1 00:00:03,120 --> 00:00:07,960 Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio. 2 00:00:09,160 --> 00:00:12,440 Speaker 1: A case in the Western District of Texas is one 3 00:00:12,440 --> 00:00:15,760 Speaker 1: of the biggest fights over abortion since the Supreme Court 4 00:00:15,880 --> 00:00:19,720 Speaker 1: overturned Roe v. Wade and the constitutional right to abortion. 5 00:00:20,160 --> 00:00:24,520 Speaker 1: As we've seen, what starts in Texas doesn't stay in Texas. 6 00:00:25,120 --> 00:00:30,319 Speaker 1: It often has grave national implications. That's Wendy Davis of 7 00:00:30,480 --> 00:00:34,520 Speaker 1: Planned Parenthood Texas Votes talking about the case where anti 8 00:00:34,600 --> 00:00:37,479 Speaker 1: abortion groups are trying to block the sales of a 9 00:00:37,640 --> 00:00:41,839 Speaker 1: key abortion pill nationwide, a pill which was approved by 10 00:00:41,840 --> 00:00:47,280 Speaker 1: the FDA decades ago, and they've brought their case in Amarillo, Texas, 11 00:00:47,680 --> 00:00:51,960 Speaker 1: where they're one certain of getting Judge Matthew kesmeric a 12 00:00:52,080 --> 00:00:56,240 Speaker 1: Trump appointee who's been criticized for his views opposing abortion 13 00:00:56,320 --> 00:01:00,440 Speaker 1: and LGBTQ rights. It's an illustration of the problem with 14 00:01:00,520 --> 00:01:04,759 Speaker 1: single judge divisions and judge shopping something, just as Alena 15 00:01:04,840 --> 00:01:09,120 Speaker 1: Kagan complained about in a case this term in Texas, 16 00:01:09,640 --> 00:01:12,600 Speaker 1: there are divisions within districts. You can pick your trial 17 00:01:12,640 --> 00:01:17,560 Speaker 1: court judge. You know, you play by the rules, that's fine, 18 00:01:18,000 --> 00:01:21,360 Speaker 1: but you pick your trial court judge. One judge stops 19 00:01:21,480 --> 00:01:24,840 Speaker 1: a federal immigration policy in its tracks. Joining me is 20 00:01:24,840 --> 00:01:28,360 Speaker 1: Professor Stephen Vlanik of the University of Texas Law School, 21 00:01:28,640 --> 00:01:31,919 Speaker 1: who's been studying this issue and written about it. Steve, 22 00:01:31,959 --> 00:01:34,880 Speaker 1: we've all heard about forum shopping. How is what's happening 23 00:01:34,880 --> 00:01:38,479 Speaker 1: in Texas any different? And I think it's worth distinguishing 24 00:01:38,520 --> 00:01:42,320 Speaker 1: between two different factories. So, in any legal system that 25 00:01:42,400 --> 00:01:46,360 Speaker 1: has relatively permissive rules about where you can file a lawsuit, 26 00:01:46,600 --> 00:01:48,800 Speaker 1: you know that doesn't just narrow it down to one 27 00:01:49,080 --> 00:01:52,320 Speaker 1: jurisdiction for every single lawsuit, You're gonna have forum shopping. 28 00:01:52,360 --> 00:01:54,920 Speaker 1: That is that you're going to have efforts by whoever 29 00:01:55,000 --> 00:01:58,560 Speaker 1: controls where the case is filed to file in a 30 00:01:58,600 --> 00:02:03,480 Speaker 1: place that is strategically advantageous, either because the general composition 31 00:02:03,520 --> 00:02:06,520 Speaker 1: of the bench is favorable, or because the jury pool 32 00:02:06,640 --> 00:02:10,960 Speaker 1: is favorable, or because maybe it's more geographically convenient to 33 00:02:11,080 --> 00:02:13,160 Speaker 1: one side of the case and not the other. June. 34 00:02:13,240 --> 00:02:15,880 Speaker 1: That is, to a degree inevitable and unavoidable in our 35 00:02:15,960 --> 00:02:18,200 Speaker 1: legal system. What we're seeing a lot more of these 36 00:02:18,280 --> 00:02:20,960 Speaker 1: days is what I think because a far more nefarious 37 00:02:21,200 --> 00:02:24,840 Speaker 1: version of that, which is judge shopping, filing in tiny, 38 00:02:25,240 --> 00:02:30,280 Speaker 1: usually single judge subdivisions of federal district courts where by 39 00:02:30,400 --> 00:02:33,680 Speaker 1: filing in that particular place you have a one hundred 40 00:02:33,680 --> 00:02:37,720 Speaker 1: percent chance of drawing a specific judge, where basically the 41 00:02:37,800 --> 00:02:40,400 Speaker 1: plantiff can choose not just where to file, but by 42 00:02:40,440 --> 00:02:42,800 Speaker 1: choosing where to file, the plantiffs can say, I want 43 00:02:42,919 --> 00:02:45,880 Speaker 1: my case to be heard by Judge Smith. And I 44 00:02:45,919 --> 00:02:49,680 Speaker 1: think that's not a brand new phenomenon, but we're seeing, 45 00:02:49,680 --> 00:02:53,360 Speaker 1: and I think being exploited a lot more systemically and 46 00:02:53,440 --> 00:02:58,200 Speaker 1: a lot more visibly in cases with partisan valances than 47 00:02:58,360 --> 00:03:01,120 Speaker 1: was the case really at any recent point in the 48 00:03:01,160 --> 00:03:03,760 Speaker 1: history of our legal system, and a lot more in Texas. 49 00:03:04,040 --> 00:03:06,320 Speaker 1: So yeah, I mean, so Texas is not unique. You know, 50 00:03:06,400 --> 00:03:08,160 Speaker 1: the headlines are all out of Texas, and there are 51 00:03:08,160 --> 00:03:10,480 Speaker 1: some reasons for that, but it's worth stressing there are 52 00:03:10,680 --> 00:03:15,200 Speaker 1: single judge divisions in a decent minority, probably around thirty 53 00:03:15,200 --> 00:03:18,359 Speaker 1: five percent of the federal district courts in the country 54 00:03:18,639 --> 00:03:20,720 Speaker 1: have at least somewhere where if you file, maybe you 55 00:03:20,800 --> 00:03:22,840 Speaker 1: get it assigned to a single judge. What I think 56 00:03:22,919 --> 00:03:25,200 Speaker 1: mixed Texas union because we've got a lot of So 57 00:03:25,639 --> 00:03:29,080 Speaker 1: of the twenty seven total divisions in Texas across our 58 00:03:29,080 --> 00:03:32,000 Speaker 1: four district courts, there are eight that are single judge divisions, 59 00:03:32,080 --> 00:03:33,400 Speaker 1: and you know, June, I think we should say a 60 00:03:33,440 --> 00:03:36,320 Speaker 1: single judge divisions staffed by judges who I think are 61 00:03:36,400 --> 00:03:40,480 Speaker 1: relatively outliers when it comes to the ideological spectrum, and 62 00:03:40,560 --> 00:03:42,600 Speaker 1: in the fifth Circuit right where you have a fairly 63 00:03:42,640 --> 00:03:45,280 Speaker 1: sympathetic appellate bench as well. And so I think there's 64 00:03:45,280 --> 00:03:48,280 Speaker 1: a reason why we've seen the state of Texas steer 65 00:03:48,680 --> 00:03:52,080 Speaker 1: lawsuit after lawsuit against the Biden administration to the single 66 00:03:52,160 --> 00:03:55,800 Speaker 1: judge divisions. Why we've seen this mythopristone case filed of 67 00:03:55,840 --> 00:03:58,960 Speaker 1: all places in the country in Amarillo, Texas, so that 68 00:03:59,000 --> 00:04:01,200 Speaker 1: it could be assigned to Dge Matthew kaz Marit. I 69 00:04:01,200 --> 00:04:04,200 Speaker 1: think it's the pattern that's the problem, not just individual 70 00:04:04,200 --> 00:04:08,560 Speaker 1: instances there. Ope, has Texas denied that it's filing in 71 00:04:08,600 --> 00:04:12,280 Speaker 1: these districts to get conservative judges? No, I mean the 72 00:04:12,320 --> 00:04:14,720 Speaker 1: irony is, though, you know, in three of the cases 73 00:04:14,800 --> 00:04:17,279 Speaker 1: Texas has filed against the federal government, the federal government 74 00:04:17,279 --> 00:04:20,880 Speaker 1: has now moved the transfer either to a different venue, 75 00:04:20,960 --> 00:04:22,640 Speaker 1: like to a different district court, or at least to 76 00:04:22,680 --> 00:04:25,400 Speaker 1: a different division within the same district court. And the 77 00:04:25,440 --> 00:04:29,000 Speaker 1: first of those a case unhelpfully called Texas versus Department 78 00:04:29,000 --> 00:04:33,120 Speaker 1: of Homeland Security. There was a hearing where Texas represented 79 00:04:33,240 --> 00:04:35,719 Speaker 1: on the record in open court that they filed that 80 00:04:35,800 --> 00:04:39,880 Speaker 1: particular lawsuit in the Victoria Division of the Southern Districtive 81 00:04:39,880 --> 00:04:43,159 Speaker 1: of Texas because they wanted Judge Tipton. And you know 82 00:04:43,160 --> 00:04:47,200 Speaker 1: what's remarkable of that is that, notwithstanding that concession, Judge 83 00:04:47,200 --> 00:04:52,640 Speaker 1: Tipton still denied DJ's motion to transfer, basically because DJ 84 00:04:52,839 --> 00:04:56,080 Speaker 1: wouldn't publicly accuse him of being biased. And you know, June, 85 00:04:56,120 --> 00:04:57,880 Speaker 1: to me that miss is the point. The question is 86 00:04:57,920 --> 00:05:02,040 Speaker 1: not whether Judge Tipton is or whether Judge Kasmarica is biased. 87 00:05:02,160 --> 00:05:05,039 Speaker 1: The question is whether the reasonable person looking at this 88 00:05:05,160 --> 00:05:08,240 Speaker 1: behavior by playing dist you know, by Texas buy on 89 00:05:08,320 --> 00:05:10,680 Speaker 1: all these lawsuits in these district cords, would say that 90 00:05:10,720 --> 00:05:13,320 Speaker 1: this looks like the system is being manipulated. And if 91 00:05:13,360 --> 00:05:15,560 Speaker 1: the answer is yes, then that ought to be a 92 00:05:15,600 --> 00:05:18,680 Speaker 1: pretty compelling reason for judges to say, you know, we 93 00:05:18,680 --> 00:05:20,919 Speaker 1: don't want to abide that, we don't want to enable that, 94 00:05:21,000 --> 00:05:23,160 Speaker 1: we don't want to support that, and yet here we are. 95 00:05:23,560 --> 00:05:28,480 Speaker 1: Is the real problem, or a secondary problem, the issuance 96 00:05:28,520 --> 00:05:32,800 Speaker 1: of nationwide injunctions. So you have a judge in Amarillo, 97 00:05:33,000 --> 00:05:37,760 Speaker 1: Texas issuing an injunction that applies to the whole country. 98 00:05:38,000 --> 00:05:42,359 Speaker 1: I think nationwide injunctions compound the problem June, because you know, 99 00:05:42,400 --> 00:05:45,880 Speaker 1: among other things, they ratchet up the stakes of each 100 00:05:45,880 --> 00:05:48,480 Speaker 1: of these individual cases. But you know, I think an 101 00:05:48,520 --> 00:05:52,240 Speaker 1: individual district judge, even without a nationwide injunction, could still 102 00:05:52,240 --> 00:05:54,560 Speaker 1: cause a stair amount of mischief by him or herself. 103 00:05:54,600 --> 00:05:57,599 Speaker 1: So the nationwide injunctions I think have made this worse 104 00:05:57,800 --> 00:06:00,520 Speaker 1: and more visible. But actually I think the sort of 105 00:06:00,520 --> 00:06:03,800 Speaker 1: the judge shopping phenomenon is a problem no matter what 106 00:06:03,920 --> 00:06:07,039 Speaker 1: kind of relief the parties receive, king especially where you 107 00:06:07,080 --> 00:06:10,120 Speaker 1: have a defendant like the federal government that, even if 108 00:06:10,200 --> 00:06:12,839 Speaker 1: not such a to a nationwide injunction right would probably 109 00:06:12,880 --> 00:06:15,960 Speaker 1: still do its best to comply with a more geographically 110 00:06:15,960 --> 00:06:18,720 Speaker 1: limited court order. So nation wide injunctions I think are 111 00:06:18,760 --> 00:06:22,080 Speaker 1: part of why we're now paying more attention to this phenomenon. 112 00:06:22,440 --> 00:06:25,240 Speaker 1: But I don't think there's a problem here. As far 113 00:06:25,240 --> 00:06:28,760 Speaker 1: as the case before, Judge Kasmeric trying to block sales 114 00:06:28,839 --> 00:06:33,440 Speaker 1: of the abortion pill nationwide. So he told the lawyer's 115 00:06:33,520 --> 00:06:36,560 Speaker 1: last Wednesday that he would delay putting the hearing on 116 00:06:36,680 --> 00:06:41,200 Speaker 1: the docket until late Tuesday to try to minimize disruptions 117 00:06:41,360 --> 00:06:46,039 Speaker 1: and possible protests. Were his actions unconstitutional, I wouldn't go 118 00:06:46,080 --> 00:06:47,919 Speaker 1: that far. I mean, I think the reality is that 119 00:06:48,000 --> 00:06:51,280 Speaker 1: Judge Kasmaric didn't close the hearing to the public, and 120 00:06:51,320 --> 00:06:53,320 Speaker 1: so from the first memo perspective, I don't think there's 121 00:06:53,320 --> 00:06:56,120 Speaker 1: any issues. But the broader point here is that I 122 00:06:56,200 --> 00:06:59,440 Speaker 1: think folks would have reacted to that new a lot 123 00:06:59,520 --> 00:07:03,280 Speaker 1: differently if there hadn't been Judge shopping here. That is 124 00:07:03,320 --> 00:07:06,479 Speaker 1: to say, if you know the plaintiffs seeking to revoke 125 00:07:06,560 --> 00:07:09,960 Speaker 1: the FDA has approval of missa pristone had randomly drawn 126 00:07:10,280 --> 00:07:13,720 Speaker 1: a randomly assigned district judge, I don't think there'd be 127 00:07:13,800 --> 00:07:17,040 Speaker 1: nearly the sort of fear that the sticks is in 128 00:07:17,560 --> 00:07:20,520 Speaker 1: anytime you see an unusual procedural order like this. So 129 00:07:20,800 --> 00:07:23,840 Speaker 1: in that respect, I actually think Judge Kasmaris probably is 130 00:07:23,840 --> 00:07:27,560 Speaker 1: a victim of nothing other than the playstiff's manipulation of 131 00:07:27,600 --> 00:07:29,960 Speaker 1: his docket, where what he really thought was in the 132 00:07:30,000 --> 00:07:34,320 Speaker 1: best interest of he and his family's personal safety. The courthouse, yeah, 133 00:07:34,680 --> 00:07:39,360 Speaker 1: looks that much more sinister because of the transparent Judge 134 00:07:39,360 --> 00:07:41,400 Speaker 1: shopping with the plays engaged in to get the case 135 00:07:41,400 --> 00:07:43,480 Speaker 1: to him in the first place, it has the federal 136 00:07:43,520 --> 00:07:48,400 Speaker 1: government moved to change venue in that case. It hasn't, 137 00:07:48,520 --> 00:07:51,160 Speaker 1: because what the plaintiffs did in that case was they 138 00:07:51,240 --> 00:07:55,600 Speaker 1: created a corporate form in Amarillo as a way of 139 00:07:55,640 --> 00:07:59,640 Speaker 1: basically trying to manufacture venue there. So there's actually a 140 00:07:59,640 --> 00:08:03,600 Speaker 1: stronger arguments somehow that Amarilla is an appropriate venue totally 141 00:08:03,640 --> 00:08:06,560 Speaker 1: because of the paper steps the planets took to create 142 00:08:06,560 --> 00:08:10,320 Speaker 1: an Amarilla based planiff. That's why the Texas cases are different, 143 00:08:10,320 --> 00:08:12,680 Speaker 1: because Texas the states can't just sort of change where 144 00:08:12,680 --> 00:08:14,640 Speaker 1: it's located. And so that's why I think that's where 145 00:08:14,680 --> 00:08:17,120 Speaker 1: we've seen DJ fight on the transfer question, at least 146 00:08:17,120 --> 00:08:20,480 Speaker 1: thus far unsuccessfully. Could they ask the judge to recuse 147 00:08:20,600 --> 00:08:25,200 Speaker 1: himself because of his long held positions prior legal work 148 00:08:25,600 --> 00:08:28,200 Speaker 1: and decision since becoming a judge, I mean that since 149 00:08:28,240 --> 00:08:29,760 Speaker 1: they could, I think if they were going through they 150 00:08:29,760 --> 00:08:31,960 Speaker 1: would have already. And you know, I think that sort 151 00:08:31,960 --> 00:08:34,719 Speaker 1: of again misses what to me is the real problem here. 152 00:08:34,880 --> 00:08:38,080 Speaker 1: One can believe that all of these judges are active 153 00:08:38,120 --> 00:08:40,080 Speaker 1: in good state, you know, perhaps coming from just a 154 00:08:40,080 --> 00:08:42,120 Speaker 1: different set of priors than some of us might have, 155 00:08:42,440 --> 00:08:44,840 Speaker 1: and still think that it ought to be incumbent upon 156 00:08:45,120 --> 00:08:49,320 Speaker 1: them to appreciate what it looks like to outsiders that 157 00:08:49,440 --> 00:08:53,360 Speaker 1: cases are being deliberately steered to them that have a 158 00:08:53,440 --> 00:08:57,360 Speaker 1: remarkable alignment with views they've previously taken publicly. To put 159 00:08:57,360 --> 00:09:00,440 Speaker 1: a different way, I would have thought that spederal judges 160 00:09:00,480 --> 00:09:03,960 Speaker 1: who are worried about the appearance of impropriety would be 161 00:09:04,040 --> 00:09:08,079 Speaker 1: the first to push back if plaintiffs were so obviously 162 00:09:08,120 --> 00:09:11,840 Speaker 1: in transparently trying to manipulate their dockets. At least thus 163 00:09:11,840 --> 00:09:14,000 Speaker 1: bar June, they've been the last. And I think that's 164 00:09:14,040 --> 00:09:17,600 Speaker 1: part of the story here. Well, if Judge Kazmeric doesn't 165 00:09:17,600 --> 00:09:20,959 Speaker 1: know by now that people have focused on this issue, 166 00:09:20,960 --> 00:09:24,880 Speaker 1: there have been so many articles about it and discussions 167 00:09:24,920 --> 00:09:28,480 Speaker 1: about the fact that he has this particular case and 168 00:09:28,520 --> 00:09:30,480 Speaker 1: the way it got to him, it seems like he 169 00:09:30,520 --> 00:09:32,280 Speaker 1: doesn't care. I think that's right, and I think the 170 00:09:32,320 --> 00:09:35,079 Speaker 1: question then is why not. This is not about Judge Kasmaric. 171 00:09:35,160 --> 00:09:37,520 Speaker 1: I think this is about any of the judges who 172 00:09:37,600 --> 00:09:40,280 Speaker 1: are seeing these cases being scared to them. I mean, 173 00:09:40,280 --> 00:09:42,280 Speaker 1: it's pretty remarkable June that you know, over the twenty 174 00:09:42,320 --> 00:09:45,280 Speaker 1: nine lawsuit Texas is file that comes to Biden administration 175 00:09:45,520 --> 00:09:48,520 Speaker 1: in Texas dish records in the last two plus years. 176 00:09:48,679 --> 00:09:50,640 Speaker 1: None of them have been filed in Austin, which is 177 00:09:50,679 --> 00:09:54,040 Speaker 1: where the Texas government is. None in Houston, none in Dallas, 178 00:09:54,080 --> 00:09:56,560 Speaker 1: none in San Antonio, non Inel Pasto. And so I 179 00:09:56,559 --> 00:09:59,599 Speaker 1: guess the question is why isn't it more trouble and 180 00:09:59,679 --> 00:10:02,800 Speaker 1: too judges who are having all of these cases steered 181 00:10:02,800 --> 00:10:06,439 Speaker 1: to them that the plainists in these cases are behavior 182 00:10:06,559 --> 00:10:09,040 Speaker 1: this way, and I think the irony is June that's 183 00:10:09,080 --> 00:10:11,960 Speaker 1: what's reinforced and charges that this is the MANI playing 184 00:10:11,960 --> 00:10:14,360 Speaker 1: on the system. That the judges themselves are refusing to 185 00:10:14,440 --> 00:10:17,520 Speaker 1: see this as manipulation. Those on the other side of 186 00:10:17,520 --> 00:10:20,800 Speaker 1: this will say, well, the Democrats did it when Trump 187 00:10:20,920 --> 00:10:23,559 Speaker 1: was in office. Yes, there's a lot of what abouts 188 00:10:23,600 --> 00:10:26,320 Speaker 1: them in response here. So two responses, I think. One 189 00:10:26,400 --> 00:10:28,679 Speaker 1: is that President Trump was subject to a lot of 190 00:10:28,760 --> 00:10:32,280 Speaker 1: lawsuits by Democratic attorneys general, and one is that there 191 00:10:32,320 --> 00:10:35,439 Speaker 1: have always been single judge division. Factually, both of those 192 00:10:35,480 --> 00:10:38,560 Speaker 1: things are true, but those are pretty different circumstances. Let's 193 00:10:38,600 --> 00:10:41,599 Speaker 1: say California, right, So, California is sued the Trump administration 194 00:10:41,880 --> 00:10:44,560 Speaker 1: on a number of occasions, and most of those losses 195 00:10:44,559 --> 00:10:46,600 Speaker 1: I think almost all of them were brought in Oakland, 196 00:10:46,760 --> 00:10:50,360 Speaker 1: in the Northern District of California. Well, one, there is 197 00:10:50,400 --> 00:10:55,120 Speaker 1: a pretty large office of the California Attorney General in Oakland, 198 00:10:55,440 --> 00:10:58,280 Speaker 1: and so it's not like Texas going to Amarillo, where 199 00:10:58,280 --> 00:11:00,880 Speaker 1: there's no Attorney General's office, and so in that respect 200 00:11:00,920 --> 00:11:02,880 Speaker 1: you don't see the same kind of manipulating where you 201 00:11:02,920 --> 00:11:05,360 Speaker 1: can file. And to June, the Northern District is not 202 00:11:05,440 --> 00:11:08,240 Speaker 1: divided the way that Texas is courted bar there's no 203 00:11:08,320 --> 00:11:11,280 Speaker 1: place in California where you can file a lawsuit you 204 00:11:11,320 --> 00:11:13,960 Speaker 1: can have a one percent chance of drawing a particular 205 00:11:14,040 --> 00:11:17,240 Speaker 1: federal district judge. Right, The real compoint of those who 206 00:11:17,280 --> 00:11:19,839 Speaker 1: would defend the Trump administration in this context is that 207 00:11:19,960 --> 00:11:23,360 Speaker 1: the overall district court bench in the northern districts of 208 00:11:23,400 --> 00:11:27,720 Speaker 1: California is heavily staffed with Democratic appointees. And that just 209 00:11:27,760 --> 00:11:30,520 Speaker 1: goes back to the difference between forum shopping and judge shopping. Right, 210 00:11:30,520 --> 00:11:32,840 Speaker 1: there's a degree to which forum shopping is always going 211 00:11:32,880 --> 00:11:36,480 Speaker 1: to be unavoidable. But unless you think that every single 212 00:11:36,559 --> 00:11:39,760 Speaker 1: judge appointed by a president of the same party is 213 00:11:39,760 --> 00:11:41,920 Speaker 1: going to rule the same way in every case, there 214 00:11:42,000 --> 00:11:44,200 Speaker 1: ought to be a pretty big difference between having a 215 00:11:44,240 --> 00:11:48,960 Speaker 1: case randomly assigned to one of say, ten Democratic appointed 216 00:11:48,960 --> 00:11:51,760 Speaker 1: district judges, and having a case that was brought in 217 00:11:51,840 --> 00:11:55,280 Speaker 1: Amarillo for the specific purpose of being assigned not just 218 00:11:55,320 --> 00:11:58,720 Speaker 1: to a Republican appointed district judge, but to a particular 219 00:11:59,080 --> 00:12:01,600 Speaker 1: Republican appointed judge. That's the difference that I think it's 220 00:12:01,640 --> 00:12:04,600 Speaker 1: good been lost in these responses. As you mentioned in 221 00:12:04,640 --> 00:12:09,600 Speaker 1: your article, Justice Elena Kagan call the Texas Solicitor General 222 00:12:09,679 --> 00:12:12,520 Speaker 1: on this. Is there anything the Supreme Court can do? 223 00:12:13,080 --> 00:12:15,040 Speaker 1: I mean I think there is so. First, of course, 224 00:12:15,080 --> 00:12:18,280 Speaker 1: the venue statutes, our statue said the Supreme Court could interpret. 225 00:12:18,360 --> 00:12:20,080 Speaker 1: But second, in the Supreme Court I think has a 226 00:12:20,120 --> 00:12:22,719 Speaker 1: bully pulpit. I mean Chief Justice Robert in his year 227 00:12:22,840 --> 00:12:25,400 Speaker 1: end report in twenty twenty one, when out of his 228 00:12:25,480 --> 00:12:27,800 Speaker 1: way to single out how there was a judge in 229 00:12:27,920 --> 00:12:31,920 Speaker 1: Waco who was basically trying to hijack the nationwide docket 230 00:12:31,960 --> 00:12:34,400 Speaker 1: of patent cases, and how one of the ways who 231 00:12:34,480 --> 00:12:36,360 Speaker 1: was doing that was by saying, if you file your 232 00:12:36,400 --> 00:12:39,040 Speaker 1: patent losses in Waco, there's a one hundred percent chance 233 00:12:39,040 --> 00:12:41,160 Speaker 1: it will be assigned to meet Robert said that was 234 00:12:41,200 --> 00:12:44,720 Speaker 1: a problem and last year, the Dishre Court changed its 235 00:12:44,760 --> 00:12:46,679 Speaker 1: rule so that it could no longer have a one 236 00:12:47,600 --> 00:12:49,960 Speaker 1: assignment policy. So I think the Supreme Court can do 237 00:12:50,000 --> 00:12:52,000 Speaker 1: things formally. June, I think the Supreme Court can do 238 00:12:52,080 --> 00:12:55,040 Speaker 1: things vocally to sort of push back against this practice. 239 00:12:55,160 --> 00:12:57,720 Speaker 1: But I also think the dishre courts can fix it themselves. 240 00:12:57,760 --> 00:12:59,680 Speaker 1: I mean, the dishre courts have the power to change 241 00:12:59,679 --> 00:13:02,439 Speaker 1: their vision of business rules. That's what happened with cases 242 00:13:02,480 --> 00:13:04,360 Speaker 1: in Waco, and so I think the real question is 243 00:13:04,360 --> 00:13:07,880 Speaker 1: why don't disrecords realize that it's in their interest to 244 00:13:07,920 --> 00:13:11,240 Speaker 1: avoid these kinds of appearances and change their own rules 245 00:13:11,240 --> 00:13:15,760 Speaker 1: proactively going forward. Can one federal judge in Texas change 246 00:13:15,840 --> 00:13:18,800 Speaker 1: that or does it require more well, So, Congress has 247 00:13:18,840 --> 00:13:22,199 Speaker 1: delegated the power to divide business within disrecords to the 248 00:13:22,280 --> 00:13:25,600 Speaker 1: chief judges of each disrecord. Now, of course, the chief judges, 249 00:13:25,679 --> 00:13:27,880 Speaker 1: you know, they have colleagues. They're not trying to offend 250 00:13:27,920 --> 00:13:30,440 Speaker 1: their colleagues. So the chief judges are going to change 251 00:13:30,440 --> 00:13:34,680 Speaker 1: those rules, usually in concert with their colleagues. But it 252 00:13:34,760 --> 00:13:37,040 Speaker 1: is ultimately up to the chief judges. And if the 253 00:13:37,080 --> 00:13:39,240 Speaker 1: chief churches aren't going to do it themselves, then Congress 254 00:13:39,240 --> 00:13:41,720 Speaker 1: ought to be consider whether we want that power to 255 00:13:41,760 --> 00:13:43,959 Speaker 1: be held by disrecords in the first place. It's such 256 00:13:44,000 --> 00:13:47,360 Speaker 1: an important point, Steve, thanks so much. That's Professor Stephen 257 00:13:47,480 --> 00:13:52,560 Speaker 1: Vladdock of the University of Texas Law School. After the 258 00:13:52,600 --> 00:13:56,040 Speaker 1: failure of the second and third largest banks in US history, 259 00:13:56,360 --> 00:14:01,040 Speaker 1: President Joe Biden sought to reassure jittery consumers and markets 260 00:14:01,160 --> 00:14:04,520 Speaker 1: that the US financial system is on solid footing. He 261 00:14:04,640 --> 00:14:08,880 Speaker 1: also promised to hold those responsible accountable. There are important 262 00:14:08,920 --> 00:14:11,400 Speaker 1: questions of how these banks got into the circumstance in 263 00:14:11,400 --> 00:14:14,760 Speaker 1: the first place. We must get the full accounting of 264 00:14:14,800 --> 00:14:18,920 Speaker 1: what happened and why those responsible can be held accountable. 265 00:14:19,760 --> 00:14:22,680 Speaker 1: And my administration no one in mindment. No one is 266 00:14:22,680 --> 00:14:25,920 Speaker 1: above the law. The Justice Department and the Securities and 267 00:14:26,000 --> 00:14:30,200 Speaker 1: Exchange Commission have launched investigations into the Silicon Valley bank 268 00:14:30,240 --> 00:14:34,480 Speaker 1: collapse and possible misconduct by bank officers, and according to 269 00:14:34,520 --> 00:14:40,080 Speaker 1: Bloomberg's sources, both agencies were already investigating Signature Bank and 270 00:14:40,240 --> 00:14:44,520 Speaker 1: potential money laundering by its crypto clients. Both banks have 271 00:14:44,720 --> 00:14:48,680 Speaker 1: also been hit with class action investor lawsuits. Joining me 272 00:14:48,760 --> 00:14:52,960 Speaker 1: is security litigator Anthony Sabino of Sabino and Sabino. He's 273 00:14:53,040 --> 00:14:56,480 Speaker 1: also a professor of law at Saint John's University. Is 274 00:14:56,520 --> 00:14:59,720 Speaker 1: it much of a surprise that the Justice Department and 275 00:14:59,800 --> 00:15:04,200 Speaker 1: the sec are investigating after these banks failures? No, not 276 00:15:04,320 --> 00:15:07,400 Speaker 1: at all, for the simple reason that banks are a 277 00:15:07,440 --> 00:15:10,280 Speaker 1: matter of public trusts. And again, while they are private 278 00:15:10,320 --> 00:15:13,200 Speaker 1: institutions and they're owned by the shareholders, the point is 279 00:15:13,280 --> 00:15:15,800 Speaker 1: that it's a matter of maintaining the integrity of the 280 00:15:15,840 --> 00:15:18,840 Speaker 1: banks and the overall banking system and assuring the public 281 00:15:19,080 --> 00:15:23,880 Speaker 1: that these institutions are trustworthy. Also, especially in these troubled times, 282 00:15:24,360 --> 00:15:27,560 Speaker 1: we have the many new challenges that are affective us 283 00:15:27,600 --> 00:15:31,000 Speaker 1: in all industries and including the banking sector. So, for example, 284 00:15:31,400 --> 00:15:34,520 Speaker 1: one of the things that's become recently known is that 285 00:15:34,600 --> 00:15:38,880 Speaker 1: apparently the Justice Department was looking into, and emphasized looking into, 286 00:15:38,920 --> 00:15:43,280 Speaker 1: no actual action taken yet signature banks dealings with respect 287 00:15:43,280 --> 00:15:46,720 Speaker 1: to cryptocurrency holdings. And since that is such a nascent 288 00:15:46,840 --> 00:15:50,280 Speaker 1: field and we're not too sure about that. Obviously, law 289 00:15:50,360 --> 00:15:55,280 Speaker 1: enforcement has concerns about cryptocurrency being manipulated by persons for 290 00:15:55,400 --> 00:15:57,520 Speaker 1: purposes of money laundering, so on and so forth, and 291 00:15:57,600 --> 00:16:00,400 Speaker 1: again there's really nothing new about that. June for the 292 00:16:00,440 --> 00:16:04,360 Speaker 1: reason that the anti money Laundering laws otherwise known as 293 00:16:04,440 --> 00:16:08,400 Speaker 1: AML have been around for decades, and it's a routine 294 00:16:08,480 --> 00:16:11,480 Speaker 1: matter for the Justice Department, the Treasure Department, so on, 295 00:16:11,520 --> 00:16:13,560 Speaker 1: and so forth to look into this to make sure 296 00:16:13,640 --> 00:16:16,040 Speaker 1: no one is engaging in money laundering, whether it is 297 00:16:16,080 --> 00:16:18,240 Speaker 1: in cold, hard cash as you might have had in 298 00:16:18,240 --> 00:16:21,200 Speaker 1: the cocaine wars of the nineteen eighties or nowadays in 299 00:16:21,240 --> 00:16:25,520 Speaker 1: the twenty twenties. With respect to cryptocurrency, SEC chair Gary 300 00:16:25,560 --> 00:16:29,360 Speaker 1: Gensler said, we at the SEC are particularly focused on 301 00:16:29,520 --> 00:16:33,520 Speaker 1: monitoring for market stability and identifying and prosecuting any form 302 00:16:33,520 --> 00:16:38,040 Speaker 1: of misconduct that might threaten investors. So they and the 303 00:16:38,120 --> 00:16:42,400 Speaker 1: Justice Department are looking for misconduct by bank executives. What 304 00:16:42,520 --> 00:16:45,440 Speaker 1: kind of misconduct might they be looking at? Well, first 305 00:16:45,440 --> 00:16:48,120 Speaker 1: of all, we have to distinguish these two distinct threads here, 306 00:16:48,160 --> 00:16:53,040 Speaker 1: as follows Chairman Gensler. Okay, while he's looking for purposes 307 00:16:53,080 --> 00:16:55,440 Speaker 1: to maintain the integrity in the market, what his job 308 00:16:55,560 --> 00:16:58,200 Speaker 1: is and what he's doing to his credit is his 309 00:16:58,320 --> 00:17:01,800 Speaker 1: concern is the integrity of the securities market. Because again, 310 00:17:01,800 --> 00:17:04,880 Speaker 1: as we've seen both signature as a VB and any 311 00:17:04,880 --> 00:17:09,680 Speaker 1: other number of institutions. They're owned by shareholders, therefore separate 312 00:17:09,720 --> 00:17:13,119 Speaker 1: and apart from the stability or in some cases the 313 00:17:13,160 --> 00:17:15,920 Speaker 1: seizure and or collapse of the banks as a bank. 314 00:17:16,000 --> 00:17:20,719 Speaker 1: Per se Gensler in the sec their paramount concern is 315 00:17:20,760 --> 00:17:24,400 Speaker 1: whether there's been truthful disclosure to shareholders, because that impacts 316 00:17:24,400 --> 00:17:27,119 Speaker 1: those individual shareholders, the integrity of the market, so on 317 00:17:27,160 --> 00:17:30,120 Speaker 1: and so forth. So all Chairman Gensler is doing the same. Look, 318 00:17:30,359 --> 00:17:32,919 Speaker 1: we have the anti fraud provisions of the securities laws. 319 00:17:33,119 --> 00:17:35,400 Speaker 1: That's what we're here to enforce. So that's his bailiwick, 320 00:17:35,640 --> 00:17:39,400 Speaker 1: that's his jurisdiction, and rightly so, the Justice Department has 321 00:17:39,440 --> 00:17:43,000 Speaker 1: a wider portfolio, if you will, And what that involves 322 00:17:43,080 --> 00:17:47,760 Speaker 1: is again looking into banking transactions as banking transactions, to 323 00:17:47,800 --> 00:17:51,399 Speaker 1: assure that the anti money laundering laws are followed, that 324 00:17:51,440 --> 00:17:54,280 Speaker 1: there's no manipulation of bank assets, so on and so forth, 325 00:17:54,440 --> 00:17:56,960 Speaker 1: and also in a broader sense, to see if there 326 00:17:57,000 --> 00:18:00,359 Speaker 1: was any fraud of manipulation, not necessarily just a security 327 00:18:00,400 --> 00:18:03,040 Speaker 1: So that comes within the jurisdiction as well to some degree, 328 00:18:03,359 --> 00:18:06,280 Speaker 1: but more so was their fraud with respect to defrauding 329 00:18:06,440 --> 00:18:09,000 Speaker 1: the depositors. And here June we have to draw the 330 00:18:09,040 --> 00:18:12,080 Speaker 1: important distinction. Let's take as a VB bank, for example, 331 00:18:12,119 --> 00:18:14,640 Speaker 1: there's two distinct groups of parties who've been injured. Here. 332 00:18:14,880 --> 00:18:17,680 Speaker 1: On the one hand, there are the folks who are stockholders, 333 00:18:18,000 --> 00:18:21,000 Speaker 1: and so that agains the the sec and also on 334 00:18:21,040 --> 00:18:23,960 Speaker 1: the criminal side of that, the Justice Department saying, okay, 335 00:18:24,200 --> 00:18:27,119 Speaker 1: did you lie to your shareholders and injured them in 336 00:18:27,240 --> 00:18:29,760 Speaker 1: terms of the stock market aspect of this. On the 337 00:18:29,800 --> 00:18:33,840 Speaker 1: other hand, okay, the other group are the depositors who, thankfully, 338 00:18:34,080 --> 00:18:36,480 Speaker 1: because of the government's action, it looks like they're going 339 00:18:36,520 --> 00:18:38,960 Speaker 1: to be made whole or if I may use a 340 00:18:39,000 --> 00:18:41,639 Speaker 1: crew term bailed out. But the bottom line is the 341 00:18:41,680 --> 00:18:44,960 Speaker 1: concern of the Justice Department in that regard is to 342 00:18:45,080 --> 00:18:48,560 Speaker 1: make sure that if there was any deception of depositors, 343 00:18:48,800 --> 00:18:52,119 Speaker 1: in essence, nothing more complicated than people put money in 344 00:18:52,359 --> 00:18:55,200 Speaker 1: any of these institutions, they thought it was safe, and 345 00:18:55,320 --> 00:18:58,520 Speaker 1: as it turned out, they were deceived. So that's something 346 00:18:58,560 --> 00:19:01,600 Speaker 1: that obviously the Justice departments crack down upon. You use 347 00:19:01,640 --> 00:19:06,840 Speaker 1: the term bailout, and the Biden administration doesn't like that word, Well, 348 00:19:06,840 --> 00:19:10,280 Speaker 1: that's politics, okay. And again it's been called everything from 349 00:19:10,320 --> 00:19:14,520 Speaker 1: rescue to bailout etc. Etc. Okay, and there were genuine 350 00:19:14,560 --> 00:19:16,520 Speaker 1: issues here that have been brought to the fore and 351 00:19:16,640 --> 00:19:19,160 Speaker 1: need to be discussed. Certainly, we're all aware that since 352 00:19:19,240 --> 00:19:23,560 Speaker 1: the nineteen thirties under FDR there is banking insurance. But 353 00:19:23,640 --> 00:19:26,200 Speaker 1: again that has limits here, and a question has been raised. 354 00:19:26,240 --> 00:19:28,359 Speaker 1: It's a legitimate one that needs to be examined in 355 00:19:28,400 --> 00:19:31,520 Speaker 1: an objective and dispassionate way. Is well, wait a minute, 356 00:19:31,480 --> 00:19:34,680 Speaker 1: all right, are you fulfilling what the law requires as 357 00:19:34,680 --> 00:19:37,320 Speaker 1: far as the insurance. That's clearly happened, But have you 358 00:19:37,400 --> 00:19:42,400 Speaker 1: gone overboard? And are you also providing funding rescuing folks 359 00:19:42,400 --> 00:19:47,040 Speaker 1: with deposits that exceed the statutory limit or depositors for 360 00:19:47,400 --> 00:19:49,479 Speaker 1: various endeavors. I think it would be certain businesses, so 361 00:19:49,520 --> 00:19:51,959 Speaker 1: on and so forth. So again that's a matter more 362 00:19:52,000 --> 00:19:54,760 Speaker 1: for the political arena, but it's still worthy of discussion 363 00:19:54,840 --> 00:19:57,120 Speaker 1: because one of the things that and let me be frank, 364 00:19:57,160 --> 00:19:59,879 Speaker 1: that troubles me most of all is the danger of 365 00:20:00,040 --> 00:20:04,280 Speaker 1: as we call it, the moral hazard. Because my personal interpretation, 366 00:20:04,400 --> 00:20:08,119 Speaker 1: free enterprise has always been free to succeed but also 367 00:20:08,200 --> 00:20:11,240 Speaker 1: free to fail, so to the extent that the government 368 00:20:11,240 --> 00:20:13,959 Speaker 1: comes in and says, okay, well, here's SVB. All right, 369 00:20:13,960 --> 00:20:16,920 Speaker 1: we'll make everybody whole. That's nice. All right, if they 370 00:20:16,960 --> 00:20:19,640 Speaker 1: do the same thing with signature, that's nice. But where 371 00:20:19,680 --> 00:20:22,000 Speaker 1: does it end? Where does it end? Where fifteen years 372 00:20:22,000 --> 00:20:26,560 Speaker 1: remove from governments? I'll use a less pejorative term assistance too, 373 00:20:26,880 --> 00:20:29,480 Speaker 1: the major order makers, the financial sectors, so on and 374 00:20:29,520 --> 00:20:31,600 Speaker 1: so forth. But we're still paying the price for that, 375 00:20:31,680 --> 00:20:35,119 Speaker 1: all right. Where does government interventions stop? Where do we 376 00:20:35,119 --> 00:20:38,200 Speaker 1: allow free enterprise to be truly free again to succeed 377 00:20:38,359 --> 00:20:42,000 Speaker 1: or conversely to fail? And certainly there's always the danger 378 00:20:42,320 --> 00:20:44,640 Speaker 1: that our free enterprise system is going to be damaged 379 00:20:44,680 --> 00:20:50,560 Speaker 1: by government assistance. Government rescues turns into government intervention and 380 00:20:50,880 --> 00:20:54,240 Speaker 1: maybe government control. Those are very scary words, and I 381 00:20:54,400 --> 00:20:56,800 Speaker 1: say them with great trepidation, but they should be out 382 00:20:56,840 --> 00:20:58,879 Speaker 1: there to be discussed in any event. It's something we 383 00:20:58,960 --> 00:21:02,200 Speaker 1: have to watch out for. So one thing that apparently 384 00:21:02,720 --> 00:21:06,879 Speaker 1: is being investigated is whether stock sales by executives violated 385 00:21:06,960 --> 00:21:11,080 Speaker 1: trading rules. According to Bloomberg sources, security filing showed that 386 00:21:11,119 --> 00:21:15,960 Speaker 1: the CEO Gregory Becker and the CFO Daniel Beck both 387 00:21:16,000 --> 00:21:19,879 Speaker 1: so shares the week before the bank collapsed. Both sales 388 00:21:19,880 --> 00:21:24,160 Speaker 1: were done under the ten B five one plans file 389 00:21:24,280 --> 00:21:27,080 Speaker 1: thirty days earlier. So if they were done within that, 390 00:21:27,400 --> 00:21:31,440 Speaker 1: is there any problem. Well, again, this matter requires examination, 391 00:21:31,520 --> 00:21:34,280 Speaker 1: but on its face, everything appears to be above board 392 00:21:34,320 --> 00:21:37,640 Speaker 1: because what you've commented upon, and what you're able colleagues 393 00:21:37,640 --> 00:21:40,480 Speaker 1: have already reported on within the last twenty four hours 394 00:21:40,640 --> 00:21:44,760 Speaker 1: is the fact that federal law explicitly provides that high 395 00:21:44,840 --> 00:21:50,200 Speaker 1: level corporate executives may, according to a stipulated plan basically 396 00:21:50,240 --> 00:21:53,560 Speaker 1: a plan made in advance, may sell shares in their 397 00:21:53,560 --> 00:21:56,720 Speaker 1: own companies. And that does not violate the law. It 398 00:21:56,800 --> 00:21:59,920 Speaker 1: does not qualify as inside of trading. And the reason 399 00:22:00,000 --> 00:22:03,359 Speaker 1: if that is simply this. Okay. Even the highest corporate 400 00:22:03,359 --> 00:22:07,240 Speaker 1: executives june their people just like us. So they need 401 00:22:07,320 --> 00:22:11,040 Speaker 1: to pay their bills, and sometimes that involves selling their 402 00:22:11,080 --> 00:22:14,800 Speaker 1: stockholdings in their own companies. And also, like any prudent investor, 403 00:22:15,240 --> 00:22:17,480 Speaker 1: they want to diversify their holdings and say, okay, a 404 00:22:17,480 --> 00:22:19,600 Speaker 1: lot of my personal world is tied up in the 405 00:22:19,640 --> 00:22:22,879 Speaker 1: company where I am the CEO, CFO, whatever, So that 406 00:22:22,960 --> 00:22:26,160 Speaker 1: corporate executive says to herself, well, I need to diversify 407 00:22:26,200 --> 00:22:29,840 Speaker 1: a little bit. Okay. Now, the problem is when they 408 00:22:29,880 --> 00:22:32,359 Speaker 1: make these sales. Are they making them at a certain 409 00:22:32,400 --> 00:22:36,480 Speaker 1: point in time based upon inside information that only they 410 00:22:36,480 --> 00:22:39,760 Speaker 1: are privy too, that the market doesn't know, and oh 411 00:22:39,800 --> 00:22:43,159 Speaker 1: that's a huge problem. That's inside or trading. The reason 412 00:22:43,200 --> 00:22:46,320 Speaker 1: the statute says explicitly what it does is you've finally 413 00:22:46,400 --> 00:22:49,320 Speaker 1: quoted it is the fact that if you have a 414 00:22:49,359 --> 00:22:52,000 Speaker 1: plan that you do in advance and make the appropriate 415 00:22:52,080 --> 00:22:54,960 Speaker 1: filing with the governments, they look, okay, I'm going to 416 00:22:55,040 --> 00:22:59,800 Speaker 1: sell shares in this amount at specific intervals. Basically, since 417 00:23:00,040 --> 00:23:02,080 Speaker 1: you have a plan and you stick to it, you're 418 00:23:02,119 --> 00:23:04,159 Speaker 1: working on information you had at that time which is 419 00:23:04,160 --> 00:23:07,440 Speaker 1: in the public domain. So there can be no real accusation. 420 00:23:07,520 --> 00:23:10,800 Speaker 1: Oh you're used insider trading and basically you're violating the 421 00:23:10,880 --> 00:23:13,560 Speaker 1: law in that regard. All right, but once again that's 422 00:23:13,600 --> 00:23:16,480 Speaker 1: what the law says, and that's the theory, and again 423 00:23:16,520 --> 00:23:19,399 Speaker 1: no action has been taken, no accusation should be made. 424 00:23:19,440 --> 00:23:22,280 Speaker 1: But the government has the obligation as well as the 425 00:23:22,400 --> 00:23:26,480 Speaker 1: right to examine this and basically assure that in fact, 426 00:23:26,520 --> 00:23:29,880 Speaker 1: everything was done according to those plans. Okay, those then 427 00:23:30,240 --> 00:23:34,159 Speaker 1: one C plans and was carried out appropriately. If it 428 00:23:34,400 --> 00:23:38,920 Speaker 1: is something on toward where these plans were modified at 429 00:23:38,920 --> 00:23:41,680 Speaker 1: the last minute or something else that's call it peculiar 430 00:23:41,680 --> 00:23:44,800 Speaker 1: went on, and it would appear that these sales were 431 00:23:44,840 --> 00:23:48,800 Speaker 1: made contrary to these prior arrangements. Then that's something to 432 00:23:48,840 --> 00:23:51,399 Speaker 1: talk about, and that's something that could get them folks 433 00:23:51,400 --> 00:23:54,440 Speaker 1: in trouble. But again, I'm not saying there is a problem, 434 00:23:54,640 --> 00:23:56,880 Speaker 1: but I'm also not saying there isn't a problem. Okay, 435 00:23:56,960 --> 00:24:00,800 Speaker 1: it requires further examination by law enforcement. It seems like 436 00:24:00,840 --> 00:24:03,240 Speaker 1: a lot is being made of the fact that SVB 437 00:24:03,800 --> 00:24:06,600 Speaker 1: did not have a chief risk officer for much of 438 00:24:06,760 --> 00:24:10,800 Speaker 1: last year. Does that mean management was hiding something or 439 00:24:10,840 --> 00:24:14,800 Speaker 1: didn't want to disclose something, or doesn't mean not much 440 00:24:14,800 --> 00:24:17,560 Speaker 1: of anything. Well, again, my answer to that would be 441 00:24:17,600 --> 00:24:20,879 Speaker 1: not necessarily okay, but it is something that should be 442 00:24:20,920 --> 00:24:24,000 Speaker 1: looked at, can be looked at. Okay. Once again, people 443 00:24:24,040 --> 00:24:25,880 Speaker 1: come and go from jobs all the time, whether it's 444 00:24:25,920 --> 00:24:28,680 Speaker 1: the CEO, whether it's the janitor. So people change jobs 445 00:24:28,680 --> 00:24:31,919 Speaker 1: all the time. So there's nothing sinister at all about 446 00:24:31,920 --> 00:24:35,359 Speaker 1: the fact that their former chief risk officer was in 447 00:24:35,400 --> 00:24:38,399 Speaker 1: fact former and a new person came in. There's nothing 448 00:24:38,480 --> 00:24:42,159 Speaker 1: necessarily insidious about the fact that there appears to be 449 00:24:42,280 --> 00:24:44,800 Speaker 1: And I stress appears to be some sort of gap 450 00:24:45,040 --> 00:24:49,200 Speaker 1: where the cro office was vacant for a period of time. However, okay, 451 00:24:49,320 --> 00:24:53,159 Speaker 1: given those events, it is worthy of further examination. And 452 00:24:53,280 --> 00:24:57,040 Speaker 1: again I stress examination, not accusations. There is none. Will 453 00:24:57,080 --> 00:25:00,360 Speaker 1: need to cast dispersions around, but the bottom line, it's 454 00:25:00,400 --> 00:25:03,680 Speaker 1: worth looking at because it could be indicative that maybe 455 00:25:03,680 --> 00:25:06,600 Speaker 1: there was a gap in terms of the office being filled. 456 00:25:06,720 --> 00:25:10,440 Speaker 1: Who was fulfilling the CRORO function was the Board of directors, 457 00:25:10,440 --> 00:25:13,880 Speaker 1: which has a fiduciary duty to oversee the operations of 458 00:25:13,920 --> 00:25:17,160 Speaker 1: that bank, like with any other corporation, especially a publicly 459 00:25:17,200 --> 00:25:21,159 Speaker 1: held corporation. Were they being kept properly informed? Was the 460 00:25:21,240 --> 00:25:26,240 Speaker 1: board itself exercising its fiduciary duty of care in making 461 00:25:26,280 --> 00:25:29,000 Speaker 1: sure that it was up to date and informed about 462 00:25:29,240 --> 00:25:31,600 Speaker 1: the levels of risk that SVB was taking, so on 463 00:25:31,640 --> 00:25:34,960 Speaker 1: and so forth. So once again, I'm not saying there 464 00:25:35,040 --> 00:25:37,200 Speaker 1: is a problem, but I'm also not saying there isn't 465 00:25:37,200 --> 00:25:39,600 Speaker 1: a problem. It needs to be looked at, and that's 466 00:25:39,640 --> 00:25:42,440 Speaker 1: what the government is doing and that's appropriate. But let's 467 00:25:42,480 --> 00:25:46,080 Speaker 1: see what they find first before we make any wild accusations. 468 00:25:46,080 --> 00:25:49,720 Speaker 1: That would be my cautionary note. A class action lawsuit. 469 00:25:49,760 --> 00:25:52,760 Speaker 1: The first one has been filed against SVB in the 470 00:25:52,800 --> 00:25:57,480 Speaker 1: top executives by shareholders who allege they concealed from investors 471 00:25:57,520 --> 00:26:00,439 Speaker 1: the impact that high interest rates would have on the 472 00:26:00,480 --> 00:26:05,200 Speaker 1: tech and VC focused firm's business, leaving it particularly susceptible 473 00:26:05,320 --> 00:26:07,800 Speaker 1: to a bank run. What kind of charges do you 474 00:26:07,840 --> 00:26:11,920 Speaker 1: have to prove to succeed in one of these investor 475 00:26:11,960 --> 00:26:15,879 Speaker 1: fraud lawsuits? Well, again, the standard for proven security supports 476 00:26:15,960 --> 00:26:18,560 Speaker 1: is very high. And again that follows the thousand year 477 00:26:18,560 --> 00:26:21,640 Speaker 1: old tradition that anytime you accuse anyone of any kind 478 00:26:21,640 --> 00:26:25,119 Speaker 1: of fraud, it's a higher legal standard. And the legal 479 00:26:25,200 --> 00:26:29,840 Speaker 1: standard under federal law for securities fraud violations is exceedingly 480 00:26:29,920 --> 00:26:32,000 Speaker 1: high as well it should be. And to give you 481 00:26:32,119 --> 00:26:36,399 Speaker 1: just a quick summary, it has to be proven that managers, 482 00:26:36,480 --> 00:26:40,359 Speaker 1: okay the managements knowingly or with a reckless disregard for 483 00:26:40,400 --> 00:26:46,760 Speaker 1: the truth, made material misrepresentations and or omissions, and that 484 00:26:46,840 --> 00:26:50,520 Speaker 1: these were disseminated to the investing public and the public 485 00:26:50,560 --> 00:26:53,760 Speaker 1: relied upon that, and as consequently when the truth came out, 486 00:26:53,760 --> 00:26:57,560 Speaker 1: they suffered a loss. So, in short form of June, 487 00:26:58,000 --> 00:27:00,880 Speaker 1: what the class action plaintiffs have to do is, first 488 00:27:00,880 --> 00:27:02,280 Speaker 1: of all, by the way, they have to be approved 489 00:27:02,320 --> 00:27:04,720 Speaker 1: as a class, and there are rigorous procedures for that 490 00:27:04,800 --> 00:27:07,919 Speaker 1: under the federal rules that govern such things. They have 491 00:27:08,000 --> 00:27:11,080 Speaker 1: to demonstrate that there were misreps as we shorthand them 492 00:27:11,119 --> 00:27:14,920 Speaker 1: misreps and or emissions, they were material in nature. And 493 00:27:15,000 --> 00:27:17,960 Speaker 1: also they have to prove the important elements that either 494 00:27:18,240 --> 00:27:20,439 Speaker 1: management knew or should have known. That's what we call 495 00:27:20,560 --> 00:27:23,960 Speaker 1: cienter in other words, evil intent, as in I'm lying, 496 00:27:24,200 --> 00:27:26,560 Speaker 1: I know, I'm lying. I want to lie to you. Okay, 497 00:27:26,600 --> 00:27:29,360 Speaker 1: to put in those pedestrian terms, so they have enough 498 00:27:29,359 --> 00:27:32,439 Speaker 1: will battle that regard. But again, one cannot understate the 499 00:27:32,520 --> 00:27:36,120 Speaker 1: seriousness of these charges because what it demonstrates is if 500 00:27:36,160 --> 00:27:39,720 Speaker 1: these allegations were to be proven true, then it demonstrates 501 00:27:39,840 --> 00:27:44,000 Speaker 1: a willful disregard for being truthful with shareholders. And once again, 502 00:27:44,400 --> 00:27:46,720 Speaker 1: put aside the fact for a moment that it's SVB 503 00:27:46,880 --> 00:27:49,680 Speaker 1: or any banking institution. This would be true for any business, 504 00:27:49,680 --> 00:27:52,679 Speaker 1: whether you're making donuts or cell phones or whatever. The 505 00:27:52,720 --> 00:27:55,520 Speaker 1: bottom line is, when you sell your stock to the public, 506 00:27:56,160 --> 00:27:59,920 Speaker 1: management is obligated by law to be truthful and displod 507 00:28:00,320 --> 00:28:04,199 Speaker 1: two investors. That preserves market integrity, and that's got to 508 00:28:04,240 --> 00:28:07,000 Speaker 1: be our concern here abof on that count. There's a 509 00:28:07,000 --> 00:28:12,320 Speaker 1: similar lawsuit against Signature Bank, also overclaimed that there were 510 00:28:12,359 --> 00:28:16,320 Speaker 1: materially false or misleading statements. Right. One of the statements 511 00:28:16,480 --> 00:28:20,040 Speaker 1: was that the chief executive officer claimed Signature was a 512 00:28:20,040 --> 00:28:23,439 Speaker 1: well diversified bank within excess of one hundred billion dollars 513 00:28:23,480 --> 00:28:26,879 Speaker 1: in assets. Is that the kind of statement that you 514 00:28:26,920 --> 00:28:31,080 Speaker 1: can sue over. Yes, it is, indeed, of course, provided 515 00:28:31,119 --> 00:28:33,919 Speaker 1: you can prove that it was untrue and that the 516 00:28:34,000 --> 00:28:36,919 Speaker 1: speaker of that statement, okay, knew it was untrue or 517 00:28:36,960 --> 00:28:39,320 Speaker 1: had a reckless just regard for the truth. And again 518 00:28:39,360 --> 00:28:41,600 Speaker 1: I'm basically couching in the words of the Supreme Court. 519 00:28:41,880 --> 00:28:45,280 Speaker 1: And the lawsuit against Signature, which was foiled in federal 520 00:28:45,280 --> 00:28:48,400 Speaker 1: court in Brooklyn, New York, is very interesting because it's 521 00:28:48,400 --> 00:28:51,680 Speaker 1: a counterpoint to the SVB lawsuit. As you've stated at 522 00:28:51,720 --> 00:28:55,520 Speaker 1: my compliments, the SMVB lawsuit, the essence of the allegations 523 00:28:55,600 --> 00:28:59,480 Speaker 1: is that, Okay, Managements, you did not disclose the risk 524 00:29:00,120 --> 00:29:02,680 Speaker 1: with respect to changes in the interest rate. Okay, So 525 00:29:02,720 --> 00:29:06,640 Speaker 1: we're faulting you for that that you've allegedly deceived investors 526 00:29:06,680 --> 00:29:09,280 Speaker 1: as to the risks the bank was subject to its 527 00:29:09,320 --> 00:29:12,160 Speaker 1: exposure to changes in the interest rate environment, which we're 528 00:29:12,200 --> 00:29:16,120 Speaker 1: going to now. The Signature lawsuit in Brooklyn also accuses 529 00:29:16,400 --> 00:29:19,160 Speaker 1: for material misreps and omissions, as you've said June, but 530 00:29:19,280 --> 00:29:22,360 Speaker 1: this is very different. What they're saying is just prior 531 00:29:22,440 --> 00:29:25,000 Speaker 1: to the seizure over this past weekend by the State 532 00:29:25,000 --> 00:29:28,720 Speaker 1: of New York and other authorities. They're claiming that management 533 00:29:28,920 --> 00:29:31,960 Speaker 1: misled investors by saying the bank is stable. And once 534 00:29:32,000 --> 00:29:35,480 Speaker 1: again you've mentioned the very press releases that came out 535 00:29:35,800 --> 00:29:40,400 Speaker 1: actually supposedly last Thursday, March nine, which are quoted extensively 536 00:29:40,560 --> 00:29:43,640 Speaker 1: in the complaint in that Brooklyn federal court action, and 537 00:29:43,720 --> 00:29:47,200 Speaker 1: in essence they've quoted and I should add selectively because 538 00:29:47,240 --> 00:29:49,719 Speaker 1: that's what lawyers do. Okay, that's the way we litigate 539 00:29:49,760 --> 00:29:52,680 Speaker 1: these cases. But you choose what's best for making your case. 540 00:29:52,760 --> 00:29:56,000 Speaker 1: And they've said that in these allegations, they've quoted various 541 00:29:56,000 --> 00:29:59,760 Speaker 1: press releases by management at Signatures is saying in essence 542 00:30:00,280 --> 00:30:03,600 Speaker 1: that everything's fine, we're diversified, we have plenty of assets, 543 00:30:03,560 --> 00:30:06,680 Speaker 1: so on and so forth. So now these shareholders, which 544 00:30:06,720 --> 00:30:10,400 Speaker 1: interestingly claiming a very compressed time frame of those who 545 00:30:10,440 --> 00:30:12,680 Speaker 1: transacted in the stock or options to buy the stock 546 00:30:12,720 --> 00:30:16,040 Speaker 1: and so forth. But they're saying that by making these disclosures, 547 00:30:16,320 --> 00:30:21,000 Speaker 1: these statements, there was misrepresentations, will more properly put, misrepresentations 548 00:30:21,000 --> 00:30:25,800 Speaker 1: of signature's financial soundness, and therefore that's misleading. And once again, okay, 549 00:30:25,800 --> 00:30:29,280 Speaker 1: these are very serious charges. The plaintiffs definitely have an 550 00:30:29,360 --> 00:30:33,360 Speaker 1: uphill battle to prove they are fourth under the rigorous 551 00:30:33,360 --> 00:30:35,520 Speaker 1: test that's been applied under the statute and by the 552 00:30:35,560 --> 00:30:39,400 Speaker 1: Supreme Court. But if they can be proven, okay, wow, 553 00:30:39,480 --> 00:30:42,440 Speaker 1: all right, then the bank and the officers who were 554 00:30:42,520 --> 00:30:44,920 Speaker 1: named defendants, they are in a heck of a lot 555 00:30:44,960 --> 00:30:47,560 Speaker 1: of trouble. And not to mention, that's the civil litigation. 556 00:30:48,040 --> 00:30:51,280 Speaker 1: And while it's on a separate yet parallel track, as 557 00:30:51,320 --> 00:30:55,360 Speaker 1: you've mentioned earlier in our conversations today, there are inquiries 558 00:30:55,400 --> 00:30:59,160 Speaker 1: by all sorts of regulatory authorities SEC. Okay, and the 559 00:30:59,240 --> 00:31:01,440 Speaker 1: SEC is going to be interested in looking at this themselves. 560 00:31:01,440 --> 00:31:04,720 Speaker 1: From the security for an angle, the justice departments, the 561 00:31:04,800 --> 00:31:07,920 Speaker 1: DFS here in New York, Department of Financial Services, in 562 00:31:07,920 --> 00:31:11,040 Speaker 1: other words, of the old Superintendent of Banks. So there's 563 00:31:11,080 --> 00:31:12,680 Speaker 1: a lot of folks who are going to be poking 564 00:31:12,720 --> 00:31:15,600 Speaker 1: and prodding and looking at these statements and whether they 565 00:31:15,640 --> 00:31:18,600 Speaker 1: were truthful or accurate and so on. Do you expect 566 00:31:18,600 --> 00:31:21,840 Speaker 1: a lot more lawsuits like this sort of a pylon 567 00:31:22,160 --> 00:31:25,560 Speaker 1: until they see who's going to lead the class action 568 00:31:25,760 --> 00:31:29,560 Speaker 1: if it's certified. Absolutely, okay, because that's what lawyers do. 569 00:31:29,640 --> 00:31:32,280 Speaker 1: We love to pile on. Okay, that's a fact of life. 570 00:31:32,360 --> 00:31:35,560 Speaker 1: In fact, if anything, I'm surprised that the best of 571 00:31:35,640 --> 00:31:38,280 Speaker 1: my knowledge, I'll be it limited is I've only seen 572 00:31:38,680 --> 00:31:41,280 Speaker 1: let's just say, rounded up to less than half a dozen. 573 00:31:41,360 --> 00:31:45,200 Speaker 1: I expect again and even dozen of lawsuits to be 574 00:31:45,280 --> 00:31:48,400 Speaker 1: filed by maybe even the end of this week, certainly 575 00:31:48,400 --> 00:31:51,400 Speaker 1: by this time next week. And again, you've reached a 576 00:31:51,520 --> 00:31:55,400 Speaker 1: very crucial question there under current federal rules of four 577 00:31:55,480 --> 00:31:59,320 Speaker 1: class actions, the federal judge and again, as of this morning, 578 00:31:59,360 --> 00:32:02,240 Speaker 1: this case, I looked at the docket June, it hadn't 579 00:32:02,280 --> 00:32:05,080 Speaker 1: even been assigned it to a judge, but the judge 580 00:32:05,080 --> 00:32:08,040 Speaker 1: and broke. For example, for the federal case that's depending 581 00:32:08,120 --> 00:32:10,719 Speaker 1: in the federal courthouse in Brooklyn, the judge who will 582 00:32:10,880 --> 00:32:14,400 Speaker 1: be signed, he or she will basically hear evidence and 583 00:32:14,560 --> 00:32:19,120 Speaker 1: consider which plaintiff will be the lead plaintiff. Anybody can sue, 584 00:32:19,160 --> 00:32:22,160 Speaker 1: but it's up to the judge decide. Okay, Miss Jones 585 00:32:22,400 --> 00:32:25,600 Speaker 1: is most representative of the class. She has a law 586 00:32:25,640 --> 00:32:28,760 Speaker 1: firm representing her and the putative classes we'd like to 587 00:32:28,800 --> 00:32:31,520 Speaker 1: call it, that is most able, So the judge basically 588 00:32:31,680 --> 00:32:33,880 Speaker 1: selects that. So you know it's going to be a 589 00:32:33,920 --> 00:32:37,080 Speaker 1: competitive process, which is actually good because in essence, you 590 00:32:37,080 --> 00:32:40,080 Speaker 1: will get a plaintiff who best can represent the class 591 00:32:40,120 --> 00:32:43,720 Speaker 1: in terms of her involvement in the situation. Her ability 592 00:32:43,800 --> 00:32:46,040 Speaker 1: to speak on behalf of what I'm going to guess. 593 00:32:46,040 --> 00:32:48,520 Speaker 1: So are tens of thousands of investors and a law 594 00:32:48,560 --> 00:32:51,080 Speaker 1: firm that's well experienced and well equipped to prosecute the 595 00:32:51,120 --> 00:32:54,840 Speaker 1: case to its fullest. It's been great getting your insights, Anthony. 596 00:32:55,240 --> 00:32:58,880 Speaker 1: That's Anthony Sabino of Sabino and Sabino. And that's it 597 00:32:58,960 --> 00:33:01,480 Speaker 1: for this edition of The bloom Or Glas Show. Remember 598 00:33:01,520 --> 00:33:03,560 Speaker 1: you can always get the latest legal news on our 599 00:33:03,600 --> 00:33:07,719 Speaker 1: Bloomberg Law podcasts. You can find them on Apple Podcasts, Spotify, 600 00:33:07,920 --> 00:33:12,960 Speaker 1: and at www dot Bloomberg dot com, Slash podcast, Slash Law, 601 00:33:13,360 --> 00:33:16,000 Speaker 1: And remember to tune into The Bloomberg Glas Show every 602 00:33:16,040 --> 00:33:19,920 Speaker 1: weeknight at ten pm Wall Street Time. I'm June Grosso 603 00:33:20,080 --> 00:33:21,680 Speaker 1: and you're listening to Bloomberg