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

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Speaker 2: Calshi won the first appellate court victory in the battle

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Speaker 2: over who gets to oversee the fast growing prediction markets,

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Speaker 2: the States or the Commodity Futures Exchange Commission. In a

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Speaker 2: two to one decision, the Third Circuit Court of Appeals

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Speaker 2: told New Jersey state officials that the CFTC regulates the platform.

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Speaker 2: Calshy has had mixed results in lower courts arguing that

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Speaker 2: it should be overseen by the CFTC rather than state officials.

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Speaker 2: But this is just the first appellate court decision on

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Speaker 2: an issue that's likely to reach the Supreme Court. Joining

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Speaker 2: me is Elliott Stein, senior litigation analyst at Bloomberg Intelligence.

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Speaker 2: Elliott tell us about the legal battle that's been going

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Speaker 2: on between the prediction markets and the states.

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Speaker 1: Yeah, this litigation has been going on for over eight

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Speaker 1: year now, and we have cases all over the country

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Speaker 1: in multiple state courts, multiple federal courts. And essentially it

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Speaker 1: started when states started sending season desist letters. Some states

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Speaker 1: started sending season desist letters to the prediction markets like

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Speaker 1: Calshie Speaking to stop them from operating in those states.

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Speaker 1: Because the States viewed those products is gambling, and the

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Speaker 1: prediction markets, in particular Calci at that point sued the

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Speaker 1: States sort of preemptively to stop the States from filing

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Speaker 1: an enforcement action against them, and the prediction markets argument

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Speaker 1: is that these are derivatives that should be regulated by

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Speaker 1: the CFTC, and under the Commodity Exchange Act, states are

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Speaker 1: preempted from regulating them as gambling. And the States of

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Speaker 1: course take the position that these products are really gambling

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Speaker 1: in effect and they should be regulated as such.

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Speaker 2: How are they not gambling? I mean you're placing a

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Speaker 2: wager on an outcome.

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Speaker 1: I mean there are some differences. And the event contracts

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Speaker 1: that the prediction markets offer, you really have two sides

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Speaker 1: to the contract. You you know, parties on both sides,

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Speaker 1: as opposed to your traditional gambling and betting apps where

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Speaker 1: consumer is really betting against the house. And event contracts,

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Speaker 1: like other derivatives, are you know, contracts that you can

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Speaker 1: get in and out of and sell, which is also

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Speaker 1: a difference, you know, But really it comes down to

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Speaker 1: the statutory language and the Commodity Exchange Act and whether

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Speaker 1: these event contracts fall into the definition of swaps, which

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Speaker 1: is very broad in the Commodity Exchange Act, and then

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Speaker 1: related to that is whether Congress intended to preempt states

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Speaker 1: from regulating these products.

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Speaker 2: There are different decisions in courts around the country. I mean,

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Speaker 2: which side is winning more of those lower court arguments.

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Speaker 1: Like you said, we have multiple decisions now at the

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Speaker 1: trial court level. It's funny. The first decisions came almost

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Speaker 1: exactly a year ago in April of twenty twenty five

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Speaker 1: with respect to these sports event contracts, and Calci won those.

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Speaker 1: They want a preliminary injunction in Nevada, they want a

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Speaker 1: preliminary injunction in New Jersey, and so you know, they

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Speaker 1: sort of came out of the gate winning. Then shortly thereafter,

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Speaker 1: in August, I believe a federal court in Maryland ruled

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Speaker 1: against Calci and ruled in the states favor. And since

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Speaker 1: then we've had probably more trial court rulings going in

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Speaker 1: favor of the states, because you've had decisions in Ohio

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Speaker 1: and in Michigan. I believe in favor of the states.

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Speaker 1: You had a state court in Massachusetts issue of preliminary

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Speaker 1: in junction in favor of the state against Calshi as well.

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Speaker 1: So I would say, you know, up until yesterday's decision

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Speaker 1: by the Third Circuit Court of Appeals, you sort of

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Speaker 1: had more federal courts ruling in favor of the states,

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Speaker 1: but you did have some like I mentioned New Jersey

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Speaker 1: and also Tennessee ruined favor of Calci. Then a bad

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Speaker 1: decision I mentioned earlier was interesting because the judge there,

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Speaker 1: even though a year ago he ruled in favor of Calci,

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Speaker 1: more recently in October, he sort of changed his mind

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Speaker 1: and ruled in favor of Nevada, and that set off

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Speaker 1: sort of a cascading series of events in Nevada litigation,

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Speaker 1: which is all going to be tied up in the

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Speaker 1: Ninth Circuit next week.

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Speaker 2: Tell us what the Third Circuit decided in a two

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Speaker 2: to one.

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Speaker 1: Decision, So, like you said, this is a split decision,

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Speaker 1: but the majority ruled that the definition of swaps under

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Speaker 1: the Commodity Exchange Act is very broad and is broad

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Speaker 1: enough to encompass event contracts like those that are offered

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Speaker 1: by the likes of Calci and other designated contract markets dcms,

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Speaker 1: and that under the Commodity Exchange Act, the CFTC has

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Speaker 1: exclusive jurisdiction over swaps that are traded on designated contract markets.

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Speaker 1: And as a result, states are preempted from regulating them

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Speaker 1: as gambling. Those are like sort of the two main issues,

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Speaker 1: and those are the same issues that we see decided

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Speaker 1: in the trial court. But yesterday's decision by the Third

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Speaker 1: Circuit is the first time that we have very federal

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Speaker 1: appeals court rule on these issues in any sort of substance.

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Speaker 2: The dissenting judge, Jane Richards Roth wrote that Calsh's actions

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Speaker 2: are a performative slight meant to obscure the reality that

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Speaker 2: Calshe's products are sports gambling, and she said that their

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Speaker 2: offerings were virtually indistinguishable from the betting products available on

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Speaker 2: online sports books like DraftKings and FanDuel.

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Speaker 1: Is she right, Well, it depends how you asked. Right,

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Speaker 1: Obviously the states that are trying to regulate these products

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Speaker 1: as game when thinks she's right. Obviously the prediction markets

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Speaker 1: thinks she's wrong. The majority of the judges on that

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Speaker 1: panel yesterday disagreed with her. But you know, she also

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Speaker 1: cited a presumption against preemption for things that states usually regulate,

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Speaker 1: like gambling. But you know, I tend to think the

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Speaker 1: prediction markets actually have the better statutory argument here. I

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Speaker 1: think the mood of the Exchange Act is pretty clear

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Speaker 1: that the CFCC has exclusive jurisdiction over swaps that are

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Speaker 1: traded on designated contact markets. You know, that doesn't mean

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Speaker 1: that states can't regulate your more traditional forms of gambling

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Speaker 1: because the Commodity Exchange Act doesn't stop them from doing that.

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Speaker 2: The Third Circuit covers Delaware, New Jersey, and Pennsylvania. Other

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Speaker 2: jurisdictions don't have to follow this ruling. So how important

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Speaker 2: is it.

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Speaker 1: It's important because it's the first federal appeals court to

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Speaker 1: weigh in on these issues, but it's not going to

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Speaker 1: be the last, right I mean, I mentioned earlier that

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Speaker 1: next week the Ninth Circuit is going to hold argument

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Speaker 1: in cases in Nevada concerning Calcey, robin Hood and poly Market.

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Speaker 1: The Maryland case that I mentioned earlier is going to

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Speaker 1: be argued in the Fourth Circuit next month in May.

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Speaker 1: The Massachusetts preliminary in junction that I mentioned earlier is

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Speaker 1: going to be argued in the Massachusetts Supreme Court also

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Speaker 1: next month in May. And then in the Sixth Circuit,

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Speaker 1: we have conflicting ruins from federal trial courts in Ohio

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Speaker 1: and Tennessee that is going to be argued sometime probably,

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Speaker 1: you know, in the second half of the year. So

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Speaker 1: we're going to have multiple decisions from multiple federal circuit courts,

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Speaker 1: and inevitably these cases are destined for the Supreme Court

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Speaker 1: because you're probably going to get conflicting rulings from some

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Speaker 1: of the circuit courts. And we're talking about issues of

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Speaker 1: federal preemption, which is a really important issue that the

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Speaker 1: Supreme Court likes to weigh in on.

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Speaker 2: In twenty eighteen, the Supreme Court freed the states to

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Speaker 2: legalize gambling on individual sporting events and struck down a

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Speaker 2: federal law that had barred single game gambling in most

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Speaker 2: of the country, saying it unconstitutionally forced states to maintain

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Speaker 2: their prohibitions. I mean, do you think that is an

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Speaker 2: indication of where the Supreme Court might stand on the

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Speaker 2: state's traditional role in regulating gambling.

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Speaker 1: I don't think so, because I think the issues here

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Speaker 1: are slightly different and have to do with what the

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Speaker 1: Commodity Exchange Act provides for and what Congress intended with

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Speaker 1: the Commodity Exchange Act going back multiple decades. And then

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Speaker 1: in nineteen seventy four, Congress basically gave the CFTC exclusive

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Speaker 1: jurisdiction over derivatives that trade on federally regulated exchanges. They

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Speaker 1: removed language that would have given states concurrent jurisdiction over

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Speaker 1: those products. And then in twenty ten you get the

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Speaker 1: Dodd Frank Act, which adds swaps to that language and

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Speaker 1: very clearly includes event contracts in the definition of swaps

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Speaker 1: and also gives the CFTC authority and discretion to ban

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Speaker 1: or reject event contacts that might be against the public interests.

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Speaker 1: So I think that's really what the focus is going

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Speaker 1: to be at the Supreme Court when these cases reached there,

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Speaker 1: just like it's been in the lower court.

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Speaker 2: So has the CFTC been regulating any of these prediction markets?

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Speaker 2: Have they done anything?

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Speaker 1: So the CFTC under the Biden administration actually they proposed

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Speaker 1: a rule that would have essentially banned contracts related to

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Speaker 1: elections and sports. When Kelsey first started offering election contracts

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Speaker 1: leading up to the twenty twenty four presidential election, the

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Speaker 1: Biden administration's CFTC tried to stop those. That was litigated

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Speaker 1: CALC won in the trial court and never really got

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Speaker 1: litigated fully in the Peals Court because then you had

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Speaker 1: the Trump administration come in and so the case sort

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Speaker 1: of went away, and it was around that time that

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Speaker 1: CALCI also started getting into sports event contracts, and the

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Speaker 1: CFTC at that point was a little bit in flux

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Speaker 1: as leadership was changing. It didn't do much until really

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Speaker 1: very recently in the last couple of months, where it

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Speaker 1: first revoked the Biden administration's proposed rule and then started

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Speaker 1: going down a path where it would read to its

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Speaker 1: own rule making. It issued staff advisory talking about, you know,

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Speaker 1: contacts that might be susceptible to manipulation and how the

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Speaker 1: exchanges have to be careful not to offer those and

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Speaker 1: should really consult maybe with the CFTC before listing those,

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Speaker 1: and it also issued an advanced Notice of proposed rule making,

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Speaker 1: which is the first step towards further rule making. So

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Speaker 1: the CFTC has started to get involved in this. It

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Speaker 1: has taken the side of the prediction markets and the

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Speaker 1: litigation in the Ninth Circuit it's filed. It's in the

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Speaker 1: amicus brief in support of the prediction markets because the

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Speaker 1: CFTC takes a position that these event contracts should be

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Speaker 1: regulated by the CFTC, not by the States. The CFTC

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Speaker 1: just last week sued three states to stop them from

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Speaker 1: trying to regulate these products as gambling. And so, you know,

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Speaker 1: we should see more developments in the area of rule

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Speaker 1: making as well in the coming months.

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Speaker 2: I would say, So, I mean, why is the CFTC

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Speaker 2: suing the States? Why isn't it leaving it up to

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Speaker 2: the prediction markets to sue.

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Speaker 1: Yeah, it's a little bit of a pile on. I

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Speaker 1: would say, I'm not sure that their lawsuits add much,

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Speaker 1: you know, beyond what the prediction markets lawsuits already are

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Speaker 1: trying to do. But you know, it's just a further

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Speaker 1: thumb on the scale, I think. But I'm not sure

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Speaker 1: it's going to change the outcome of the cases all

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Speaker 1: that much.

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Speaker 2: Thanks for joining me, Elliott. That's Bloomberg Intelligence seed litigation

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Speaker 2: analyst Elliott Stein coming up next on the Bloomberg Law Show.

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Speaker 2: The Department of Justice wants to put its attorneys above

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Speaker 2: state law. You're listening to Bloomberg With a new move,

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Speaker 2: the Justice Department appears to be attempting to get around

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Speaker 2: the scrutiny of their attorneys in disciplinary proceedings by state

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Speaker 2: bar associations. Under a proposed rule, the Attorney General could

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Speaker 2: pause or block state bar investigations into current and former

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Speaker 2: DOJ lawyers and former federal judges are warning that the

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Speaker 2: proposal violates the Constitution and would put Justice Department lawyers

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Speaker 2: above the ethical rules that govern every other attorney in

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Speaker 2: the country. Joining me is former federal judge Jeremy Fogel.

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Speaker 2: He was a District Court judge of the US District

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Speaker 2: Court for the Northern District of California. Judge Fogel, licensing

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Speaker 2: and regulation of lawyers has been the responsibility of the states.

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Speaker 2: Will you explain the legal basis for that and why

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Speaker 2: you think it's important.

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Speaker 3: It actually goes back to the constitutions. It's in the

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Speaker 3: tenth Amendment, and the tenth Amendment is one of the

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Speaker 3: amendments doesn't often get as much attention as some of

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Speaker 3: the others, but it's actually very important. And what it says,

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Speaker 3: in pretty plain language is that if the Constitution doesn't

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Speaker 3: give the federal government power to do something, then as

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Speaker 3: the power belong to the states, or it belongs to

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Speaker 3: the people. And there's lots of examples of that. You know,

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Speaker 3: Congress has the power to tax, Congress has the power

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Speaker 3: to regulate commerce. Congress has the power to wage war.

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Speaker 3: I mean, there's all these different things that Congress is

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Speaker 3: empowered to do in the Constitution. But if it's not

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Speaker 3: enumerated in there, or if it's not closely related to

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Speaker 3: one of the enumerated powers, then the Tenth Amendment says

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Speaker 3: that that is a power that belongs to the states.

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Speaker 3: The regulation of professions, including the legal profession, is not

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Speaker 3: mentioned anywhere in the Constitution. It's not a power that's

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Speaker 3: given to Congress. It's not a power that's given to

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Speaker 3: the president. So it is by constitutional order. It's a

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Speaker 3: power that belongs to the states. And historically it is

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Speaker 3: something that the states have always done. The states licensed lawyers,

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Speaker 3: the state's licensed doctors, the state's licensed teachers. You know,

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Speaker 3: any profession you can think of that requires licensing. The

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Speaker 3: licensing is done by the states, not by the federal government.

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Speaker 3: So that's the point. And it's not it's not in

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Speaker 3: a statute or anything like that. It's actually in the Constitution.

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Speaker 3: It's the way the Constitution divides the different powers of

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Speaker 3: the government.

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Speaker 2: What is the Justice Department proposing to do about ethical

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Speaker 2: violations by its attorneys.

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Speaker 3: Well, what they're proposing is that before a state can

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Speaker 3: conduct a disciplinary proceeding with regard to a DOJ lawyer,

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Speaker 3: to a federal lawyer, that they the Department of Justice

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Speaker 3: has the right to vet that complaint, to decide for

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Speaker 3: itself what the merits of the complaint are and whether

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Speaker 3: the complaint is justified or not. And while that's going on,

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Speaker 3: while they're doing that, the state is not empowered to

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Speaker 3: proceed against the lawyer. So it's kind of a pre

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Speaker 3: evaluation of what would be going on in the States,

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Speaker 3: and it can constitute interference depending on how long it takes.

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Speaker 3: So you know, they could look at it and say, well,

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Speaker 3: we're going to turn this around forty eight hours and

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Speaker 3: say we got some concerns. But what the regulation would

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Speaker 3: do is it simply says that it's up to the

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Speaker 3: Justice Department to conduct a review, doesn't provide how long

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Speaker 3: that review would take, even what kind of review would be.

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Speaker 3: And while that review is taking place, the states, the

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Speaker 3: other disciplinary authorities can't proceed to do anything with regard

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Speaker 3: to the lawyers that is unprecedented with regard to any

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Speaker 3: other kind of lawyer. So, you know, let's say it's

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Speaker 3: the law firm said, well, we don't want any of

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Speaker 3: our law firm members any of our partners or any

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Speaker 3: of our associates being disciplined by a state disciplinary body

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Speaker 3: until we've had a chance to do an internal investigation.

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Speaker 3: I don't think that would get very far. I mean,

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Speaker 3: I don't think there's any precedent for that. There's no

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Speaker 3: precedent that I'm aware of that gives a client, which

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Speaker 3: in this case is the federal government, gives the client

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Speaker 3: a right to conduct its own determination as to whether

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Speaker 3: there's been any ethical wrongdoing by one of its lawyers.

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Speaker 3: Every lawyer who works for the Department of Justice, to

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Speaker 3: my knowledge, is licensed by somebody, and they can't be

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Speaker 3: in are not licensed by the federal government. They're licensed

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Speaker 3: by a stay entity. For instance, in d C, which

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Speaker 3: is I think where a lot of this controversy is focused.

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Speaker 3: The lawyers who work for the federal government in DC

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Speaker 3: are licensed by the District of Columbia, and they have

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Speaker 3: their own bar association, and they have their own disciplinary authority.

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Speaker 3: And that's true in all of the other states. So

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Speaker 3: the idea that a client in this case, the federal

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Speaker 3: agencies that are represented by the Department of Justice and

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Speaker 3: the Department of Justice itself would have some right to

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Speaker 3: delay indefinitely the review of the actions of its own lawyers.

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Speaker 3: There is no precedent for that. And I think the concern,

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Speaker 3: certainly that our group, our Judges coalition has, and I

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Speaker 3: think that many judges have and many lawyers groups have,

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Speaker 3: is that that is simply an appropriate intrusion into the

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Speaker 3: power of states to regulate the lawyers who practiced there.

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Speaker 3: I think that's the that's the problem.

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Speaker 2: We've come to a time where recently there have been

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Speaker 2: actually hundreds of instances of Justice Department lawyers being scolded

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Speaker 2: by judges for making false, misleading or incomplete representations and

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Speaker 2: defense of some of the government's policies, you know, unprofessional conduct,

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Speaker 2: even failing to comply with court orders. Do you think

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Speaker 2: that this rule from the Justice Department, or the proposed

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Speaker 2: rule has anything to do with what's been happening in

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Speaker 2: federal courts.

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Speaker 1: I do.

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Speaker 3: And the reason I think that is that this move

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Speaker 3: to establish this regulation arose in the context of the

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Speaker 3: kinds of complaints that you're talking about. In other words,

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Speaker 3: that there were actions taken by federal judges, by federal

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Speaker 3: courts to raise the issue of non compliance with court

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Speaker 3: orders or unprofessional conduct or other things that DOJ lawyers

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Speaker 3: are alleged to have done, and it was in the

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Speaker 3: context of those kinds of complaints that this proposal emerged.

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Speaker 3: I don't know what was in the minds of the

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Speaker 3: Justice Department people who propose it. I'm not a mind reader,

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Speaker 3: but there certainly is a proximity in time to the

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Speaker 3: complaints and the emergence of this proposal. And one of

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Speaker 3: the things that happened was that the disciplinary entity in

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Speaker 3: the district of Columbia, where a lot of these lawyers

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Speaker 3: are licensed, began acting on some of these complaints. And

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Speaker 3: the response from the Justice Department was, Oh, this is

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Speaker 3: a political witch hunt. This is weaponization of the dissiplinary process.

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Speaker 3: They just don't like the way we're representing the president.

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Speaker 3: They don't like the way we're representing the Department of

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Speaker 3: Justice or the federal government, and so they're using disciplinary

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Speaker 3: proceedings as a tool, as a weapon to keep us

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Speaker 3: from doing the kind of work we want to do

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Speaker 3: for our clients. I think that's the rhetoric that has

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Speaker 3: accompanied the proposal, at least from some quarters, and I

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Speaker 3: can't read the minds of the regulatory authorities either. All

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Speaker 3: I can say is that the way the Constitution devised

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Speaker 3: these responsibilities. It's not the responsibility of the Department of

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Speaker 3: Justice to decide and make its own independent determination about

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Speaker 3: whether a complaint is justified and have that complaint be

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Speaker 3: a barrier to any discipline taking place. It's incumbent on

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Speaker 3: the disciplinary authorities to act responsibly and professionally in accordance

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Speaker 3: with the rules. And if there is some violation of

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Speaker 3: the rights of the lawyers, the lawyers have remedies. They

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Speaker 3: can go to court and say that they were denied

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Speaker 3: a fair hearing, they were denied due process, there wasn't evidence.

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Speaker 3: I mean my background as a legal ethics person that

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Speaker 3: goes back a long way. You know, certainly there have

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Speaker 3: been opportunities when lawyers feel that the discipline imposed on

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Speaker 3: them was excessive or unfair or not based on evidence.

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Speaker 3: They have remedies and sometimes they can get relief from

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Speaker 3: the court that oversee judicial discipline. So it's not that

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Speaker 3: they're without a remedy. But the idea is like, where

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Speaker 3: do you start and the history for two hundred and

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Speaker 3: fifty Well, we've been a country for a little less

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Speaker 3: two hundred and fifty years, but I mean throughout our

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Speaker 3: existence as a country that the regulation of lawyers is

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Speaker 3: done by state disciplinary bodies. If there's been some showing

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Speaker 3: that a lawyer's rights are violated, they have remedies, they

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Speaker 3: have appellate remedies in the disciplinary process, they have remedies

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Speaker 3: in court. So I think they're just turning it around

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Speaker 3: and they're saying, well, because we're right and the discilinary

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Speaker 3: authorities don't like what we're doing, we have the right

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Speaker 3: to stop them from acting. And I just I think

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Speaker 3: that's very problematic.

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Speaker 2: It would put Justice Department lawyers on a different level

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Speaker 2: than you know, every other lawyer appearing in court. So

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Speaker 2: would that be a violation of the McDaid Amendment.

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Speaker 3: Yes, that's why the McDade Amendment. That's that was its origins.

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Speaker 3: You know, it's a real privilege and an honor to

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Speaker 3: represent the United States government too. I mean, the DJ

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Speaker 3: has always enjoyed a very, very reputation. When I was

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Speaker 3: a federal judge, I was always very aware of that.

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Speaker 3: But that doesn't mean that you put any lawyer, whether

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Speaker 3: they work for DJ or whether they work for the

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Speaker 3: law firm of Smith and Jones, you don't put them

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Speaker 3: on a pedestal by virtue of who they represent, or

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Speaker 3: the kinds of cases they have, or the kinds of

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Speaker 3: positions they take. There are ethical responsibilities that lawyers have.

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Speaker 3: They apply equally to all lawyers in a particular jurisdiction.

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Speaker 3: And the whole point of McDade, and the whole point

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Speaker 3: of the history of this conversation is that the lawyers

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Speaker 3: of the DJ at the very least have the same

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Speaker 3: ethical responsibilities as every other lawyer. And I think culturally,

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Speaker 3: in terms of what the aspirations of DJ have been historically,

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Speaker 3: they try to be better. They try to really be

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Speaker 3: the model, the positive model for other lawyers. And I

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Speaker 3: have to say, and I've said this before, I always

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Speaker 3: have had a very high opinion of the DOJ lawyers

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Speaker 3: and the work that they do, and I know a

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Speaker 3: lot of other federal judg just do as well. I

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00:22:01,359 --> 00:22:04,280
Speaker 3: think we've been very privileged to have that kind of

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Speaker 3: representation in our courts, and I think this particular controversy

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Speaker 3: really does not reflect well on DJ. There have been

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Speaker 3: instances of judges, even very conservative judges. I have to say,

381
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Speaker 3: this is not political. Some of the most withering criticisms

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Speaker 3: of DJ lawyers have come from very conservative judges, and

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Speaker 3: so the idea that they would have greater protection, or

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Speaker 3: that they would enjoy not a free pass, but at

385
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Speaker 3: least something that would allow them to prevent or slow

386
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Speaker 3: down a disciplinary process. I think that's very much anathetical

387
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Speaker 3: to the way DOJ has been regarded over the decades.

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Speaker 2: I wonder how this, if it would affect what happens

389
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Speaker 2: in the courtroom, because individual judges can still find Justice

390
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Speaker 2: Department lawyers in contempt, right, So would this kind of

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Speaker 2: a rule have any effect, you know, at the ground

392
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Speaker 2: level what happens in the courtroom.

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Speaker 3: Well, that's a really good question, and I think think

394
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Speaker 3: to be fair that the judges do retain their contempt powers.

395
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Speaker 3: There's nothing in this proposal that would take that away

396
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Speaker 3: from the courts. I have to say that the contempt

397
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Speaker 3: power is a very very significant power that judges have.

398
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Speaker 3: It's very rarely exercised if you look at the cases

399
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Speaker 3: where it's been threatened even I mean some of the

400
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Speaker 3: cases I can think of, and you probably can think

401
00:23:20,960 --> 00:23:23,520
Speaker 3: of too, where people were supposed to be brought to

402
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Speaker 3: court and the government said well, I'm sorry, they're in

403
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Speaker 3: El Salvador, they're in unto rest or something like that.

404
00:23:28,119 --> 00:23:30,440
Speaker 3: They were taken out of the country without the court's

405
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Speaker 3: knowledge or permission. Those are very tricky situations. Even in

406
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Speaker 3: those cases, the judges have used their contempt power in

407
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Speaker 3: a way to try to get a compliance. But as

408
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Speaker 3: far as I know, no government lawyer to my knowledge,

409
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Speaker 3: has actually been held in contempt. It's a very technical procedure.

410
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Speaker 3: It is used very rarely. It's not that it couldn't

411
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Speaker 3: be used, But I think one of the values of

412
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Speaker 3: the state disciplinary proceedings is that it isn't a question

413
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Speaker 3: of well, did you commit a contempt? Are you going

414
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Speaker 3: to be put in jail or or are you going to

415
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Speaker 3: be fine? There are other things that the state disciplinary

416
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Speaker 3: authorities can do to improve performance. They're really not meant

417
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Speaker 3: to be futative. I mean, if somebody does a really

418
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Speaker 3: bad thing and you know, they steal from clients or

419
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Speaker 3: they you know, they do things like that that are

420
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Speaker 3: completely inappropriate, there's no defense for it. They can be disbarred,

421
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Speaker 3: they can be prived of their right to practice law,

422
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Speaker 3: they can be suspended. But a lot of what state

423
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Speaker 3: disciplinary bodies do is they try to figure out what's

424
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Speaker 3: going on with the lawyer, Why do they do this,

425
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Speaker 3: what kind of remedial procedures can be put in place.

426
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Speaker 3: They have a much wider range of options in the

427
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Speaker 3: disciplinary process then there is in a formal contemp proceeding.

428
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Speaker 3: So the premise of your question is right. The courts

429
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Speaker 3: still have the power to impose direct discipline. The problem

430
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Speaker 3: is that not every case is one where you want

431
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Speaker 3: to hold a lawyer in contempt. Sometimes it's just a

432
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Speaker 3: matter of saying, you know, when you make reponitisment presentations

433
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Speaker 3: to the court, when you cite cases that don't exist,

434
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Speaker 3: when you claim ignorance of something that you actually know about,

435
00:24:58,320 --> 00:25:01,280
Speaker 3: you know, things like that needs to be some way

436
00:25:01,480 --> 00:25:05,119
Speaker 3: to get accountability for that. And that's traditionally what the

437
00:25:05,200 --> 00:25:07,280
Speaker 3: role of state disciplinary authorities has been.

438
00:25:10,040 --> 00:25:14,040
Speaker 2: Twenty state attorneys general submitted a letter to the Justice

439
00:25:14,080 --> 00:25:17,560
Speaker 2: Department on Monday laying out their opposition to a new

440
00:25:17,640 --> 00:25:21,199
Speaker 2: proposed rule by the department. Under the proposed rule, the

441
00:25:21,240 --> 00:25:25,840
Speaker 2: attorney general could pause or block state bar investigations into

442
00:25:26,000 --> 00:25:30,600
Speaker 2: current and former DOJ lawyers. The state attorneys general said

443
00:25:30,640 --> 00:25:34,760
Speaker 2: that would allow the DOJ to insulate employees accused of

444
00:25:34,800 --> 00:25:38,960
Speaker 2: professional misconduct and would infringe on the state's power to

445
00:25:39,080 --> 00:25:43,600
Speaker 2: discipline attorneys licensed in their jurisdictions. I've been talking to

446
00:25:43,680 --> 00:25:48,080
Speaker 2: former federal judge Jeremy Fogel, so, I mean, what's next

447
00:25:48,119 --> 00:25:52,440
Speaker 2: for this rule. Can the DOJ just you know, implement

448
00:25:52,520 --> 00:25:56,159
Speaker 2: it on its own and then I don't know, lawsuits.

449
00:25:56,280 --> 00:25:59,280
Speaker 3: Yeah, no, I think that's right. They've asked for comment.

450
00:25:59,320 --> 00:26:02,760
Speaker 3: They have to the federal law requires notice in comment period.

451
00:26:03,240 --> 00:26:07,480
Speaker 3: They've received thousands of comments, tens of thousands of comments.

452
00:26:07,920 --> 00:26:12,400
Speaker 3: They have been overwhelmingly negative, and they have made many

453
00:26:12,440 --> 00:26:14,399
Speaker 3: of the same points that I've tried to make with

454
00:26:14,440 --> 00:26:17,879
Speaker 3: you now and then some I think there's a sense

455
00:26:17,880 --> 00:26:20,359
Speaker 3: that this simply is not going to do. There have

456
00:26:20,359 --> 00:26:24,439
Speaker 3: been bar associations from around the country that have issued

457
00:26:24,480 --> 00:26:28,480
Speaker 3: statements saying how inappropriate this is. There have been disciplinary

458
00:26:28,720 --> 00:26:32,240
Speaker 3: bodies that have made the constitutional point that I tried

459
00:26:32,240 --> 00:26:35,439
Speaker 3: to make earlier. There's a sense that this simply is

460
00:26:35,520 --> 00:26:38,040
Speaker 3: not what the constitutional order requires in terms of the

461
00:26:38,080 --> 00:26:41,240
Speaker 3: regulation of lawyers. I have no knowledge as to whether

462
00:26:41,280 --> 00:26:44,280
Speaker 3: there are any favorable comments, but I mean there's certainly

463
00:26:44,280 --> 00:26:49,399
Speaker 3: an overwhelmingly negative reaction to the proposal that said DALJ

464
00:26:49,520 --> 00:26:52,440
Speaker 3: can implement it. They've asked for comments. They can decide

465
00:26:52,480 --> 00:26:54,920
Speaker 3: to ignore the comments or they can write the comments

466
00:26:54,920 --> 00:26:57,560
Speaker 3: off in some way and say that the result of

467
00:26:57,600 --> 00:27:00,679
Speaker 3: an organized political campaign or something like that. They can

468
00:27:00,680 --> 00:27:04,480
Speaker 3: implement it, and then I think somebody will litigate it

469
00:27:04,560 --> 00:27:08,800
Speaker 3: because it raises a constitutional issue, and I think, you know,

470
00:27:08,840 --> 00:27:11,080
Speaker 3: then we would see what happens with that. I'm pretty

471
00:27:11,600 --> 00:27:14,520
Speaker 3: comfortable with the tenth Amendment analysis they gave you before,

472
00:27:14,600 --> 00:27:16,879
Speaker 3: but I mean that would be up for an actual court.

473
00:27:16,920 --> 00:27:18,640
Speaker 3: I mean, I'm retired judge, I'm not a sitting judge.

474
00:27:18,680 --> 00:27:20,880
Speaker 3: It would be up to a sitting judge and appellate

475
00:27:20,880 --> 00:27:23,120
Speaker 3: courts if necessary, to review that issue. But I think

476
00:27:23,160 --> 00:27:26,120
Speaker 3: that is what would happen if they adopt the regulation.

477
00:27:26,720 --> 00:27:31,640
Speaker 2: We see instances of the Justice Department not obeying court orders.

478
00:27:31,680 --> 00:27:35,760
Speaker 2: You have judges giving specific orders nowadays. For example, a

479
00:27:35,840 --> 00:27:39,120
Speaker 2: person released from ice, you can't just release him outside

480
00:27:39,280 --> 00:27:42,040
Speaker 2: the facility he orsue. Has to be taken back to

481
00:27:42,119 --> 00:27:45,320
Speaker 2: their state and they have to be released with their belongings,

482
00:27:45,400 --> 00:27:49,320
Speaker 2: and you know, judges making these really specific orders in

483
00:27:49,480 --> 00:27:53,240
Speaker 2: order to ensure compliance. But still there seems to be

484
00:27:53,320 --> 00:27:56,960
Speaker 2: a lot of non compliance with judges orders. And you know,

485
00:27:57,040 --> 00:28:01,120
Speaker 2: as we talked about, there are either intentional or unintentional

486
00:28:01,160 --> 00:28:05,600
Speaker 2: misrepresentations made to judges. Have you ever seen a situation

487
00:28:05,800 --> 00:28:10,040
Speaker 2: like this before where it seems so pervasive through the system.

488
00:28:10,280 --> 00:28:12,520
Speaker 3: No, I have not, and I want to say two

489
00:28:12,560 --> 00:28:16,159
Speaker 3: things about that. First of all, we're talking in the

490
00:28:16,160 --> 00:28:18,600
Speaker 3: context of a particular view of what's happening. I think

491
00:28:18,640 --> 00:28:21,600
Speaker 3: people who would defend what the Justice Department is doing

492
00:28:22,440 --> 00:28:24,840
Speaker 3: would say that they're simply trying to do the right

493
00:28:24,920 --> 00:28:27,240
Speaker 3: thing with regard to immigration. And most of these things

494
00:28:27,280 --> 00:28:30,320
Speaker 3: have arisen in the context of immigration, not all of them,

495
00:28:30,800 --> 00:28:32,600
Speaker 3: but they're trying to do the right thing and the

496
00:28:32,600 --> 00:28:36,880
Speaker 3: courts are interfering. That's the way they're characterizing the situation

497
00:28:37,000 --> 00:28:39,000
Speaker 3: that we're in. They're just trying to get all the

498
00:28:39,040 --> 00:28:40,640
Speaker 3: people who don't have a right to be here out

499
00:28:40,640 --> 00:28:44,680
Speaker 3: of the country. And if there are some missed connections

500
00:28:44,800 --> 00:28:47,280
Speaker 3: or some information that doesn't get relayd I mean, it's

501
00:28:47,320 --> 00:28:50,000
Speaker 3: all in the context of the policy that they're trying

502
00:28:50,000 --> 00:28:52,960
Speaker 3: to enforce, and the courts are walking the policy that

503
00:28:53,000 --> 00:28:55,560
Speaker 3: the government wants to enforce and the president wants to report.

504
00:28:55,600 --> 00:28:58,000
Speaker 3: So there are people who see it that way, and

505
00:28:58,080 --> 00:29:00,440
Speaker 3: it's not like they're sitting around and saying, well, you know,

506
00:29:00,480 --> 00:29:03,240
Speaker 3: let's just ignore this court. Let's go out and violate

507
00:29:03,280 --> 00:29:04,800
Speaker 3: a court order. You know, they really think that what

508
00:29:04,840 --> 00:29:07,960
Speaker 3: they're doing is the right thing. I think you put

509
00:29:08,000 --> 00:29:12,680
Speaker 3: that up against the experience that judges have, which is

510
00:29:12,960 --> 00:29:15,520
Speaker 3: it kind of doesn't matter what your motivations are. You know,

511
00:29:15,520 --> 00:29:19,520
Speaker 3: when you are given a particular obligation to comply with,

512
00:29:19,760 --> 00:29:22,240
Speaker 3: you may not deport this person or you have to

513
00:29:22,240 --> 00:29:25,160
Speaker 3: produce this person in court within X number of hours

514
00:29:25,240 --> 00:29:28,080
Speaker 3: or days. And there's very specific and there's orders that

515
00:29:28,120 --> 00:29:31,800
Speaker 3: people can comply with. I think judges are not used

516
00:29:31,800 --> 00:29:35,400
Speaker 3: to having that not happen. And I think what you're

517
00:29:35,440 --> 00:29:38,960
Speaker 3: seeing is and again I want to stress this is

518
00:29:39,080 --> 00:29:42,920
Speaker 3: not just the Democrat appointed judges. I mean there are

519
00:29:42,920 --> 00:29:46,400
Speaker 3: some very conservative Republican appointed judges who have expressed exactly

520
00:29:46,440 --> 00:29:49,120
Speaker 3: these same frustrations. This is a sort of an across

521
00:29:49,160 --> 00:29:52,960
Speaker 3: the board concern. And you know, and I'll just make

522
00:29:53,000 --> 00:29:55,200
Speaker 3: this somewhat personal. I mean, I was a federal judge

523
00:29:55,200 --> 00:29:58,320
Speaker 3: for twenty years. As I said earlier, I trusted the

524
00:29:58,480 --> 00:30:02,560
Speaker 3: DJI had respected lawyers. It was hard to become an

525
00:30:02,600 --> 00:30:05,280
Speaker 3: assistant US attorney was a very competitive job, and they

526
00:30:05,360 --> 00:30:08,320
Speaker 3: got they got the best lawyers and most capable lawyers,

527
00:30:08,720 --> 00:30:10,640
Speaker 3: and I really trust them. And I think what I'm

528
00:30:10,640 --> 00:30:13,400
Speaker 3: what I'm hearing from so many former colleagues is I

529
00:30:13,440 --> 00:30:17,160
Speaker 3: don't trust them if they're telling me that defendant X

530
00:30:17,240 --> 00:30:19,640
Speaker 3: is going to be produced, the court wants defend and

531
00:30:19,840 --> 00:30:22,280
Speaker 3: X produced in court tomorrow, and then they come in

532
00:30:22,280 --> 00:30:24,400
Speaker 3: tomorrow and they say, oh, sorry, we can't find him,

533
00:30:25,040 --> 00:30:27,200
Speaker 3: or you know, we just found out that he's in

534
00:30:27,240 --> 00:30:29,480
Speaker 3: Al salbat, or we have no idea how that happened,

535
00:30:29,880 --> 00:30:33,280
Speaker 3: you know. And when that gets said, I think judges

536
00:30:33,280 --> 00:30:35,960
Speaker 3: are having a very very hard time believing that. And

537
00:30:36,000 --> 00:30:39,480
Speaker 3: so you can get I'm not going to mention judges

538
00:30:39,520 --> 00:30:44,360
Speaker 3: by namebody, you can get people across the spectrum philosophically

539
00:30:44,360 --> 00:30:46,520
Speaker 3: who say I made a really specific order, I made

540
00:30:46,520 --> 00:30:49,200
Speaker 3: a really specific request, and you came into court and

541
00:30:49,240 --> 00:30:51,640
Speaker 3: you didn't tell me the truth. You know that that

542
00:30:51,960 --> 00:30:56,000
Speaker 3: is a serious concern within the judiciary. And that's the

543
00:30:56,040 --> 00:30:57,600
Speaker 3: other side of the context. I mean, you have the

544
00:30:57,640 --> 00:31:01,040
Speaker 3: people saying, you know, why are these federal judges blocking

545
00:31:01,040 --> 00:31:03,880
Speaker 3: the president's agenda, And then you have the federal judges saying, hey,

546
00:31:03,880 --> 00:31:05,320
Speaker 3: wait a minute. You know we've got a court to

547
00:31:05,360 --> 00:31:08,840
Speaker 3: round here. We've got rules. We have ethical responsibilities that

548
00:31:08,920 --> 00:31:12,440
Speaker 3: lawyers have, and when they don't meet them, that's a

549
00:31:12,480 --> 00:31:16,960
Speaker 3: fundamental challenge to the system. So I think that's sort

550
00:31:16,960 --> 00:31:20,040
Speaker 3: of the context in which this is happening and thinks

551
00:31:20,040 --> 00:31:21,040
Speaker 3: why it matters so much.

552
00:31:21,280 --> 00:31:23,760
Speaker 2: Thanks so much, Judge Fogel. I appreciate your taking the

553
00:31:23,800 --> 00:31:27,560
Speaker 2: time to talk to me. That's former federal judge Jeremy Fogel,

554
00:31:27,880 --> 00:31:30,200
Speaker 2: and that's it for this edition of The Bloomberg Law Show.

555
00:31:30,520 --> 00:31:32,880
Speaker 2: Remember you can always get the latest legal news on

556
00:31:32,920 --> 00:31:37,200
Speaker 2: our Bloomberg Law Podcast. You can find them on Apple Podcasts, Spotify,

557
00:31:37,400 --> 00:31:42,440
Speaker 2: and at www dot Bloomberg dot com, slash podcast Slash Law,

558
00:31:42,840 --> 00:31:45,440
Speaker 2: and remember to tune into The Bloomberg Law Show every

559
00:31:45,480 --> 00:31:49,400
Speaker 2: weeknight at ten pm Wall Street Time. I'm June Grosso,

560
00:31:49,520 --> 00:31:51,120
Speaker 2: and you're listening to Bloomberg