Speaker 1: This is Bloomberg Law with June Grosso from Bloomberg Radio.
Speaker 2: During the Supreme Court arguments over whether former President Donald
Speaker 2: Trump is immune from criminal charges for illegally trying to
Speaker 2: overturn the results of the twenty twenty election, Justice Samuel
Speaker 2: Alito stood out from the other justices with his repeated
Speaker 2: concerns about opening presidents up to criminal prosecution.
Speaker 1: Today, I understand you to say, well, you know, if
Speaker 1: he makes a mistake, he makes a mistake, he subject
Speaker 1: to the criminal laws just like anybody else. You don't
Speaker 1: think he's in a special, a peculiarly precarious.
Speaker 3: Position, but that the president may be criminally prosecuted by
Speaker 3: a bitter political opponent. Will that not lead us into
Speaker 3: a cycle that destabilizes the functioning of our country as.
Speaker 2: A Democracytional Democrats have asked Aledo to recuse himself from
Speaker 2: that case and another case that could have implications for
Speaker 2: the Trump prosecution, not because of the questioning, but because
Speaker 2: flags flown outside Aledo's homes are associated with the pro
Speaker 2: Trump mob that attacked the capital on January sixth, creating
Speaker 2: an appearance of impropriety for the conservative justice. An upside
Speaker 2: down American flag associated with the Stop the Steel Movement
Speaker 2: was flown outside Aledo's Virginia home, and an Appeal to
Speaker 2: Heaven flag, a symbol of Christian nationalism, was flown outside
Speaker 2: Aledo's beach residence in New Jersey. Similar flags were carried
Speaker 2: by the January sixth rioters, but Alito has flatly refused
Speaker 2: to recuse himself from the cases, blaming his wife for
Speaker 2: the flag flying. What's more, the Chief Justice has said
Speaker 2: he's not getting involved. It's a pattern we've seen before
Speaker 2: with Aledo, who has a history of stirring up political contra.
Speaker 2: Joining me is an expert in constitutional law, David Super,
Speaker 2: a professor at Georgetown Law. Justice Alito says there was
Speaker 2: an upside down flag flying at his house for days,
Speaker 2: and he was not aware of it until it was
Speaker 2: called his attention, and then he tried to get his
Speaker 2: wife to take it down, but she refused for days.
Speaker 2: Does that pass the Laft test?
Speaker 4: Not for me, I don't think for most people. It's
Speaker 4: his house. We are responsible for what's on display in
Speaker 4: our houses, and if it is his house, as co
Speaker 4: owner with her, he has every right to take it down.
Speaker 4: She probably then would have a right to put it
Speaker 4: back up, but he doesn't need her approval to take
Speaker 4: it down as a co owner of the house.
Speaker 2: What was really odd was he went into detail about
Speaker 2: the ownership of the two houses. I just thought that
Speaker 2: that was unnecessary and odd.
Speaker 4: It is he protests a way too much. Which he
Speaker 4: is a co owner of the house under whatever ownership
Speaker 4: arrangement there is, he has the ability to change the
Speaker 4: house and what is displayed on it. And if he couldn't,
Speaker 4: he surely must recognize that reasonable people would feel that
Speaker 4: that casts a question on his impartiality. Most people don't
Speaker 4: understand the intricacies of property ownership. It would assume quite
Speaker 4: reasonably that a flag displayed in front of his house
Speaker 4: tells us what he thinks.
Speaker 2: Initially, he denied the flag was hung upside down as
Speaker 2: a political protest. He said it was flown by his
Speaker 2: wife in response to a neighbour's yard signs that were
Speaker 2: critical of Trump, saying Trump is a fascist, etc. So
Speaker 2: there was a political reason, then tied to the former
Speaker 2: president who was accused of taking part in a coup attempt,
Speaker 2: you know, days earlier to the flying of the flag.
Speaker 4: Yes, that's obviously political. What you or I think about
Speaker 4: the president United States or a former president is inevitably political,
Speaker 4: and it's political relating to cases that he was deciding.
Speaker 2: As far as the Appeal to Heaven flag flown outside
Speaker 2: his beach residence in New Jersey, he said he wasn't
Speaker 2: familiar with the flag's meaning. I was not aware of
Speaker 2: any connection between the historic flag and the Stop the
Speaker 2: Steel movement, and neither was my wife. So he's just
Speaker 2: feigning ignorance.
Speaker 4: This is a very smart justice, a very learned justice,
Speaker 4: a very well read justice, and a justice who, in
Speaker 4: his opinions, in his interventions in oral argument, shows a
Speaker 4: great deal of knowledge about a great many things. I
Speaker 4: don't know what he does or does not know, but
Speaker 4: I know a reasonable person would assume that he knows
Speaker 4: what that means, and would assume that that indicates a
Speaker 4: pre commitment. In cases involving January sixth, he cited.
Speaker 2: The recently adopted Code of conduct by this Court. A
Speaker 2: justice should disqualify himself for herself in a proceeding in
Speaker 2: which the justice's impartiality might reasonably be questioned. That is,
Speaker 2: we're an unbiased and reasonable person who's aware of all
Speaker 2: relevant circumstances would doubt that the Justice could fairly discharge
Speaker 2: his or her duties, and he said that these two
Speaker 2: incidents of flag flying don't meet the conditions for recusal.
Speaker 2: But we have people, lawmakers and others saying that this
Speaker 2: puts his impartiality in question. So it seems like it
Speaker 2: does satisfy it.
Speaker 4: Oh, it certainly satisfies it. This is something that, if
Speaker 4: the shoes were on the other foot, would be subject
Speaker 4: to enormous outrage. Much more tangential indications of commitment have
Speaker 4: been cited by former President Trump and many others as
Speaker 4: signs of bias, And indeed, a liberal Supreme Court Justice A.
Speaker 4: Ford Us was put off the court in significant part
Speaker 4: because of perceptions of bias in favor of the Johnson
Speaker 4: administration that were much weaker than this.
Speaker 2: What does it say about that ethics code that the
Speaker 2: Justice is adopted last year, which they get to enforce themselves.
Speaker 2: I mean, is it worth the paper it was printed on?
Speaker 4: No, it's completely worthless. The lack of independent and forcibility
Speaker 4: or even independent fact finding makes it worthless right there.
Speaker 4: But then when you look deeper, the substance of it
Speaker 4: is completely flimsy. It is for the sake of quieting
Speaker 4: public outrage, not for actually improving the ethical standards of
Speaker 4: the court.
Speaker 2: Is it rare for justices to get into this back
Speaker 2: and forth with lawmakers, you know, writing letters responding to them.
Speaker 2: I mean, does it show that Alito might be concerned
Speaker 2: about public reaction for once to.
Speaker 4: Some extent, yes, Justice Alito has been more willing to
Speaker 4: engage in the popular media than most Supreme Court justices
Speaker 4: of the modern era have been. And this it's consistent
Speaker 4: with those tendencies.
Speaker 2: So Senator Dick Durbin, the chair of the Judiciary Committee,
Speaker 2: and Senator Sheldon Whitehouse wrote a letter to the Chief
Speaker 2: Justice Roberts asking him to make certain that Alito recuses
Speaker 2: himself in any case is related to the twenty twenty
Speaker 2: presidential election in the January sixth attack on the Capitol,
Speaker 2: and they also requested a meeting with Roberts as soon
Speaker 2: as possible, and Roberts refused on both counts. He refused
Speaker 2: to meet with the senators, saying, apart from ceremonial events,
Speaker 2: only on rare occasions in our nation's history has a
Speaker 2: sitting chief justice met with legislators, and he refused to
Speaker 2: get involved in the request for Alito to recuse it all,
Speaker 2: saying members of the Supreme Court recently reaffirmed the practice
Speaker 2: we have followed for two hundred and thirty five years
Speaker 2: pursue into which individual justices decide recusal issue chose. This
Speaker 2: is the second time in less than a year that
Speaker 2: there have been ethical controversies surrounding Justice Alito. Isn't it
Speaker 2: time for Roberts to get involved?
Speaker 4: He certainly could step in. The Other justices on occasions
Speaker 4: in the past, have chosen to prevent justices who they
Speaker 4: thought were impaired from participating in decisions. There are seven
Speaker 4: justices that do not have these questions about them, and
Speaker 4: they could simply decide that they will not hand down
Speaker 4: any decisions in which Justice Alito's vote is decisive, or
Speaker 4: if they are similarly concerned with the ethical questions about
Speaker 4: Justice Thomas in which either of their votes are decided.
Speaker 4: If they do that, they still have a solid conservative majority,
Speaker 4: and the outcomes of cases might well not change, but
Speaker 4: the public confidence certainly would be much higher.
Speaker 2: Democratic Senator Richard Blumenthal has also suggested that the Chief
Speaker 2: Chief Justice should just refuse to assign opinions to Alito
Speaker 2: and Thomas.
Speaker 4: That's completely within the Chief justices authority, but I'm not
Speaker 4: sure what that accomplishes. Justices on the Supreme Court to
Speaker 4: exercise much of their power through their votes, and unless
Speaker 4: the individual justice refuses themselves or the other justices refuse
Speaker 4: to allow that justice's vote to be decisive, then the
Speaker 4: compromise justice will still be able to participate and still
Speaker 4: have great power.
Speaker 2: Senator Durbin said he's not going to hold any hearings
Speaker 2: on this or do anything further. But unless Congress does
Speaker 2: something further, this is going to continue, isn't it? With
Speaker 2: justices not recusing themselves when it seems apparent they should.
Speaker 2: Another example is Justice Clarence Thomas taking part in January
Speaker 2: sixth case is when his wife had some involvement there.
Speaker 2: I mean, there seems to be no way to force
Speaker 2: ethical obligations on these justices when they're deciding for themselves,
Speaker 2: and no one is overlooking that.
Speaker 5: Well.
Speaker 4: There are several people that could impose us f coal
Speaker 4: obligations on them, but none are willing. The Justice themselves
Speaker 4: could do so. There's ample precedent of not engaging in
Speaker 4: over political activity when you're sitting on the court and
Speaker 4: not taking valuable gifts from parties with interests in front
Speaker 4: of the court so that justice could do it themselves.
Speaker 4: The others have injustices could do it for them by
Speaker 4: refusing to allow those two to cast siding votes in
Speaker 4: cases where they're compromised. Congress could do it by passing legislation.
Speaker 4: The Constitution says that the Supreme Court's jurisdiction is subject
Speaker 4: to any exceptions Congress wishes to make, and Congress could
Speaker 4: simply say that the Court has no jurisdiction in cases
Speaker 4: in which justices are compromised, and Congress could impeach and
Speaker 4: remove one or more justices. The fact is that Congress
Speaker 4: isn't going to do that because the voters have not
Speaker 4: demanded that Congress do that and have not insisted that
Speaker 4: their representatives in Congress be willing to hold the Court
Speaker 4: to a higher standard.
Speaker 2: Reading Alito's letter, it just seemed to me that he's
Speaker 2: just not self aware. He may be smart, he may
Speaker 2: be brilliant, even but he's not self aware. He writes
Speaker 2: this about his wife. She makes her own decisions, and
Speaker 2: I have always respected her right to do so, And
Speaker 2: it seems so ironic to me, considering his decision to
Speaker 2: take away every woman's right to choose to decide what
Speaker 2: to do with her own body.
Speaker 4: Well, it is, and the notion of hiding behind one's
Speaker 4: wife to excuse one's conduct is one that unfortunately, men
Speaker 4: have used throughout the years, not to empower women, but
Speaker 4: to exploit them. And in that sense this fits with
Speaker 4: the pattern. It's also striking that he expresses such ambivalence
Speaker 4: about what these flags mean when quite recently he wrote
Speaker 4: a concurring opinion in a case about flying flags in
Speaker 4: Boston City Hall in which he said flags are very important.
Speaker 2: And in this one he said, my wife likes flying flags.
Speaker 4: I don't, which suggests that flags are not very important.
Speaker 4: So which is it?
Speaker 6: Justice?
Speaker 2: You want to have it both ways, I guess Congressman
Speaker 2: Jamie Raskin saying that you know, the Justice Department can
Speaker 2: do something if it wants to.
Speaker 4: What is he referring to, Well, there is a statute
Speaker 4: part of the Judiciary Act that requires justices to recuse
Speaker 4: themselves if a reasonable person could regard them as being
Speaker 4: biased particular case, and that requires them to refuse themselves
Speaker 4: if they have or their spouses have certain kinds of
Speaker 4: connections with the parties or the interests or the outcome
Speaker 4: in the case. This statute pretty clearly is implicated by
Speaker 4: Justice Alito's flag flying and by some of the valuable
Speaker 4: gifts that he and Justice Thomas have received by parties
Speaker 4: with interest in front of the court. This statute does
Speaker 4: not require anyone to file any emotions. Historically, as Justice
Speaker 4: Roberts says, individual judges and justices have taken upon themselves
Speaker 4: to recuse themselves. But the Justice Department, as a party
Speaker 4: to these cases, is certainly able to file emotion for
Speaker 4: the refusal of these justices.
Speaker 2: But unlikely too, because of the repercussions.
Speaker 4: Very unlikely too. It would be refusal in just a
Speaker 4: few cases, and the Justice Department appears in front of
Speaker 4: the Court on dozens of cases every year and would
Speaker 4: not want to alienate two of the nine justices for
Speaker 4: all of those other cases by pressed seeing a recusal
Speaker 4: in this one. And in fact, the likelihood that either
Speaker 4: justice would recuse themselves when they've so far refused to
Speaker 4: do so is infinitesimal.
Speaker 2: During the oral arguments on the presidential immunity case, some
Speaker 2: of Justice Alito's comments were supportive of presidential immunity. In
Speaker 2: first of all, they've delayed this so long and then
Speaker 2: decided to take it and then did it on the
Speaker 2: last day of the session, and now probably there won't
Speaker 2: be a decision until the end of June. I mean,
Speaker 2: how do you think the public will receive it if
Speaker 2: it's again a six to three vote down ideological lines.
Speaker 5: Oh.
Speaker 4: I think the public will be quite troubled because the
Speaker 4: Supreme Court has shown on numerous occasions its ability to
Speaker 4: move very very sat when important issues are at stake.
Speaker 4: They took cases involving the restrictions under the pandemic very quickly.
Speaker 4: They've engaged very quickly in challenges to things that President
Speaker 4: Trump did about immigration about Muslims. They can move fast
Speaker 4: if they want to. Their choice to move slowly, and
Speaker 4: particularly if the final decision is one that requires a
Speaker 4: remand and lengthy proceedings below which everybody knows will then
Speaker 4: get further appealed. I think a great many voters will
Speaker 4: believe that the majority the Court is running out the
Speaker 4: clock for the President to allow him to avoid going
Speaker 4: to trial before the election.
Speaker 2: Thanks so much, David Best. Professor David Super of Georgetown Law.
Speaker 2: In a unanimous decision, the Supreme Court cleared the way
Speaker 2: for an NRA lawsuit against a former New York state official,
Speaker 2: overclaimed she unconstitutionally pressured companies to blacklist the gun law
Speaker 2: be Following the deadly twenty eighteen school shooting in Parkland, Florida,
Speaker 2: Justice Sonya Sotomayor wrote that the critical takeaway is that
Speaker 2: the First Amendment prohibits government officials from wielding their power
Speaker 2: selectively to punish or suppress speech. Joining me his First
Speaker 2: Amendment expert Eugene Volik, a professor at UCLA Law School.
Speaker 2: He was counsel of record to the NRA before the
Speaker 2: Supreme Court. Eugene, what many people may see as unusual
Speaker 2: here is that a lawyer for the ACLU argued the
Speaker 2: case for the NRA before the Supreme Court.
Speaker 7: David Cole was a very experienced from court advocate. More importantly,
Speaker 7: I think what was really helpful is that there were
Speaker 7: the NRA and the ACLU before the Court together. I
Speaker 7: think that sends an important message about the significance of
Speaker 7: the case and about the breadth of the First Amendment issue.
Speaker 2: Start by telling us, know what you think the significance
Speaker 2: of this case is.
Speaker 7: So let's say the government falls up, some intermediary maybe
Speaker 7: calls up a bookstore or calls up a billboard owner
Speaker 7: or calls up an insurance company and says, you know,
Speaker 7: we think that the advocacy groups you're dealing with, or
Speaker 7: the books that you're distributing, or the group that is
Speaker 7: buying space on your billboard, we think that its messages
Speaker 7: are bad messages. We think they're bad for society in
Speaker 7: various ways, and we'd like you to stop doing that.
Speaker 7: And what's more, we have power over you. We could
Speaker 7: be the police department, or the Justice Department, or financial
Speaker 7: regulatory thought that could have a profoundly coercive effect on
Speaker 7: these intermediaries that even without actual prosecution or a civil
Speaker 7: case against the actual speaker, these kinds of threats to
Speaker 7: intermediaries can do a lot to make it harder for
Speaker 7: the speakers to speak because they won't be able to
Speaker 7: distribute their books through certain bookstores, or they won't have
Speaker 7: financial services that they need in order to So the
Speaker 7: NRA alleged that that's what the New York Department of
Speaker 7: Financial Services did, that it pressured various financial companies insurance companies, banks,
Speaker 7: and the like to stop doing business with the NRA
Speaker 7: and thus make it farther for the NRA to engage
Speaker 7: in its advocacy. But of course this isn't a second
Speaker 7: amendent case. It's a first Amendment case. It applies to everybody.
Speaker 7: It could equally be some other state try to do
Speaker 7: the same to plant Parenthoot, or some state trying to
Speaker 7: do the same to a Propoalestinian organization or a pro
Speaker 7: Israeli organization. So this is a broad first Amendment question
Speaker 7: that the courts dealt with and unanimously resolved in favor
Speaker 7: of the speakers and said, look, if it can be
Speaker 7: shown that the government was engaging in such coersion. At
Speaker 7: this point, it's just alleged. This is just an emotion
Speaker 7: to dismiss. So nothing has improved yet. But if it
Speaker 7: could be shown in court that the government was pressuring
Speaker 7: intermediaries to stop doing business with organizations because of those
Speaker 7: organization speech, that would be potentially a first to women violation.
Speaker 7: That's an important holding. It reaffirms a principle that was
Speaker 7: first announced by the court more than sixty years ago.
Speaker 7: But it's an important principle that's worth reaffirming.
Speaker 2: I think, so Eugene, was this case an easy one
Speaker 2: for the justices to decide.
Speaker 7: Then well, they were unanimous. There were concurrences from Justice
Speaker 7: Gorsic and from Justice Jackson, but both of them joined
Speaker 7: all the other justices, So I think at that level
Speaker 7: it probably seemed pretty straightforward for the court. This having
Speaker 7: been said, you know, the Second Circuit ruled the other way,
Speaker 7: ruled against the NRA in this case and said, on
Speaker 7: these facts, there's not enough allegation of coercion. So you know,
Speaker 7: I like to think, I mean, I'm representing the NRA here,
Speaker 7: I'm obviously not an impartial party here. I like to
Speaker 7: think we have a very strong case, and the US
Speaker 7: Supreme Court agreed with us. But at the same time,
Speaker 7: this was something that lower courts, you know, had struggled
Speaker 7: with in various kinds of cases, and I think this
Speaker 7: is something that the Supreme Courts unanimous decision here is
Speaker 7: going to provide more.
Speaker 2: Guidance for lower What was the argument at the Supreme
Speaker 2: Court of Maria Vulo, the New York state official who
Speaker 2: was the former superintendent of the Department of Financial Services.
Speaker 7: First of all, there were, as usual in these kinds
Speaker 7: of cases, there is or usual various procedural arguments. The
Speaker 7: lawyer's cruse superpower is that we can turn any question
Speaker 7: into a question about procedures. The Supreme Court was not
Speaker 7: impressed by their procedural arguments for various reasons. I won't
Speaker 7: detain you further with them. I don't think your listeners
Speaker 7: are going to be terribly interested. But a lot of
Speaker 7: the argument was about this procedural bush substantively. One of
Speaker 7: the things that New York said is, look, we're entitled
Speaker 7: to speak out. We as the government, We're entitled to say, oh,
Speaker 7: the NRA is bad, gun control is good. And the
Speaker 7: Supreme Court agreed, and we agreed. Of course, the government
Speaker 7: is entitled to express its views. But the Court said,
Speaker 7: what was going on here, at least as alleged by
Speaker 7: the NRA, was not just the government's self expression. It
Speaker 7: was rather the government saying things in a way that
Speaker 7: might be seen as coercive to a reasonable financial intermediate.
Speaker 7: And once the government stops just trying to persuade and
Speaker 7: begins kind of pressure that could be coercive, well that's
Speaker 7: where the government's right to speak stops, and the NRAs
Speaker 7: and other such groups for First Amendment right to start.
Speaker 7: Another thing that the New York argued is that the
Speaker 7: NRA had participated in various insurance transactions that were illegal
Speaker 7: under New York insurance law, and for the purposes of
Speaker 7: this case, the Supreme Courts was willing to assume that
Speaker 7: this was so. But the Court said it doesn't matter. Obviously,
Speaker 7: if the NRA had violated some rules, then those rules
Speaker 7: could be enforced against the NRA and could be punished
Speaker 7: in various ways, could find and such. But what the
Speaker 7: New York government was trying to do is not just
Speaker 7: imposifying on the NRA for past contact, but was trying
Speaker 7: to pressure, at least as alleged to pressure financial intermediaries
Speaker 7: to stop doing business with the enteray in the future
Speaker 7: as well, including for perfectly legal transactions. So the Court acknowledged,
Speaker 7: of course, the government has the power to speak. Of course,
Speaker 7: the government has the power to enforce neutral conduct restrictions,
Speaker 7: such as restrictions on certain kinds of insurance practices. What
Speaker 7: the government can't do is try to use those powers
Speaker 7: as a means of trying to punish or deter or
Speaker 7: otherwise interfere with constitutionally protected speech.
Speaker 2: Did you and the ACLU take this case in order
Speaker 2: to support the broad principle of free speech for all organizations,
Speaker 2: no matter what they represent this is going back to
Speaker 2: the lower courts. But there's a qualified immunity argument that
Speaker 2: the Supreme Court didn't discuss. Could that actually stop the
Speaker 2: case from going forward?
Speaker 7: Well, so there's a qualified immunity argument here which says
Speaker 7: that in any case, Ania shouldn't be able to get
Speaker 7: damages because the law wasn't clearly settled. The Supreme Court
Speaker 7: didn't reach that. It said, look, we've resolved the substance
Speaker 7: of First Amendment argument. We're going to leave it to
Speaker 7: lower courts deal further with any qualified immunity claims. They're
Speaker 7: also injunctive claims that in this case that wouldn't be
Speaker 7: subject to qualified immunity in any event.
Speaker 2: Of the like the Court is considering similar issues in
Speaker 2: a fight over the Biden administration's communications with social media companies.
Speaker 2: Does this decision at all indicate how that case might
Speaker 2: be decided.
Speaker 7: It does not speak to that case. This is the
Speaker 7: mercy the Missouri case, and I think the Court bard
Speaker 7: deliberately didn't dip its hand. It tries not to disclose
Speaker 7: upfront what it's going to be deciding, even in a
Speaker 7: couple of weeks. This case involved a pretty straightforward application.
Speaker 7: This principle set forth over sixty years ago. In this
Speaker 7: case called Bantam Books be solid. It involved a claim
Speaker 7: that the government was coercing inter dearies to stop doing
Speaker 7: business with speakers. And the real question was was there
Speaker 7: enough alleged to find that kind of courson in mercy?
Speaker 7: The facts are very different, So there's a separate question
Speaker 7: there was enough alleged there to show that there was
Speaker 7: coersion by the government of social media platforms, And the
Speaker 7: court may very well say in that case, yes there
Speaker 7: was or there wasn't. But the decision in this case
Speaker 7: likely wouldn't affect much but what it decided there. Likewise,
Speaker 7: in the Mirthy case, there's also a separate question, which is,
Speaker 7: even if there's no coercion, was there enough entanglement between
Speaker 7: the government and the social media platforms that even kind
Speaker 7: of non coercive requests were on constitution non coursive request
Speaker 7: that platforms removed certain material that was not an issue
Speaker 7: that was pressing.
Speaker 2: I mean, the Roberts Court has been, would you say,
Speaker 2: very receptive to First Amendment claims.
Speaker 7: Well, so there are different kinds of First and claims,
Speaker 7: and even if we focus just on free speech claims,
Speaker 7: there different kinds of free speech claims. There are different
Speaker 7: legal theories involved in them, some of them involved, for example,
Speaker 7: claims there was a case last year having to do
Speaker 7: with alleged solicitation of criminal conduct. Well, no, Robert score
Speaker 7: isn't very friendly to claims that someone has a First
Speaker 7: Amendment right to urge people to commit certain kinds of
Speaker 7: very specific crime, whereas here it's a very different kind
Speaker 7: of first amenation. Likewise, a lot turns on the facts.
Speaker 7: I think that the facts in this case, again as
Speaker 7: alleged by the plaintiffs, were really quite strong under existing
Speaker 7: well settled precedent president going back of course to the
Speaker 7: Warren Court right nineteen sixty three. So I don't think
Speaker 7: this has to do much with whether the Robert scord
Speaker 7: is particularly free speech friendly or not. And again you
Speaker 7: see here both the liberals on the Court and the
Speaker 7: conservatives of the Court reaching the same view. I think,
Speaker 7: just on the well settled legal doctrine in this case,
Speaker 7: without any real need to dive further elaborated further, I
Speaker 7: think the NA has a very strong claim and that's
Speaker 7: what Supreme Court concludes.
Speaker 2: So he's a pleasure to have you on Eugene and
Speaker 2: congratulations on the Supreme Court win. That's Professor Eugene Vollik
Speaker 2: of UCLA Law School coming up next on the Bloomberg
Speaker 2: Lawn Show. In another unanimous decision, the Court gave homeowners
Speaker 2: another chance in an ESCRO dispute with the Bank of America.
Speaker 2: I'm June Grosso and you're listening to Bloomberg. In a
Speaker 2: unanimous decision on Thursday, the Supreme Court basically punted on
Speaker 2: the question of whether the Bank of America must pay
Speaker 2: interest on New York mortgage borrowers' ESCRO accounts, which state
Speaker 2: law requires, but the Court did give homeowners another chance
Speaker 2: to force that bank and other large banks to pay
Speaker 2: that interest. The Court threw out the Second Circuits ruling
Speaker 2: in favor of the bank, which has refused to pay
Speaker 2: interest on the money it collects to pay borrowers, insuranceants,
Speaker 2: and property tax bills. Bank of America and the Office
Speaker 2: of the Controller of the Currency, the federal regulator overseeing
Speaker 2: national banks, had argued that national banks are exempt from
Speaker 2: state consumer protection laws under the National Bank Act, but
Speaker 2: the Justice Department was on the opposite side of the argument,
Speaker 2: supporting the homeowner's position. Something Justice is Neil Gorsich and
Speaker 2: Brett Kavanaugh pointed to when questioning Deputy Solicitor General Malcolm Stewart.
Speaker 5: In fact, we have exactly the regulation you say, if
Speaker 5: they did this, they did it.
Speaker 6: They said there are no.
Speaker 3: ESCRO regulations, they're permissible, understated, they're all preempted.
Speaker 7: But you're not defending that regulation.
Speaker 6: You're disavowing it.
Speaker 7: You flipped flopped positions on it.
Speaker 5: And I'm asking, is the OCC ever going to get
Speaker 5: around to doing that which God Frank directs it to do? Well,
Speaker 5: I think I would say God Frank authorizes, but doesn't
Speaker 5: direct it to do this. Now, if the petitioner's position
Speaker 5: in this case veils, and if the court holds that
Speaker 5: some inquiry into practical impacts is necessary with respect to
Speaker 5: the individual state law, then it's very possible that the
Speaker 5: OCC will start making these case by case determinations, because,
Speaker 5: independent of legal expertise, the OCC has expertise in the
Speaker 5: way that national banks operate and can bring that expertise
Speaker 5: to bear in determining. If it has expertise, why are.
Speaker 4: You disagreeing with its long standing position?
Speaker 5: I think the two or three reasons.
Speaker 2: In the majority opinion, Justice Kavanaugh wrote that the Appeals
Speaker 2: Court did not perform the kind of nuanced analysis required
Speaker 2: by federal law and prior Supreme Court decisions to determine
Speaker 2: if a state law must give way to a federal statute,
Speaker 2: and the court sent the case back to the Second
Speaker 2: Circuit for that analysis. Joining me is Aaron Bryan. She's
Speaker 2: co chair of the Consumer Financial Services Group at Dorsey
Speaker 2: and Whitney. Tell us about the case, Karn, what.
Speaker 6: This case was about at a factual level, with state
Speaker 6: interest on escro laws. What those are are state laws
Speaker 6: that require banks to pay a certain percentage of interest
Speaker 6: on escro accounts that they're maintaining for mortgage borrowers. Those
Speaker 6: vary by state. Not every state has those requirements. The
Speaker 6: specific interest rates can vary, and so that becomes a
Speaker 6: compliance burden for banks to manage the different requirements in
Speaker 6: all of these different states. So, in this particular case,
Speaker 6: a borrower challenged Bank of America's practices on this instead,
Speaker 6: Bank of America needed to follow the state law in
Speaker 6: New York that required the payment of interest on escrow.
Speaker 6: Bank of America's position was, we are a national bank.
Speaker 6: This is preempted under the National Bank Act. We can't
Speaker 6: be expected to comply with us in every state, and
Speaker 6: so this ended up being litigated, went up to the
Speaker 6: Second Circuit, and eventually it went up to the Supreme Court.
Speaker 6: And the legal issue here was whether these state laws,
Speaker 6: which can very considerably state to state, are pre empted
Speaker 6: by Section ten forty four of the Dodd Frank Act,
Speaker 6: which was enacted in twenty ten. This followed the financial crisis.
Speaker 6: And what that section does is it codifies an earlier
Speaker 6: Supreme Court case called Barnet Bank. And Barnet Bank was
Speaker 6: a preemption case that basically required that courts look at
Speaker 6: the specific facts to determine whether a state law is
Speaker 6: interfering with a national banking power. So, in other words,
Speaker 6: if the bank is permitted to do something under its
Speaker 6: national bank charter, but maybe operating in different states, the
Speaker 6: courts look at whether the particular state requirements that the
Speaker 6: state is asking the national banks to comply with are
Speaker 6: going to be preempted or not. And so that's what
Speaker 6: that case was. It got codified as part of DoD Frank.
Speaker 6: The OCC which is the primary prudential regulator for national banks,
Speaker 6: also issued regulations under that but this was the first
Speaker 6: time that the Supreme Court had a chance to take
Speaker 6: a look at this. They've had other opportunities, they've declined sart.
Speaker 6: This was the first time we got to hear what
Speaker 6: the Court thinks about whether that standard articulated and DoD
Speaker 6: Frank changed the previous standard, narrated, expanded it, or kept
Speaker 6: things exactly the same.
Speaker 2: So it was a unanimous decision written by Justice Brett Cavin. Also,
Speaker 2: what did he say? What did the court actually find?
Speaker 6: So the Court was resolving a circuit split with this case.
Speaker 6: We had an older case Lousmac versus Bank of America
Speaker 6: that dates back to twenty eighteen. In twenty nineteen, the
Speaker 6: Supreme Court had denied start on that, and these two
Speaker 6: cases basically articulated different preemption standards and so and in
Speaker 6: this case is the Supreme Court gave us a little
Speaker 6: bit of what the industry was looking for, but not
Speaker 6: all of it. The Court came to this and said,
Speaker 6: we're looking at the National Bank Act, which codified Barnet
Speaker 6: Bank in order to apply that, We're going to actually
Speaker 6: look at Barnet Bank and look at the reasoning that
Speaker 6: the Court had reached in the Barnet Bank decision. And
Speaker 6: what they said was there's no bright line test here.
Speaker 6: This is always going to be a fact specific inquiry,
Speaker 6: both for the banks and for the courts that are
Speaker 6: applying this. They will have to actually look at whether
Speaker 6: there is significant interference with the national banks banking powers
Speaker 6: caused by the state law at issue. And so the
Speaker 6: court is not going to say something like they've done
Speaker 6: an immigration law where they say any state law, almost
Speaker 6: any state law touching immigration is preempted by federal law.
Speaker 6: They did not go that direction. They said, this is narrow,
Speaker 6: this is fact specific. You were going to have to
Speaker 6: look under our previous precedents, even before Barnett Bank and
Speaker 6: analyze whether a state law significantly interferes with the bank's powers.
Speaker 2: So basically they're sending it back to the Second Circuit
Speaker 2: for redo and saying, redo this. We didn't like the
Speaker 2: way you analyzed this, or you didn't analyze this well enough.
Speaker 6: Yes, that's exactly what they did. They said, you applied
Speaker 6: the wrong standard, so we want you to go back
Speaker 6: and apply the right standard. What the Second Circuit had
Speaker 6: done was close to a field preemption standard, where they said,
Speaker 6: if there's any interference with the national banks powers, we're
Speaker 6: going to treat that as significant interference, and so essentially
Speaker 6: the Supreme Court said that is taking things a little
Speaker 6: bit too far. We need to return to this fact
Speaker 6: specific inquiry. But they did not reach the ultimate issue
Speaker 6: of whether the specific interest on escro law was preempted. Instead,
Speaker 6: they said, okay, Second Circuit, here is the correct formulation
Speaker 6: of this test. We want you to go back and
Speaker 6: look at this again under that standard.
Speaker 2: Did the Court give in Justice Kavanaugh's opinion, did they
Speaker 2: give enough guidance to the Second Circuit?
Speaker 6: I think so. You know, time will tell. It's hard
Speaker 6: to say whether we're going to see more litigation on
Speaker 6: these issues going forward. What the Court has done is said,
Speaker 6: our prior precedents on this are still good law, and
Speaker 6: so these are older cases. But there are cases that
Speaker 6: are well known in the banking industry. And so I
Speaker 6: do think that there's enough there, and there's enough specificity
Speaker 6: in the opinion about what significant interference means that the
Speaker 6: Second Circuit should be well positioned to do the analysis. Now,
Speaker 6: it is probably likely that we're going to continue to
Speaker 6: see disputes over the application of that test because it
Speaker 6: is fact specific, and so you know, two people can
Speaker 6: look at the same set of facts through a different
Speaker 6: lens and sometimes reach different conclusions. But ultimately they have
Speaker 6: told the Second Circuit exactly how they want them to
Speaker 6: look at these issues, without directing what the outcome should
Speaker 6: be on this particular law.
Speaker 2: In this case, so Bank of America and the OCC
Speaker 2: were on one side, and the Solicitor General and the
Speaker 2: Justice Department were on the other, which is unusual. Why
Speaker 2: were they not in tune.
Speaker 6: It's a great question. They were not in tune because
Speaker 6: the Solicitor General and the Justice Department were looking at
Speaker 6: this lightly differently. So the OCC, as I had mentioned earlier,
Speaker 6: they are the primary prudential regulator for national banks, and
Speaker 6: the OCC has its own regulations. They have their own
Speaker 6: position on these things. Their position is a little bit
Speaker 6: more to the middle of both what the Court and
Speaker 6: the Second Circuit in Canta did and what the Court
Speaker 6: and LUSNAC did. I think they felt that this was
Speaker 6: just not the right case for this to come up,
Speaker 6: that there wasn't a need to revisit this.
Speaker 2: Consumer advocates were they hoping that the Supreme Court would
Speaker 2: set some kind of a bright line rule that state
Speaker 2: consumer protection laws can apply to national banks.
Speaker 6: Yes, let me say no, one was completely happy with
Speaker 6: this decision.
Speaker 2: Maybe that means it's a good decision.
Speaker 6: I don't know, it might yeah, So a lot of
Speaker 6: consumer advocates were really hoping that the Supreme Court would
Speaker 6: would come out and really narrow preemption. If the Court
Speaker 6: had taken a position that says, there are very narrow
Speaker 6: circumstances where we're going to find a federal preemption of
Speaker 6: state consumer laws. That would be good for consumer advocates
Speaker 6: because it gives them more of an ability to challenge
Speaker 6: bank's abilities to shield themselves from some of these state laws.
Speaker 6: So some consumer advocates were certainly hoping for that outcome.
Speaker 6: Consumer advocates have been happy with this decision because, at
Speaker 6: the very least, it didn't expand preemption, which would have
Speaker 6: made it more difficult for them to force banks to
Speaker 6: comply with state laws. But it also didn't give them
Speaker 6: everything they wanted because the Court did not reach the
Speaker 6: ultimate issue on this particular case. It didn't expand the
Speaker 6: doctrine at all. So while there's some celebration, I don't
Speaker 6: think that consumer advocates are one hundred percent thrilled with
Speaker 6: us either.
Speaker 2: So, I mean, does this mean more litigation in the
Speaker 2: future for national banks.
Speaker 6: I expect this to be about the same amount of litigation,
Speaker 6: because what this is doing is really saying the law
Speaker 6: that you all thought applied does apply. Luznak and Cantaro
Speaker 6: confused things a little bit, so there had been an
Speaker 6: understanding that the Barnet Bank standard would apply, and what
Speaker 6: that meant. With the circuit split, that became more complicated.
Speaker 6: For the most part, national banks have continued to analyze
Speaker 6: these issues under the Barnett Bank standard, and so I
Speaker 6: don't think this is going to change much in terms
Speaker 6: of day to day practices, but you know, time will
Speaker 6: tell anytime you have a change to how consumer laws
Speaker 6: are interpreted. There's certainly interest in bringing new challenges, bringing
Speaker 6: creative arguments that might cause the court to look at
Speaker 6: it from a slightly different perspective, But I personally am
Speaker 6: not thinking that this is going to have a huge
Speaker 6: effect on that.
Speaker 2: Coming up next on the Bloomberg Law Show, I'll continue
Speaker 2: this conversation with Aaron Bryan of Dorsey and Whitney and
Speaker 2: we'll discuss the implications of this decision for the occ
Speaker 2: Also an update on the Hunter Biden criminal case, which
Speaker 2: began today. Remember you can always get the latest legal
Speaker 2: news by listening to our Bloomberg Lawn podcast. You can
Speaker 2: find them on Apple Podcasts, Spotify, and it www dot
Speaker 2: Bloomberg dot com, slash podcast, Slash Law. I'm June Grosso,
Speaker 2: and you're listening to Bloomberg. I've been talking to Aaron Bryan,
Speaker 2: co chair of the Consumer Financial Services Group at Dorsey
Speaker 2: and Whitney. Erin Justice Gorsach had a lot of questions
Speaker 2: about the OCC. Will this decision have any implications for
Speaker 2: the OCC?
Speaker 6: At this point, I don't see any major implications for
Speaker 6: the OCC. The message to them appears to be business
Speaker 6: as usual, although obviously they will be monitoring developments on
Speaker 6: this as it goes back to the Second Circuit, potentially
Speaker 6: if it comes back to the Supreme Court for a
Speaker 6: second time, or if other challenges work their way up
Speaker 6: in different cases, they will be monitoring it. But I
Speaker 6: would not expect any major changes to the way that
Speaker 6: they regulate banks based on this decision because it is
Speaker 6: fairly consistent with their prior view and.
Speaker 2: There was a circuit split between the Ninth Circuit and
Speaker 2: the Second Circuit. So is the Court saying that what
Speaker 2: the Ninth Circuit did was correct and the Second Circuit
Speaker 2: was wrong.
Speaker 6: The court is saying that they both got it a
Speaker 6: little bit wrong. The Court is saying we have to
Speaker 6: look for significant interference and that that's going to be
Speaker 6: fact specific. So you can't just say if the law
Speaker 6: can theoretically be complied with by a bank in all
Speaker 6: fifty states, then it's not significant interference, which is more
Speaker 6: like what Lusnak said. At the same time, you can't
Speaker 6: say that if there's any interference, then it's significant, which
Speaker 6: is more like what Cancerro said. They're really drawing a
Speaker 6: line down the middle and saying significant interference is going
Speaker 6: to depend on the facts. The court needs to look
Speaker 6: at what is the bank saying about, how this is
Speaker 6: significant interference? How does this fit with prior precedence? Is
Speaker 6: just an issue that the courts have looked at before.
Speaker 6: What is the law in all of those have to
Speaker 6: be examined. So although in some ways they're using similar
Speaker 6: words to both the Second Circuit and the Ninth Circuit,
Speaker 6: they're telling both of them that they got it a
Speaker 6: little bit wrong and that ultimately this has to be
Speaker 6: a more effect specific inquiry.
Speaker 2: And only about a dozen states have mortgagees grow account
Speaker 2: interest rules similar to new York's. I'm surprised. I thought
Speaker 2: it would be more.
Speaker 6: Well, it may be more after this that's certainly getting
Speaker 6: a lot of attention, so that could be one possible change.
Speaker 6: You know, these are very small amounts though that we're
Speaker 6: talking about. The kind of interest on these accounts and
Speaker 6: the aggregate it can make a big difference. But you know,
Speaker 6: for the average consumer it may be a few dollars
Speaker 6: a year. It's not an incredibly large amount of money.
Speaker 6: That can make a big difference for some people's budgets,
Speaker 6: of course, but this isn't a way that the banks
Speaker 6: tend to make a lot of money. I think from
Speaker 6: the bank's perspective, this is really more of a compliance issue,
Speaker 6: but it can be very challenge. Escrow honestly is one
Speaker 6: of the most challenging parts of mortgage servicing to begin with,
Speaker 6: and so the more variations you have on how you
Speaker 6: need to handle escrow accounts, the more complicated it becomes
Speaker 6: and the more likely errors are. So from the bank's perspective,
Speaker 6: you know, this is really about the challenges of complying
Speaker 6: with very different laws and different jurisdictions. The preference, obviously
Speaker 6: would be to have one set of laws that applies everywhere. Now,
Speaker 6: one thing that Congress could do is to say we
Speaker 6: are going to specifically pass the law. You know that
Speaker 6: overrides us, but basically could codifies preemption specifically for interest
Speaker 6: on escrow. So it's probably not going to happen, but
Speaker 6: that would be one other way that this could be resolved.
Speaker 2: The attorney for the homeowners call this a big win
Speaker 2: for American consumers. But is it a big win?
Speaker 6: Well, it may be a win for a plaintiffs' attorneys.
Speaker 6: I don't see this as a big win for either
Speaker 6: consumers or banks. I think that from the bank's perspective,
Speaker 6: in a perfect world, or might have decided to expand
Speaker 6: preemption towards something more like field preemption, which we talked
Speaker 6: about earlier, and some in the banking industry had pushed
Speaker 6: for that. But I just don't think that was ever
Speaker 6: going to happen. The outcome we got was right down
Speaker 6: the middle. I don't think that it makes either side
Speaker 6: really happy. I don't see this as a huge win
Speaker 6: for consumers. I also don't see it as a huge
Speaker 6: win for banks. I think ultimately this is a decision
Speaker 6: that reaffirms the status quo consumers are not going to
Speaker 6: get rich off of this. We're huge amounts of money
Speaker 6: that they'll be getting an interest on their escor accounts,
Speaker 6: even in those states. So I don't see this as
Speaker 6: a huge win for consumers. It's not necessarily bad news
Speaker 6: for them either, But this is really just down the middle.
Speaker 2: Aaron, This may be a little in the weeds, but
Speaker 2: tell us about what you've called this provocative footnote.
Speaker 6: The Court did have a really interesting footnote. So the
Speaker 6: Court common that on remand the Second Circuit could consider
Speaker 6: the significance if there is any of the OCC's preemption rules.
Speaker 6: So that's interesting because although it was discussed at one
Speaker 6: point earlier in the case, that was not an issue
Speaker 6: before the Supreme Court, So for them to specifically call
Speaker 6: that out in a footnote, all that says, we want
Speaker 6: you to consider this right. And then the other thing
Speaker 6: that they noted was that the Second Circuit could also
Speaker 6: consider the potential relevance of a Dodd Frank Act provision
Speaker 6: that recognizes preemption of state consumer finance laws under other
Speaker 6: federal statutes. So again, this was something that came up
Speaker 6: earlier in the case was not litigated at this stage.
Speaker 6: But it is curious that the Court specifically highlighted this.
Speaker 6: It's almost teasing that they would like the court to
Speaker 6: look at these issues, but they would like another chance
Speaker 6: to consider it. So hard to say what that means
Speaker 6: if the Court is leaning one direction or the other.
Speaker 6: But also interesting that they that they flagged that for
Speaker 6: the parties involved with us.
Speaker 2: What's the big takeaway here for banks?
Speaker 6: The takeaway here for banks they're going to have to
Speaker 6: continue to monitor this. In the short terms, they're going
Speaker 6: to have to continue to assume that there may not
Speaker 6: be preemption for some of these state laws that are
Speaker 6: not specifically called out in federal statutes. But we'll see
Speaker 6: what the Second Circuit does with this. It may be
Speaker 6: that this interest on ESCO issue goes away now that
Speaker 6: there's agreement about how the test should be applied, but
Speaker 6: banks to continue to monitor this because we have not
Speaker 6: reached the ultimate issue yet and there is still potential
Speaker 6: for new direction on the topic.
Speaker 2: Thursday was not a good day for the Second Circuit.
Speaker 2: It was reversed in two cases. Thanks so much, Aaron.
Speaker 2: That's Aaron Bryan, co chair of the Consumer Financial Services
Speaker 2: Group at Dorsey and Whitney. In other legal news today,
Speaker 2: a jury has been seated in the federal gun case
Speaker 2: against Hunter Biden, President Biden's son. The jury of six
Speaker 2: men and six women will hear opening statements tomorrow. Hunter
Speaker 2: Biden has been charged in Delaware with three felonies stemming
Speaker 2: from a twenty eighteen firearms purchase when he was, according
Speaker 2: to his memoir, in the throes of crack addiction. He's
Speaker 2: been accused of lying to a federally licensed gun dealer,
Speaker 2: making a false claim on the application by saying he
Speaker 2: was not a drug user, and illegally having the gun
Speaker 2: for eleven days. The case has had a tortured history.
Speaker 2: It's going to trial following the collapse of a plea
Speaker 2: deal that would have avoided the spectacle of a trial
Speaker 2: so close to the twenty twenty four election. Hunter Biden
Speaker 2: has pleaded not guilty and has argued he's being unfairly
Speaker 2: targeted by the Justice Department. The questions to the potential
Speaker 2: jurors tested their knowledge of the case, their thoughts about
Speaker 2: gun ownership, and whether they or anyone close to them
Speaker 2: have struggled with substance abuse or addiction. Other questions focused
Speaker 2: on the role politics may have played in the charges.
Speaker 2: One potential durer who was sent home, said she didn't
Speaker 2: know whether she could be impartial because of the opinion
Speaker 2: she'd formed about Hunter Biden based on media reports quote
Speaker 2: It's not a good one. In a statement today, the
Speaker 2: President said he has boundless love for his son, confidence
Speaker 2: in him, and respect for his strength. And that's it
Speaker 2: for this edition of the Bloomberg Law Podcast. Remember you
Speaker 2: can always get the latest legal news by subscribing and
Speaker 2: listening to the show on Apple Podcasts, Spotify, and at
Speaker 2: Bloomberg dot com, Slash podcast, Slash Law. I'm June Grosso
Speaker 2: and this is Bloomberg