker 1: to be on the Federal Election Commission and is, you know, 166 00:10:58,640 --> 00:11:02,880 Speaker 1: a very close sical ally of Mr McConnell. And so 167 00:11:03,080 --> 00:11:06,640 Speaker 1: we know that each and every one of the judges 168 00:11:06,720 --> 00:11:10,360 Speaker 1: that have come up in those years has been vetted 169 00:11:10,920 --> 00:11:14,520 Speaker 1: for their position on this by Don McGann. And that 170 00:11:14,679 --> 00:11:17,320 Speaker 1: is a position that is similar to Mr Cruises, which 171 00:11:17,400 --> 00:11:23,400 Speaker 1: is to remove as many restrictions as possible on campaign 172 00:11:23,520 --> 00:11:27,840 Speaker 1: finance as they can achieve with the Supreme Court. So 173 00:11:28,640 --> 00:11:33,000 Speaker 1: the expectation here is that the majority right now will 174 00:11:33,120 --> 00:11:39,120 Speaker 1: be sympathetic to Mr Cruz because they were vetted by 175 00:11:39,520 --> 00:11:42,200 Speaker 1: the White House that supported getting rid of most of 176 00:11:42,200 --> 00:11:45,640 Speaker 1: the restrictions. Thanks for being on the Bloomberg Law Show, Meredith. 177 00:11:46,080 --> 00:11:52,839 Speaker 1: That's campaign finance expert Mareth McGehee. President Joe Biden may 178 00:11:52,840 --> 00:11:57,120 Speaker 1: be struggling to get his expansive federal government overhaul into law, 179 00:11:57,400 --> 00:12:01,400 Speaker 1: but he's on a record pace in another area, judicial nominations. 180 00:12:01,880 --> 00:12:05,800 Speaker 1: Biden has outpaced all his predecessors since Richard Nixon with 181 00:12:06,000 --> 00:12:10,000 Speaker 1: fourteen district and circuit court confirmations, thanks in part to 182 00:12:10,080 --> 00:12:14,079 Speaker 1: a focus on Blue states, and the nominees reflect Biden's 183 00:12:14,120 --> 00:12:17,440 Speaker 1: push to diversify the courts in terms of demographics and 184 00:12:17,480 --> 00:12:21,560 Speaker 1: professional experience. Joining me is Carl Tobias, a professor at 185 00:12:21,559 --> 00:12:25,080 Speaker 1: the University of Richmond Law School, explain some of the 186 00:12:25,160 --> 00:12:28,760 Speaker 1: reasons why Biden has been able to move so quickly 187 00:12:28,800 --> 00:12:33,040 Speaker 1: on these nominations. What Biden has done is taken a 188 00:12:33,120 --> 00:12:40,120 Speaker 1: page from Miss McConnell's playbook or pages focusing on low 189 00:12:40,200 --> 00:12:45,199 Speaker 1: hanging fruit, if you will, and moving very quickly and 190 00:12:45,280 --> 00:12:49,080 Speaker 1: so like a laser. The White House is focused on 191 00:12:49,160 --> 00:12:52,760 Speaker 1: the blue state vacancies, which, of course, as a Republican 192 00:12:53,160 --> 00:12:57,320 Speaker 1: pretty much ignored until the very end of Trump's administration, 193 00:12:57,800 --> 00:13:03,280 Speaker 1: and so a very disprepar portionate percentage of vacancies when 194 00:13:03,440 --> 00:13:09,080 Speaker 1: Biden came into office were from blue states, and so 195 00:13:09,320 --> 00:13:11,640 Speaker 1: it's quite natural that he would focus on those. And 196 00:13:11,640 --> 00:13:16,040 Speaker 1: of course they're easier because he works with those senators 197 00:13:16,520 --> 00:13:20,440 Speaker 1: very closely, knows a number of them, and they've made 198 00:13:20,520 --> 00:13:24,880 Speaker 1: very strong recommendations in line with the December letter from 199 00:13:24,920 --> 00:13:29,960 Speaker 1: the White House Council to Senators requesting that the nominees 200 00:13:30,000 --> 00:13:35,079 Speaker 1: be diverse in terms of ethnicity, gender, sexual orientation, and 201 00:13:35,280 --> 00:13:39,920 Speaker 1: especially experience. And that's exactly what you're seeing recommended by 202 00:13:39,960 --> 00:13:42,840 Speaker 1: the Senators to the White House and the types of 203 00:13:42,880 --> 00:13:46,360 Speaker 1: people being nominated, which we saw last week in the 204 00:13:46,440 --> 00:13:50,240 Speaker 1: eighth slate of nominees. Forward, is it going to slow 205 00:13:50,320 --> 00:13:54,720 Speaker 1: down necessarily when he turns his attention to the Red States. 206 00:13:55,679 --> 00:13:57,760 Speaker 1: It depends on the Red State, depends on the Home 207 00:13:57,840 --> 00:13:59,960 Speaker 1: state senators, and how much they're willing to work with 208 00:14:00,000 --> 00:14:01,920 Speaker 1: the White Has depends on how much the White House 209 00:14:02,040 --> 00:14:06,160 Speaker 1: is willing to work with them. But I would offer 210 00:14:06,160 --> 00:14:11,560 Speaker 1: a caveat to last week's nomination of three strong candidates 211 00:14:11,640 --> 00:14:15,200 Speaker 1: for the Northern District of Ohio, and that is Senator 212 00:14:15,360 --> 00:14:20,640 Speaker 1: Portman is up is retiring, I think in so his 213 00:14:20,720 --> 00:14:24,760 Speaker 1: seat will be up. But he and shared Brown have 214 00:14:24,920 --> 00:14:28,720 Speaker 1: worked very well together. In fact, during the trumpetministration they 215 00:14:28,720 --> 00:14:32,480 Speaker 1: were able to agree um using I think a body 216 00:14:32,520 --> 00:14:38,000 Speaker 1: partisans selection panel on many nominees, so they kept the 217 00:14:38,120 --> 00:14:41,600 Speaker 1: vacancy filled. So it's not a good test. I think 218 00:14:41,600 --> 00:14:46,040 Speaker 1: a better test might be where you have two very 219 00:14:46,360 --> 00:14:51,840 Speaker 1: red state Republican senators for example Texas. Uh, let's see 220 00:14:51,840 --> 00:14:56,600 Speaker 1: what happens with the vacancy there or other states where 221 00:14:57,480 --> 00:15:02,400 Speaker 1: you have extremely conservative senator as opposed to somebody like Portman, 222 00:15:02,440 --> 00:15:06,280 Speaker 1: who has worked closely with Brown to be sure the 223 00:15:06,320 --> 00:15:10,680 Speaker 1: vacancies are filled in their state. So now let's talk 224 00:15:10,800 --> 00:15:17,000 Speaker 1: about the recent nominations he selected. The American Civil Liberties 225 00:15:17,080 --> 00:15:20,840 Speaker 1: Union's top voting rights lawyer, Dale Hoe tell us a 226 00:15:20,920 --> 00:15:24,280 Speaker 1: little bit about how well he has has headed up 227 00:15:24,320 --> 00:15:28,280 Speaker 1: that voting rights project for a long time at the 228 00:15:28,320 --> 00:15:30,640 Speaker 1: a c l U. I want to say, almost a decade, 229 00:15:31,160 --> 00:15:36,120 Speaker 1: and he's brought some extraordinarily important cases and won a 230 00:15:36,240 --> 00:15:39,400 Speaker 1: number of them. Probably the most famous one was in 231 00:15:40,960 --> 00:15:47,600 Speaker 1: challenging the citizenship question that Trump wanted to put into 232 00:15:47,640 --> 00:15:50,400 Speaker 1: the census, and he took it to the Supreme Court 233 00:15:50,480 --> 00:15:53,600 Speaker 1: and won it. But there was a big case out 234 00:15:53,600 --> 00:15:58,200 Speaker 1: of North Carolina which went to the Fourth Circuit on 235 00:15:58,840 --> 00:16:02,320 Speaker 1: voting restrictions that were imposed by the Republican legislature in 236 00:16:02,360 --> 00:16:07,080 Speaker 1: North Carolina, and the Fourth Circuit opinion said that the 237 00:16:07,240 --> 00:16:14,400 Speaker 1: legislature had focused on black voters with surgical precision in 238 00:16:14,520 --> 00:16:21,800 Speaker 1: order to dampen the force of their votes in elections, 239 00:16:21,920 --> 00:16:25,840 Speaker 1: and so overturned a number of those restrictions imposed by 240 00:16:25,840 --> 00:16:30,520 Speaker 1: the North Carolina legislature. And he argued that case as 241 00:16:30,560 --> 00:16:34,760 Speaker 1: well in the Fourth Circuit. And so he is one 242 00:16:34,800 --> 00:16:38,040 Speaker 1: of the foremost people of his generation in the voting 243 00:16:38,160 --> 00:16:43,000 Speaker 1: rights area, in the immigration area, and in cutting edge 244 00:16:43,080 --> 00:16:48,480 Speaker 1: litigation around voting rights. Uh. He's young. He was nominated 245 00:16:48,520 --> 00:16:52,560 Speaker 1: for the Southern District of New York, which is an 246 00:16:52,600 --> 00:16:55,880 Speaker 1: excellent court. He clerked there, clerked on the New York 247 00:16:55,920 --> 00:16:59,000 Speaker 1: Court of Appeals, which is the High Court in New York. UM, 248 00:16:59,280 --> 00:17:02,840 Speaker 1: and has you know, really a splendid record. Plus he's 249 00:17:02,880 --> 00:17:05,600 Speaker 1: a very nice person. I've met him on occasions. We 250 00:17:05,640 --> 00:17:08,760 Speaker 1: had him here for a UH symposium and he talked 251 00:17:08,760 --> 00:17:12,000 Speaker 1: about voting rights. UM. And he's written a fair amount 252 00:17:12,119 --> 00:17:15,480 Speaker 1: of law review and other kinds of pieces, but been 253 00:17:15,640 --> 00:17:20,520 Speaker 1: very active in litigating major cases. Because of his record 254 00:17:20,920 --> 00:17:24,280 Speaker 1: arguing on the side of voting rights. Do you think 255 00:17:24,280 --> 00:17:29,000 Speaker 1: there'll be some severe questioning by Republicans on the committee. Well, 256 00:17:29,359 --> 00:17:33,520 Speaker 1: let's look at the quality of his work and see 257 00:17:34,359 --> 00:17:38,879 Speaker 1: the cases he's won and how difficult they've been. UH, 258 00:17:38,880 --> 00:17:41,280 Speaker 1: And I think they might try to do that, but 259 00:17:41,400 --> 00:17:45,960 Speaker 1: I don't think they'll succeed. UM. My guess is the 260 00:17:46,320 --> 00:17:53,240 Speaker 1: Democrats will all vote for him in committee and so 261 00:17:53,400 --> 00:17:56,600 Speaker 1: at worst it could come out on a ten ten vote. 262 00:17:56,600 --> 00:17:59,200 Speaker 1: But my guess is Lindsey Graham, who has been voting 263 00:17:59,800 --> 00:18:06,800 Speaker 1: for or people who are well qualified UM as who 264 00:18:07,200 --> 00:18:11,640 Speaker 1: is are likely to vote yes. UM. I'd be surprised 265 00:18:11,680 --> 00:18:14,439 Speaker 1: if he voted no. On on how We'll see what 266 00:18:14,520 --> 00:18:17,400 Speaker 1: the hearing looks like. But I don't think there's anything 267 00:18:17,400 --> 00:18:21,880 Speaker 1: in his record when you take an honest appraisal of it, 268 00:18:22,400 --> 00:18:27,160 Speaker 1: that would make him disqualified to sit on the Southern District. 269 00:18:28,560 --> 00:18:32,719 Speaker 1: So how uncommon is it to have judges with civil 270 00:18:32,800 --> 00:18:39,520 Speaker 1: rights backgrounds? Well? It it's uncommon in the Trump administration, 271 00:18:40,119 --> 00:18:43,639 Speaker 1: to be sure, even though Chuck Grassley says that a 272 00:18:43,760 --> 00:18:48,040 Speaker 1: number of the appellate nominees and confirmies did have civil 273 00:18:48,119 --> 00:18:52,760 Speaker 1: rights litigation experience, but from a very different perspective than 274 00:18:53,600 --> 00:18:57,560 Speaker 1: a number of Democratic nominees. But there have been um 275 00:18:57,760 --> 00:19:02,680 Speaker 1: civil rights advocates. There are good Marshal for example, UM, 276 00:19:02,720 --> 00:19:05,200 Speaker 1: A number of people who were at the ny A 277 00:19:05,320 --> 00:19:08,159 Speaker 1: CP Legal Defense Fund have served, for example, on the 278 00:19:08,160 --> 00:19:12,520 Speaker 1: Southern District, or Eastern District in New York and spots 279 00:19:12,560 --> 00:19:16,720 Speaker 1: with Robinson from Richmond who worked on some of the 280 00:19:16,760 --> 00:19:20,960 Speaker 1: Brown cases in Virginia, and the Fourth Circuit and the 281 00:19:21,000 --> 00:19:24,680 Speaker 1: Supreme Court was appointed the d C District and to 282 00:19:24,880 --> 00:19:29,159 Speaker 1: the d C Circuit. So there have been a number 283 00:19:29,400 --> 00:19:33,479 Speaker 1: of people with civil rights backgrounds who have been involved 284 00:19:33,480 --> 00:19:38,240 Speaker 1: in civil rights litigation, and Biden has been very forthright 285 00:19:38,280 --> 00:19:41,919 Speaker 1: about that and saying he wants people with diverse experiences 286 00:19:42,000 --> 00:19:44,200 Speaker 1: and the force. Voting rights is one of the critical 287 00:19:44,320 --> 00:19:49,280 Speaker 1: issues UM, given what Republican legislatures are doing now by 288 00:19:49,359 --> 00:19:55,040 Speaker 1: way of curtailing voting rights. So the three nominees to 289 00:19:55,119 --> 00:19:59,320 Speaker 1: the Northern District of Ohio marked the first of Biden's 290 00:19:59,320 --> 00:20:01,439 Speaker 1: District Court in nominees to come from a state with 291 00:20:01,480 --> 00:20:05,000 Speaker 1: a Republican senator. Are they similar to the rest of 292 00:20:05,040 --> 00:20:09,280 Speaker 1: the Biden nominees well to some extent, I mean, I 293 00:20:09,320 --> 00:20:15,720 Speaker 1: think the three do bring diversity of experience. One um 294 00:20:15,880 --> 00:20:21,479 Speaker 1: had been a federal defender, Charles Fleming judge ruez Is 295 00:20:21,840 --> 00:20:26,360 Speaker 1: I think he's a magistrate judge in um the Northern District. 296 00:20:26,760 --> 00:20:31,240 Speaker 1: And then Bridget Mehan Brennan has been acting U S Attorney, 297 00:20:31,400 --> 00:20:35,440 Speaker 1: So I assumed that she comes from a prosecutorial background. 298 00:20:35,600 --> 00:20:39,919 Speaker 1: So there's there's some balance there for Republicans, and I 299 00:20:40,000 --> 00:20:44,120 Speaker 1: don't think that they're going to be opposed when Portman, 300 00:20:44,240 --> 00:20:48,200 Speaker 1: I think has been very supportive of them, and that 301 00:20:48,800 --> 00:20:51,639 Speaker 1: should go a long way with the members of the committee. 302 00:20:52,119 --> 00:20:56,280 Speaker 1: But you're getting the diversity that, especially of experience, that 303 00:20:56,800 --> 00:21:02,160 Speaker 1: Biden pledged he would bring in his nominations and appointments. Now, 304 00:21:02,240 --> 00:21:06,560 Speaker 1: let's talk about Biden's nominee for the U. S. Attorney 305 00:21:06,560 --> 00:21:12,200 Speaker 1: in Massachusetts, Rachel Rawlins, what can you tell us about her? Well, 306 00:21:12,280 --> 00:21:16,600 Speaker 1: she was elected, I think, to be a district attorney 307 00:21:16,640 --> 00:21:21,919 Speaker 1: in Massachusetts and has been involved in politics and the 308 00:21:22,040 --> 00:21:26,040 Speaker 1: law in Boston in that area for a long time. 309 00:21:26,920 --> 00:21:33,960 Speaker 1: And so um, we'll see the Republicans were vociferous in 310 00:21:34,000 --> 00:21:40,960 Speaker 1: their opposition to her in the committee discussion, which was 311 00:21:41,040 --> 00:21:46,160 Speaker 1: almost unprecedented. By and large. What has happened traditionally, going 312 00:21:46,200 --> 00:21:50,320 Speaker 1: back for decades, is that the home state senators recommend 313 00:21:50,440 --> 00:21:53,359 Speaker 1: the U. S. Attorney nominees to the White House. The 314 00:21:53,359 --> 00:21:56,119 Speaker 1: White House easily signs off because they trust the home 315 00:21:56,160 --> 00:22:00,400 Speaker 1: state senators to bring forward well qualified people. And there's 316 00:22:00,440 --> 00:22:02,480 Speaker 1: a lot of difference paid to the home state senators. 317 00:22:02,480 --> 00:22:05,480 Speaker 1: In that context, they don't have hearings. All the US 318 00:22:05,520 --> 00:22:09,600 Speaker 1: attorney nominees are vetted by the committee and if there 319 00:22:09,600 --> 00:22:13,680 Speaker 1: are no controversial issues, then they go to the committee. 320 00:22:13,720 --> 00:22:17,719 Speaker 1: The committee didn't even have any discussion of any of 321 00:22:17,760 --> 00:22:21,080 Speaker 1: the other nominees in her group seven or so others 322 00:22:21,640 --> 00:22:25,720 Speaker 1: or any that came before, like fifteen other BI nominees 323 00:22:25,760 --> 00:22:29,960 Speaker 1: for US attorneys, but then had a lengthy discussion and 324 00:22:30,040 --> 00:22:33,639 Speaker 1: she was held over a week before they actually discussed 325 00:22:34,000 --> 00:22:38,560 Speaker 1: her nomination. And then Republicans were extremely critical of her, 326 00:22:39,280 --> 00:22:44,720 Speaker 1: labeling her some kind of progressive prosecutor in quotes, and 327 00:22:44,840 --> 00:22:49,240 Speaker 1: so that was the type of concern that they voiced 328 00:22:49,359 --> 00:22:53,520 Speaker 1: in the committee. And then she received a eleven eleven 329 00:22:53,600 --> 00:22:57,240 Speaker 1: party line vote, so she still could be confirmed because 330 00:22:57,400 --> 00:23:02,400 Speaker 1: Humor could send her on for a final vote by 331 00:23:02,520 --> 00:23:07,560 Speaker 1: discharging her from committee, which he did for two other 332 00:23:08,000 --> 00:23:12,760 Speaker 1: d o J high level nominees Kristen Clark you might remember, 333 00:23:12,760 --> 00:23:17,960 Speaker 1: per Civil Rights Division and Benita Gupta for Associate Attorney General. 334 00:23:18,040 --> 00:23:21,440 Speaker 1: The third ranking person in the department was the Republican 335 00:23:21,520 --> 00:23:26,240 Speaker 1: objection to her. She had had a list of crimes 336 00:23:26,320 --> 00:23:29,879 Speaker 1: she wouldn't prosecute was that their main objection. That was 337 00:23:29,960 --> 00:23:32,400 Speaker 1: one of them, but there were a number of others. 338 00:23:32,520 --> 00:23:34,879 Speaker 1: And there has been a lot of firmat about the 339 00:23:34,960 --> 00:23:40,080 Speaker 1: question of prosecutorial discretion in light of George Floyd and 340 00:23:40,280 --> 00:23:43,679 Speaker 1: other events that have happened in the last year and 341 00:23:43,680 --> 00:23:47,800 Speaker 1: a half, and so some of that came to bear 342 00:23:47,920 --> 00:23:52,199 Speaker 1: in the discussion in the committee, But there was a 343 00:23:52,240 --> 00:23:55,880 Speaker 1: lot of back and forth, especially from the Republicans being 344 00:23:56,000 --> 00:23:59,840 Speaker 1: highly critical of what she might do. Tom Cotton called 345 00:23:59,840 --> 00:24:05,640 Speaker 1: here a quote unquote radical pro criminal prosecutor, and similar 346 00:24:05,720 --> 00:24:10,240 Speaker 1: language from Ted Cruz and others. And normally for US 347 00:24:10,320 --> 00:24:13,880 Speaker 1: Attorney nominees it's just typically a voice vote. Here they 348 00:24:13,920 --> 00:24:18,560 Speaker 1: held an actual vote. Yes, absolutely, that's exactly right. And 349 00:24:18,720 --> 00:24:24,600 Speaker 1: Chair Durban pointed out that eighty five of President Trump's 350 00:24:24,800 --> 00:24:29,679 Speaker 1: U S Attorney nominees had exactly that same treatment, and 351 00:24:29,720 --> 00:24:32,080 Speaker 1: I think there were only votes on two or three 352 00:24:32,200 --> 00:24:35,600 Speaker 1: of them something like that, so that gives you a sense, 353 00:24:36,160 --> 00:24:39,440 Speaker 1: and more of his nominees than Biden's, by a percentage, 354 00:24:39,720 --> 00:24:43,520 Speaker 1: were more controversial, I think in terms of their records 355 00:24:43,600 --> 00:24:46,360 Speaker 1: and what they promised to do as U S attorney. 356 00:24:46,720 --> 00:24:49,879 Speaker 1: Thanks Carl, that's Professor Carl Tobias of the University of 357 00:24:49,960 --> 00:24:55,560 Speaker 1: Richmond Law School. Remember that half a billion dollar mistakes 358 00:24:55,600 --> 00:24:59,680 Speaker 1: City Bank made in one of the biggest banking errors 359 00:24:59,680 --> 00:25:03,520 Speaker 1: in sent memory. An employee error caused it to mistakenly 360 00:25:03,600 --> 00:25:06,240 Speaker 1: pay out more than nine million dollars of its own 361 00:25:06,359 --> 00:25:09,439 Speaker 1: money to a group of lenders expecting an interest payment 362 00:25:09,520 --> 00:25:13,480 Speaker 1: on behalf of Revlon. City Group unexpectedly lost the first 363 00:25:13,600 --> 00:25:16,159 Speaker 1: round of the legal battle to recover half a billion 364 00:25:16,160 --> 00:25:20,359 Speaker 1: dollars when federal Judge Jesse Ferman ruled in February that 365 00:25:20,520 --> 00:25:23,560 Speaker 1: ten asset managers for the lenders did not have to 366 00:25:23,640 --> 00:25:27,600 Speaker 1: return the five hundred four million dollars City mistakenly sent 367 00:25:27,680 --> 00:25:30,320 Speaker 1: to them because they shouldn't have been expected to know 368 00:25:30,440 --> 00:25:33,800 Speaker 1: that the transfer was an error. Now City Group is 369 00:25:33,840 --> 00:25:37,160 Speaker 1: asking the Second Circuit Court of Appeals to fix its error. 370 00:25:37,680 --> 00:25:40,359 Speaker 1: Joining me is a Natt Allen Beck, a professor at 371 00:25:40,400 --> 00:25:44,600 Speaker 1: Case Western Reserve University Law School, and at start by 372 00:25:44,640 --> 00:25:48,399 Speaker 1: explaining the lower courts decision. Let me start with setting 373 00:25:48,400 --> 00:25:51,879 Speaker 1: the stage. Okay, so what's going on here? First, Let's 374 00:25:52,119 --> 00:25:55,320 Speaker 1: talk about the industry. We're talking about the corporate debt market. 375 00:25:56,240 --> 00:26:00,520 Speaker 1: And um, we're talking about corporate debt contracts. And what 376 00:26:00,720 --> 00:26:04,200 Speaker 1: happened here was, you know, if you think of everything 377 00:26:04,240 --> 00:26:06,760 Speaker 1: can go wrong, and things went wrong. There was a 378 00:26:06,840 --> 00:26:10,440 Speaker 1: mistake that happened. It wasn't even on Revlon side, but 379 00:26:10,640 --> 00:26:13,639 Speaker 1: it was on the side of City Bank. And that 380 00:26:13,960 --> 00:26:18,080 Speaker 1: accident is a one billion dollar payoffs that was sent 381 00:26:18,400 --> 00:26:21,920 Speaker 1: to Revlon's distressed creditors. And again it wasn't done by 382 00:26:21,920 --> 00:26:25,960 Speaker 1: Revlon by rather buy an administrative agents for the loan 383 00:26:26,040 --> 00:26:30,520 Speaker 1: Citty Bank. As a result, several lenders actually returned the 384 00:26:30,640 --> 00:26:35,040 Speaker 1: cash back, but others did not, so Federal Court Judge 385 00:26:35,080 --> 00:26:40,720 Speaker 1: Furman decided to actually go with the lenders. Some thought 386 00:26:40,760 --> 00:26:44,520 Speaker 1: that this was a dramatic opinion. Furman decided that the 387 00:26:44,640 --> 00:26:48,800 Speaker 1: lenders should be able to keep the funds that were 388 00:26:48,840 --> 00:26:52,080 Speaker 1: transferred by mistakes. We applied this doctrine, we call it 389 00:26:52,119 --> 00:26:56,120 Speaker 1: an equitable doctrine. It's known as discharge for a value defense. 390 00:26:56,560 --> 00:27:00,520 Speaker 1: And as a result, basically the lenders could keep this 391 00:27:00,600 --> 00:27:03,720 Speaker 1: one fall. And now the case is up for appeal. 392 00:27:04,320 --> 00:27:08,359 Speaker 1: And so it's interesting because this case would have a 393 00:27:08,440 --> 00:27:10,600 Speaker 1: lot of influence on how contracts are going to be 394 00:27:10,680 --> 00:27:14,199 Speaker 1: drafted in the future. And overall, I think it's definitely 395 00:27:14,240 --> 00:27:18,000 Speaker 1: going to have an impact on the corporate debt market. 396 00:27:18,480 --> 00:27:22,280 Speaker 1: Would you say that the judge's opinion came as a 397 00:27:22,320 --> 00:27:26,639 Speaker 1: surprise to most people in the industry. It's not that 398 00:27:26,680 --> 00:27:28,879 Speaker 1: it came just as a surprise to most people in 399 00:27:28,920 --> 00:27:31,640 Speaker 1: the industry. I guess there's a movement in the law, 400 00:27:31,720 --> 00:27:34,720 Speaker 1: especially in contract law of law and equon law and economics. 401 00:27:34,760 --> 00:27:38,920 Speaker 1: And I think that some prominent scholars in a law 402 00:27:38,960 --> 00:27:42,919 Speaker 1: and economics disagreed with the opinion. They disagreed with the results. 403 00:27:42,960 --> 00:27:47,000 Speaker 1: I'm sure that there's other scholars that have the opposite opinion. Right. 404 00:27:47,200 --> 00:27:49,560 Speaker 1: I feel like anything else, when we're professors, we can 405 00:27:49,600 --> 00:27:53,720 Speaker 1: disagree about curing things. So personally, when I interviewed with 406 00:27:53,760 --> 00:27:56,240 Speaker 1: you last year, I told you that I think there's 407 00:27:56,240 --> 00:27:59,280 Speaker 1: a chance that this might happen. I was very surprised 408 00:28:00,000 --> 00:28:04,320 Speaker 1: a City Bank was not willing to, you know, come 409 00:28:04,359 --> 00:28:07,639 Speaker 1: to some sort of a bargain, but rather continue with 410 00:28:07,680 --> 00:28:12,159 Speaker 1: this lawsuit. And perhaps that is because of this notion. Again, 411 00:28:12,640 --> 00:28:16,280 Speaker 1: like I said, some prominent incording some of my friends 412 00:28:16,280 --> 00:28:21,480 Speaker 1: to teach contact law and corporate finance who believe the opposite. 413 00:28:21,640 --> 00:28:25,320 Speaker 1: They think that City Bank should have gotten the money back. 414 00:28:25,440 --> 00:28:29,680 Speaker 1: But I think that there are interesting policy and legal questions, 415 00:28:29,720 --> 00:28:31,840 Speaker 1: and I think it's a close call. I don't think 416 00:28:31,880 --> 00:28:34,560 Speaker 1: that this is such a you know, slum dunk, but 417 00:28:34,600 --> 00:28:38,120 Speaker 1: I would think that the Court of Appeals might not 418 00:28:38,200 --> 00:28:40,760 Speaker 1: even make a decision on this because of that. I mean, 419 00:28:40,760 --> 00:28:44,120 Speaker 1: you say that they didn't negotiate. Would the lenders have 420 00:28:44,240 --> 00:28:46,920 Speaker 1: been willing to negotiate with City Bank when they had 421 00:28:46,960 --> 00:28:50,000 Speaker 1: the money in hand? I'm not sure that's actually a 422 00:28:50,040 --> 00:28:52,200 Speaker 1: fird point. And that is, once you have the money 423 00:28:52,240 --> 00:28:54,000 Speaker 1: in hand, why would you want to give it back, 424 00:28:54,120 --> 00:28:57,080 Speaker 1: especially you know, with everything that was going on in 425 00:28:57,160 --> 00:28:59,920 Speaker 1: the background. So you're absolutely right that perhaps they were 426 00:29:00,160 --> 00:29:02,160 Speaker 1: be willing to negotiate, But I don't know if any 427 00:29:02,200 --> 00:29:04,200 Speaker 1: of it happened in the background or not. You know, 428 00:29:04,400 --> 00:29:07,480 Speaker 1: if I was representing City Bank, I would descried. So 429 00:29:07,640 --> 00:29:11,440 Speaker 1: let's talk about the argument at the appeals court. What 430 00:29:11,520 --> 00:29:14,600 Speaker 1: were some of the issues. So there are several legal 431 00:29:14,720 --> 00:29:17,920 Speaker 1: issues on appeals. Okay. One is whether the defense that 432 00:29:17,960 --> 00:29:20,280 Speaker 1: I just told you about, the d SV defense, whether 433 00:29:20,360 --> 00:29:24,840 Speaker 1: that applies only when the debt is due and payable. Again, 434 00:29:25,320 --> 00:29:29,800 Speaker 1: what happened was that Judge Furman, he used this obscure 435 00:29:29,960 --> 00:29:34,720 Speaker 1: equitable doctrine. And he's also looking at a very well 436 00:29:34,760 --> 00:29:38,360 Speaker 1: known case in New York. The case is called Bank Warms. 437 00:29:38,400 --> 00:29:42,840 Speaker 1: The district court concluded that the discharge for value defense 438 00:29:43,040 --> 00:29:48,120 Speaker 1: barred City Banks recovery even though this particular debt was 439 00:29:48,200 --> 00:29:51,720 Speaker 1: not due for an additional years. So this debt was 440 00:29:51,800 --> 00:29:54,360 Speaker 1: not DOE until I believe, two thousand and twenty three. 441 00:29:54,720 --> 00:29:59,000 Speaker 1: And despite the fact that the dependants in this case 442 00:29:59,080 --> 00:30:02,400 Speaker 1: were on what we call inquiry noticed that the transfer 443 00:30:02,520 --> 00:30:07,200 Speaker 1: was made in error. So despite these matters, the judge 444 00:30:07,320 --> 00:30:12,560 Speaker 1: Bill decided for the lenders. City Bank is arguing whether 445 00:30:12,680 --> 00:30:17,240 Speaker 1: this defense applies here where we know that these lenders, 446 00:30:17,280 --> 00:30:21,760 Speaker 1: these recipients of the funds, had no entitlement to think 447 00:30:21,920 --> 00:30:25,240 Speaker 1: that they really should have gotten the funds. Why because 448 00:30:25,320 --> 00:30:27,680 Speaker 1: when they got it, which was last year, it wasn't 449 00:30:27,680 --> 00:30:31,040 Speaker 1: two thousand twenty three. And then the burden approof was 450 00:30:31,080 --> 00:30:35,760 Speaker 1: their good faith? Was their actual or constructive notice that 451 00:30:35,840 --> 00:30:39,520 Speaker 1: the payment was made in error? So there's multiple legal issues. 452 00:30:39,840 --> 00:30:43,680 Speaker 1: One of the judges on the panel indicated that they 453 00:30:43,720 --> 00:30:46,640 Speaker 1: could also kick the case over the New York's highest 454 00:30:46,680 --> 00:30:50,320 Speaker 1: court for its views. Why that's a great question, and 455 00:30:50,400 --> 00:30:54,040 Speaker 1: I saw that that was happening, and the council objected 456 00:30:54,280 --> 00:30:59,440 Speaker 1: whether they're going to do that to determine the facts, right, 457 00:30:59,520 --> 00:31:03,240 Speaker 1: because we also have policy issues that are happening here. 458 00:31:03,720 --> 00:31:06,920 Speaker 1: And I think that the highest court in New York, 459 00:31:06,920 --> 00:31:08,600 Speaker 1: which is a Court of Appeals, is going to have 460 00:31:08,640 --> 00:31:11,640 Speaker 1: more we go groom to decide on policy issues what 461 00:31:11,840 --> 00:31:15,320 Speaker 1: is fair here? So I think that's um, that's why 462 00:31:15,360 --> 00:31:17,600 Speaker 1: they would do that, if they would decide to do that. 463 00:31:18,200 --> 00:31:22,360 Speaker 1: One of the things that City Banks lawyer said is 464 00:31:22,400 --> 00:31:25,479 Speaker 1: that all of these red flags should have led the 465 00:31:25,600 --> 00:31:28,800 Speaker 1: lenders to ask any one of the million questions that 466 00:31:28,800 --> 00:31:31,840 Speaker 1: would have led to discovery of the mistake. Is that 467 00:31:31,880 --> 00:31:34,840 Speaker 1: true to a certain extent? Well, I think it depends 468 00:31:34,840 --> 00:31:37,040 Speaker 1: when you ask what's the what's the red flag do 469 00:31:37,120 --> 00:31:40,600 Speaker 1: you write? And then what's customary in practice? And I 470 00:31:40,640 --> 00:31:44,000 Speaker 1: think that's where the lawyers were also arguing as to 471 00:31:44,440 --> 00:31:48,400 Speaker 1: what kind of notice is customary? Is prepayment customary? And 472 00:31:48,440 --> 00:31:51,680 Speaker 1: it's so, how and when and in which kind of situation? 473 00:31:52,240 --> 00:31:57,440 Speaker 1: And so I think um, at least um the attorney 474 00:31:57,440 --> 00:32:01,920 Speaker 1: that was representing the under she said, well, free payments 475 00:32:01,920 --> 00:32:04,440 Speaker 1: are customary in the industry, and I think she also 476 00:32:04,480 --> 00:32:08,200 Speaker 1: got some pushback on that as well, saying well, what 477 00:32:08,240 --> 00:32:11,040 Speaker 1: type of situations whether you need to give notice or not? 478 00:32:11,200 --> 00:32:13,400 Speaker 1: What kind of notice? Who needs to give the notice? 479 00:32:13,680 --> 00:32:16,000 Speaker 1: Does Revlo need to give the notice? The City Bank 480 00:32:16,080 --> 00:32:18,200 Speaker 1: need to get the notice? And what is the notice? 481 00:32:18,520 --> 00:32:20,600 Speaker 1: Is the fact you've got something after the fact? Is 482 00:32:20,640 --> 00:32:23,920 Speaker 1: that sufficient noticed or not? So there's several things that 483 00:32:23,960 --> 00:32:28,080 Speaker 1: are happening here, and what the court will need to 484 00:32:28,160 --> 00:32:32,920 Speaker 1: decide is what makes economic sense for the future because 485 00:32:33,000 --> 00:32:36,600 Speaker 1: parties will use this opinion in the future, or are 486 00:32:36,680 --> 00:32:40,040 Speaker 1: just gonna take you no fairness into account? What is 487 00:32:40,120 --> 00:32:42,680 Speaker 1: far in this particular case, or are we gonna look 488 00:32:42,720 --> 00:32:45,120 Speaker 1: at each one of the lenders and see what happened? 489 00:32:45,280 --> 00:32:48,120 Speaker 1: Did they get sufficient notice? Didn't get sufficient notice? What 490 00:32:48,200 --> 00:32:50,840 Speaker 1: were the interactions with them? Did they use the funds not? 491 00:32:50,920 --> 00:32:53,120 Speaker 1: Do the funds? Where I say by use, I mean 492 00:32:53,120 --> 00:32:55,200 Speaker 1: did they put them on their ledgers or not? And 493 00:32:55,240 --> 00:32:57,720 Speaker 1: so there's really a lot going on here. I think 494 00:32:57,720 --> 00:32:59,840 Speaker 1: it's a very closet case here, and they're gonna be 495 00:32:59,840 --> 00:33:02,360 Speaker 1: going back and forth on these issues, and the court 496 00:33:02,640 --> 00:33:07,680 Speaker 1: will need to decide on whether the lenders had reasonable 497 00:33:07,920 --> 00:33:11,360 Speaker 1: noticed with regards to the mistake, and then what is 498 00:33:11,400 --> 00:33:16,360 Speaker 1: reasonable and notice reasonable to whom? Also, what about bank wires? 499 00:33:16,440 --> 00:33:18,960 Speaker 1: Right when you get a wire? Are they final? Are 500 00:33:19,000 --> 00:33:22,400 Speaker 1: they not final? What happens with mistakes? There's also case 501 00:33:22,520 --> 00:33:25,560 Speaker 1: law on that. So there's a lot that that's happening here. 502 00:33:26,080 --> 00:33:28,600 Speaker 1: Is there any doubt about what would happen if a 503 00:33:28,640 --> 00:33:32,320 Speaker 1: City Bank customer found that their mortgage, which had ten 504 00:33:32,400 --> 00:33:35,000 Speaker 1: years to run, suddenly they got to notice that it 505 00:33:35,040 --> 00:33:40,200 Speaker 1: was paid? I wish that's always my dream, But I mean, 506 00:33:40,400 --> 00:33:44,560 Speaker 1: wouldn't that customer be told by city bank no? And 507 00:33:44,880 --> 00:33:48,640 Speaker 1: what would happen there? That's a great question. And again 508 00:33:48,720 --> 00:33:52,760 Speaker 1: I think it really depends on the case itself, because 509 00:33:52,800 --> 00:33:56,720 Speaker 1: sometimes we stay, well, is it final? Did you make plans? 510 00:33:56,840 --> 00:33:59,040 Speaker 1: For example, if it's not a mortgage, what if you 511 00:33:59,160 --> 00:34:01,480 Speaker 1: just got million dollars all of a sudden your account, 512 00:34:01,480 --> 00:34:04,760 Speaker 1: you start spending that money. Can the bank take that back? 513 00:34:05,000 --> 00:34:06,920 Speaker 1: They're gonna try to take it back, can they I'm 514 00:34:06,920 --> 00:34:09,359 Speaker 1: not sure that they can. Sometimes we say, well, when 515 00:34:09,360 --> 00:34:12,880 Speaker 1: a bank wire transfer, it's final, and we want it 516 00:34:12,920 --> 00:34:16,000 Speaker 1: to be final. Why because we want to reduce the cost. 517 00:34:16,280 --> 00:34:18,879 Speaker 1: If you look at it from that perspective, we want 518 00:34:18,880 --> 00:34:22,160 Speaker 1: the bank to have the responsibility when they transfer a 519 00:34:22,200 --> 00:34:24,680 Speaker 1: wire tail a client when they transfer wire and make 520 00:34:24,719 --> 00:34:28,160 Speaker 1: sure you put in the correct number right, because we 521 00:34:28,200 --> 00:34:31,359 Speaker 1: want to encourage people to use wires. If we're not 522 00:34:31,440 --> 00:34:33,239 Speaker 1: going to make them efficient, if we're not going to 523 00:34:33,320 --> 00:34:35,680 Speaker 1: make you rely on the fact that if you get 524 00:34:35,719 --> 00:34:39,480 Speaker 1: money or if you transfer money that's gonna pass through whoever, 525 00:34:39,640 --> 00:34:41,799 Speaker 1: then it's going to make it much more expensive to 526 00:34:41,920 --> 00:34:44,560 Speaker 1: use wires. And so I think we do have this 527 00:34:45,520 --> 00:34:48,719 Speaker 1: um notion that when, for example, when a wire transfer, 528 00:34:48,760 --> 00:34:51,759 Speaker 1: it should be final, because we want to put the 529 00:34:51,760 --> 00:34:54,719 Speaker 1: onus on the bank. The bank is the one that 530 00:34:54,840 --> 00:34:58,080 Speaker 1: can monitor their actions. They're the ones that are sending 531 00:34:58,120 --> 00:35:00,200 Speaker 1: all these wires. They're the ones that are doing all 532 00:35:00,280 --> 00:35:04,080 Speaker 1: this and that's why they make you sign, for example, 533 00:35:04,239 --> 00:35:08,120 Speaker 1: when you do transfer a wire, basically a contract that said, 534 00:35:08,239 --> 00:35:11,120 Speaker 1: once you transfer the wire, that's it. You checked that 535 00:35:11,280 --> 00:35:13,279 Speaker 1: this is the correct number that you gave us, and 536 00:35:13,360 --> 00:35:16,000 Speaker 1: this is final, even if they want somewhere else. Do 537 00:35:16,040 --> 00:35:18,399 Speaker 1: you sign the fact that once it's released from your 538 00:35:18,400 --> 00:35:22,040 Speaker 1: account's final. And I think because these errors happen all 539 00:35:22,040 --> 00:35:27,000 Speaker 1: the time, I think errors do happen, what degree and 540 00:35:27,080 --> 00:35:31,319 Speaker 1: how many times, I'm not sure, but the cheapest cost avoider. Right, 541 00:35:31,400 --> 00:35:33,560 Speaker 1: if we look at that, is should be the bank. 542 00:35:33,640 --> 00:35:36,440 Speaker 1: The bank should be the one that's keeping their system 543 00:35:36,960 --> 00:35:39,680 Speaker 1: in that scenario. They're the ones who are doing it, 544 00:35:39,760 --> 00:35:43,640 Speaker 1: and they need to maintain that their system for the customer. 545 00:35:44,200 --> 00:35:47,080 Speaker 1: It's going to be much more expensive every time I 546 00:35:47,080 --> 00:35:50,759 Speaker 1: get a wire to know is this wire did it 547 00:35:50,840 --> 00:35:53,600 Speaker 1: get into my account by mistake or was it you know? 548 00:35:54,080 --> 00:35:56,120 Speaker 1: Or was I supposed to get it? What if I'm 549 00:35:56,120 --> 00:35:59,240 Speaker 1: a business and I get hundreds of millions of dollars 550 00:35:59,280 --> 00:36:02,319 Speaker 1: into my count right, of course I'm going to check 551 00:36:02,360 --> 00:36:05,319 Speaker 1: where it came from. But but I should assume that 552 00:36:05,400 --> 00:36:07,279 Speaker 1: ifid that's what I do, and that's my business, that 553 00:36:07,320 --> 00:36:09,960 Speaker 1: I'm going to be getting these these amounts of money. 554 00:36:10,600 --> 00:36:15,120 Speaker 1: How will the decision in this case impact the banking industry, 555 00:36:15,600 --> 00:36:20,080 Speaker 1: That's a great question. I think it will have detrimental effects, 556 00:36:20,719 --> 00:36:23,880 Speaker 1: and I'll tell you why. First of all, I think 557 00:36:24,000 --> 00:36:26,279 Speaker 1: we need to ask ourselves who do we want to 558 00:36:26,320 --> 00:36:32,040 Speaker 1: put substantial cost on. We want to encourage leverage loan markets, right, 559 00:36:32,080 --> 00:36:36,000 Speaker 1: we have them, and we want to encourage other businesses, right, 560 00:36:36,040 --> 00:36:39,960 Speaker 1: other people to participate in them. And so if we 561 00:36:40,520 --> 00:36:43,560 Speaker 1: allow the lenders to get this one fall, are we 562 00:36:43,719 --> 00:36:47,439 Speaker 1: basically saying that we're going to add more costs? Two 563 00:36:47,440 --> 00:36:52,200 Speaker 1: people are participating in leverage loan markets. Who is um 564 00:36:52,320 --> 00:36:54,520 Speaker 1: the cheapest cost avoid or how do we want to 565 00:36:54,560 --> 00:36:58,160 Speaker 1: allocate the risk? Right? We want to discourage people or 566 00:36:58,280 --> 00:37:03,680 Speaker 1: encourage them to enter into what we call collaborative contracting, right, 567 00:37:03,800 --> 00:37:08,600 Speaker 1: which are these types of forms of UM, these leverage 568 00:37:08,640 --> 00:37:13,400 Speaker 1: laws that they entered into. And so I think that 569 00:37:13,600 --> 00:37:19,000 Speaker 1: we want to the Christmas strategy. And so again, if 570 00:37:19,000 --> 00:37:22,160 Speaker 1: we look at it from this length of economic policy. 571 00:37:22,320 --> 00:37:28,880 Speaker 1: Right now in economics, if we say two, UM, the 572 00:37:29,000 --> 00:37:33,600 Speaker 1: lenders you don't have to uh return the funds. Then 573 00:37:34,520 --> 00:37:37,680 Speaker 1: as a result, would banks like city banks not be 574 00:37:37,760 --> 00:37:40,840 Speaker 1: willing to be an administrative agent in the future, or 575 00:37:40,960 --> 00:37:44,440 Speaker 1: are they going to charge more costs to you know 576 00:37:44,920 --> 00:37:49,000 Speaker 1: doing that? Um? And And so I think, UM, there 577 00:37:49,040 --> 00:37:51,839 Speaker 1: are really public policy questions that we need to ask 578 00:37:51,880 --> 00:37:54,640 Speaker 1: to ourselves or or do we feel bad for you know, 579 00:37:54,680 --> 00:37:57,560 Speaker 1: a bank like city that should have you know, done 580 00:37:57,560 --> 00:37:59,960 Speaker 1: a better job in policing what they did write there 581 00:38:00,200 --> 00:38:04,719 Speaker 1: there's no question that there's a human error here, right, Um, 582 00:38:04,760 --> 00:38:07,120 Speaker 1: But let's think about who's going to bear the brunt 583 00:38:07,160 --> 00:38:10,400 Speaker 1: of this who's gonna bear the cost If if City decides, 584 00:38:10,440 --> 00:38:12,440 Speaker 1: you know what, it's not worth it for me, I'm 585 00:38:12,440 --> 00:38:14,839 Speaker 1: going to charge more for this. Somebody's going to have 586 00:38:14,960 --> 00:38:19,560 Speaker 1: to pay, right, So what we need to ask ourselves 587 00:38:19,560 --> 00:38:22,520 Speaker 1: from a policy perspective is who is it that we 588 00:38:22,560 --> 00:38:27,040 Speaker 1: want to pay and future contracts. Definitely, if I was City, 589 00:38:27,040 --> 00:38:31,439 Speaker 1: I would put in uh, you know, provisions to try 590 00:38:31,440 --> 00:38:34,560 Speaker 1: to protect the bank. And I'm sure that you will 591 00:38:34,640 --> 00:38:39,040 Speaker 1: find the different kind of you know, provisions in the future, 592 00:38:39,760 --> 00:38:45,879 Speaker 1: um so that parties will be continuing to um use 593 00:38:46,000 --> 00:38:52,000 Speaker 1: these types of services. Do you think that manual processes 594 00:38:52,200 --> 00:38:56,680 Speaker 1: at banks need to be automated? That's a good question 595 00:38:56,760 --> 00:39:00,120 Speaker 1: as well. I think that's a hard one. I'm not 596 00:39:00,239 --> 00:39:02,319 Speaker 1: sure if it's going to make a difference whether it's 597 00:39:02,320 --> 00:39:05,560 Speaker 1: automated or I mean, somebody has to put it into 598 00:39:05,719 --> 00:39:07,920 Speaker 1: Even if it's automated, doesn't mean we're not going to 599 00:39:08,000 --> 00:39:13,239 Speaker 1: be you know, completely avoiding human errors. Somebody has to 600 00:39:13,400 --> 00:39:16,080 Speaker 1: enter the information into the computer, right and what if 601 00:39:16,080 --> 00:39:20,319 Speaker 1: they add another zero substract substractor zero. What I really 602 00:39:20,360 --> 00:39:23,359 Speaker 1: think that is, and I would and I'm sure it's 603 00:39:23,440 --> 00:39:26,160 Speaker 1: happening now, is that the parties are going to negotiate 604 00:39:26,320 --> 00:39:29,239 Speaker 1: and it's really about risk allocation. And what's going to 605 00:39:29,360 --> 00:39:34,200 Speaker 1: happen is that parties are going to negotiate provisions to say, 606 00:39:34,239 --> 00:39:36,719 Speaker 1: what if this happens in the future, how do you 607 00:39:37,160 --> 00:39:39,560 Speaker 1: how would you act? You have to give the money back? 608 00:39:40,200 --> 00:39:44,799 Speaker 1: What about the responsibility of the administrative agent? And I'm 609 00:39:44,800 --> 00:39:49,480 Speaker 1: sure you're going to you know, see more discussion on 610 00:39:49,560 --> 00:39:54,160 Speaker 1: that with regards to contracting. Um, I'm not sure that 611 00:39:54,239 --> 00:39:58,320 Speaker 1: automation is just gonna solve this because even behind the machine, 612 00:39:58,360 --> 00:40:01,120 Speaker 1: there's a human being that needs to enter the information. 613 00:40:01,280 --> 00:40:03,880 Speaker 1: Right at the end, we still need somebody to do that, 614 00:40:03,960 --> 00:40:07,440 Speaker 1: so mistakes can still happen. Thanks to Nat. That's Natt 615 00:40:07,480 --> 00:40:11,560 Speaker 1: Allen Beck, a professor at Case Western Reserve University School 616 00:40:11,600 --> 00:40:13,680 Speaker 1: of Law. And that's it for this edition of The 617 00:40:13,680 --> 00:40:16,720 Speaker 1: Bloomberg Law Show. Remember you can always get the latest 618 00:40:16,800 --> 00:40:20,000 Speaker 1: legal news Honor Bloomberg Lawn Podcast. You can find them 619 00:40:20,000 --> 00:40:24,880 Speaker 1: on Apple Podcasts, Spotify, or go to www dot Bloomberg 620 00:40:24,960 --> 00:40:29,160 Speaker 1: dot com, Slash podcast, Slash Law. I'm June Russo and 621 00:40:29,200 --> 00:40:30,560 Speaker 1: you're listening to Bloomberg