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

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Speaker 2: The President has already signed seventy three executive orders. That

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Speaker 2: is more than double the number signed by Joe Biden

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Speaker 2: and more than quadruple the number signed by Barack Obama

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Speaker 2: over the same period.

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Speaker 3: Despite the enthusiasm from the White House Press Secretary, a

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Speaker 3: president signing an executive order is not an indicator of success.

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Speaker 3: It's simply a directive. Witness how many of President Trump's

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Speaker 3: executive orders are already mired in legal battles. With his

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Speaker 3: executive orders, Trump is making a brond push to centralize

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Speaker 3: the power of the federal government in the White House.

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Speaker 1: And now a judge who's an activist judge wants to

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Speaker 1: try and stop us from doing this.

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Speaker 3: And why would they want to do that. I campaign

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Speaker 3: on this.

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Speaker 1: I campaign to the fact that I said government is corrupt.

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Speaker 3: And this week, in a to clamp down the power

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Speaker 3: of some of Washington's most powerful regulators, Trump issued an

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Speaker 3: executive order declaring he has direct control over dozens of

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Speaker 3: independent agencies like the Securities in Exchange Commission, the Federal

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Speaker 3: Trade Commission, and the Federal Communications Commission. It allows him

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Speaker 3: to direct their rulemaking, policy agendas, spending, and interpretations of

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Speaker 3: the law, undercutting the congressional protections against political influence that

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Speaker 3: independent agencies have historically operated under. Joining me is Carrie Colinisi,

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Speaker 3: who directs the University of Pennsylvania Carrie Law School's program

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Speaker 3: on Regulation. Carrie, will you broadly explain what Trump's executive

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Speaker 3: Order on independent Agencies entails?

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Speaker 4: It is taking several strands of White House review and

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Speaker 4: oversight of administrative agencies that have normally applied to those

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Speaker 4: agencies that are non independent, called executive branch agencies, and

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Speaker 4: now applying that same suite of oversight mechanisms to independent agencies.

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Speaker 4: The point is that this is now sort of treating

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Speaker 4: independent agencies as if they're no longer independent.

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Speaker 3: Yeah, explain what being an independent agency up until this

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Speaker 3: point entails as opposed to executive branch agencies.

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Speaker 4: So executive branch agencies are like the cabinet level departments

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Speaker 4: agencies like the Environmental Protection Agency that are headed by

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Speaker 4: officials who are appointed by the President, confirmed by the Senate,

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Speaker 4: but then they can be removed for any reason by

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Speaker 4: the President. So if the President just doesn't like the tie,

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Speaker 4: even that one of the administrators might be wearing or

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Speaker 4: whatever a tire they might have. You could fire them

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Speaker 4: for any reason whatsoever. Usually that be in the form

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Speaker 4: of policy disagreements. You know, if they're not following the

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Speaker 4: administration's agenda, then.

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Speaker 5: They can be fired.

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Speaker 4: And that puts a lot of leverage and control on

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Speaker 4: what agencies do or don't do. Needless to say, independent

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Speaker 4: agencies have been established by Congress with a kind of

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Speaker 4: tenure protection where the heads of those agencies can't be

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Speaker 4: removed just for any old reason or for policy disputes

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Speaker 4: with the president. There has to be some really good

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Speaker 4: cause before president can fire the head of an independent agency.

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Speaker 4: And those independent agencies include a lot of multi member

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Speaker 4: commissions like the Federal Communications Commission, the Federal Trade Commission,

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Speaker 4: the Federal Reserve Board. They are headed by officials who

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Speaker 4: have fixed terms of office and can enjoy some sense

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Speaker 4: of autonomy that comes from knowing that they can't be

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Speaker 4: fired just because they're adopting policy decisions that might not

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Speaker 4: be in a total alignment with what the White House wants.

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Speaker 3: But the President does appoint the heads of these agencies, right,

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Speaker 3: so they do share his philosophy.

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Speaker 4: Yeah, so there's often in practice a great deal of

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Speaker 4: alignment already between what at least a majority of the

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Speaker 4: members on these commissions want to do. Many of the

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Speaker 4: commissions have a political balance requirement, so they allow for

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Speaker 4: a majority of the commissioners to be of the same

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Speaker 4: political party as the president, but there needs to be

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Speaker 4: some minority of other commissioners. But once you have the

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Speaker 4: majority control on a commission and they're appointed by the president,

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Speaker 4: they are coming in with an ideology and a predisposition

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Speaker 4: to do the sorts of things that the president wants. Anyway,

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Speaker 4: so as a practical matter, these agencies are now as

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Speaker 4: totally independent as maybe the label an independent agency might

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Speaker 4: make them seem.

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Speaker 3: Yeah, because when a new administration comes in, you see

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Speaker 3: the different kinds of enforcements. For example, the SEC it

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Speaker 3: was very tough on crypto, for example, and now with

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Speaker 3: a new SEC under President Trump, it seems to be

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Speaker 3: letting go of crypto, so to speak. So, I mean,

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Speaker 3: you see, the difference is in the way the agencies

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Speaker 3: govern from president to president.

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Speaker 4: Right, So that always existed and you know, many respects.

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Speaker 4: It may be you know, eighty or ninety percent of

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Speaker 4: the way there for what a president wants by way

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Speaker 4: of controlling the direction of these agencies. This executive order, though, eliminates,

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Speaker 4: at least its claiming to eliminate what kind of hands

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Speaker 4: off approach that quite frankly many presidents have taken with.

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Speaker 5: Respect to some of the.

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Speaker 4: Very institutionalized review processes, of having budgets not reviewed by

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Speaker 4: the White House, of having regulations not.

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Speaker 5: Reviewed by the White House.

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Speaker 4: This administration is now claiming, well, We're not only going

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Speaker 4: to have our loyalists heading these agencies, but we also

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Speaker 4: want to scrutinize your budgets, we want to scrutinize your

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Speaker 4: strategic plans, we want to scrutinize your legal decision making,

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Speaker 4: we want to scrutinize your important regulations, just like we

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Speaker 4: do the Department of Transportation, just like we do the

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Speaker 4: Department of Labor. All of those are agencies that are

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Speaker 4: headed by folks that have been appointed by the president,

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Speaker 4: too right, and share the president's objectives. But you know

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Speaker 4: what white houses have found is that you know, they

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Speaker 4: want to coordinate and they want to make sure that

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Speaker 4: all of these you know, dozens of dozens of agencies

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Speaker 4: that are conducting activity, are doing the president's bidding and

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Speaker 4: sometimes you know, you can get heads of these agencies

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Speaker 4: that have viewpoints that do depart a little bit from

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Speaker 4: what the White House wants, or heads of agencies that

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Speaker 4: are not as vigilant about carrying out the president's agenda.

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Speaker 4: And these institutional processes that the Trump administration says now

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Speaker 4: it's going to apply to the independence are there to

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Speaker 4: try to really put the hammer down and make sure

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Speaker 4: that agencies follow what the White House wants them to do.

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Speaker 3: So under this executive order, the agencies would have to

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Speaker 3: take positions that are the same as the presidents and

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Speaker 3: the Attorney generals.

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Speaker 5: That's right.

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Speaker 4: Some independent agencies also have independent litigating authority That means

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Speaker 4: they can go into court and say some things about

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Speaker 4: what the laws that they're implementing say and what they

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Speaker 4: mean that haven't been vetted by the Department of Justice

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Speaker 4: like an executive branch agency has. And so this executive

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Speaker 4: order is aiming to bring that process of coming to

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Speaker 4: independent understandings of their statutes under an umbrella of White

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Speaker 4: House review and the Attorney General and Department of Justice review.

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Speaker 3: And it makes Russell Vaught, the OMB director, like a

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Speaker 3: super regulator. Everything goes through him.

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Speaker 4: Yeah, you could look at it that way, right, And

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Speaker 4: this has been a process for regulations at least that

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Speaker 4: have been that's been in place since nineteen eighty one,

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Speaker 4: where there's some centralized review of regulations of executive departments

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Speaker 4: and agencies. This is now saying independent agencies, you also

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Speaker 4: need to have your new regulations reviewed and approved by

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Speaker 4: O and B before you can go forward and put

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Speaker 4: them out.

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Speaker 3: I mean, the agencies have particular expertise, so then you're

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Speaker 3: going to have someone who doesn't have that expertise overseeing this.

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Speaker 5: That's right.

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Speaker 4: It's a particular problem with this latest move to bring

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Speaker 4: on board independent financial regulatory bodies under O and B

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Speaker 4: review because the particular office within O and B that

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Speaker 4: reviews regulations, known as OIRA or the Office of Information

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Speaker 4: and Regulatory Affairs, has built up expertise and capacity for

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Speaker 4: the kinds of regulations that they've been reviewing over the

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Speaker 4: last forty plus years, which are you know, tend to

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Speaker 4: be transportation, environmental, health and safety and so forth regulations,

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Speaker 4: not financial regulatory decisions, because the financial regulatory agencies haven't

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Speaker 4: fallen under the ambit of their review. So if this

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Speaker 4: is going to be any meaningful expert oversight of what

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Speaker 4: independent financial regulatory bodies are doing. OHIRA will need to

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Speaker 4: build up its internal capacity to understand and evaluate the

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Speaker 4: benefits and the costs of financial regulations, something it doesn't

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Speaker 4: currently possess.

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Speaker 3: And how does this order treat the Federal Reserve.

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Speaker 4: Well, it brings the Federal Reserve as a regulator under

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Speaker 4: the ambit of the Executive Order, but it specifically exempts

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Speaker 4: the Federal Reserve in its exercise of monetary policy decision

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Speaker 4: making from White House scrutiny and oversight and control under

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Speaker 4: the Executive Order.

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Speaker 5: So, at least for.

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Speaker 4: Now, and this is a good thing for the country,

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Speaker 4: the Federal Reserve's monetary policy is supposed to remain independent

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Speaker 4: and free from political interference from the White House. Not

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Speaker 4: so with respect to say, the banking regulatory functions of.

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Speaker 5: The Federal Reserve.

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Speaker 4: At least as this order is is now drafted.

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Speaker 3: Each agency would have to have a liaison to the

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Speaker 3: White House.

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Speaker 5: Yeah.

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Speaker 4: Yeah, there's supposed to be a liaison to the White House.

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Speaker 5: There's DOGE leaders.

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Speaker 4: That are now going to, you know, be helping the

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Speaker 4: White House oversee what's going on at these agencies. In

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Speaker 4: some ways, it seems a bit of an overkill. If

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Speaker 4: you already are putting in place loyalists at the very

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Speaker 4: top of the agency, why you would need this additional

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Speaker 4: layer of scrutiny or oversight. But yeah, that's what's contemplated here.

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Speaker 3: Coming up next on the Bloomberg Law Show, I'll continue

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Speaker 3: this conversation with Professor Carrie COLINIESI. Well, the Supreme Court

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Speaker 3: support Trump's power grab. You're listening to Bloomberg. I've been

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Speaker 3: talking to an expert in regulatory law, Professor Carry Colonies

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Speaker 3: of the University of Sylvania Law School, about an executive

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Speaker 3: order from President Trump this week claiming vast control over

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Speaker 3: independent agencies like the Securities and Exchange Commission and the

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Speaker 3: Federal Trade Commission. What do you think are some of

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Speaker 3: the dangers of a president taking control of independent agencies

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Speaker 3: in the way envisioned by this order.

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Speaker 4: Well, there's a lot of practicalities behind the order. At least,

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Speaker 4: let's start with the regulations that will need to be

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Speaker 4: worked out. I've already mentioned the need for expertise by

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Speaker 4: folks in the White House Regulatory Review Office, but there's

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Speaker 4: also other aspects of that traditional review process that just

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Speaker 4: don't fit structurally at all with a multi member commission.

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Speaker 4: It's really been a model designed for overseeing agencies that

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Speaker 4: are headed by a single administrator. The White House staff

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Speaker 4: goes back and forth with agency staff and ultimately even

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Speaker 4: with the agency head at times to work out any

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Speaker 4: disagreements or iron out any wrinkles that there might be.

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Speaker 5: How that works with a.

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Speaker 4: Multi member body. I don't really know. In fact, the

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Speaker 4: current process that this new Executive Order says will apply

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Speaker 4: to independent agencies regulations has a dispute resolution process that

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Speaker 4: specifically says the agency head shall be able to appeal

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Speaker 4: some disagreement with O and B to the President. It's

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Speaker 4: not clear who the agency head is in a multi

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Speaker 4: member commission. Do they all have to vote on whether

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Speaker 4: they go appeal something to the president or not. There

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Speaker 4: are going to be some guidelines that are supposedly issued

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Speaker 4: by O and B as to how this new executive

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Speaker 4: Order gets worked out, and so I think, you know,

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Speaker 4: some of these practicalities will have to remain as to

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Speaker 4: the large your issue about, you know, what we're getting

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Speaker 4: and what we're losing. I think all agencies, whether they're

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Speaker 4: executive branch agencies or independent regulatory agencies, need a degree

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Speaker 4: of autonomy from the kind of raw politics that can

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Speaker 4: often be important to presidents, and I think are clearly

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Speaker 4: important to this president.

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Speaker 5: We don't want a government where.

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Speaker 4: Agencies are acting on impulses of favoritism retribution, and some

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Speaker 4: presidents might want that, this president might want that. And

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Speaker 4: if we don't have a degree of autonomy and our

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Speaker 4: governmental institutions from that kind of raw politics, we really

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Speaker 4: suffer as a country.

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Speaker 3: This is all part of the theory of the unitary executive,

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Speaker 3: which gives the president sweeping powers sole authority over the

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Speaker 3: federal government's executive brand. And the speculation is that the

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Speaker 3: Trump administration wants to push the Supreme Court to adopt

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Speaker 3: the unitary executive theory.

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Speaker 4: Right they're basically acting is if the Court has already

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Speaker 4: adopted wholesale the unitary executive theory by in effect overturning

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Speaker 4: the nineteen thirty five Supreme Court decision called Humphrey's Executor.

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Speaker 4: That decision, the Supreme Court said that Congress can create

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Speaker 4: these independent agencies that are headed by officials who have

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Speaker 4: some kind of tenure protection and can't be removed at

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Speaker 4: will by presidents. You know, this administration is taking action

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Speaker 4: that one would expect to see if Humphrey's Executor had

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Speaker 4: already been determined to be unconstitutional, that is that Congress

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Speaker 4: isn't allowed to insulate any agencies from presidential removal. That

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Speaker 4: will they're firing already some officials at the NRB that

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Speaker 4: have had good cause protections and taking other actions like

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Speaker 4: this executive order that are very aggressive, and I think

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Speaker 4: they're setting up and hoping that they'll get the Supreme

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Speaker 4: Court to overturn Humphrey's Executor. It wouldn't be a big

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Speaker 4: stretch to expect the Supreme Court will do that. The

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Speaker 4: Supreme Court's been whittling away.

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Speaker 5: At Humphrey's Executor for easily.

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Speaker 4: Ten years or so now, and you know it's probably

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Speaker 4: expected by most observers to be on the chopping block.

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Speaker 4: The big deal will be if Humphrey's executor goes, Will

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Speaker 4: it go big time, that is, by sweeping in civil

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Speaker 4: service protections and protections for the federal reserves, monetary policy,

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Speaker 4: or will there be some way that the Supreme Court says, well,

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Speaker 4: it's unconstitutional for Congress to create insulation for every other

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Speaker 4: position in government, but we still think it's okay for

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Speaker 4: civil servants to be protected with some good cause protections

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Speaker 4: or for the Federal Reserve when it's adopting monetary policy

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Speaker 4: to have that. Hard to know exactly how the Supreme

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Speaker 4: Court will decide when this case comes before us, But

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Speaker 4: I think it's headed there, and this administration, I think

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Speaker 4: is already acting in effect as if it's been there.

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Speaker 5: And they want do we know.

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Speaker 3: Which Supreme Court justices are fully behind the unitary executive theory.

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Speaker 5: Well, I think there's probably a good majority.

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Speaker 4: That are inclined to this. I mean, you know, as

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Speaker 4: Chief Justice Roberts even has been kind of spearheading decisions

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Speaker 4: to whittle away at Humphrey's executor going back to the

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Speaker 4: decisions that first started to say that we couldn't have

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Speaker 4: sub agencies that have good cause protection if the head

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Speaker 4: agency did that was held to be unconstitutional. Then it

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Speaker 4: was held that you can't have a single headed body

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Speaker 4: that has an administrator that's got good cause protection. So

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Speaker 4: there's a clear majority that looks suspiciously on these They've

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Speaker 4: just been moving incrementally and maybe waiting for the case

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Speaker 4: that will take it to the next step.

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Speaker 3: I don't understand why a judge would want to give

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Speaker 3: more power to the head of the executive branch on

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Speaker 3: check power. I would think they want to keep more

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Speaker 3: balance between the branches of government.

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Speaker 4: Yeah, you know, I think if you look at at

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Speaker 4: a lot of the cases over the years, and there

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Speaker 4: haven't been that many, but when these issues have arisen,

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Speaker 4: the courts have been suspicious of Congress's power, believe it

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Speaker 4: or not, and Congress's power to kind of interfere with

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Speaker 4: the administration of government by putting in place limitations on

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Speaker 4: who can head up agencies or how they can be removed.

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Speaker 4: And I think there's been, you know, some sensible decisions

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Speaker 4: that have said, you know, Congress, you can't pick who

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Speaker 4: are the heads of agencies, or you can't yourself have

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Speaker 4: a role in deciding whether an agency head is removed

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Speaker 4: or not. But you know, now those cases and the

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Speaker 4: suspicion of Congress is sort of going to the extreme.

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Speaker 4: And you know, we do have justices on the Court

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Speaker 4: who have spent time, like Justice Roberts and Justice Kavanaugh

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Speaker 4: and so forth, who have spent time working in the

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Speaker 4: White House, and maybe that has emboldened them to think

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Speaker 4: in presidentialist terms. There's also I think a mindset of

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Speaker 4: sort of formalist, rigid hierarchical authority that some of our

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Speaker 4: justices and the majority seem to exhibit that they think

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Speaker 4: that there should be just one person at the top

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Speaker 4: of the executive branch who should get to say everything

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Speaker 4: that the government does and have the ability to shape

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Speaker 4: the course of all policies. Now that's not really I

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Speaker 4: think how the text of the Constitution is necessarily written.

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Speaker 4: There are actually no provisions in the Constitution dealing with

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Speaker 4: the removal of officials, So you know, it's not something

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Speaker 4: that's demanded by the text of the Constitution, Nor is

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Speaker 4: it really in our history, whether at the time of

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Speaker 4: the founding or subsequently, to say that Congress can't create

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Speaker 4: bodies that have some degree of autonomy from the president.

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Speaker 3: So we're a month into Trump's second term and the

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Speaker 3: administration is already going to the Supreme Court asking for

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Speaker 3: an unusual invention, asking the Justices to step into a

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Speaker 3: newly filed lawsuit and allow the president to fire the

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Speaker 3: head of a federal whistleblower agency Hampton Dellinger. Do you

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Speaker 3: think how the Court handles this will be an indication

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Speaker 3: of how they're going to respond to other attempts by

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Speaker 3: Trump to gain power.

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Speaker 5: Yes, or no.

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Speaker 4: I mean, it depends on how sweeping they want to

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Speaker 4: make their decision. It could be that this is just

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Speaker 4: a very narrow decision that follows from a prior precedent,

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Speaker 4: like I was saying before about where you know, there's

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Speaker 4: double layers of protection that can't exist, or so forth.

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Speaker 4: It may be a very narrow decision, in which case

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Speaker 4: we might not learn very much. I suspect that's probably

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Speaker 4: the easiest thing for the court to do, but you know,

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Speaker 4: I prize that Trump versus the United States says, yeah, well,

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Speaker 4: are the court wanted to really go at it and

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Speaker 4: make a very broad ruling about presidential immunity?

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Speaker 5: So we'll have to see.

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Speaker 3: Most people are assuming that lawsuits are going to be

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Speaker 3: brought over these executive orders, but we've seen that in

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Speaker 3: some of these cases over executive orders, the judges are

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Speaker 3: finding that the plaintiffs don't have standing to bring the case,

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Speaker 3: basically an interest in the outcome of the case. Who

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Speaker 3: would be able to bring a lawsuit over this executive order?

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Speaker 3: I mean, the heads of the agencies are Trump appointdee,

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Speaker 3: so they're not bringing a case right exactly.

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Speaker 4: It's going to be difficult because, first of all, the

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Speaker 4: executive order itself is hard to challenge. As an executive order.

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Speaker 4: It has to be some kind of concrete decision that

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Speaker 4: an agency's making that adversely affects somebody that you can

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Speaker 4: claim would not have been made that way but for

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Speaker 4: the executive order. And there's creative lawyers out there, and

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Speaker 4: there will be arguments in lawsuits that I think.

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Speaker 5: Will be filed.

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Speaker 4: Whether they're persuasive to the lower courts or ultimately to

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Speaker 4: the Supreme Court remains to be seen. It is though

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Speaker 4: the case that you know, executive orders rarely are themselves

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Speaker 4: directly vehicles for litigation. It's the actions that follow from them.

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Speaker 4: And as we were talking earlier, sometimes these actions that

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Speaker 4: might be thought to follow from them might be just

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Speaker 4: due to having a loyalist in these independent agencies to

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Speaker 4: begin with. So it may be hard to untangle how

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Speaker 4: much an adverse action that is being challenged is due

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Speaker 4: to the executive order versus just having a loyalist heading

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Speaker 4: up the commission. It's going to be probably facts specific,

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Speaker 4: and I think it also is a pretty long shot

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Speaker 4: given the predisposition of a majority of the Supreme Court

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Speaker 4: to be a pro presidentialist.

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Speaker 3: I'm sure Trump will keep the Supreme Court very busy.

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Speaker 3: Thanks so much, Carrie Death. Professor Kerry Coliniesi, who directs

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Speaker 3: the University of Pennsylvania Carry Law Schools program on regulation.

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Speaker 3: Coming up next on the Bloomberg Law Show, Jay and

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Speaker 3: Jay is on trial in bankruptcy court over its plan

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Speaker 3: to end thousands of lawsuits over its baby powder causing

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Speaker 3: cancer in a bankruptcy settlement. I'm June Grosso. When you're

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Speaker 3: listening to Bloomberg, Johnson and Johnson is trying to use

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Speaker 3: the power of bankruptcy to drive a settlement of thousands

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Speaker 3: of lawsuits filed by women or their family members who

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Speaker 3: claim it's baby powder gave them cancer. Jay and Jay,

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Speaker 3: one of the most profitable companies in the world, has

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Speaker 3: put a very small unit into bankruptcy to achieve this end.

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Speaker 3: Courts in New Jersey and Philadelphia stopped earlier attempts by

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Speaker 3: Jay and Jay to tap bankruptcy, but now the company

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Speaker 3: is betting on a different conclusion from a Texas court.

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Speaker 3: Joining me is Stephen Church, Bloomberg Bankruptcy Reporter. This case

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Speaker 3: has a long and complicated history. Tell us how we

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Speaker 3: got to this point. With a trial in Houston Texas Sure.

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Speaker 1: For the last ten years, Johnson and Johnson has been

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Speaker 1: fighting allegations that painted baby powder, something that has asbestos

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Speaker 1: in it, allegedly pauses ovarian cancer and other gynecological cancers

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Speaker 1: in women who use this powder just about every day.

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Speaker 1: Those lawsuits have slowly been building. There have been more

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Speaker 1: and more than filed. Now there are about sixty thousand

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Speaker 1: lawsuits that have been filed and another twenty five thousand

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Speaker 1: or so claims that have not yet been filed in

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Speaker 1: court but are still being prepared by lawyers. The company

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Speaker 1: has fought them throughout the entire time and has refused

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Speaker 1: to settle, and has claimed repeatedly that there is no

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Speaker 1: scientific link between bata by powder and other calc based

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Speaker 1: products and cancer. The problem is they've had at least

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Speaker 1: one major verdict that went all the way to the

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Speaker 1: Supreme Court, forcing Johnson and Johnson to pay out more

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Speaker 1: than two billion dollars two about twenty winning. That got

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Speaker 1: the company's attention, and they tried to find a new

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Speaker 1: way to resolve these all at once. That new way,

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Speaker 1: just a few years ago, was to go into bankruptcy court.

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Speaker 1: The theory is they took a small unit and made

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Speaker 1: this unit responsible for paying off all the CALC claims.

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Speaker 1: Then they gave this unit a contract that promised that

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Speaker 1: Johnson and Johnson would cover all the expenses. They've tried

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Speaker 1: this three times. The first two bankruptcy cases of a

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Speaker 1: unit of Johnson and Johnson where they tried to create

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Speaker 1: this settlement failed. They're now on their third attempt, and

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Speaker 1: this third attempt has gotten further than the other two.

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Speaker 1: They're after an actual trial where a judge will decide

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Speaker 1: whether the plan to pay nine billion dollars out is

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Speaker 1: legitimate or has fatal flaws that cannot be approved.

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Speaker 3: I don't know how many attorneys there are, but there

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Speaker 3: are many attorneys and they're fighting. Some want the settlement,

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Speaker 3: some don't want the settlement correct.

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Speaker 1: There are about two dozen or so prominent attorneys who

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Speaker 1: represent tens of thousands of women who have some sort

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Speaker 1: of health issues that they claim came from the baby

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Speaker 1: powder or related products. Most of those attorneys have settled

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Speaker 1: with Johnson and Johnson in this third effort, and they

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Speaker 1: have agreed that a trust fund with nine billion dollars

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Speaker 1: in it will be set up to handle almost all

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Speaker 1: of the talk really claims. There may be a few

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Speaker 1: hundreds that are exempt, but almost all of these claims

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Speaker 1: will go to a special trust where they have rules

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Speaker 1: set up to decide who gets paid and how much

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Speaker 1: they get paid. Holdouts, a handful of attorneys who represent

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Speaker 1: several thousand women object. They say there isn't enough money

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Speaker 1: and that the plan itself is flawed and legally can't

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Speaker 1: be justified.

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Speaker 3: What made it different this time around was that Johnson

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Speaker 3: and Johnson got pre approval from a majority of the claimants.

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Speaker 1: Yes, Johnson and Johnson made a couple of changes in

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Speaker 1: between their second failure and this third effort. After a

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Speaker 1: Philadelphia federal appeals court rejected their second attempt to win

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Speaker 1: approval of this trust fund, Johnson and Johnson negotiated heavily

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Speaker 1: with many of the plaintiffs firms and got a new deal.

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Speaker 1: They added more than a billion dollars on top of

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Speaker 1: the original offer, bringing it to nine billion. And they

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Speaker 1: also did something that happens in many bankruptcies, big giant bankruptcies,

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Speaker 1: where they took a vote of all of the claimants

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Speaker 1: in order to prepackage the bankruptcy case. They wrote the plan,

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Speaker 1: they developed the trust, and they asked more than eighty

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Speaker 1: thousand women to vote in favor of it. Many of

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Speaker 1: the women did, most of the women. Johnson and Johnson

443
00:29:21,320 --> 00:29:26,080
Speaker 1: claims that more than seventy five percent voted in favor

444
00:29:26,120 --> 00:29:29,720
Speaker 1: of the plan. The holdouts claim that those numbers are

445
00:29:29,760 --> 00:29:33,600
Speaker 1: not accurate because of some flaws in the way the

446
00:29:33,680 --> 00:29:37,720
Speaker 1: voting took place. They claimed Johnson and Johnson bought votes.

447
00:29:37,840 --> 00:29:40,880
Speaker 1: They claimed Johnson and Johnson counted votes in favor of

448
00:29:40,920 --> 00:29:43,120
Speaker 1: the plan that should have been counted against the plan.

449
00:29:43,760 --> 00:29:47,720
Speaker 1: And so that's a very technical aspect of this trial.

450
00:29:48,320 --> 00:29:51,960
Speaker 1: Was the voting fair? Was it in compliance with these

451
00:29:52,040 --> 00:29:55,800
Speaker 1: detailed rules that happen in bankruptcy court? Both sides have

452
00:29:55,920 --> 00:29:58,120
Speaker 1: spent a lot of money fighting on this case.

453
00:29:58,840 --> 00:30:01,280
Speaker 3: Is that the main question that the judge is going

454
00:30:01,320 --> 00:30:04,680
Speaker 3: to decide? Or is he going to decide the fairness

455
00:30:04,720 --> 00:30:07,840
Speaker 3: of this? I mean, what's his major question?

456
00:30:08,240 --> 00:30:11,360
Speaker 1: There are two big focuses. The one is the voting.

457
00:30:11,760 --> 00:30:13,960
Speaker 1: Was the voting does correctly? Then once you get past

458
00:30:13,960 --> 00:30:17,200
Speaker 1: the voting, there's another set of objections that might be

459
00:30:17,280 --> 00:30:22,000
Speaker 1: even more serious. Those complaints are mostly coming from the

460
00:30:22,360 --> 00:30:25,880
Speaker 1: US Trustee, that's the arm of the US Justice Department

461
00:30:25,960 --> 00:30:28,680
Speaker 1: that is a watchdog in corporate bankruptcies. Some of the

462
00:30:28,720 --> 00:30:31,520
Speaker 1: holdout playments, some of the holdout women who are assuming

463
00:30:31,640 --> 00:30:34,959
Speaker 1: also back this type of argument against the plan, and

464
00:30:35,000 --> 00:30:38,080
Speaker 1: that is Johnson and Johnson is one of the world's

465
00:30:38,120 --> 00:30:42,080
Speaker 1: most profitable companies. How is it possible that they can

466
00:30:42,280 --> 00:30:47,200
Speaker 1: use these special bankruptcy rules that are designed for companies

467
00:30:47,480 --> 00:30:52,760
Speaker 1: in financial distress, companies with serious financial problems in order

468
00:30:52,800 --> 00:30:56,800
Speaker 1: to cancel a bunch of debt and create this new trust.

469
00:30:57,080 --> 00:31:00,480
Speaker 1: Jaun Cheen Johnson argues, well, there's an exception under a

470
00:31:00,560 --> 00:31:04,200
Speaker 1: law that Congress passed many years ago, cases that are

471
00:31:04,280 --> 00:31:08,320
Speaker 1: about asbestos. If a company uses asbestos, which is a

472
00:31:08,400 --> 00:31:12,480
Speaker 1: known toxic substance in one of its products, and that

473
00:31:12,560 --> 00:31:18,240
Speaker 1: company files for bankruptcy, then related parties related companies can

474
00:31:18,400 --> 00:31:22,800
Speaker 1: also benefit from that bankruptcy case. So in this case,

475
00:31:23,120 --> 00:31:25,960
Speaker 1: the two big issues are was the voting done properly?

476
00:31:26,280 --> 00:31:28,880
Speaker 1: And then step back, did Johnson and Johnson even be

477
00:31:28,960 --> 00:31:32,080
Speaker 1: allowed to take advantage of these bankruptcy rules If the

478
00:31:32,200 --> 00:31:35,240
Speaker 1: company itself doesn't go bankrupt and they take advantage of

479
00:31:35,280 --> 00:31:38,280
Speaker 1: this tiny little unit put it in bankruptcy, and then

480
00:31:38,320 --> 00:31:40,360
Speaker 1: that giant corporation gets the benefit.

481
00:31:40,600 --> 00:31:45,000
Speaker 3: Is the bankruptcy trustee afraid that this would set a

482
00:31:45,040 --> 00:31:47,800
Speaker 3: precedent if Johnson and Johnson's allowed to do this.

483
00:31:48,280 --> 00:31:52,120
Speaker 1: There is that argument that this will encourage other very

484
00:31:52,120 --> 00:31:57,280
Speaker 1: profitable companies to use sort of a loophole to avoid

485
00:31:57,760 --> 00:32:02,480
Speaker 1: bankruptcy themselves. You can dump and eliminate these big lawsuits

486
00:32:03,120 --> 00:32:05,200
Speaker 1: without actually going bankrupt yourself.

487
00:32:05,640 --> 00:32:08,959
Speaker 3: Was one of the first witnesses, one of the plaintiff's

488
00:32:09,120 --> 00:32:11,960
Speaker 3: lawyers talking about, you know, the position that some of

489
00:32:12,200 --> 00:32:13,360
Speaker 3: his clients are in.

490
00:32:13,800 --> 00:32:17,520
Speaker 1: Yes. What's unusual about this is that there's only been

491
00:32:17,720 --> 00:32:22,040
Speaker 1: one major victory against Johnson and Johnson that made them

492
00:32:22,080 --> 00:32:24,960
Speaker 1: all the way through the appeal process, and that forced

493
00:32:25,040 --> 00:32:28,560
Speaker 1: Johnson Johnson to pay money to victims. What has happened

494
00:32:29,000 --> 00:32:31,840
Speaker 1: until now is many of these cases have been stuck

495
00:32:31,880 --> 00:32:36,360
Speaker 1: on appeal. So some women have won hundreds of millions

496
00:32:36,360 --> 00:32:40,120
Speaker 1: of dollars, but those cases were overturned on appeal, and

497
00:32:40,160 --> 00:32:43,640
Speaker 1: now there are still fights going on in state courts

498
00:32:43,680 --> 00:32:47,160
Speaker 1: and in federal courts over whether some of these cases

499
00:32:47,240 --> 00:32:52,200
Speaker 1: should eventually be upheld or rejected. That has stalled a

500
00:32:52,240 --> 00:32:56,400
Speaker 1: lot of the plaintiff's lawyers from being able to move forward.

501
00:32:56,880 --> 00:32:59,800
Speaker 1: So the net result is that none of these women

502
00:33:00,240 --> 00:33:03,680
Speaker 1: have actually collected money from Johnson and Johnson other than

503
00:33:03,720 --> 00:33:06,240
Speaker 1: that one unusual case that've been all the way to

504
00:33:06,240 --> 00:33:10,040
Speaker 1: the Supreme Court. One lawyer testified earlier this week that

505
00:33:10,160 --> 00:33:13,840
Speaker 1: he has at least twenty thousand women that he represents

506
00:33:14,080 --> 00:33:16,959
Speaker 1: who haven't collected the dining yet, and his argument in

507
00:33:17,040 --> 00:33:20,680
Speaker 1: favor of the cases, this is the fastest way to

508
00:33:20,720 --> 00:33:23,000
Speaker 1: get money to them. Put the money in the trust

509
00:33:23,480 --> 00:33:26,040
Speaker 1: and then let the women go to the trust explain

510
00:33:26,080 --> 00:33:29,960
Speaker 1: their situation, fill out a whole lot of incredibly complicated

511
00:33:30,040 --> 00:33:33,640
Speaker 1: forms explaining their health condition, how they got cancer, what

512
00:33:33,840 --> 00:33:37,480
Speaker 1: cancer stage they are in, what types of ailments they have,

513
00:33:38,440 --> 00:33:42,040
Speaker 1: and then a trust board will then decide, based on

514
00:33:42,320 --> 00:33:46,960
Speaker 1: complicated rules, how much they get paid. That this attorney

515
00:33:47,040 --> 00:33:50,440
Speaker 1: and many of his allies argue is the fastest way

516
00:33:50,640 --> 00:33:54,640
Speaker 1: to get money into the pockets of women who have cancer.

517
00:33:55,000 --> 00:33:58,840
Speaker 3: Is it expected that this decision here would be taken

518
00:33:58,920 --> 00:34:02,320
Speaker 3: up on appeal and then eventually end up at the

519
00:34:02,360 --> 00:34:03,280
Speaker 3: Supreme Court.

520
00:34:03,720 --> 00:34:05,880
Speaker 1: Most of the lawyers in the court room in this

521
00:34:06,040 --> 00:34:08,400
Speaker 1: trial have accepted the idea that there will be an

522
00:34:08,400 --> 00:34:10,800
Speaker 1: appeal no matter what. Whether that appeal goes all the

523
00:34:10,840 --> 00:34:13,920
Speaker 1: way to the Supreme Court is an open question. But

524
00:34:14,320 --> 00:34:18,520
Speaker 1: the Federal Appeals Court in Texas has a much different

525
00:34:18,640 --> 00:34:23,600
Speaker 1: standard when it comes to certain kinds of cases and

526
00:34:23,760 --> 00:34:28,439
Speaker 1: how you decide whether a case fits the law than

527
00:34:28,800 --> 00:34:33,279
Speaker 1: the Philadelphia Appeals Court. So the assumption is that when

528
00:34:33,320 --> 00:34:35,720
Speaker 1: this gets appealed, no matter who, whether one side wins

529
00:34:35,719 --> 00:34:37,600
Speaker 1: and one side loses, somebody is going to go to

530
00:34:37,760 --> 00:34:41,360
Speaker 1: the appeals court in Texas, the Federal Appeals Court in Texas,

531
00:34:41,520 --> 00:34:45,080
Speaker 1: and that's where a lot of the answers will come from,

532
00:34:45,280 --> 00:34:48,840
Speaker 1: probably the last stage. But even that could be appealed

533
00:34:48,920 --> 00:34:52,440
Speaker 1: to the US Supreme Court, and if that happens, we

534
00:34:52,520 --> 00:34:56,680
Speaker 1: could see a precedent that other companies will will try

535
00:34:56,680 --> 00:34:57,840
Speaker 1: to take advantage.

536
00:34:57,360 --> 00:35:01,040
Speaker 3: Of, and that appeals court will be the Fifth Circuit,

537
00:35:01,680 --> 00:35:05,440
Speaker 3: which is the most conservative circuit in the country and

538
00:35:06,120 --> 00:35:10,240
Speaker 3: has often come up with, shall we say, novel theories

539
00:35:10,280 --> 00:35:13,640
Speaker 3: of the law. Thanks so much, Steven, we'll check back

540
00:35:13,680 --> 00:35:17,040
Speaker 3: with you at the end of the trial. That's Stephen Church,

541
00:35:17,239 --> 00:35:20,600
Speaker 3: Bloomberg Bankruptcy Reporter, and that's it for this edition of

542
00:35:20,600 --> 00:35:23,239
Speaker 3: The Bloomberg Law Show. Remember you can always get the

543
00:35:23,320 --> 00:35:26,560
Speaker 3: latest legal news on our Bloomberg Law podcast. You can

544
00:35:26,560 --> 00:35:30,799
Speaker 3: find them on Apple Podcasts. Spotify and at www dot

545
00:35:30,840 --> 00:35:35,000
Speaker 3: bloomberg dot com. Slash podcast Slash Law, and remember to

546
00:35:35,040 --> 00:35:38,120
Speaker 3: tune into The Bloomberg Law Show every weeknight at ten

547
00:35:38,160 --> 00:35:41,920
Speaker 3: pm Wall Street Time. I'm June Grosso and you're listening

548
00:35:42,000 --> 00:35:42,680
Speaker 3: to Bloomberg