WEBVTT - Chief Justice Roberts Pledges to Reform Judiciary (Audio) 0:00:03.480 --> 0:00:07.360 Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every 0:00:07.440 --> 0:00:10.239 day we bring you insight and analysis into the most 0:00:10.280 --> 0:00:13.200 important legal news of the day. You can find more 0:00:13.280 --> 0:00:17.840 episodes of the Bloomberg Law Podcast on Apple Podcasts, SoundCloud 0:00:18.120 --> 0:00:22.560 and on Bloomberg dot com Slash Podcasts. It's Chief Justice 0:00:22.640 --> 0:00:25.759 John roberts thirteen year end report on the state of 0:00:25.800 --> 0:00:28.680 Federal Judiciary, and it may be the report that gets 0:00:28.720 --> 0:00:31.520 more attention than any other because it raises issues that 0:00:31.560 --> 0:00:34.000 have been sweeping the country with the me too movement. 0:00:34.479 --> 0:00:37.919 The report is largely devoted to the federal judiciary's response 0:00:37.960 --> 0:00:41.600 to this year's natural disasters, but the Chief also highlights 0:00:41.680 --> 0:00:44.120 the depth of the problem of sexual harassment in the 0:00:44.159 --> 0:00:47.640 workplace across the country, shinning a spotline on a special 0:00:47.720 --> 0:00:51.159 problem for the judiciary where law clerks work closely and 0:00:51.240 --> 0:00:54.960 in confidence with powerful judges Joining me as Deborah Cat's 0:00:55.040 --> 0:00:59.360 founding partner of Cats, Marshall and Banks, Deborah Roberts said 0:00:59.400 --> 0:01:02.840 events in past few weeks have made clear that the 0:01:03.040 --> 0:01:06.400 judicial branch is not immune from the problem of sexual harassment. 0:01:06.680 --> 0:01:10.640 He didn't mentioned prominent Judge Alex Kazinski of the Ninth 0:01:10.720 --> 0:01:14.240 circuit by name, but he was undoubtedly referring to him. 0:01:14.800 --> 0:01:18.640 Tell us what happened with Judge Kazinski, sure well. On 0:01:19.000 --> 0:01:23.640 December eight the Washington Post ran UH bombshell of a 0:01:23.760 --> 0:01:27.319 report reporting on the fact that a number of former 0:01:28.160 --> 0:01:32.240 clerks of Judge Kazinski had accused him of sexual misconduct 0:01:32.319 --> 0:01:34.520 and there was a range of behavior that was reported 0:01:34.560 --> 0:01:38.080 by these former judges that ran the gamut from subjecting 0:01:38.160 --> 0:01:45.000 them to inappropriate, bizarre, sexualized comments, to pornography UH and 0:01:45.360 --> 0:01:49.600 essentially creating an environment where they did not feel able 0:01:49.720 --> 0:01:53.200 to complain because there was no mechanism to complain, but 0:01:53.280 --> 0:01:58.120 that they felt completely UH demeaned by the experience, and 0:01:58.240 --> 0:02:01.480 the judge responded in a way that was extremely dismissive 0:02:01.520 --> 0:02:03.520 and said, essentially, if this is the worst I've done 0:02:03.520 --> 0:02:06.080 in thirty five years, I can live with that. That 0:02:06.280 --> 0:02:10.239 led to the Washington Post on December fifteenth reporting that 0:02:10.440 --> 0:02:13.920 nine more women had come forward and these women had 0:02:14.040 --> 0:02:20.160 also described bizarre, inappropriate comments, but also said that the 0:02:20.280 --> 0:02:23.480 judge had subjected at least four of them to touching 0:02:23.720 --> 0:02:28.600 or kissing, clear sexual harassment, and at that point, UH 0:02:28.840 --> 0:02:32.079 it was clear that a floodgate had been opened and 0:02:32.280 --> 0:02:35.520 the judiciary had to respond. Ultimately, the judge was forced 0:02:35.600 --> 0:02:39.760 to submit his resignation before an investigation was undertaken, so 0:02:39.880 --> 0:02:43.760 he announced his retirement on December eighteenth. Let's discuss the 0:02:43.840 --> 0:02:46.960 complexity of the problem with law clerks because an appeals 0:02:47.000 --> 0:02:50.160 court judge will usually have four clerks and there is 0:02:50.200 --> 0:02:54.240 a strict code of confidentiality they work under. There's also 0:02:54.320 --> 0:02:56.840 the fact that the judge is very influential in their 0:02:56.919 --> 0:03:00.560 future career as many times one are the special pressures 0:03:00.600 --> 0:03:05.200 and conflicts a clerk faces who is harassed, Well, you've 0:03:05.280 --> 0:03:09.480 you've named for a few Getting a federal judicial clerkship 0:03:09.680 --> 0:03:13.200 is a real plump for any uh person graduating from 0:03:13.440 --> 0:03:16.480 law school, and it is a significant stepping stone for 0:03:16.560 --> 0:03:21.160 advancement in the legal profession. People are very reliant on 0:03:21.320 --> 0:03:25.079 judges to get recommendations to either advanced to higher level 0:03:25.160 --> 0:03:28.120 clerkships in Kazynski's case, to the U. S. Supreme Court, 0:03:28.200 --> 0:03:32.399 which is the very top of the profession, or two 0:03:32.720 --> 0:03:37.200 other positions at firms and elsewhere, um. And it really 0:03:37.400 --> 0:03:40.760 is the first significant lawyering lawyering job that someone has 0:03:40.840 --> 0:03:43.800 out of law school, so the clerk is completely reliant 0:03:43.960 --> 0:03:47.760 on the judge for connections and recommendations, and few people 0:03:47.840 --> 0:03:51.040 want to burn that bridge. The other problem is that, 0:03:51.480 --> 0:03:55.720 as you've described, seederal judges have four clerks, and you 0:03:55.840 --> 0:04:00.960 are very isolated in the judges chambers. You don't discuss 0:04:01.040 --> 0:04:04.760 your work with other clerks or with other judges. UM. 0:04:05.080 --> 0:04:08.360 So there really isn't a mechanism to go tell your coworkers, 0:04:08.440 --> 0:04:11.440 this is what's happening in my chambers. And what the 0:04:11.560 --> 0:04:14.840 clerks have done is they sent a letter that I 0:04:14.880 --> 0:04:17.440 think at this point has well over seven hundred signatures 0:04:18.279 --> 0:04:22.799 describing needed reforms within the court system to make clear 0:04:22.920 --> 0:04:28.480 that the UH condition of confidentiality does not apply to 0:04:28.760 --> 0:04:33.920 keeping judges UH. I'm sorry to keeping clerks muzzled when 0:04:33.960 --> 0:04:36.920 they're being subjected to sexual harassment. So that was a 0:04:37.040 --> 0:04:41.400 very significant first step UH that the judiciary did, which 0:04:41.480 --> 0:04:46.640 is it amended the law Clerk Handbook to provide UH 0:04:47.640 --> 0:04:52.080 clarity that harassment is not one of those conditions that 0:04:52.400 --> 0:04:56.400 is to be kept confidential. Roberts said he's already asked 0:04:56.480 --> 0:05:00.080 the Director of the Administrative Office of US Courts to 0:05:00.120 --> 0:05:03.400 assemble a working group to consider whether changes are needed 0:05:03.600 --> 0:05:08.960 in the Judiciary's Code of Conduct, etcetera. Is that enough 0:05:09.279 --> 0:05:13.560 is will that do it? Well? That's an important first 0:05:13.600 --> 0:05:17.400 step because and that was one of the reforms that 0:05:17.600 --> 0:05:21.360 the clerks who signed onto that letter ask for. UH. 0:05:21.600 --> 0:05:25.880 The code provides ethical canons for all judicial employees, including judges, 0:05:26.080 --> 0:05:30.880 and it's very clear that UH there is a paucity 0:05:31.600 --> 0:05:35.200 of direction in this code that makes clear that judicial 0:05:35.440 --> 0:05:39.000 employees UH can report these things and sets out a 0:05:39.080 --> 0:05:43.000 mechanism to handle harassment should it be encountered in the workplace, 0:05:43.960 --> 0:05:48.320 Unlike UH members in the private sector even or even 0:05:48.440 --> 0:05:51.960 in federal executive agencies, there's no recourse if you're sexually 0:05:52.000 --> 0:05:55.520 harassed and you're clerking for a federal judge. UH, there 0:05:55.680 --> 0:05:59.920 isn't Title seven does not cover you in the workplace. UH, 0:06:00.120 --> 0:06:03.000 and there aren't clear reporting lines like going to the 0:06:03.080 --> 0:06:06.760 E E O C. So revising the Code of Conduct 0:06:06.960 --> 0:06:11.080 for judicial employees is really crucial. Only about forty five 0:06:11.160 --> 0:06:13.560 seconds here, I just wanted to get your opinion, Debora, 0:06:13.600 --> 0:06:16.600 about there's been a lot of reporting about things that 0:06:16.760 --> 0:06:21.200 happened UH sexual inappropriate activity from let's say twenty years ago, 0:06:21.640 --> 0:06:24.320 where the statute of limitations has run and there was 0:06:24.360 --> 0:06:28.600 an October sixteenth article about account of a woman who 0:06:28.640 --> 0:06:35.440 said Justice Clarence Thomas had touched her inappropriately in what 0:06:35.560 --> 0:06:40.800 about this going back so far? Well, people are coming 0:06:40.920 --> 0:06:46.400 forward with these allegations because they are of important public concern. 0:06:46.520 --> 0:06:49.279 This is a moment where women are finally being believed 0:06:49.360 --> 0:06:52.440 about these allegations. And they're not coming forward seeking money, 0:06:52.920 --> 0:06:55.720 They're not asserting legal claims. They're essentially saying that people 0:06:55.800 --> 0:06:58.680 who hold the public trust need to be held accountable. 0:06:59.080 --> 0:07:02.120 And that's what happened Kazynski's case. He's paid for this 0:07:02.320 --> 0:07:04.920 with you know, the ultimate got I've got to stop 0:07:04.960 --> 0:07:07.440 you there. We have so much to talk about this, 0:07:07.600 --> 0:07:18.960 but thank you. New York financier Lynn Tilton is starting 0:07:19.000 --> 0:07:20.840 the new year on a high note with a record 0:07:20.880 --> 0:07:24.680 of two out of three court wins. In last Friday, 0:07:24.720 --> 0:07:27.440 a federal judge throughout the charges against Tilton in a 0:07:27.560 --> 0:07:31.320 one billion dollars civil racketeering suit, just three months after 0:07:31.360 --> 0:07:34.480 the Securities and Exchange Commission cleared her of front charges 0:07:34.720 --> 0:07:37.640 of building investors out of more than two hundred million dollars. 0:07:38.120 --> 0:07:41.760 Following the sec ruling, Tilton told Bloomberg TV that she 0:07:41.840 --> 0:07:46.200 had been completely vindicated. The documents spoke for themselves. They 0:07:46.280 --> 0:07:49.880 gave me complete discretion, as the judge said, they gave 0:07:49.920 --> 0:07:52.680 me control over the funds, and as she said, there 0:07:52.720 --> 0:07:56.000 were no emissions. Everything was reported, Everything was there for 0:07:56.200 --> 0:07:59.800 people to see. However, Tilton did not fare as well 0:08:00.000 --> 0:08:03.040 in a Delaware trial. She's appealing to judge's ruling that 0:08:03.160 --> 0:08:06.640 she was properly ousted as a director from some portfolio 0:08:06.760 --> 0:08:10.320 company she claimed to control. My guest is Robert Hockett, 0:08:10.360 --> 0:08:14.560 professor at Cornell University Law School. Bob tell us about 0:08:14.640 --> 0:08:19.200 the civil racketeering lawsuit against Tilton and her Patriarch Partners 0:08:19.280 --> 0:08:22.960 investment firm. Sure. Yeah, so they're basically quite a few 0:08:23.000 --> 0:08:24.520 moving parts here, But I think we can kind of 0:08:24.560 --> 0:08:27.280 spoil it down to its essence by noting what the 0:08:27.720 --> 0:08:31.840 sec suit first amounted to and then understanding the kind 0:08:31.920 --> 0:08:33.719 of the private suits sort of in relation to that. 0:08:34.200 --> 0:08:35.800 So essentially, what you have here is a case of 0:08:35.920 --> 0:08:39.920 some failing companies. Miss Tilton becomes an owner of those 0:08:39.960 --> 0:08:43.800 companies with you to turning them around. She also runs, however, 0:08:44.000 --> 0:08:47.719 a funds which is used to extend funds to the 0:08:47.800 --> 0:08:51.800 failing firms, which she needs in order to turn them around. Okay, 0:08:52.120 --> 0:08:55.080 it's a fairly unorthodox arrangement, but there's nothing illegal about 0:08:55.160 --> 0:08:58.840 illegal about it as such, and all right, So ultimately, 0:08:58.920 --> 0:09:02.240 of course, the whole plan comes a cropper. It doesn't 0:09:02.320 --> 0:09:05.520 end up working out. So the SEC brings a suit 0:09:05.600 --> 0:09:08.880 against her, alleging that she's defrauded the investors in the 0:09:09.080 --> 0:09:12.640 funds that she used to extend financing to the failing 0:09:12.679 --> 0:09:15.880 companies that she was trying to turn around. She actually 0:09:15.960 --> 0:09:19.080 objects to that SEC suit. She thinks that it's unconstitutional. 0:09:19.480 --> 0:09:21.439 That was, of course a stilly argument on her part, 0:09:21.520 --> 0:09:23.880 and she lost it. She was rebuffed there, but the 0:09:24.040 --> 0:09:28.240 SEC nevertheless ultimately found in her favor. It said that, Okay, look, 0:09:28.320 --> 0:09:31.480 she didn't defraud those investors because she had informed them 0:09:31.840 --> 0:09:34.920 all along precisely how she was going to be operating. 0:09:35.520 --> 0:09:38.480 And also she had, um, you know, being given a 0:09:38.480 --> 0:09:42.920 great deal of discretion under those funds organizing documents. Okay, Now, 0:09:43.160 --> 0:09:46.880 the fund those who invested in the funds weren't satisfied, 0:09:46.960 --> 0:09:49.640 of course, with the SEC finding. They sued in their 0:09:49.679 --> 0:09:52.760 own names. So now we have a civil action brought 0:09:52.800 --> 0:09:56.000 by private parties rather than by a regulator. They sued 0:09:56.080 --> 0:10:00.640 her on racketeering claims or racketeering charges. The problem with 0:10:00.800 --> 0:10:03.120 that suit is that that kind of suit had been 0:10:03.200 --> 0:10:07.160 foreclosed in the mid ninety nineties um by Congress, right 0:10:07.280 --> 0:10:09.599 in the so called ps l R A, which was 0:10:09.760 --> 0:10:11.959 essentially a suit that I mean, a statute that was 0:10:12.000 --> 0:10:15.679 designed to place limitations on the kinds of civil suits 0:10:15.720 --> 0:10:20.400 that could be brought against alleged securities fraudsters. So that 0:10:20.640 --> 0:10:24.120 suit was thrown out ultimately by the court precisely because 0:10:24.160 --> 0:10:27.560 the ps l r A prohibited it um. One last 0:10:27.600 --> 0:10:29.319 thing may be worth noting in this connection is that 0:10:29.559 --> 0:10:32.000 miss Chilton might be right, and she might not be 0:10:32.160 --> 0:10:34.320 right when she says that she's been fully vindicated by 0:10:34.400 --> 0:10:37.559 this most recent decision um. The reason that she might 0:10:37.640 --> 0:10:39.800 not be right is that this is just the suit 0:10:39.920 --> 0:10:43.199 was tossed out because it's foreclosed by statute, not on 0:10:43.280 --> 0:10:46.000 the merits right. So she could in theory still be 0:10:46.040 --> 0:10:47.959 wrong on the merits. But we'll never have occasion to 0:10:48.000 --> 0:10:51.720 find that out because Congress says you can't bring suits 0:10:51.800 --> 0:10:54.719 like that against people like miss Chilton. So I think 0:10:54.760 --> 0:10:58.280 I need a diagram now to figure out all these 0:10:58.320 --> 0:11:03.360 different lawsuits. So Judge William Pauli's decision that found that 0:11:03.440 --> 0:11:06.800 these allegations were outside the scope of federal racketeering laws. 0:11:06.880 --> 0:11:10.120 That was not based on a determination that the allegations 0:11:10.160 --> 0:11:14.360 were false. That was procedural, right exactly, Its entirely procedural 0:11:14.480 --> 0:11:16.439 as a matter of essentially whether the law, you know, 0:11:16.760 --> 0:11:20.040 whether this this kind of suit is permitted. Again, it's 0:11:20.040 --> 0:11:23.320 a civil suit. This was a private litigation brought at 0:11:23.320 --> 0:11:27.000 a civil suit, not a regulatory charge. Uh. And essentially 0:11:27.040 --> 0:11:29.240 with the court found was that, well, that's exactly the 0:11:29.360 --> 0:11:32.040 kind of suit that Congress decided no longer to allow 0:11:32.559 --> 0:11:34.880 in the mid ninety nine when it passed b. S 0:11:35.000 --> 0:11:38.920 l r. A. So, is there any other way that 0:11:39.080 --> 0:11:42.240 they can go after her the the you know, the 0:11:42.400 --> 0:11:47.120 investors as far as the racketeering charges. Is there any 0:11:47.200 --> 0:11:49.599 other kind of suit or are they dead in the 0:11:49.679 --> 0:11:52.959 water there? Well, in theory, they could try to go 0:11:53.160 --> 0:11:56.319 after her on the same theory that the sec itself 0:11:56.480 --> 0:11:59.480 had gone after her. But in light of the fact 0:11:59.559 --> 0:12:02.800 that the s s SEE itself ultimately found that she 0:12:02.960 --> 0:12:05.439 had not defrauded her investors because she had, you know, 0:12:05.520 --> 0:12:08.400 even though it was an unorthodox arrangement, she had informed 0:12:08.440 --> 0:12:10.720 them of everything. And plus again they had entrusted her 0:12:10.760 --> 0:12:13.440 with a great deal of scratch and lighted the SEC's 0:12:13.480 --> 0:12:17.400 finding that way, it seems unlikely that any private suit 0:12:17.559 --> 0:12:20.920 would succeed here. A private suit that doesn't sound in 0:12:21.040 --> 0:12:25.120 racketeering might be bringable, but again that would probably lose 0:12:25.160 --> 0:12:27.520 on the marriage in light of what the SEC itself 0:12:27.600 --> 0:12:30.640 had found. So, Bob, let's go to lawsuit number three, 0:12:30.840 --> 0:12:34.600 which she lost, tell us about what the Delaware judge ruled, 0:12:34.880 --> 0:12:38.520 and she's going to appeal that decision. Yeah, so the 0:12:38.559 --> 0:12:41.120 Delaware judge. I mean, so, in the midst of all 0:12:41.160 --> 0:12:45.640 of this, Um, you know, she ultimately, how should I say, 0:12:45.920 --> 0:12:48.760 the funds that she was managing in order to raise 0:12:48.880 --> 0:12:52.920 money that would help her finance her attempts to turn 0:12:53.000 --> 0:12:56.160 around at the failing companies that she was trying to tournament. Uh, 0:12:56.400 --> 0:12:59.800 those particular funds ultimately asked her as there as their 0:12:59.800 --> 0:13:03.640 may manager. Right. Uh. They auskedd her essentially on the 0:13:03.679 --> 0:13:07.599 basis that well, this was essentially again the arrangement was 0:13:07.679 --> 0:13:11.240 so unorthodox and that it was such an inherently conflicted 0:13:11.720 --> 0:13:14.120 sort of arrangement that it basically presented her with such 0:13:14.160 --> 0:13:17.000 a conflict of interest that it wouldn't do for her 0:13:17.080 --> 0:13:20.079 any longer to be on, you know, managing those particular funds. 0:13:20.679 --> 0:13:24.280 Um and Uh. They asked her on that basis, right, 0:13:24.520 --> 0:13:27.079 so the Delaware Court. So she sues saying that that's 0:13:27.080 --> 0:13:29.920 a wrongful termination, so to speak. Right in effect, she's saying, 0:13:29.960 --> 0:13:32.440 that was a wrongful separance of my relation with these 0:13:32.480 --> 0:13:36.640 particular funds. The Delaware court upheld this, but it didn't 0:13:36.679 --> 0:13:39.000 uphold this on the on the on the basis of 0:13:39.080 --> 0:13:41.040 a theory to the effect that well, she really was 0:13:41.520 --> 0:13:44.720 somehow wronging those funds, just saying that the funds themselves 0:13:44.800 --> 0:13:47.079 have a good bit of discretion when it comes to 0:13:47.160 --> 0:13:50.079 determining who they want to be managing them. Uh. And 0:13:50.160 --> 0:13:52.560 they also have discretion to you know, say, look, we're 0:13:52.640 --> 0:13:56.360 uncomfortable with the conflict of interest this places her in. Uh. 0:13:56.400 --> 0:13:58.120 And so we're going to ask her on that basis. 0:13:58.720 --> 0:14:00.280 I think that's going to be a harder one for 0:14:00.360 --> 0:14:03.640 her to challenge. Write the Delaware court, having upheld the 0:14:03.760 --> 0:14:08.559 fund's decision upheld on unreasonable grounds, on sensible grounds, it 0:14:09.000 --> 0:14:12.600 wasn't clearly wrong or clearly illegal or clearly in breach 0:14:12.640 --> 0:14:15.400 of contract for the funds to oust miss Tilton on 0:14:15.480 --> 0:14:18.000 the grounds that they did. Uh. And so I think 0:14:18.559 --> 0:14:22.280 her appeal of that particular decision is not likely to prevail. 0:14:23.600 --> 0:14:25.480 Maybe my big good idea to quit while she's ahead, 0:14:25.520 --> 0:14:27.440 if I could put it that way. We have about 0:14:27.480 --> 0:14:31.200 one minute here right now. What is her power? What 0:14:31.560 --> 0:14:34.640 is she in charge of? Is she managing? Is she 0:14:34.760 --> 0:14:38.840 getting money from different things? Where does she stand? Well, 0:14:38.920 --> 0:14:41.760 she's got other funds now, of course, right, Uh? And 0:14:41.920 --> 0:14:44.240 so I mean she's still doing the kinds of things 0:14:44.280 --> 0:14:46.000 she was doing before, which as far as we know, 0:14:46.600 --> 0:14:49.640 are legal. Right, there's nothing, Um, there's nothing that's kind 0:14:49.680 --> 0:14:54.040 of the per se illegal or per se shady about 0:14:54.080 --> 0:14:56.640 what she's doing. What she's doing is unorthodox, and it 0:14:56.720 --> 0:15:00.160 does definitely raise certain conflicts of interest. Uh. And could 0:15:00.200 --> 0:15:01.840 very well be that the law in the distant past 0:15:02.040 --> 0:15:05.920 would have just flat out prohibited her whole wearing these 0:15:06.120 --> 0:15:09.400 particular hats in such a way as subjects or to 0:15:09.440 --> 0:15:11.920 this particular conflict of interest. But the laws that stands 0:15:11.960 --> 0:15:14.880 now doesn't prevent that. So she's essentially doing the kinds 0:15:14.920 --> 0:15:18.600 of things that she was doing before now with another firm. 0:15:18.920 --> 0:15:22.520 All right, Bob, that was an excellent explanation of a 0:15:22.720 --> 0:15:27.720 really complicated situation. That's Robert Hockett, professor at Cornell University 0:15:27.880 --> 0:15:31.800 Law School. Thanks for listening to the Bloomberg Law Podcast. 0:15:32.200 --> 0:15:36.240 You can subscribe and listen to the show on Apple podcast, SoundCloud, 0:15:36.360 --> 0:15:40.240 and on Bloomberg dot com slash podcast. I'm June Brasso. 0:15:40.720 --> 0:15:44.560 This is Bloomberg Ye.