1
00:00:03,200 --> 00:00:08,000
Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio.

2
00:00:10,360 --> 00:00:12,880
Speaker 1: The weed of the crime bears bitter fruit.

3
00:00:13,640 --> 00:00:14,360
Speaker 2: I like this.

4
00:00:15,360 --> 00:00:19,120
Speaker 1: Did you think you'd get away with it? What did

5
00:00:19,200 --> 00:00:26,200
Speaker 1: you think I would know? The shadow knows?

6
00:00:29,840 --> 00:00:33,839
Speaker 3: Perhaps that explains why a novel theory of the SEC's

7
00:00:34,360 --> 00:00:38,880
Speaker 3: is being called shadow trading. A corporate insider may think

8
00:00:38,920 --> 00:00:41,959
Speaker 3: he got away with it, after all, he used inside

9
00:00:42,000 --> 00:00:44,920
Speaker 3: information from his company to trade in the stock of

10
00:00:44,960 --> 00:00:48,239
Speaker 3: a rival company. But it seems like the SEC is

11
00:00:48,320 --> 00:00:52,320
Speaker 3: trying to show that, like the shadow, it knows all.

12
00:00:52,840 --> 00:00:57,880
Speaker 3: Ask former Metivation executive Matthew Panawat a California jury convicted

13
00:00:57,960 --> 00:01:02,160
Speaker 3: him in the regulator's first enforcement action targeting so called

14
00:01:02,200 --> 00:01:06,320
Speaker 3: shadow trading. Joining me is securities law expert James Park,

15
00:01:06,440 --> 00:01:10,160
Speaker 3: a professor at UCLA Law School. Jim, this case has

16
00:01:10,200 --> 00:01:14,040
Speaker 3: been called groundbreaking. Do you think it's groundbreaking and if so,

17
00:01:14,319 --> 00:01:15,360
Speaker 3: why it is?

18
00:01:15,400 --> 00:01:17,600
Speaker 4: In some ways, but in other ways, I think it's

19
00:01:17,600 --> 00:01:21,640
Speaker 4: the standard case. The reason why it's unusual is I

20
00:01:21,720 --> 00:01:25,040
Speaker 4: believe it's the first time the SDC has brought and

21
00:01:25,160 --> 00:01:29,120
Speaker 4: won a case involving something called shadow trading, which is

22
00:01:29,160 --> 00:01:34,320
Speaker 4: a type of insider trading where you're using information that

23
00:01:34,680 --> 00:01:37,800
Speaker 4: you obtained from your own company to trade in the

24
00:01:37,880 --> 00:01:40,760
Speaker 4: stock of another company. This is the first time the

25
00:01:40,840 --> 00:01:46,280
Speaker 4: SDC has brought such a case and pursued serious sanctions.

26
00:01:46,520 --> 00:01:50,560
Speaker 4: It's not all that unusual, though, in that most of

27
00:01:50,720 --> 00:01:56,120
Speaker 4: the sort of outcome hinged upon factual issues. Did you

28
00:01:56,200 --> 00:02:01,080
Speaker 4: believe that this individual got and read the email from

29
00:02:01,080 --> 00:02:03,800
Speaker 4: the CEO which said that the company was going to

30
00:02:03,840 --> 00:02:08,519
Speaker 4: be acquired? Factual issues which are fairly routine in insider

31
00:02:08,560 --> 00:02:12,080
Speaker 4: trading cases. And I think you could argue that this

32
00:02:12,240 --> 00:02:17,720
Speaker 4: is a straightforward extension of existing law that has been

33
00:02:17,760 --> 00:02:21,480
Speaker 4: in place since the US Supreme Court's decision in the

34
00:02:21,560 --> 00:02:25,040
Speaker 4: United States versus o'hagen. But I do think that it

35
00:02:25,200 --> 00:02:28,880
Speaker 4: is significant because it shows the SEC is willing to

36
00:02:28,919 --> 00:02:33,400
Speaker 4: bring these types of cases and could do so in

37
00:02:33,440 --> 00:02:34,000
Speaker 4: the future.

38
00:02:34,560 --> 00:02:38,079
Speaker 3: What was the evidence against the defendant here?

39
00:02:38,400 --> 00:02:42,240
Speaker 4: Some of the evidence was circumstantial, so they knew the

40
00:02:42,280 --> 00:02:47,359
Speaker 4: CEO sent an email that included him and other individuals

41
00:02:47,400 --> 00:02:52,079
Speaker 4: in the company. They didn't necessarily know though, whether or

42
00:02:52,120 --> 00:02:54,840
Speaker 4: not he read the email, and he claimed the trial

43
00:02:54,960 --> 00:02:57,880
Speaker 4: that he did not read the email. But what they

44
00:02:57,919 --> 00:03:03,120
Speaker 4: do know is that minutes after the email was sent

45
00:03:03,200 --> 00:03:06,080
Speaker 4: and would have been received. He spent one hundred thousand

46
00:03:06,120 --> 00:03:11,320
Speaker 4: dollars in options in this company that was likely to

47
00:03:11,520 --> 00:03:15,040
Speaker 4: go up in price upon the announcement that his company

48
00:03:15,040 --> 00:03:18,840
Speaker 4: would be acquired, And so that is circumstantial evidence. We

49
00:03:18,919 --> 00:03:21,360
Speaker 4: don't know for a fact, you know, one hundred percent

50
00:03:21,360 --> 00:03:25,600
Speaker 4: certainty that he actually knew of this inside information and

51
00:03:25,680 --> 00:03:28,800
Speaker 4: that he read the email. But you know, that's what

52
00:03:28,840 --> 00:03:32,040
Speaker 4: a jury's for. Does a jury believe his explanation for

53
00:03:32,160 --> 00:03:34,600
Speaker 4: buying all of these options, which is that he read

54
00:03:34,960 --> 00:03:38,640
Speaker 4: a research analyst report by Goldman Sachs and that he

55
00:03:38,800 --> 00:03:42,520
Speaker 4: had been following this company for a long time. You know,

56
00:03:42,600 --> 00:03:44,880
Speaker 4: that's up to the jury. And recall that this is

57
00:03:44,920 --> 00:03:47,600
Speaker 4: a civil case. It's not a criminal case where the

58
00:03:47,640 --> 00:03:51,160
Speaker 4: SEC has to prove beyond a reasonable doubt that he

59
00:03:51,320 --> 00:03:55,320
Speaker 4: violated Rule ten B five, which is the major securities

60
00:03:55,320 --> 00:03:58,560
Speaker 4: fraud provision that prohibits insider trading. They only have to

61
00:03:58,640 --> 00:04:01,600
Speaker 4: prove by a propondance of the evidence.

62
00:04:02,200 --> 00:04:05,600
Speaker 3: The defense also argued that the SEC couldn't prove that

63
00:04:05,680 --> 00:04:09,640
Speaker 3: Panawat had an intent to defraud or see enter because

64
00:04:09,680 --> 00:04:11,520
Speaker 3: he didn't know it was illegal to trade in a

65
00:04:11,600 --> 00:04:15,280
Speaker 3: company that wasn't his employer and didn't conduct business with

66
00:04:15,320 --> 00:04:18,719
Speaker 3: his employer. So his attorney told the jury, the evidence

67
00:04:18,760 --> 00:04:21,799
Speaker 3: will show that the entire SEC case is an attempt

68
00:04:21,880 --> 00:04:24,919
Speaker 3: to put thoughts in mister Panawat's head that were not

69
00:04:25,120 --> 00:04:26,720
Speaker 3: there when he made the trades.

70
00:04:27,440 --> 00:04:31,919
Speaker 4: It's a substantial argument, and these cases depend on intent,

71
00:04:32,640 --> 00:04:36,120
Speaker 4: and because we don't know for sure what someone's intent is,

72
00:04:36,680 --> 00:04:39,120
Speaker 4: that's up for the jury to decide. And the jury

73
00:04:39,160 --> 00:04:42,279
Speaker 4: looked at the evidence and they believed circumstantially that he

74
00:04:42,360 --> 00:04:45,320
Speaker 4: acted with bad intent. And you know, one fact in

75
00:04:45,320 --> 00:04:48,599
Speaker 4: favor of the SEC is that he buys one hundred

76
00:04:48,640 --> 00:04:52,880
Speaker 4: thousand dollars in option. His purchase is represented around eighty

77
00:04:52,920 --> 00:04:56,479
Speaker 4: percent of the options trading in that stock on that

78
00:04:56,600 --> 00:05:01,279
Speaker 4: particular day. That is very unusual. And you know, the

79
00:05:01,360 --> 00:05:04,000
Speaker 4: other point I would make is that ignorance of the

80
00:05:04,120 --> 00:05:06,880
Speaker 4: law is not a defense. Even if you don't know

81
00:05:06,920 --> 00:05:09,200
Speaker 4: all the ins and outs of insider trading law, which

82
00:05:09,240 --> 00:05:13,880
Speaker 4: is complicated, that is not a defense to liability. Now,

83
00:05:14,120 --> 00:05:16,200
Speaker 4: he does have an argument that I just was not

84
00:05:16,360 --> 00:05:19,559
Speaker 4: conscious of doing anything wrong, because you know, I didn't

85
00:05:19,640 --> 00:05:22,839
Speaker 4: understand I couldn't trade in the stock of other companies,

86
00:05:23,080 --> 00:05:25,800
Speaker 4: and the fact of the matter is he signs the

87
00:05:25,920 --> 00:05:30,480
Speaker 4: policy saying that you cannot use company information to trade

88
00:05:30,480 --> 00:05:34,359
Speaker 4: in the securities of another publicly traded company. Now, you know,

89
00:05:34,400 --> 00:05:37,080
Speaker 4: I think, mister Pano, what would say, You know, we

90
00:05:37,279 --> 00:05:40,400
Speaker 4: sign all sorts of things when he joined a new company.

91
00:05:40,680 --> 00:05:43,840
Speaker 4: We may not read these things carefully. And I just

92
00:05:43,880 --> 00:05:47,479
Speaker 4: didn't understand this. The jury could have decided you are accountable,

93
00:05:47,600 --> 00:05:50,760
Speaker 4: and you are accountable because you signed the policy, and

94
00:05:51,040 --> 00:05:53,960
Speaker 4: because you signed it, you have to follow it. And

95
00:05:54,000 --> 00:05:57,360
Speaker 4: if you're not following it, you know you're deceiving your company.

96
00:05:57,600 --> 00:06:00,560
Speaker 4: And that sort of deception is a type of missuppropriation

97
00:06:01,040 --> 00:06:05,160
Speaker 4: of the company's confidential information. You know, another argument you

98
00:06:05,240 --> 00:06:07,120
Speaker 4: could make might be a you know, I found a

99
00:06:07,160 --> 00:06:09,720
Speaker 4: loophole and I'm gaving the system. I don't know how

100
00:06:09,720 --> 00:06:12,200
Speaker 4: sympathetic the jury would be to that argument, but you know,

101
00:06:12,279 --> 00:06:14,400
Speaker 4: that is the sort of argument that one could give

102
00:06:14,520 --> 00:06:17,680
Speaker 4: some weights to. But the jury rejected those arguments.

103
00:06:18,040 --> 00:06:22,200
Speaker 3: You mentioned the policy, the confidentiality agreement that Panawat signed.

104
00:06:22,680 --> 00:06:27,200
Speaker 3: Could the SEC have brought this case without that confidentiality agreement?

105
00:06:27,800 --> 00:06:28,240
Speaker 2: This is the.

106
00:06:28,240 --> 00:06:32,760
Speaker 4: Foundation of the case. Without this policy, the SEC would

107
00:06:32,800 --> 00:06:36,240
Speaker 4: not have an insider trading case, you can only misappropriate

108
00:06:36,520 --> 00:06:40,479
Speaker 4: confidential information and violate Rule ten B five based on

109
00:06:40,600 --> 00:06:45,120
Speaker 4: inside information if you have a fiduciary duty to the

110
00:06:45,120 --> 00:06:50,120
Speaker 4: corporation who stock your trading in, or you have agreed

111
00:06:50,440 --> 00:06:54,120
Speaker 4: to keep information confidential. Those are the two mechanisms by

112
00:06:54,160 --> 00:06:58,960
Speaker 4: which you can violate insider trading prohibitions. The first avenue

113
00:06:59,080 --> 00:07:02,440
Speaker 4: is called the classical theory of insider trading, and that

114
00:07:02,480 --> 00:07:07,280
Speaker 4: actually does not apply to this case because Panawat does

115
00:07:07,320 --> 00:07:10,680
Speaker 4: not have any fiduciary duties to Insight, which is the

116
00:07:10,720 --> 00:07:14,120
Speaker 4: company that he traded in. He might have some juduciary

117
00:07:14,280 --> 00:07:18,920
Speaker 4: like duties to his company metivation. But that's why you

118
00:07:19,000 --> 00:07:21,119
Speaker 4: know this is seen or was seen as a type

119
00:07:21,120 --> 00:07:25,280
Speaker 4: of loophole. It gets you around the classical theory. But

120
00:07:25,840 --> 00:07:29,200
Speaker 4: there's a second theory which has just as much status,

121
00:07:29,240 --> 00:07:32,840
Speaker 4: has been approved by the Supreme Court called the misappropriation theory.

122
00:07:33,240 --> 00:07:37,160
Speaker 4: And under that theory, the deception is when you sign

123
00:07:37,240 --> 00:07:41,120
Speaker 4: a policy of confidentiality with your company that commits you

124
00:07:41,280 --> 00:07:45,280
Speaker 4: to complying with that policy, and if you deceptively trade

125
00:07:45,280 --> 00:07:48,680
Speaker 4: and violation of that policy, you have violated Rule ten

126
00:07:48,760 --> 00:07:52,240
Speaker 4: D five. So it is absolutely essential that they had

127
00:07:52,280 --> 00:07:55,680
Speaker 4: a policy that specified you cannot trade in the securities

128
00:07:55,840 --> 00:07:59,280
Speaker 4: of another publicly traded company. If they did not have

129
00:07:59,800 --> 00:08:03,880
Speaker 4: that policy and a general policy of confidentiality, the SEC

130
00:08:03,920 --> 00:08:07,080
Speaker 4: would not have had a case. Many public companies are

131
00:08:07,120 --> 00:08:10,960
Speaker 4: adopting these types of broad insider trading policies that cover

132
00:08:11,280 --> 00:08:13,720
Speaker 4: securities of other publicly traded companies.

133
00:08:14,120 --> 00:08:17,880
Speaker 3: Do you think that this case will survive and appeal this.

134
00:08:17,880 --> 00:08:20,640
Speaker 4: Theory, It's always hard to say. I think on the

135
00:08:20,680 --> 00:08:25,120
Speaker 4: factual determinations, there's not much of a basis for overturning

136
00:08:25,160 --> 00:08:28,120
Speaker 4: the case. The vulnerable point to me, I think is

137
00:08:28,280 --> 00:08:30,840
Speaker 4: on the enter. I think that is the one argument

138
00:08:31,000 --> 00:08:34,160
Speaker 4: that a judge on the Ninth Circuit or perhaps the

139
00:08:34,200 --> 00:08:38,280
Speaker 4: Supreme Court could look at very closely on these facts

140
00:08:38,360 --> 00:08:41,760
Speaker 4: and could be a little bit skeptical of the sec

141
00:08:42,080 --> 00:08:45,080
Speaker 4: theory of the case. On the other hand, you know,

142
00:08:45,120 --> 00:08:49,240
Speaker 4: these are typically factual matters. The fraudulent intent is a

143
00:08:49,280 --> 00:08:52,800
Speaker 4: matter for the jury, and many appellate courts will defer

144
00:08:52,880 --> 00:08:55,440
Speaker 4: to that, and the Supreme Court may not think of

145
00:08:55,480 --> 00:08:58,560
Speaker 4: this as a good vessel for clarifying the boundaries of

146
00:08:58,559 --> 00:08:59,680
Speaker 4: insider trading laws.

147
00:09:00,000 --> 00:09:04,080
Speaker 3: The SEC has been criticized for pushing into new territory

148
00:09:04,200 --> 00:09:09,320
Speaker 3: and stretching its enforcement powers beyond its jurisdiction, for example,

149
00:09:09,360 --> 00:09:14,080
Speaker 3: bringing cases over McDonald's CEO's relationship with an employee, the

150
00:09:14,200 --> 00:09:18,240
Speaker 3: workplace culture at a video game developer, and several cutting

151
00:09:18,360 --> 00:09:21,840
Speaker 3: edge cases to gain greater control over cryptocurrency.

152
00:09:22,320 --> 00:09:26,439
Speaker 4: That is the criticism, and one response the SEC might

153
00:09:26,520 --> 00:09:30,160
Speaker 4: have is that these are novel problems and the reason

154
00:09:30,200 --> 00:09:33,240
Speaker 4: we were not addressing them before is the SEC was

155
00:09:33,320 --> 00:09:35,800
Speaker 4: too passive. We need to get out there, We need

156
00:09:35,800 --> 00:09:40,360
Speaker 4: to enforce the laws the novel situations and educate people

157
00:09:40,400 --> 00:09:43,760
Speaker 4: about what the law is. You can't simply ignore these

158
00:09:43,960 --> 00:09:48,200
Speaker 4: broader standards and principles. And if you're applying the definition

159
00:09:48,240 --> 00:09:51,760
Speaker 4: of insider trading in this appropriation in security and good faith,

160
00:09:52,080 --> 00:09:54,760
Speaker 4: you would know that in some cases that there are

161
00:09:54,840 --> 00:09:58,120
Speaker 4: violations of securities laws. Now, the argument on the other

162
00:09:58,200 --> 00:10:02,319
Speaker 4: side is that certainly the SEC has become more aggressive

163
00:10:02,520 --> 00:10:05,640
Speaker 4: and I would say more entrepreneurial in certain ways, and

164
00:10:05,720 --> 00:10:08,559
Speaker 4: part of that is that you have a more expansive,

165
00:10:08,640 --> 00:10:12,760
Speaker 4: aggressive regulatory policy, and enforcement is a way to develop

166
00:10:12,840 --> 00:10:16,559
Speaker 4: that policy. And you know they're positives and negatives, I think,

167
00:10:16,640 --> 00:10:18,920
Speaker 4: but recall that there are times when the SEC is

168
00:10:18,960 --> 00:10:22,960
Speaker 4: criticized as too passive, too much of a bureaucracy captured

169
00:10:22,960 --> 00:10:26,240
Speaker 4: by the industry because the lawyers want to get good

170
00:10:26,320 --> 00:10:28,840
Speaker 4: jobs with law firms, and so, you know, I think

171
00:10:28,880 --> 00:10:31,400
Speaker 4: either way, if you're too passive, if you're too aggressive,

172
00:10:31,440 --> 00:10:34,040
Speaker 4: the SEC is going to face some criticism for its

173
00:10:34,120 --> 00:10:37,200
Speaker 4: enforcement policies. But I would say that I do think

174
00:10:37,240 --> 00:10:41,200
Speaker 4: that this administration, for better or worse, has implemented a

175
00:10:41,200 --> 00:10:45,120
Speaker 4: more entrepreneurial or aggressive approach to enforcement.

176
00:10:45,679 --> 00:10:48,559
Speaker 3: Finally, how big a victory is this for the SEC?

177
00:10:49,200 --> 00:10:51,240
Speaker 3: A ten on a ten scale or.

178
00:10:51,360 --> 00:10:54,320
Speaker 4: Five, it's a big victory. Every trial win is a

179
00:10:54,400 --> 00:10:57,280
Speaker 4: big thing and a good thing for the SEC, because

180
00:10:57,320 --> 00:11:00,640
Speaker 4: you're not just settling cases. That's the criticism of the

181
00:11:00,720 --> 00:11:04,160
Speaker 4: SEC is that too often they just settle cases the

182
00:11:04,200 --> 00:11:08,160
Speaker 4: defendant doesn't admit too wrongdoing or deny it, and the

183
00:11:08,200 --> 00:11:11,000
Speaker 4: SEC has been afraid or doesn't have the resources to

184
00:11:11,120 --> 00:11:14,080
Speaker 4: actually go in front of judges and juries and test

185
00:11:14,160 --> 00:11:18,520
Speaker 4: their theory. So I think this is very significant, and

186
00:11:19,120 --> 00:11:23,439
Speaker 4: you know, along with their win in the Coinbase motion

187
00:11:23,640 --> 00:11:27,640
Speaker 4: to dismiss, it's been a good few weeks for the SDC,

188
00:11:28,000 --> 00:11:31,479
Speaker 4: and these are needed wins because when you're getting criticized

189
00:11:31,559 --> 00:11:36,079
Speaker 4: for stretching the law regulating by enforcement. The suurest response

190
00:11:36,200 --> 00:11:39,400
Speaker 4: is winning cases in courts, and you know they have

191
00:11:39,520 --> 00:11:43,120
Speaker 4: won these cases. They need to keep litigating cases and

192
00:11:43,240 --> 00:11:48,040
Speaker 4: winning them fairly consistently in order to enhance the legitimacy

193
00:11:48,080 --> 00:11:49,200
Speaker 4: of their enforcement effort.

194
00:11:49,400 --> 00:11:52,760
Speaker 3: Thanks so much, Jim. That's Professor James Park of UCLA

195
00:11:52,880 --> 00:11:56,320
Speaker 3: Law School coming up. The twenty twenty four election is

196
00:11:56,400 --> 00:12:00,000
Speaker 3: already being fought out in the courts. I'm June Gross

197
00:12:00,080 --> 00:12:03,400
Speaker 3: and you're listening to Bloomberg and.

198
00:12:03,360 --> 00:12:05,959
Speaker 5: That was a rigged election and it's a shame that

199
00:12:06,000 --> 00:12:07,480
Speaker 5: we had to go through, and it's very bad for

200
00:12:07,520 --> 00:12:08,040
Speaker 5: our country.

201
00:12:08,200 --> 00:12:11,120
Speaker 3: We've heard that false claim from Donald Trump about the

202
00:12:11,160 --> 00:12:16,280
Speaker 3: twenty twenty presidential election over and over and over, despite

203
00:12:16,320 --> 00:12:19,600
Speaker 3: the fact that sixty court cases found no evidence of

204
00:12:19,640 --> 00:12:23,720
Speaker 3: fraud or illegality. It seems to be part of Trump's repertoire.

205
00:12:23,960 --> 00:12:28,080
Speaker 5: The election is being rigged by corrupt media, pushing false

206
00:12:28,120 --> 00:12:33,000
Speaker 5: allegations and outright lies in an effort to elect Hillary

207
00:12:33,040 --> 00:12:34,120
Speaker 5: Clinton president.

208
00:12:34,440 --> 00:12:38,520
Speaker 3: Of course, he dropped those rigged election claims after he won,

209
00:12:39,000 --> 00:12:42,200
Speaker 3: but they're just below the surface of this year's election.

210
00:12:42,760 --> 00:12:44,240
Speaker 5: Republicans must win.

211
00:12:44,360 --> 00:12:45,920
Speaker 3: We want to landslide.

212
00:12:45,960 --> 00:12:48,600
Speaker 5: We wanted to be too big, too rigged.

213
00:12:48,840 --> 00:12:51,480
Speaker 3: Will there be a repeat this year of the litigation

214
00:12:51,760 --> 00:12:55,320
Speaker 3: frenzy that followed the twenty twenty election. Well, the election

215
00:12:55,480 --> 00:12:58,760
Speaker 3: is more than six months away, but political groups are

216
00:12:58,840 --> 00:13:03,000
Speaker 3: filing so many lawsuits over voting rules that the numbers

217
00:13:03,080 --> 00:13:06,679
Speaker 3: could reach the record set in that bitterly contested election.

218
00:13:07,200 --> 00:13:10,679
Speaker 3: The Democratic and Republican parties have raised about forty one

219
00:13:10,760 --> 00:13:15,840
Speaker 3: point three million dollars to spend on court fights, and nonprofits,

220
00:13:15,840 --> 00:13:19,960
Speaker 3: including some dark money groups, have likely raised hundreds of

221
00:13:20,000 --> 00:13:23,840
Speaker 3: millions more. Joining me is elections law expert Derek Muller,

222
00:13:23,880 --> 00:13:27,280
Speaker 3: a professor at Notre Dame Law School. Fighting over election

223
00:13:27,440 --> 00:13:30,960
Speaker 3: rules in court is big business for lawyers and the

224
00:13:31,000 --> 00:13:33,319
Speaker 3: groups challenging them. Just how big?

225
00:13:33,640 --> 00:13:38,040
Speaker 1: So we know that the political parties can collect significant

226
00:13:38,040 --> 00:13:42,120
Speaker 1: amounts of money ear mark designated for election expenses. So

227
00:13:42,160 --> 00:13:46,200
Speaker 1: the RNC and DNC have large pools of money that

228
00:13:46,280 --> 00:13:49,520
Speaker 1: are upwards of one hundred million dollars a year now

229
00:13:49,679 --> 00:13:52,600
Speaker 1: to be thinking about these kinds of expenditures. So they

230
00:13:52,640 --> 00:13:56,280
Speaker 1: have significant funds that they can use to involve them

231
00:13:56,320 --> 00:14:00,080
Speaker 1: self mitigation to start litigation to intervene in litigation. Not

232
00:14:00,120 --> 00:14:03,680
Speaker 1: even just the parties, the growth of additional five LLANC

233
00:14:03,840 --> 00:14:08,600
Speaker 1: three's nonprofits organizations dedicated to rooting out voter fraud or

234
00:14:08,640 --> 00:14:12,280
Speaker 1: protecting democracy or whatever we might label the organizations and

235
00:14:12,320 --> 00:14:14,640
Speaker 1: those we don't even have a sense of the scope

236
00:14:14,640 --> 00:14:17,040
Speaker 1: and scale of these things. So it's significant amounts of

237
00:14:17,080 --> 00:14:20,480
Speaker 1: money coming into the system specifically for litigation.

238
00:14:21,360 --> 00:14:25,640
Speaker 3: And there are groups nonprofits where we don't know where

239
00:14:25,640 --> 00:14:28,480
Speaker 3: their money is coming from or how they're spending it.

240
00:14:28,720 --> 00:14:31,160
Speaker 1: So when it comes to the DNC or the RNC,

241
00:14:31,440 --> 00:14:33,960
Speaker 1: we know their donors, we know the individuals who have

242
00:14:34,080 --> 00:14:38,440
Speaker 1: contributed to these entities. You know, there are limitations about

243
00:14:38,440 --> 00:14:43,160
Speaker 1: what packs can contribute to parties, so we have some

244
00:14:43,200 --> 00:14:45,720
Speaker 1: transparency about where that money is coming from, at least

245
00:14:45,720 --> 00:14:48,800
Speaker 1: in terms of the direct contributions to the parties. Where

246
00:14:48,880 --> 00:14:51,520
Speaker 1: the so called dark money groups comes in would be

247
00:14:51,760 --> 00:14:54,760
Speaker 1: if there are other outside groups on the right or

248
00:14:54,760 --> 00:14:59,560
Speaker 1: the left who are starting litigation, engaged in litigation, funding litigation,

249
00:14:59,720 --> 00:15:03,920
Speaker 1: in beingian litigation, who want to support or promote certain

250
00:15:04,000 --> 00:15:06,440
Speaker 1: kinds of laws or anticipate those ahead of the twenty

251
00:15:06,480 --> 00:15:09,520
Speaker 1: twenty four election, So you've seen some of these organizations

252
00:15:09,520 --> 00:15:12,760
Speaker 1: from you know, former government officials, you know, both on

253
00:15:12,760 --> 00:15:14,960
Speaker 1: the right and the left, to support Trump who opposed Trump.

254
00:15:15,120 --> 00:15:16,800
Speaker 1: I think often think of it in those terms, maybe

255
00:15:16,880 --> 00:15:20,480
Speaker 1: rather than a Republican and Democrats these days. But those organizations,

256
00:15:20,680 --> 00:15:23,720
Speaker 1: you know, we don't necessarily know where their funding's coming from,

257
00:15:23,920 --> 00:15:26,680
Speaker 1: who's supporting them? Are the reasons why they're litigating. But

258
00:15:26,680 --> 00:15:28,280
Speaker 1: when it comes to the parties, at least we have

259
00:15:28,360 --> 00:15:30,400
Speaker 1: some some pretty good transparency.

260
00:15:30,800 --> 00:15:35,160
Speaker 6: This, you know, sort of fierce challenging of election laws

261
00:15:35,240 --> 00:15:39,440
Speaker 6: and venus election laws. Did it start after Bush v.

262
00:15:39,600 --> 00:15:42,920
Speaker 6: Gore or did it start in twenty twenty?

263
00:15:44,600 --> 00:15:48,120
Speaker 1: It keeps rising, So there's lots of inflection points. So

264
00:15:48,240 --> 00:15:51,200
Speaker 1: Professor Rickhats in his tracked how Bush versus Gore was

265
00:15:51,240 --> 00:15:53,760
Speaker 1: sort of the first wave of these things because Bush

266
00:15:53,800 --> 00:15:55,680
Speaker 1: versus Gore, it's not just that, you know, a very

267
00:15:55,760 --> 00:15:57,960
Speaker 1: small margin to Florida could affect the outcome of a

268
00:15:58,000 --> 00:16:01,200
Speaker 1: presidential election. It also signified the federal courts were open

269
00:16:01,280 --> 00:16:04,240
Speaker 1: for business about how you get a recount right, how

270
00:16:04,240 --> 00:16:08,600
Speaker 1: your machines were counting ballots. So we see a steady

271
00:16:08,680 --> 00:16:12,800
Speaker 1: uptick in election litigation after the two thousand election. But again,

272
00:16:12,840 --> 00:16:15,760
Speaker 1: there are different inflection points that arise, you know, throughout

273
00:16:15,760 --> 00:16:19,760
Speaker 1: this period of time, as states introduce vot identification laws

274
00:16:19,760 --> 00:16:22,520
Speaker 1: and those become a sort of rallying cry and a

275
00:16:22,680 --> 00:16:26,560
Speaker 1: challenging point for different groups or different legislatures. We see

276
00:16:26,560 --> 00:16:29,920
Speaker 1: just the significant uptick in litigation around those things FROMNIBUS

277
00:16:30,000 --> 00:16:33,720
Speaker 1: Bill twenty fourteen. Twenty fifteen creates this mechanism for more

278
00:16:33,800 --> 00:16:37,200
Speaker 1: funding and elections. You know, after the twenty sixteen election

279
00:16:37,400 --> 00:16:40,520
Speaker 1: we see Green Party candidate Jill Steine pressing for recounts

280
00:16:40,560 --> 00:16:43,160
Speaker 1: around the United States, and twenty twenty we see the

281
00:16:43,240 --> 00:16:45,920
Speaker 1: run up to the election is a lot of changes

282
00:16:46,000 --> 00:16:49,000
Speaker 1: due to COVID, and then there's just tons of litigation

283
00:16:49,160 --> 00:16:52,960
Speaker 1: being filed to challenge the rules or to last accommodations

284
00:16:52,960 --> 00:16:55,840
Speaker 1: from the rules, followed by all those challenges after the

285
00:16:55,880 --> 00:16:59,280
Speaker 1: twenty twenty election. So every cycle just seems to be

286
00:16:59,280 --> 00:17:03,880
Speaker 1: bringing its own new challenges, new crises, new rallying points

287
00:17:03,920 --> 00:17:06,639
Speaker 1: to fundraise off of. You know, a lot of election

288
00:17:06,800 --> 00:17:09,720
Speaker 1: laws that were enacted by legislatures in the past that

289
00:17:09,840 --> 00:17:12,160
Speaker 1: might have been ignored or sort of just moved beyond,

290
00:17:12,240 --> 00:17:15,440
Speaker 1: and party organizers would have accommoded them or handled them

291
00:17:15,640 --> 00:17:19,280
Speaker 1: now are being challenged. Almost any change to your election

292
00:17:19,440 --> 00:17:21,919
Speaker 1: machinery in very basic terms, from the buying of a

293
00:17:21,960 --> 00:17:26,000
Speaker 1: machine to the list maintenance of your voter roles, gets

294
00:17:26,080 --> 00:17:28,320
Speaker 1: challenged by some group on the right or left. So

295
00:17:28,359 --> 00:17:30,760
Speaker 1: we're just seeing this escalation, and I think part of

296
00:17:30,760 --> 00:17:32,760
Speaker 1: it is the availability of funding, and maybe part of

297
00:17:32,800 --> 00:17:35,439
Speaker 1: it is the awareness that parties think that very small

298
00:17:35,440 --> 00:17:38,480
Speaker 1: differences can matter, and so they want to challenge as

299
00:17:38,560 --> 00:17:41,359
Speaker 1: much as they can, anticipating that a small change might

300
00:17:41,400 --> 00:17:42,240
Speaker 1: matter in their election.

301
00:17:42,680 --> 00:17:47,119
Speaker 6: And are the big groups that are challenging and defending

302
00:17:47,160 --> 00:17:50,560
Speaker 6: these laws. Are they all tied to a party or

303
00:17:50,600 --> 00:17:53,480
Speaker 6: a candidate, or any of them independent?

304
00:17:54,200 --> 00:17:57,480
Speaker 1: So a number are at least extensively independent right, But

305
00:17:57,560 --> 00:17:59,520
Speaker 1: a number of them do tend to file on one

306
00:17:59,560 --> 00:18:01,680
Speaker 1: side or the other. So some of them will have

307
00:18:01,920 --> 00:18:05,560
Speaker 1: former Republican officials think about restoring integrity and trust and elections,

308
00:18:05,640 --> 00:18:08,359
Speaker 1: the Honest Elections Project or things like that, or some

309
00:18:08,400 --> 00:18:10,760
Speaker 1: of them will have former Democratic officials or of never

310
00:18:10,800 --> 00:18:13,880
Speaker 1: Trump officials who are participating. Some of them States, United

311
00:18:13,920 --> 00:18:16,920
Speaker 1: Democracy Center, Protect Democracy, or some of these organizations tend

312
00:18:16,920 --> 00:18:18,920
Speaker 1: to file much more heavily on the democratic side, and

313
00:18:18,960 --> 00:18:22,280
Speaker 1: the Republican side, so you can trace what these organizations

314
00:18:22,280 --> 00:18:25,359
Speaker 1: are doing and see where their officials are. And they

315
00:18:25,440 --> 00:18:28,679
Speaker 1: can't formally coordinate with the parties because if you have

316
00:18:28,760 --> 00:18:33,119
Speaker 1: that coordination, it creates campaign finance problems. But it's that

317
00:18:33,240 --> 00:18:36,280
Speaker 1: they are going around. They're filing litigation and again places

318
00:18:36,280 --> 00:18:38,719
Speaker 1: maybe where the party doesn't have the resources to do it,

319
00:18:38,840 --> 00:18:41,639
Speaker 1: or isn't aware of it, or wants another group president

320
00:18:41,720 --> 00:18:43,919
Speaker 1: the party to be involved. That said, the parties do

321
00:18:44,000 --> 00:18:46,840
Speaker 1: still have some significant involvement. I'sk the most significant party

322
00:18:46,920 --> 00:18:50,560
Speaker 1: level litigation right now. It's Democratic National Committee leading a

323
00:18:50,600 --> 00:18:53,640
Speaker 1: number of challenges to keep Robert F. Kennedy's name off

324
00:18:53,680 --> 00:18:55,960
Speaker 1: the ballot in a number of states, I think, viewing

325
00:18:56,000 --> 00:18:58,040
Speaker 1: him as a third party threat. I think the R

326
00:18:58,080 --> 00:18:59,520
Speaker 1: and T might view him as a threat too, but

327
00:18:59,600 --> 00:19:03,120
Speaker 1: hasn't all those challenges. So again, it's hard to pin

328
00:19:03,280 --> 00:19:06,520
Speaker 1: down exactly who's leading the litigation in some of these places.

329
00:19:06,560 --> 00:19:10,080
Speaker 1: It's following the headlines, seeing who's led on the docket,

330
00:19:10,119 --> 00:19:12,080
Speaker 1: what the lead party's name is, and then trying to

331
00:19:12,080 --> 00:19:15,679
Speaker 1: identify who they tend to support or where their attorneys

332
00:19:15,760 --> 00:19:16,879
Speaker 1: have come from.

333
00:19:17,359 --> 00:19:21,000
Speaker 3: And it seems like so many of these lawsuits.

334
00:19:21,080 --> 00:19:25,240
Speaker 6: Are not helping to clarify things, but they're attacking this

335
00:19:25,560 --> 00:19:27,959
Speaker 6: minutia to deter the process.

336
00:19:28,680 --> 00:19:31,200
Speaker 1: So I think about this from kind of an economic standpoint.

337
00:19:31,400 --> 00:19:37,240
Speaker 1: If you have limited resources to challenge the rules governing elections,

338
00:19:37,760 --> 00:19:40,360
Speaker 1: you are going to challenge the things that you think

339
00:19:40,400 --> 00:19:43,600
Speaker 1: are the biggest deal, right, the most important ones, the

340
00:19:43,600 --> 00:19:47,000
Speaker 1: ones that you think are really truly changing the game.

341
00:19:47,280 --> 00:19:49,320
Speaker 1: And that's also the case that if you didn't have

342
00:19:49,400 --> 00:19:52,879
Speaker 1: money earmarked for litigation as a campaign, you would have

343
00:19:52,960 --> 00:19:55,160
Speaker 1: to make a judgment call, do I think this two

344
00:19:55,200 --> 00:19:59,720
Speaker 1: hundred and fifty thousand dollars is better spent on advertisements

345
00:20:00,080 --> 00:20:04,720
Speaker 1: in our district or on litigating you know, this absentee

346
00:20:04,800 --> 00:20:08,159
Speaker 1: voter rule or this drop box rule or whatever it is.

347
00:20:08,400 --> 00:20:12,080
Speaker 1: So in the past, you would focus your resources on

348
00:20:12,200 --> 00:20:15,159
Speaker 1: those things that were the most salient, issues that you

349
00:20:15,240 --> 00:20:17,640
Speaker 1: thought had the highest likelihood of winning, and those things

350
00:20:17,680 --> 00:20:21,480
Speaker 1: that you thought were better uses of resources than sort

351
00:20:21,480 --> 00:20:25,280
Speaker 1: of ordinary political expenses. Now, when you earmark the funds,

352
00:20:25,359 --> 00:20:28,120
Speaker 1: you are saying this money is for only litigation. These

353
00:20:28,160 --> 00:20:31,560
Speaker 1: contributions can only be for litigation purposes, So you don't

354
00:20:31,600 --> 00:20:34,400
Speaker 1: have to make that trade off, and the more resources

355
00:20:34,440 --> 00:20:36,960
Speaker 1: you have, the more money you have to spend on litigation,

356
00:20:37,359 --> 00:20:40,400
Speaker 1: then the more things you can challenge, and the more

357
00:20:40,400 --> 00:20:43,520
Speaker 1: things you challenge, by definition, you are challenging weaker and

358
00:20:43,560 --> 00:20:46,439
Speaker 1: weaker claims, or more and more marginal claims, more and

359
00:20:46,440 --> 00:20:49,240
Speaker 1: more minutia of elections. To say, you know, we're dealing

360
00:20:49,280 --> 00:20:52,160
Speaker 1: with a very small subset of what we think could

361
00:20:52,200 --> 00:20:54,560
Speaker 1: be at stake here. So if we can say, you know,

362
00:20:54,680 --> 00:20:57,080
Speaker 1: at a very high level, of course, we want elections

363
00:20:57,080 --> 00:20:59,960
Speaker 1: to be run fairly and with integrity. We want every

364
00:21:00,080 --> 00:21:03,040
Speaker 1: eligible voter to have a reasonable opportunity to vote, and

365
00:21:03,080 --> 00:21:07,000
Speaker 1: we don't want that vote unreasonably burdened. But we now

366
00:21:07,080 --> 00:21:10,119
Speaker 1: expect a lot of things, even what we could describe

367
00:21:10,160 --> 00:21:13,879
Speaker 1: as fairly small things about how elections are run, on

368
00:21:14,200 --> 00:21:18,600
Speaker 1: how counties are purchasing voting equipment, or the methods they

369
00:21:18,680 --> 00:21:21,919
Speaker 1: use to tabulate ballots. They're just being routinely challenged. So

370
00:21:22,080 --> 00:21:24,320
Speaker 1: many of these lawsuits just don't go anywhere. They're not

371
00:21:24,400 --> 00:21:26,560
Speaker 1: going to end up being successful, or even if they're

372
00:21:26,560 --> 00:21:28,639
Speaker 1: successful at the district court level, they're likely to be

373
00:21:28,720 --> 00:21:33,080
Speaker 1: reversed and appeal. We're watching that escalation and trying to

374
00:21:33,080 --> 00:21:36,040
Speaker 1: calculate what's the actual added value at the end of

375
00:21:36,080 --> 00:21:38,320
Speaker 1: the day, how much of it is win loss rate,

376
00:21:38,400 --> 00:21:41,640
Speaker 1: and how much of it is convincing donors. They're convincing

377
00:21:41,640 --> 00:21:43,960
Speaker 1: those are your fund raised from to say, hey, we've

378
00:21:44,240 --> 00:21:46,479
Speaker 1: filed lawsuit, we're fighting the fight, and then even if

379
00:21:46,520 --> 00:21:49,160
Speaker 1: we lose, the point is we're fighting. So that's been

380
00:21:49,520 --> 00:21:51,280
Speaker 1: a change in the dynamic, I would say, over the

381
00:21:51,359 --> 00:21:52,280
Speaker 1: last couple of decades.

382
00:21:52,560 --> 00:21:55,760
Speaker 3: So could this year be worse in terms of election

383
00:21:55,920 --> 00:22:02,080
Speaker 3: litigation than the seemingly endless litigation we saw in twenty twenty.

384
00:22:02,880 --> 00:22:05,600
Speaker 1: Well, it could be. It always depends on how close

385
00:22:05,640 --> 00:22:08,560
Speaker 1: it is, right, the closer the margin, the more lidiation.

386
00:22:08,760 --> 00:22:10,679
Speaker 1: Now we say that, you know, twenty twenty in a

387
00:22:10,720 --> 00:22:13,840
Speaker 1: way wasn't particularly close because you would have had to

388
00:22:13,880 --> 00:22:19,080
Speaker 1: flip several states with somewhat significant margins of victory in

389
00:22:19,080 --> 00:22:23,320
Speaker 1: those jurisdictions, even after a recount in places like Georgia.

390
00:22:23,400 --> 00:22:25,639
Speaker 1: So we'll have to see, you know, if it's a

391
00:22:25,720 --> 00:22:29,440
Speaker 1: Republican loss or an apparent Republican loss. There are a

392
00:22:29,520 --> 00:22:32,960
Speaker 1: number of attorneys who promoted things in twenty twenty and

393
00:22:33,040 --> 00:22:36,200
Speaker 1: filed lawsuits who are facing sanctions or have been disbarred,

394
00:22:36,320 --> 00:22:38,000
Speaker 1: and I don't know if that's going to be sobering

395
00:22:38,040 --> 00:22:41,000
Speaker 1: for attorneys on the Republican side to think about the

396
00:22:41,080 --> 00:22:43,639
Speaker 1: quality of the claims they bring. And again it depends

397
00:22:43,680 --> 00:22:45,639
Speaker 1: on the side of the loss, the scope of the laws,

398
00:22:45,920 --> 00:22:48,320
Speaker 1: and many of the strategies in twenty twenty turn on

399
00:22:48,440 --> 00:22:51,440
Speaker 1: allegations that states change their laws in the middle of

400
00:22:51,440 --> 00:22:54,120
Speaker 1: the pandemic inappropriately. You're not going to see that kind

401
00:22:54,160 --> 00:22:57,840
Speaker 1: of dynamic effect in twenty twenty four, And there are

402
00:22:57,920 --> 00:23:00,879
Speaker 1: changes to Electoral Account Reform Act that sort of tighten

403
00:23:00,960 --> 00:23:04,400
Speaker 1: some of the deadlines and force governors to submit certificates

404
00:23:04,480 --> 00:23:07,000
Speaker 1: in an earlier and more timely fashion. So I think

405
00:23:07,160 --> 00:23:10,399
Speaker 1: there's a decent chance we would see less litigation on

406
00:23:10,480 --> 00:23:13,320
Speaker 1: that front for Democrats and a close loss. Again, it's

407
00:23:13,359 --> 00:23:15,639
Speaker 1: hard to know exactly what that would look like. You know,

408
00:23:15,840 --> 00:23:18,879
Speaker 1: how many resources would be focused on certain jurisdictions to

409
00:23:18,920 --> 00:23:22,359
Speaker 1: allege their violations of federal law. Again, I think it

410
00:23:22,400 --> 00:23:26,480
Speaker 1: depends on the kinds of jurisdictions where places like Pennsylvania,

411
00:23:26,680 --> 00:23:30,239
Speaker 1: where you have more disparate methods in how ballots are

412
00:23:30,240 --> 00:23:33,600
Speaker 1: counted across counties, you have more opportunities to bring those

413
00:23:33,680 --> 00:23:36,640
Speaker 1: challenges and to try to get more absentee other kinds

414
00:23:36,640 --> 00:23:39,960
Speaker 1: of ballots counted, which might redound to the benefits of

415
00:23:40,160 --> 00:23:42,920
Speaker 1: whichever candidate is trailing at the time. But it's a

416
00:23:42,960 --> 00:23:46,080
Speaker 1: high degree of uncertainty. We might see more in twenty

417
00:23:46,440 --> 00:23:48,480
Speaker 1: twenty four. And you know, I go back to the

418
00:23:48,480 --> 00:23:50,960
Speaker 1: two thousand elections. We didn't see a lot of states

419
00:23:50,960 --> 00:23:53,639
Speaker 1: with litigation. We just saw a lot of litigation concentrated

420
00:23:53,640 --> 00:23:56,040
Speaker 1: in one state. I think the thing about twenty twenty

421
00:23:56,040 --> 00:23:58,399
Speaker 1: that was more remarkable with seeing how diffuse and spread

422
00:23:58,440 --> 00:24:01,240
Speaker 1: out the litigation was. I think that's less likely to

423
00:24:01,280 --> 00:24:03,760
Speaker 1: see that kind of litigation spread out. But if the

424
00:24:03,840 --> 00:24:07,439
Speaker 1: election turns on a close result in one or two states,

425
00:24:07,560 --> 00:24:09,720
Speaker 1: not just four or five states, I would not be

426
00:24:09,760 --> 00:24:11,800
Speaker 1: surprised to see a significant uptake in litigation.

427
00:24:12,160 --> 00:24:15,639
Speaker 3: So I guess what we do is hope for wide margins.

428
00:24:16,280 --> 00:24:19,320
Speaker 3: Thanks so much for your insights, Derek. That's Professor Derek

429
00:24:19,400 --> 00:24:22,760
Speaker 3: Muller of Notre Dame Law School. I'm June Grosso and

430
00:24:22,800 --> 00:24:24,199
Speaker 3: you're listening to Bloomberg.

431
00:24:35,880 --> 00:24:41,119
Speaker 5: Thirty plus years of service calmbat note citation. If you

432
00:24:41,200 --> 00:24:44,959
Speaker 5: can't get a promotion, you won't retire and despite your

433
00:24:44,960 --> 00:24:45,880
Speaker 5: best effort.

434
00:24:45,600 --> 00:24:48,960
Speaker 4: To refuse to die the kindest headed for extinction.

435
00:24:50,080 --> 00:24:52,120
Speaker 1: Maybe so, sir, but.

436
00:24:52,160 --> 00:24:58,080
Speaker 3: Not today, Certainly not today or even tomorrow. In fact,

437
00:24:58,119 --> 00:25:02,080
Speaker 3: there's already another seat to the sequel in the works,

438
00:25:02,600 --> 00:25:06,560
Speaker 3: Top Gun three. After all, Top Gun Maverick gross nearly

439
00:25:06,640 --> 00:25:10,160
Speaker 3: one point five billion dollars at the box office, Tom

440
00:25:10,240 --> 00:25:14,159
Speaker 3: Cruise's biggest film, So Paramount must have been breathing a

441
00:25:14,280 --> 00:25:17,080
Speaker 3: huge sigh of relief when a judge threw out a

442
00:25:17,119 --> 00:25:20,840
Speaker 3: copyright lawsuit seeking some of the profits from that twenty

443
00:25:20,880 --> 00:25:24,520
Speaker 3: twenty two sequel. A California federal judge found that the

444
00:25:24,560 --> 00:25:29,320
Speaker 3: sequel featured a plot, settings, characters, and themes that diverged

445
00:25:29,480 --> 00:25:32,639
Speaker 3: far from anything found in the article that inspired the

446
00:25:32,680 --> 00:25:36,040
Speaker 3: first Top Gun movie. Here to unravel all this is

447
00:25:36,160 --> 00:25:41,359
Speaker 3: intellectual property litigator Terrence Ross a partner Katon Nutchen Rosenman Terry.

448
00:25:41,480 --> 00:25:44,240
Speaker 3: This suit was by the heirs of the writer who

449
00:25:44,280 --> 00:25:48,199
Speaker 3: wrote the article that inspired the original movie. Why were

450
00:25:48,240 --> 00:25:50,800
Speaker 3: they suing Paramount over Top Gun Maverick?

451
00:25:51,560 --> 00:25:55,240
Speaker 2: Way back in nineteen eighty three, coud Yunai wrote this

452
00:25:55,920 --> 00:26:00,400
Speaker 2: article in California Magazine on the Top Gun program. DANNQS

453
00:26:00,520 --> 00:26:03,160
Speaker 2: Navy Fighter weapons school, but wrote it in a sort

454
00:26:03,200 --> 00:26:05,040
Speaker 2: of an interesting way where he wrote it from the

455
00:26:05,080 --> 00:26:08,280
Speaker 2: perspective of a pilot in his backseat going through the program,

456
00:26:08,400 --> 00:26:12,480
Speaker 2: and it caught somebody's eye in Hollywood, and bear Mount

457
00:26:12,520 --> 00:26:15,040
Speaker 2: went out and got an assignment of rights for a

458
00:26:15,080 --> 00:26:17,600
Speaker 2: movie from him. When I look at such agreements, I

459
00:26:17,680 --> 00:26:20,359
Speaker 2: was focused on what's the credit being called for, you know,

460
00:26:20,359 --> 00:26:22,320
Speaker 2: at the end of the movie. And he got the

461
00:26:22,359 --> 00:26:25,240
Speaker 2: lowest possible credit you could get, which is suggested by

462
00:26:25,440 --> 00:26:29,600
Speaker 2: story written by Jinay I mean suggested by is like

463
00:26:29,640 --> 00:26:32,439
Speaker 2: the lowest language you can get and still get some

464
00:26:32,480 --> 00:26:34,720
Speaker 2: sort of credit. But they have complete rights in the

465
00:26:34,800 --> 00:26:37,280
Speaker 2: article for purposes of a movie, and they went out made

466
00:26:37,320 --> 00:26:40,520
Speaker 2: the movie unclear whether they really needed those rights, but

467
00:26:40,600 --> 00:26:43,359
Speaker 2: they did it. So the you know, I said, Copyright

468
00:26:43,400 --> 00:26:46,399
Speaker 2: Act has a provision in it that allows heirs to

469
00:26:46,840 --> 00:26:51,359
Speaker 2: a copyright to terminate a license in the copyright years

470
00:26:51,440 --> 00:26:54,240
Speaker 2: after the license was given, on sort of the theory

471
00:26:54,359 --> 00:26:58,160
Speaker 2: that young up and coming writers artists often get cheated

472
00:26:58,359 --> 00:27:01,080
Speaker 2: in these licenses, and so we have to leave a

473
00:27:01,119 --> 00:27:03,560
Speaker 2: window of opportunity later on if the work has been

474
00:27:03,600 --> 00:27:06,760
Speaker 2: worth something for them to recover some value. So they're

475
00:27:06,760 --> 00:27:10,560
Speaker 2: allowed to terminate the license, and after Yone's death in

476
00:27:10,600 --> 00:27:14,640
Speaker 2: twenty eighteen, his son and widow did exactly that. They

477
00:27:14,840 --> 00:27:19,040
Speaker 2: sent a letter to Paramount saying they've terminated the rights

478
00:27:19,080 --> 00:27:23,120
Speaker 2: in the nineteen eighty three California Magazine article because they

479
00:27:23,200 --> 00:27:26,920
Speaker 2: had seen somewhere that there was a sequel being worked on,

480
00:27:27,200 --> 00:27:29,400
Speaker 2: and that sort of got us up to the top

481
00:27:29,400 --> 00:27:30,000
Speaker 2: gun Maverick.

482
00:27:30,080 --> 00:27:34,400
Speaker 3: The sequel, the judge seemed to address every possible angle here.

483
00:27:34,800 --> 00:27:38,040
Speaker 3: One thing he said was similarities between the two works

484
00:27:38,040 --> 00:27:42,160
Speaker 3: based on facts can't be protected. So doesn't that pretty

485
00:27:42,240 --> 00:27:47,520
Speaker 3: much cover everything? Because the initial magazine article was nonfiction, right,

486
00:27:47,600 --> 00:27:49,000
Speaker 3: it was about real people.

487
00:27:49,400 --> 00:27:52,480
Speaker 2: So I agree with you, June. As the judge found

488
00:27:52,720 --> 00:27:55,600
Speaker 2: at one point the magazine article was really just a

489
00:27:55,680 --> 00:28:01,520
Speaker 2: factual recitation of what went on at Navy Cider Weapons

490
00:28:01,520 --> 00:28:05,040
Speaker 2: Skull dan A Miramar, and therefore there really wasn't much

491
00:28:05,320 --> 00:28:07,960
Speaker 2: that could be protected by copyright. And I have to say,

492
00:28:08,040 --> 00:28:09,560
Speaker 2: I mean, you said the judge went through this carefully.

493
00:28:09,520 --> 00:28:13,000
Speaker 2: I agree with you completely. Judge Anderson did a very

494
00:28:13,280 --> 00:28:17,639
Speaker 2: careful job here with this decision. He went through every

495
00:28:17,880 --> 00:28:23,240
Speaker 2: possible argument raised by the plaintiffs and succinctly described what

496
00:28:23,480 --> 00:28:26,160
Speaker 2: was wrong with those arguments as a matter of law,

497
00:28:26,280 --> 00:28:28,919
Speaker 2: which is going to make it very hard to appeal

498
00:28:29,000 --> 00:28:30,320
Speaker 2: this case to the Ninth Circuit.

499
00:28:30,880 --> 00:28:34,560
Speaker 3: Why did Paramount even get a license for the first movie?

500
00:28:34,720 --> 00:28:36,480
Speaker 3: It seems like they wouldn't have needed a license.

501
00:28:37,160 --> 00:28:41,760
Speaker 2: So in the age of copyright lawsuits, at the drop

502
00:28:41,800 --> 00:28:44,800
Speaker 2: of a hat that we live in, lawyers in house

503
00:28:45,200 --> 00:28:48,960
Speaker 2: at creative organizations such as Paramount Pictures had to be

504
00:28:49,040 --> 00:28:53,240
Speaker 2: very careful and the cost of getting a license here

505
00:28:53,400 --> 00:28:56,800
Speaker 2: was relatively inexpensive. They didn't have to give away much

506
00:28:56,920 --> 00:29:00,960
Speaker 2: credit in the movie for getting a license Swiss relatively

507
00:29:01,000 --> 00:29:03,400
Speaker 2: low as these things go. So I mean it made

508
00:29:03,440 --> 00:29:06,600
Speaker 2: sense even if the in house lawyer thought there was

509
00:29:06,640 --> 00:29:10,080
Speaker 2: no need to get a copyright license, why not get

510
00:29:10,120 --> 00:29:12,360
Speaker 2: it as an insurance mechanism. I sort of get it.

511
00:29:12,440 --> 00:29:15,360
Speaker 2: Although it did lead to these problems down the road

512
00:29:15,480 --> 00:29:18,640
Speaker 2: at that point in time, back in nineteen eighty four,

513
00:29:19,200 --> 00:29:22,320
Speaker 2: I think it was a very reasonable decision and the

514
00:29:22,360 --> 00:29:23,640
Speaker 2: part of the Paramount lawyers.

515
00:29:24,120 --> 00:29:26,400
Speaker 3: So Terry, will you go through some of what the

516
00:29:26,520 --> 00:29:29,040
Speaker 3: judge considered in making this decision.

517
00:29:29,640 --> 00:29:34,120
Speaker 2: So you know, the planet raised a number of alleged

518
00:29:34,200 --> 00:29:40,080
Speaker 2: similarities between the top the Maverick and this California magazine article.

519
00:29:40,560 --> 00:29:43,959
Speaker 2: I think I saw somewhere in the opinion as on

520
00:29:44,160 --> 00:29:49,200
Speaker 2: the order magnitude of seventy seven zero different alleged similarity.

521
00:29:49,680 --> 00:29:52,480
Speaker 2: And the judge source said they all fit into certain categories,

522
00:29:52,640 --> 00:29:55,400
Speaker 2: and he went through the category by category and pointed

523
00:29:55,440 --> 00:29:58,200
Speaker 2: out there are certain things that just not protected by copyright.

524
00:29:58,360 --> 00:30:01,440
Speaker 2: We talked about facts not protected. So the fact that

525
00:30:01,480 --> 00:30:04,160
Speaker 2: there is this top gun program, the fact that Navy

526
00:30:04,200 --> 00:30:06,560
Speaker 2: pilots that are selected to go through are the best

527
00:30:06,600 --> 00:30:09,600
Speaker 2: in the navy. Those are all factual elements that get

528
00:30:09,640 --> 00:30:13,920
Speaker 2: no protection whatsoever. But then there are literary expression elements

529
00:30:14,040 --> 00:30:17,440
Speaker 2: that also get no protection. So general plot ideas a

530
00:30:17,520 --> 00:30:21,000
Speaker 2: murder mystery, you can't protect that. You know, stock characters,

531
00:30:21,480 --> 00:30:26,400
Speaker 2: the detective solving the mystery, the British secret agent, you

532
00:30:26,400 --> 00:30:28,960
Speaker 2: don't get protection for that. And then there certain SEMs

533
00:30:28,960 --> 00:30:33,400
Speaker 2: are fair, which are sort of situations that arise naturally

534
00:30:33,520 --> 00:30:35,560
Speaker 2: out of the plot. So if you've got a World

535
00:30:35,600 --> 00:30:38,600
Speaker 2: War II drama set in Europe, the bad guys are

536
00:30:38,600 --> 00:30:40,400
Speaker 2: gonna be Nazis, right, and they're gonna be wearing SATs

537
00:30:40,440 --> 00:30:43,040
Speaker 2: Because you don't get to copyright that. All those things

538
00:30:43,080 --> 00:30:47,560
Speaker 2: are unprotected and the bulk of what was in the

539
00:30:47,600 --> 00:30:50,880
Speaker 2: California magazine article, which is the allegedly in French work,

540
00:30:51,080 --> 00:30:52,880
Speaker 2: fit into a category such as that.

541
00:30:53,400 --> 00:30:56,959
Speaker 3: The plaintiff's attorney said they disagree with the court's ruling,

542
00:30:57,120 --> 00:31:01,000
Speaker 3: particularly on summary judgment, and they will appear now. The

543
00:31:01,120 --> 00:31:06,040
Speaker 3: Ninth Circuit has warned against dismissing copyright lawsuits before allowing

544
00:31:06,200 --> 00:31:10,440
Speaker 3: experts to testify and hear. The judge excluded testimony from

545
00:31:10,440 --> 00:31:12,840
Speaker 3: the plaintiff's expert. How does that play in?

546
00:31:13,240 --> 00:31:16,680
Speaker 2: So the Ninth Circuit has caution district court judges about

547
00:31:16,960 --> 00:31:20,520
Speaker 2: dismissing copyright lawsuits at too early a point in the case,

548
00:31:20,680 --> 00:31:24,840
Speaker 2: particularly prior to jury trial. The defendants had brought a

549
00:31:24,920 --> 00:31:28,360
Speaker 2: motion to dismiss right after the complaint was filed, the

550
00:31:28,400 --> 00:31:31,800
Speaker 2: earliest possible time to get a dismissal. It's basically an

551
00:31:31,840 --> 00:31:35,120
Speaker 2: attack on the pleating itself, saying the way you've played

552
00:31:35,120 --> 00:31:39,600
Speaker 2: this doesn't amount to a cognizable legal claim. And the

553
00:31:39,760 --> 00:31:42,360
Speaker 2: court had heard that way back in November of twenty

554
00:31:42,440 --> 00:31:45,160
Speaker 2: twenty two. If I recall correctly and said, look, this

555
00:31:45,200 --> 00:31:47,720
Speaker 2: is way too early. I think within the four corners

556
00:31:47,840 --> 00:31:50,080
Speaker 2: of the complaints the judge that have within this, I

557
00:31:50,080 --> 00:31:53,320
Speaker 2: think there's enough to make out a cognizable legal claim,

558
00:31:53,360 --> 00:31:55,640
Speaker 2: but I'm not going to comment upon where this might

559
00:31:55,640 --> 00:31:58,080
Speaker 2: go in the future. So we go through discovery, we

560
00:31:58,120 --> 00:32:01,280
Speaker 2: get expert reports, and Paramount comes back at the end

561
00:32:01,520 --> 00:32:04,640
Speaker 2: of discovery. The last thing you do before the jury

562
00:32:04,680 --> 00:32:07,560
Speaker 2: trial and files most for summary judgment says you're on.

563
00:32:07,760 --> 00:32:10,080
Speaker 2: We're back. You said we needed to allow the facts

564
00:32:10,080 --> 00:32:12,560
Speaker 2: to be developed and get expert testimony. We did, and

565
00:32:12,640 --> 00:32:16,040
Speaker 2: we say this is still not a legally cognizable claim,

566
00:32:16,200 --> 00:32:19,200
Speaker 2: and therefore we should be entitled summery judgment. And at

567
00:32:19,200 --> 00:32:22,040
Speaker 2: that point I think the judge was perfectly within his

568
00:32:22,240 --> 00:32:27,360
Speaker 2: rights to consider such emotion and given what we now

569
00:32:27,400 --> 00:32:32,160
Speaker 2: know about those various alleged points of infringement, I think

570
00:32:32,160 --> 00:32:33,920
Speaker 2: the judge got it right and was allowed to do

571
00:32:33,960 --> 00:32:37,280
Speaker 2: this on summary judgment. Now there's a second question that's

572
00:32:37,440 --> 00:32:40,720
Speaker 2: raised by the plaintiff, which is, well, yes, you did

573
00:32:40,960 --> 00:32:46,560
Speaker 2: allow experts to give testimony, but you refuse to accept

574
00:32:46,560 --> 00:32:50,360
Speaker 2: the testimony of our expert. This is where it gets complicated.

575
00:32:50,480 --> 00:32:53,160
Speaker 2: In my view, it was not that the plaintiff wasn't

576
00:32:53,160 --> 00:32:55,880
Speaker 2: allowed to put up expert testimony in my view, I

577
00:32:55,880 --> 00:32:59,320
Speaker 2: think in the judges the plaintiff copyright owners put up

578
00:32:59,400 --> 00:33:04,560
Speaker 2: expert testimony that wasn't competent and relevant to the case.

579
00:33:04,880 --> 00:33:08,680
Speaker 2: The expert for the plaintiff had failed to take into

580
00:33:08,800 --> 00:33:12,680
Speaker 2: account any of these defenses to copyright and infringement. You

581
00:33:12,720 --> 00:33:15,320
Speaker 2: know that they're just facts, that their sins are fair,

582
00:33:15,600 --> 00:33:18,160
Speaker 2: that they're non protectable elements. The expert for the plaianffs

583
00:33:18,200 --> 00:33:21,000
Speaker 2: have just assumed everything was copyrightable. And the judge said,

584
00:33:21,200 --> 00:33:22,760
Speaker 2: you know, that's what this case is all about, whether

585
00:33:22,840 --> 00:33:25,080
Speaker 2: or not it's copyrightable, whether it's protectable in the first place.

586
00:33:25,240 --> 00:33:28,240
Speaker 2: You can't assume that away. Therefore, your expert opinion is

587
00:33:28,280 --> 00:33:30,320
Speaker 2: of no value here and we're not going to allow it.

588
00:33:30,440 --> 00:33:33,600
Speaker 2: And I again think the judge got that right, and

589
00:33:33,640 --> 00:33:36,360
Speaker 2: therefore I really do not think that that's a legitimate

590
00:33:36,360 --> 00:33:39,800
Speaker 2: complaint on appeal. I'm sure the plaintiffs will appeal to

591
00:33:39,840 --> 00:33:43,040
Speaker 2: the Ninth Circuit and raise this point, but judges have

592
00:33:43,440 --> 00:33:47,600
Speaker 2: enormous discretion at the trial court level into what testimony

593
00:33:47,800 --> 00:33:50,200
Speaker 2: they will allow into evidence what they will not, And

594
00:33:50,240 --> 00:33:53,480
Speaker 2: I just don't see the Ninth Circuit overturning his decision here.

595
00:33:53,480 --> 00:33:55,760
Speaker 3: And let me just say that you are on record

596
00:33:56,040 --> 00:33:58,480
Speaker 3: that when we discussed this case, when the suit was

597
00:33:58,480 --> 00:34:02,600
Speaker 3: first filed, you said it wasn't going to fly, so

598
00:34:02,680 --> 00:34:05,000
Speaker 3: to speak. So I just want to credit you for that.

599
00:34:05,280 --> 00:34:07,040
Speaker 2: Terry Well, I appreciate the question.

600
00:34:09,000 --> 00:34:09,480
Speaker 3: Anything.

601
00:34:10,120 --> 00:34:12,120
Speaker 2: You know, when you've been doing this as long as

602
00:34:12,160 --> 00:34:15,160
Speaker 2: I have, you sort of get a flavor for the

603
00:34:15,200 --> 00:34:18,440
Speaker 2: types of cases that get brought. And you know, one

604
00:34:18,480 --> 00:34:21,160
Speaker 2: of the really telling things to me was the planners

605
00:34:21,200 --> 00:34:26,600
Speaker 2: were only able to identify a single sentence, and the

606
00:34:26,640 --> 00:34:29,120
Speaker 2: sentences being generous because it's only a two word sentence,

607
00:34:29,280 --> 00:34:33,040
Speaker 2: a single sentence of dialogue that was similar between the

608
00:34:33,160 --> 00:34:37,279
Speaker 2: article and Top Gun Maverick the sequel. And that's one

609
00:34:37,280 --> 00:34:38,960
Speaker 2: of the things I always look for. Are there a

610
00:34:39,040 --> 00:34:43,719
Speaker 2: lot of similarities in dialogue? Are there really unique settings

611
00:34:43,840 --> 00:34:47,360
Speaker 2: that are similar? And here the only dialogue that was

612
00:34:47,400 --> 00:34:52,359
Speaker 2: similar was a phrase fight on, which apparently is the

613
00:34:52,400 --> 00:34:55,280
Speaker 2: code word at the Top Gun school that these pilots

614
00:34:55,360 --> 00:34:59,400
Speaker 2: used to say that the mock engagement is starting. And

615
00:34:59,680 --> 00:35:03,680
Speaker 2: again that's telling that that's the only dialogue similarity they

616
00:35:03,680 --> 00:35:06,239
Speaker 2: could come up with. And quite frankly, Idi itself is

617
00:35:06,239 --> 00:35:10,000
Speaker 2: not copyrightable because the Copyright Office does not allow copyrights

618
00:35:10,239 --> 00:35:13,880
Speaker 2: in short phrases that would come within that exception to

619
00:35:13,920 --> 00:35:15,720
Speaker 2: the rules. So when you look at and you see

620
00:35:15,719 --> 00:35:19,400
Speaker 2: no dialogue, similar, no settings that are really unique, and

621
00:35:19,520 --> 00:35:22,719
Speaker 2: just all these generalities, it's impossible to not have those

622
00:35:22,760 --> 00:35:25,560
Speaker 2: gut reactions that this isn't go anywhere. Do's greg get dismissed.

623
00:35:25,600 --> 00:35:26,799
Speaker 2: I guess I got it right this one.

624
00:35:27,360 --> 00:35:29,280
Speaker 3: You always get it right. But why appeal?

625
00:35:29,400 --> 00:35:29,560
Speaker 2: Then?

626
00:35:30,080 --> 00:35:32,480
Speaker 3: I'd say they're looking for some sort of settlement. But

627
00:35:32,760 --> 00:35:35,839
Speaker 3: is Paramount going to want to settle when top Gune

628
00:35:35,920 --> 00:35:38,080
Speaker 3: three is coming out and they have the win.

629
00:35:38,520 --> 00:35:42,920
Speaker 2: I don't know what this plaintiff's specific motivation will be

630
00:35:43,000 --> 00:35:45,760
Speaker 2: to appeal, And I can only tell you in general

631
00:35:46,160 --> 00:35:48,839
Speaker 2: how attorneys think about this. And you know, there's no

632
00:35:48,880 --> 00:35:50,360
Speaker 2: doubt that this had to have been I have no

633
00:35:50,400 --> 00:35:52,480
Speaker 2: inside information, but this had to be a contingent V

634
00:35:52,600 --> 00:35:55,319
Speaker 2: litigation where the lawyer only gets paid if they win.

635
00:35:55,760 --> 00:35:59,440
Speaker 2: So that's the factor. Second, Tops the Maverick made enormous.

636
00:36:00,280 --> 00:36:04,320
Speaker 2: I believe the box office gross was one point five billion. Yeah,

637
00:36:04,360 --> 00:36:05,759
Speaker 2: And I think it had to do something with the

638
00:36:05,800 --> 00:36:07,759
Speaker 2: timing of being one of the first released after the

639
00:36:07,800 --> 00:36:10,320
Speaker 2: pandemic and people are coming back in theaters and desperate

640
00:36:10,360 --> 00:36:12,640
Speaker 2: for content. But if you can believe this June, that

641
00:36:12,800 --> 00:36:16,279
Speaker 2: is the largest gross of any Tom Cruise movie of

642
00:36:16,320 --> 00:36:18,760
Speaker 2: all time. It's bigger than the Jackie Reach your movies,

643
00:36:18,840 --> 00:36:20,600
Speaker 2: bigger than any of the I don't all. We're up

644
00:36:20,640 --> 00:36:23,560
Speaker 2: to six or seven missions possible series. This is the

645
00:36:23,760 --> 00:36:26,520
Speaker 2: enormous amount of money. And you know, the argument for

646
00:36:26,640 --> 00:36:29,920
Speaker 2: damages if there was copyright infringement is that we're entitled

647
00:36:29,960 --> 00:36:32,600
Speaker 2: to the reasonable royalty based on that amount. And so

648
00:36:32,920 --> 00:36:35,440
Speaker 2: the amount at steak is enormous. And so when you

649
00:36:35,560 --> 00:36:38,319
Speaker 2: have large amounts at steak, even if you have a

650
00:36:38,560 --> 00:36:41,680
Speaker 2: minimal chance of success, you know, the math works out

651
00:36:41,719 --> 00:36:44,600
Speaker 2: that you ought to pursue the appeal on the off

652
00:36:44,719 --> 00:36:46,800
Speaker 2: chance that you get two out of three judges on

653
00:36:46,800 --> 00:36:49,560
Speaker 2: the appellate panels have some problem with what the district

654
00:36:49,600 --> 00:36:51,919
Speaker 2: court did. And of course the longer it drags out,

655
00:36:52,080 --> 00:36:54,520
Speaker 2: the hope on the planet side is always that defendants

656
00:36:54,560 --> 00:36:58,320
Speaker 2: get tired of paying their attorneys because this is expensive

657
00:36:58,400 --> 00:37:00,560
Speaker 2: sort of litigation, and then they might just consent to

658
00:37:00,560 --> 00:37:02,680
Speaker 2: the settlement and so they get some money out of it,

659
00:37:02,880 --> 00:37:05,840
Speaker 2: and you're right, pop gun free. The script is already

660
00:37:05,880 --> 00:37:09,920
Speaker 2: being written, their negotiations with director and other principal roles,

661
00:37:10,120 --> 00:37:13,160
Speaker 2: so it looks like it semi green. Lena ready, and

662
00:37:13,239 --> 00:37:15,200
Speaker 2: so there's that much more money to be had, and

663
00:37:15,520 --> 00:37:18,840
Speaker 2: that's my speculation in my opinion, based on past experience,

664
00:37:18,840 --> 00:37:20,160
Speaker 2: as to why they might appeal.

665
00:37:20,600 --> 00:37:22,720
Speaker 3: Well, you have a winning record on this show, Terry,

666
00:37:22,760 --> 00:37:26,200
Speaker 3: so I trust your opinions. Thanks so much. That's Terrence

667
00:37:26,280 --> 00:37:29,040
Speaker 3: Ross of Kata, Nutchen Rosenmann, and that's it for this

668
00:37:29,200 --> 00:37:32,320
Speaker 3: edition of the Bloomberg Law Podcast. Remember you've can always

669
00:37:32,320 --> 00:37:35,080
Speaker 3: get the latest legal news by subscribing and listening to

670
00:37:35,120 --> 00:37:39,280
Speaker 3: the show on Apple Podcasts, Spotify, and at Bloomberg dot com,

671
00:37:39,320 --> 00:37:43,560
Speaker 3: slash podcast, slash Law. I'm June Grosso and this is

672
00:37:43,600 --> 00:37:44,200
Speaker 3: Bloomberg