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

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Speaker 2: Before last Friday, Donald Trump would frequently rail against advice

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Speaker 2: columnist Egene Carroll and her claims that he sexually abused her.

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Speaker 3: And Yeah, I'm going to go to it, and I'm

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Speaker 3: going to explain. I don't know who the hell she is.

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Speaker 3: I have no idea. They called me up years ago

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Speaker 3: and they said, do you know about this woman twenty

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Speaker 3: five or thirty years ago? She doesn't even know the date,

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Speaker 3: the time, the month, the season. She has no idea.

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Speaker 2: And though Trump did go to the trial, he didn't

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Speaker 2: get a chance to explain that or much of anything

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Speaker 2: else on the stand. And since a jury delivered a

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Speaker 2: stunning eighty three point three million dollar verdict against him

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Speaker 2: on Friday, there's been perhaps just as stunning silence from

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Speaker 2: the former president on the subject. It took only three

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Speaker 2: hours of delis for the Manhattan Federal jury to return

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Speaker 2: the verdict in the trial in which Carol claimed Trump

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Speaker 2: defamed her when he denied he sexually assaulted her. The

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Speaker 2: award includes eighteen point three million dollars in compensation for

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Speaker 2: harm cause to Carol's reputation, plus sixty five million dollars

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Speaker 2: in punitive damages to penalize Trump and deter him from

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Speaker 2: engaging in any future defamation. Trump is called the verdict

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Speaker 2: absolutely ridiculous and says he'll appeal. Joining me is former

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Speaker 2: federal prosecutor Robert Mintz, a partner Macarter in English. So

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Speaker 2: the descriptions of Trump's behavior in the court are off

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Speaker 2: the chart, shaking his head, muttering as Egene Carrol testified,

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Speaker 2: sparring with the judge who threatened to kick him out

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Speaker 2: of the courtroom, and then this drama of storming out

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Speaker 2: of the courtroom during her attorney's closing argument. Do you

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Speaker 2: think that contributed in any way to the jury's verdict.

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Speaker 4: Well, I think that it did, because what typically happens

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Speaker 4: is that jurors form a bond with the presiding judge.

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Speaker 4: The judge has time to talk to them during the trial.

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Speaker 4: He sometimes will make general small talk with him while

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Speaker 4: they're waiting for the trial to begin, and they form

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Speaker 4: a bond with the judge, and they look to the

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Speaker 4: judge as the arbiter of how this proceeding ought to

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Speaker 4: go forward. They see that the judge controls the courtroom.

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Speaker 4: The judge makes the decisions, and if jury a defense

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Speaker 4: lawyer or a defendant acting in a way that seems

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Speaker 4: to disrespect the judge and disrespect the process, often jurys

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Speaker 4: will find that distasteful and that's not good for the

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Speaker 4: outcome of the defendant.

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Speaker 2: Also, it played into Carol's closing arguments. She argued that

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Speaker 2: Trump acted as if the law didn't apply to him

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Speaker 2: and said that this trial is about punishing him for

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Speaker 2: the malicious nature of his attacks right up to and

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Speaker 2: including this trial. It's all about getting him to stop

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Speaker 2: once and for all. So she played into his behavior

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Speaker 2: in the courtroom.

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Speaker 4: No, that's exactly right. From the plaintiff side of the case.

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Speaker 4: This couldn't have played out any better because what the

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Speaker 4: lawyer was arguing is that mister Trump was asserting the

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Speaker 4: rules that apply to everybody else do not apply to him,

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Speaker 4: and rather than sit there stoically in the courtroom when

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Speaker 4: these accusations were being made against them, even though they

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Speaker 4: were extremely distasteful, his conduct suggested very much what the

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Speaker 4: planets were arguing here, which is that he does not

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Speaker 4: believe that the rules did apply to him. So in

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Speaker 4: many ways, he reinforced exactly the theme that the Planet's

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Speaker 4: lawyers were trying to establish throughout the trial.

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Speaker 2: And you know, Trump does brag about his wealth. That's

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Speaker 2: been going on for as long as I can remember.

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Speaker 2: It seemed to backfire on him, though, because Egene Carroll's

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Speaker 2: lawyers played part of a deposition Trump's deposition in the

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Speaker 2: lawsuit by the New York Attorney General Tisha James, where

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Speaker 2: he said, we have a lot of cash. I believe

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Speaker 2: we have substantially an excess of four hundred million dollars

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Speaker 2: in cash, which is a lot for a developer. And

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Speaker 2: then Carol's attorney shot back in closing arguments that you

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Speaker 2: can consider Donald Trump's wealth billions of dollars is just

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Speaker 2: a drop in the bucket for Trump. So maybe that's

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Speaker 2: where that huge punitive award came from.

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Speaker 4: Well, I think you're right, because what the plans were

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Speaker 4: arguing is that what this trial was about was trying

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Speaker 4: to deter Donald Trump from making future statements that defamed

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Speaker 4: Eve Gene Carroll. And the only way to do that,

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Speaker 4: according to the Planeff lawyer, was to return a verdict

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Speaker 4: with a penalty, a financial penalty that was significant enough

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Speaker 4: that it would actually get former President Trump's attention and

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Speaker 4: determined from making those future comments. So by playing the

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Speaker 4: prior testimony and the deposition testimony a former President Trump

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Speaker 4: about his substantial wealth, it really signal to the jury

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Speaker 4: that if they were going to find damages that we're

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Speaker 4: going to Detery's future conduct, that amount had to be

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Speaker 4: significant in order to be effective.

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Speaker 2: He hasn't said anything so far about the verdict, which

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Speaker 2: is sort of astonishing. Maybe it worked. His attorney, Alina Habba,

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Speaker 2: fought with the judge over and over everything from his

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Speaker 2: limiting Trump's testimony to rules of evidence. She also fought

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Speaker 2: with the judge in the New York Attorney General's case.

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Speaker 2: Why argue with the judge is she perhaps thinking that

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Speaker 2: it might be a point on appeal.

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Speaker 4: Well, as a general, really you don't want to fight

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Speaker 4: with the judge because you want to share respect for

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Speaker 4: the court and respect for the process. Sometimes, though, you're

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Speaker 4: arguing with the judge in order to try to get

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Speaker 4: an issue that will resonate on appeal. So in there

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Speaker 4: are times where a defense Laura may actually try to

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Speaker 4: provoke a judge into a ruling, into making a statement

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Speaker 4: in front of the jury that might result in reversible error.

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Speaker 4: So there could have been a lot of things going

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Speaker 4: on there. They were also, at the end of the day,

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Speaker 4: remember playing to the jury. So if there was somebody

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Speaker 4: on the jury who really believed that former President Trump

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Speaker 4: was the victim here and that his free speech rights

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Speaker 4: were being curtailed because he was not permitted to deny

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Speaker 4: the specual assault allegation from the prior trial, that might

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Speaker 4: have resonated with a juror too, but apparently did not

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Speaker 4: happen in this case. And fighting with the judge does

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Speaker 4: generally backfire on the defense because jurors tend to respect judges,

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Speaker 4: and arguing with them is viewed as disrespectful and viewed

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Speaker 4: as simply trying to obstruct the trial.

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Speaker 2: In the New York Attorney General's trial, you had Judge

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Speaker 2: and Goron, who seemed to be a little more lass

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Speaker 2: a fair in the courtroom. But in this trial you

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Speaker 2: had Judge Kaplan, who is extremely strict, known for that

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Speaker 2: running a tight courtroom. So what does it say about

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Speaker 2: Trump's future behavior in a criminal case, in one of

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Speaker 2: the four criminal cases he's facing where he would have

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Speaker 2: to be in the courtroom every day, do you think

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Speaker 2: it's even possible for him to sort of behave like

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Speaker 2: a normal defendant.

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Speaker 4: Well, that's a good question, and you make a good

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Speaker 4: point that this is a civil case, and so former

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Speaker 4: President Trump was not required to attend. He could attend

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Speaker 4: if he wanted to, but he also could not be

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Speaker 4: there if he chose not to. But in a criminal case,

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Speaker 4: he does have to be there for every day and

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Speaker 4: every moment of the preceding. And that means, there's a

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Speaker 4: defense lawyer, you have to instruct your client to control

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Speaker 4: themselves during the proceeding, because you remember that jurors are

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Speaker 4: constantly looking at the defendant throughout the trial. They're not

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Speaker 4: only listening to the testimony coming from the witness stand,

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Speaker 4: They're not only listening to the arguments of the lawyers

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Speaker 4: during the trial, but they are looking at both the

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Speaker 4: plaintiffs and the defendant, or in a criminal case, both

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Speaker 4: the prosecution and the defendant to gauge their reactions to

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Speaker 4: the testimony. So a criminal defendant or a defendant in

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Speaker 4: any civil case is always on in that respect, in

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Speaker 4: that jurors are watching them, looking at their reactions, and

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Speaker 4: that ultimately factors into how they make their decision.

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Speaker 2: Trump says, are going to appeal, And I'm wondering what

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Speaker 2: the appellate issues might be the judge did severely limit

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Speaker 2: his defense and what he could say on the stand.

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Speaker 2: Is that a possible argument on appeal.

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Speaker 4: Well, I certainly think it will be one of the

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Speaker 4: issues raised on appeal because the key ruling in this

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Speaker 4: case that came before the trial started when Judge Kaplan

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Speaker 4: ordered former President Trump's legal team not to attempt to

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Speaker 4: argue in court that he didn't sexually assault e. Gene Carroll.

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Speaker 4: That was really one of the critical arguments that the

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Speaker 4: defense wanted to make in this case, and Judge Chaplin

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Speaker 4: said that would essentially be a do over of the

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Speaker 4: first trial, which he lost in May, when a jury

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Speaker 4: found him libel for sexually abusing Carroll more than two

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Speaker 4: decades ago, and in that trial there was five million

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Speaker 4: dollars that was awarded. Taking that argument away, it essentially

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Speaker 4: prevented former President Trump from denying the allegations that were

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Speaker 4: at the heart of this case. Trial number two, which

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Speaker 4: is the trial that was just concluded, was simply about

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Speaker 4: the question of damages, and it was very difficult for

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Speaker 4: the defense to control their client because you have there

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Speaker 4: a defendant, former President Trump, who continues to deny that

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Speaker 4: he sexually assaulted Eging Carroll, or that he even knew

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Speaker 4: Egen Carroll, and that was the defense they wanted to argue,

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Speaker 4: but the court said they couldn't. They still got that in.

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Speaker 4: Former President Trump took the stand for about three minutes

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Speaker 4: and denied the underlying sexual assault. But the jury was

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Speaker 4: immediately instructed by the judge to disregard that testimony. And

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Speaker 4: whenever a judge instructs a jury to disregard testimony from

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Speaker 4: a defendant or a witness, or to disregard arguments made

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Speaker 4: by a lawyer, that undermines the credibility of that witness

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Speaker 4: or that lawyer with the jury, and that's never a

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Speaker 4: good thing.

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Speaker 2: So, Bob, the two verdicts in this case, I'm wondering

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Speaker 2: if they pose any problem, because it was another jury,

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Speaker 2: as you say, who made the decision that Trump was

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Speaker 2: lible for sexually abusing Carol. That jury awarded five million dollars.

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Speaker 2: The second jury who didn't hear that evidence, but rather

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Speaker 2: heard the judge, who, as you mentioned before, a figure

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Speaker 2: of authority that the jury usually believes, and he said

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Speaker 2: that Trump did sexually assault Carrol, and he said that

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Speaker 2: more than once in different ways, and then this jury

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Speaker 2: awards Carol eighty three point three million dollars. That's more

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Speaker 2: than sixteen times the award of the first jury who

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Speaker 2: found that he was lible for sexually assaulting her. Is

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Speaker 2: there any problem with the contrast in those two.

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Speaker 4: Verdicts, Well, the appeals court will probably look at these

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Speaker 4: two cases. The difference between case number one and case

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Speaker 4: number two is that case number one that went to

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Speaker 4: trial in twenty nineteen was about statements that were made

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Speaker 4: by former President Trump after he left office. The reason

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Speaker 4: there were two trials here is because there were statements

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Speaker 4: that were made by former President Trump while he was

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Speaker 4: president that was tied up in appeals, as the former

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Speaker 4: president's legal team argued that he had immunity for those statements.

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Speaker 4: Though it's possible that the appeals court could say that

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Speaker 4: defamatory statements that were made by somebody while they were

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Speaker 4: president carried even more weight than statements made when they

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Speaker 4: were a former president. But they will be looking at

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Speaker 4: the juxtaposition of those two verdicts and those two awards

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Speaker 4: to determine whether this eighty three million dollar verdict is excessive.

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Speaker 2: Coming up next on the Bloomberg Lanch Show, I'll continue

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Speaker 2: this conversation with former federal prosecutor Robert Mint, and we'll

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Speaker 2: talk about how much money Trump has to put up

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Speaker 2: in order to appeal the verdict. I'm June Grosso and

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Speaker 2: you're listening to Bloomberg. It's a civil case where money

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Speaker 2: is at stake, not his freedom. But Donald Trump has

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Speaker 2: been railing against the E. G. And Carrol defam case

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Speaker 2: with as much fervor or perhaps more than he has

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Speaker 2: about the four criminal cases against him. Yeah.

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Speaker 3: Well, that's another one that's sponsored by Reid Hoffman and

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Speaker 3: some Democrat operators. I never saw this woman in my

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Speaker 3: life other than they have a picture with her and

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Speaker 3: a husband, John Johnson, a nice guy who was a

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Speaker 3: newscaster many years ago. I remember him, and she said

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Speaker 3: horrible things about him since I mean horrible, horrible things,

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Speaker 3: called him bad names. I have no idea who this

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Speaker 3: woman is. I have absolutely no idea. The whole thing

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Speaker 3: is ridiculous that this is even a case. This should

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Speaker 3: never have happened.

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Speaker 2: And last Friday, after the Manhattan jury delivered its stunning

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Speaker 2: verdict of eighty three point three million dollars eighteen point

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Speaker 2: three million in compensation for harm cause to Carol's reputation

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Speaker 2: plus sixty five million impunitive damages to penalize Trump. The

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Speaker 2: former president posted this on truth Social absolutely ridiculous. I

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Speaker 2: fully disagree with both verdicts and will be appealing this

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Speaker 2: whole Biden directed witch hunt, and they have taken away

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Speaker 2: all First Amendment rights. This is not America. But the

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Speaker 2: road to an appeal will require Trump to part with

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Speaker 2: a hefty amount of cash if he doesn't secure a bond.

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Speaker 2: If Trump decides to put money in escrow in lieu

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Speaker 2: of a bond, it could amount to as much as

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Speaker 2: one hundred ten percent of the judgment. On top of that,

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Speaker 2: a verdict is expected this week in New York civil

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Speaker 2: fraud trial, which seeks the return of three hundred and

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Speaker 2: seventy million dollars in illegal profits Trump allegedly made by

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Speaker 2: lying to banks about his wealth to get better terms

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Speaker 2: on loans. I've been talking to former federal prosecutor Robert Mintz,

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Speaker 2: a partner Macarter in English. Bob, we discussed Trump appealing

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Speaker 2: based on the way the judge limited his defense any

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Speaker 2: other appellet issues you see.

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Speaker 4: Judge Chaplin made a number of significant pre trial rulings

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Speaker 4: that really hemmed in the defense here, which will likely

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Speaker 4: form the basis of an appeal. He barred Trump and

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Speaker 4: his lawyers from making arguments the trials concerning Carol's choice

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Speaker 4: of lawyer on the fact that her litigation was financed

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Speaker 4: by somebody with close ties to the Democratic Party. He

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Speaker 4: also barred the defense team from presenting arguments concerning Miss

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Speaker 4: Carroll's path romantic relationships and really prevented the defense from

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Speaker 4: focusing on Egen Carroll and more focusing on the statements

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Speaker 4: that were made by former President Trump. Now, the heart

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Speaker 4: of the defense here at this trial was ultimately that

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Speaker 4: the statements made by former President Trump did not actually

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Speaker 4: damage her reputation but enhanced it. So the defense argued

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Speaker 4: that Egen Carroll was essentially down on her luck, that

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Speaker 4: the money she was making as an advice columnist had

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Speaker 4: essentially dried up, and that she made these claims only

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Speaker 4: to try to restart her career, and that ultimately, by

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Speaker 4: making the statements, she actually became more famous and actually

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Speaker 4: increased her reputation and her earning capacity. Ultimately, the jury

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Speaker 4: did not accept that they were able to hear testimony

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Speaker 4: about threats that were made against her, and obviously the

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Speaker 4: falsity of those statements was something that they took into

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Speaker 4: account in terms of reaching their verdict here. But those

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Speaker 4: will be issues that I expect will be raised on

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Speaker 4: appeal as well, and.

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Speaker 2: Trump might also raise on appeal the damages calculation that

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Speaker 2: the defense wanted the judge to instruct the jury on.

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Speaker 2: Tell us about that.

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Speaker 4: One of the other interesting arguments raised by the defense

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Speaker 4: on the question of damages was whether or not the

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Speaker 4: court should adopt a gross versus net view of the damages.

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Speaker 4: In other words, the defense was arguing that even if

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Speaker 4: the statements were defamatory, the court needed to look at

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Speaker 4: the total impact of those statements to determine damages. So,

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Speaker 4: in other words, it's possible. They argued that it could

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Speaker 4: make a defamatory statement that injured someone's reputation in one

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Speaker 4: part of the community but actually enhanced it in another.

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Speaker 5: So they were.

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Speaker 4: Trying to argue that while you could point to people

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Speaker 4: who supported President Trump and say that her reputation was

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Speaker 4: damaged by the statements that he made about her, in

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Speaker 4: other parts of the community, her reputation was actually enhanced.

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Speaker 4: She became essentially a celebrity over this case, and they

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Speaker 4: did point to the fact that well known people were

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Speaker 4: coming to her aid. Suddenly everybody knew who she was,

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Speaker 4: and they asked the judge to look at that issue,

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Speaker 4: and in determining damages, to instruct a jury that they

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Speaker 4: had to consider not just the gross damages, but they

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Speaker 4: had to take whatever the gross damages were and then

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Speaker 4: discount them by the portion of the population who actually

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Speaker 4: would view her reputation as having been enhanced by these statements,

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Speaker 4: not simply damaged by them.

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Speaker 2: Bob, before we get to the mechanics of an appeace,

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Speaker 2: explain the basics here. Some people say, well, Trump was

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Speaker 2: just trying to defend himself. It's his first Amendment right

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Speaker 2: to say that I didn't commit that crime. And in fact,

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Speaker 2: there was no criminal conviction. I mean, these are all

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Speaker 2: civil cases. And so the first jury found him libele

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Speaker 2: for sexually assaulting Egene Carol by a preponderance of the

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Speaker 2: evidence that's a little more than fifty percent, whereas if

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Speaker 2: it were a criminal case, a jury would have to

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Speaker 2: find him guilty beyond a reasonable doubt.

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Speaker 4: As you say, former President Trump was never charged criminally

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Speaker 4: in this case. Obviously, he was never convicted of sexually

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Speaker 4: assaulting or raping Egene Carol and in this trial he

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Speaker 4: was not allowed to stand up in front of the

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Speaker 4: jury and deny the underlying charges about this case, and

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Speaker 4: that was what he found frustrating and then ultimately unable

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Speaker 4: to do. So, the question is why was he unable

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Speaker 4: to defend himself. From the defense standpoint, they argue that

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Speaker 4: it was essentially a free speech right that he ought

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Speaker 4: to be able to say that he never sexually assaulted her,

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Speaker 4: But the judge in this case ruled that that decision

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Speaker 4: had already been made in the first trial where that

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Speaker 4: issue was addressed. Former President Trump decided not to take

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Speaker 4: the stand, so he never defended himself in front of

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Speaker 4: the jury, and he was trying to do that for

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Speaker 4: the first time in this second trial, but the judge

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Speaker 4: ruled that he wasn't permitted to do it. That would

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Speaker 4: essentially be a do over. So the question that raises

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Speaker 4: in many people's mind is why were his comments tofamatory.

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Speaker 4: But what it basically boils down to is that you

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Speaker 4: can defend yourself against an accusation by denying that you

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Speaker 4: did something. So former President Trump could have said in

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Speaker 4: the first trial, and could have said even in his

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Speaker 4: statements that formed the base of this trial, that he

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Speaker 4: did not commit the sexual assault, that Egen Carroll had

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Speaker 4: a leg that he did. But the defamation comes into

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Speaker 4: play because what he can that do is then impune

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Speaker 4: her motives, and that's what happened here. He can't, for example,

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Speaker 4: say that she lied for monetary gain or that she

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Speaker 4: lied for other reasons. You can say that you didn't

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Speaker 4: do something, but you can't say that the other person

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Speaker 4: did something that they didn't do. And that was what

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Speaker 4: this case was ultimately about.

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Speaker 2: Trump says he's going to appeal, but he can't just

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Speaker 2: file papers first. He has to put up some money.

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Speaker 2: Explain that process.

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Speaker 4: Sure, So former President Trump is appealing both verdicts. The

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Speaker 4: earlier verdict for five million dollars, now this one for

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Speaker 4: eighty three million dollars, and he has two options. Basically,

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Speaker 4: he can pay the money into the court system, which

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Speaker 4: is what he did for the five million dollars verdict.

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Speaker 4: He simply paid that into the court system, and that

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Speaker 4: money is held by the court while the appeal is pending. Alternatively,

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Speaker 4: he can try to secure an appeal bond, which would

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Speaker 4: save him for having to pay the full amount into

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Speaker 4: the court. What that would do was would be to

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Speaker 4: essentially assure miss Carroll that mister Trump has the money

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Speaker 4: to pay if ultimately he's unsuccessful on appeal, but it

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Speaker 4: prevents them from collecting the money while the appeals are

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Speaker 4: being heard. The problem with getting the bond in this

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Speaker 4: circumstance is that former President Trump has to find a

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Speaker 4: company willing to write a bond when he's facing other

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Speaker 4: significant legal jeopardy, and the value of the bond is

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Speaker 4: likely to be about one hundred and ten percent of

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Speaker 4: the verdict, which would mean he would need a ninety

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Speaker 4: two million dollar bond, and he also would have to

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Speaker 4: pay the bonding company a substantial premium. And there's also

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Speaker 4: a question of what collateral he would have to put up.

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Speaker 4: He might not be able, for example, to post properties

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Speaker 4: as collateral. The bonding company might demand that he plays

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Speaker 4: liquid assets, success certificates of deposit or treasury bond. So

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Speaker 4: although the bonding option is certainly available and he may

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Speaker 4: avail himself with that, given the size of this verdict,

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Speaker 4: it's not going to be that easy to get a

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Speaker 4: bond in this circumstance.

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Speaker 2: So then he'd have to put up the cash plus

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Speaker 2: ten percent if.

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Speaker 4: He decides to put the cash up, he would have

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Speaker 4: to pay that money into the court and the court

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Speaker 4: would hold that money until the appeals were exhausted, and that.

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Speaker 2: Could be years down the road. And this week Judge

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Speaker 2: and Goron could issue his verdict in the New York

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Speaker 2: Attorney General's case against Trump, which could mean hundreds of

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Speaker 2: millions of dollars more in damages. Thanks so much for

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Speaker 2: being on the show, Bob. That's former federal prosecutor Robert Mintz,

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Speaker 2: a partner maccarter and English. In other legal news today,

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Speaker 2: House Republicans are taking the next steps in the impeachment

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Speaker 2: inquiry against Homeland Security Secretary Alejandra Majorcis. They accused majorcas

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Speaker 2: of failing to curb the influx of migrants at the border,

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Speaker 2: but the DHS says their efforts aren't based in fact

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Speaker 2: or evidence that as a bipartisan group of senators are

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Speaker 2: trying to iron out an immigration reform bill, Democratic Senator

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Speaker 2: Chris Murphy, one of the principal negotiators, said there's a

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Speaker 2: possibility for a vote sometime this week, but even if

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Speaker 2: there's meaningful progress in the Senate, the quest and becomes

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Speaker 2: with the House take up this Legislation Speaker Mike Johnson

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Speaker 2: has said he's skeptical of the deal, and during her

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Speaker 2: briefing today, White House Press Secretary Karine Jean Pierre was

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Speaker 2: asked about former President Trump's recent pushes for his party

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Speaker 2: to reject a bipartisan deal over the border.

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Speaker 6: This is exactly what they've been asking for, literally, what

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Speaker 6: Republicans have been asking for, and now here it is.

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Speaker 6: It's coming to fruition, it's being discussed, there's potential by

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Speaker 6: person agreement. That's what the American people want to see.

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Speaker 6: Seventy five percent of the American people have said that

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Speaker 6: they want this issue to be dealt with, an issue

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Speaker 6: that again that they have been for, that they have

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Speaker 6: been for for years, So they should get on board.

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Speaker 2: In the meantime, Texas Republican Governor Greg Abbott is finding

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Speaker 2: long distance allies in his battle with the federal government

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Speaker 2: over border policy. Last week, the Supreme Court said that

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Speaker 2: US Border Patrol agents may legally cut the razor wire

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Speaker 2: the State of Texas has put up along the Rio Grande.

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Speaker 2: But here's what a defiant Abbot told Bloomberg News.

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Speaker 1: We are adding more razor wire as we speak right

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Speaker 1: now to make sure that we are doing even more

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Speaker 1: to secure the border. We are going to make it

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Speaker 1: impossible to enter Texas illegally, and that includes maintaining the

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Speaker 1: National Garland border, building more border wall just like what

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Speaker 1: President of Trump put up, as well as extending the

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Speaker 1: razor wire wall in the state of Texas.

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Speaker 2: And in a show of support for Abbott and Texas,

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Speaker 2: twenty six Republican attorneys general demanded in a letter today

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Speaker 2: that the Biden administration quote enforced the laws that secured

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Speaker 2: the southern border. Iowa Attorney General Brenna Bird said the

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Speaker 2: invasion on our southern border has made every state a

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Speaker 2: border state, and Idaho Governor Brad Little is sending two

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Speaker 2: teams of Idaho state troopers to act as quote, a

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Speaker 2: force multiplier at our lawless southern border. Coming up next

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Speaker 2: on the Bloomberg Law Show, Exxon is taking a novel

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Speaker 2: path to block a climate vote by shareholders. It's taking

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Speaker 2: activist investors to court. But will it work. I'm June

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Speaker 2: Grosso and you're listening to Bloomberg. Could Exxon Mobil be

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Speaker 2: a potential trendsetter with its novel paths to block shareholder

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Speaker 2: climate votes? The company is trying an unusual approach of

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Speaker 2: using the court system to keep environmental and social investor

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Speaker 2: bids out of its annual meeting. The Houston Oil Company is,

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Speaker 2: of course, no stranger to pressure from activist investors over

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Speaker 2: its greenhouse gas emissions. It's been facing a shareholder push

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Speaker 2: for greater climate impact targets for three consecutive years, but

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Speaker 2: last week it took a rather unusual step in fighting

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Speaker 2: the pressure by suing activist shareholders are Juna Capital and

438
00:24:49,359 --> 00:24:52,840
Speaker 2: follow this in federal court, hoping to kill the proposal.

439
00:24:53,119 --> 00:24:55,600
Speaker 2: This is possibly the first time that a company has

440
00:24:55,680 --> 00:25:00,200
Speaker 2: sued an activist investor over a shareholder proposal before or

441
00:25:00,280 --> 00:25:04,080
Speaker 2: initially filing an objection with the Securities and Exchange Commission,

442
00:25:04,280 --> 00:25:07,239
Speaker 2: which routinely weighs in on whether companies should have to

443
00:25:07,280 --> 00:25:11,000
Speaker 2: face certain investor bids. Joining me is Bruce Golfard, the

444
00:25:11,040 --> 00:25:15,200
Speaker 2: president and CEO of Ocopy Partners. This is the third

445
00:25:15,280 --> 00:25:18,480
Speaker 2: year in a row that Exxon is facing a shareholder

446
00:25:18,680 --> 00:25:24,000
Speaker 2: push for greater climate impact targets. For the uninitiated, how

447
00:25:24,080 --> 00:25:30,320
Speaker 2: do companies usually fight or thwart proposals from activist shareholders?

448
00:25:31,720 --> 00:25:36,679
Speaker 5: Very interesting question because there's been a real evolution in

449
00:25:36,720 --> 00:25:43,439
Speaker 5: the process for companies addressing shareholder proposals to be voted

450
00:25:43,480 --> 00:25:48,280
Speaker 5: on at their annual meetings, and typically the shareholders submit

451
00:25:48,320 --> 00:25:53,840
Speaker 5: a proposal under SEC Rule fourteen a eight, and that

452
00:25:54,240 --> 00:25:58,560
Speaker 5: rule provides the proponent with the ability to make a

453
00:25:58,640 --> 00:26:03,720
Speaker 5: proposal and provide statement within the proxy material unless the

454
00:26:03,760 --> 00:26:08,879
Speaker 5: company has a way to exclude the statement. For many years,

455
00:26:08,880 --> 00:26:13,720
Speaker 5: companies were able to rely on exceptions to Rule fourteen

456
00:26:13,840 --> 00:26:19,600
Speaker 5: A eight and request an exemption to exclude the proposal.

457
00:26:19,680 --> 00:26:23,520
Speaker 5: They could use what was called no action relief. They

458
00:26:23,560 --> 00:26:27,000
Speaker 5: would send a letter to the SEC and request no

459
00:26:27,280 --> 00:26:31,639
Speaker 5: action be taken against the company, where they'd exclude the proposal.

460
00:26:32,119 --> 00:26:38,920
Speaker 5: In more recent years, especially since the Biden administration has

461
00:26:39,640 --> 00:26:45,040
Speaker 5: taken over, the SEC has changed their view of what

462
00:26:45,160 --> 00:26:51,159
Speaker 5: proposals would potentially gain that no action exemption, and so

463
00:26:51,400 --> 00:26:56,480
Speaker 5: we are now experiencing that more proposals are submitted and

464
00:26:56,600 --> 00:27:00,480
Speaker 5: included in proxy materials than they have in the past.

465
00:27:00,600 --> 00:27:06,840
Speaker 5: What Exon has done in this most recent situation is said,

466
00:27:07,400 --> 00:27:12,320
Speaker 5: rather than even attempt to receive a no action letter,

467
00:27:12,800 --> 00:27:18,359
Speaker 5: they went to court to indicate that the court would

468
00:27:18,359 --> 00:27:22,520
Speaker 5: put out a declaratory judgment to exclude the shareholder proposal.

469
00:27:22,880 --> 00:27:28,520
Speaker 5: From their proxy material, and that is not it's not unprecedented,

470
00:27:28,960 --> 00:27:34,119
Speaker 5: but it is an unusual way to approach addressing the problem.

471
00:27:34,359 --> 00:27:36,760
Speaker 5: Of course, the other way to address these problems is

472
00:27:36,800 --> 00:27:38,600
Speaker 5: to let the shareholders vote.

473
00:27:38,840 --> 00:27:42,560
Speaker 2: Why make a federal case out of this? Exon argued

474
00:27:42,560 --> 00:27:45,480
Speaker 2: that the proposal was similar to one put forward in

475
00:27:45,800 --> 00:27:49,960
Speaker 2: twenty twenty two and twenty twenty three, and last year

476
00:27:50,000 --> 00:27:53,280
Speaker 2: only ten point five percent of shareholders voted in favor

477
00:27:53,280 --> 00:27:56,840
Speaker 2: of the proposal. So what does Exon hope to gain

478
00:27:57,040 --> 00:27:59,879
Speaker 2: by filing this case in federal court.

479
00:28:00,240 --> 00:28:04,640
Speaker 5: From the perspective of a company who is looking to

480
00:28:04,680 --> 00:28:09,399
Speaker 5: conduct a meeting of their shareholders, they're expecting to be

481
00:28:09,560 --> 00:28:14,480
Speaker 5: voting on an annual basis to elect directors, to ratify auditors,

482
00:28:14,840 --> 00:28:18,680
Speaker 5: and to conduct business of the company. In some instances,

483
00:28:19,400 --> 00:28:23,679
Speaker 5: shareholder proposals become valid business of the company, and in

484
00:28:23,760 --> 00:28:27,800
Speaker 5: other instances, the shareholder meeting may not be the right forum.

485
00:28:27,880 --> 00:28:31,879
Speaker 5: That's why Section fourteen a eight of the Security of

486
00:28:32,160 --> 00:28:36,959
Speaker 5: Rules allows four companies to exclude certain proposals, especially if

487
00:28:37,000 --> 00:28:41,000
Speaker 5: they are deemed to be ordinary business operations. And so

488
00:28:41,760 --> 00:28:46,120
Speaker 5: Exon is arguing that a discussion of how they run

489
00:28:46,200 --> 00:28:52,200
Speaker 5: their business in terms of some environmental issues is ordinary business,

490
00:28:52,280 --> 00:28:57,480
Speaker 5: and they actually make use of the voting results from

491
00:28:57,520 --> 00:29:02,600
Speaker 5: prior years to indicate that their shareholders don't particularly want

492
00:29:02,640 --> 00:29:07,160
Speaker 5: to expend the effort to move forward with this proposal.

493
00:29:07,680 --> 00:29:11,040
Speaker 5: Why bring up the same idea over and over?

494
00:29:11,520 --> 00:29:13,960
Speaker 2: Exactly what are they asking the court to do.

495
00:29:14,680 --> 00:29:18,440
Speaker 5: They're asking the court to allow them to exclude the

496
00:29:18,480 --> 00:29:23,640
Speaker 5: proposal before they print their proxy material and have it

497
00:29:23,720 --> 00:29:29,240
Speaker 5: distributed to their shareholders. There is a cost to putting

498
00:29:29,320 --> 00:29:34,880
Speaker 5: forced shareholder proposals, especially for companies who have a large

499
00:29:35,000 --> 00:29:41,680
Speaker 5: constituency of investors. The printing, mailing, distribution of materials, even

500
00:29:41,720 --> 00:29:47,920
Speaker 5: electronically has a cost. The time to evaluate the proposals

501
00:29:48,040 --> 00:29:54,520
Speaker 5: is considerable, and in this instance, Exxon is arguing that

502
00:29:55,200 --> 00:30:00,200
Speaker 5: this proposal is not fully relevant to the business that

503
00:30:00,240 --> 00:30:03,880
Speaker 5: they do. Now. Certainly, investors, there are investors who disagree,

504
00:30:03,880 --> 00:30:07,040
Speaker 5: There are investors who vote for the proposal, But there

505
00:30:07,160 --> 00:30:11,640
Speaker 5: is in many instances a time and place to bring

506
00:30:11,840 --> 00:30:17,560
Speaker 5: forth your issues as an investor, and ultimately the challenge

507
00:30:17,600 --> 00:30:21,760
Speaker 5: becomes one of floodgates. And I use the term ironically

508
00:30:22,080 --> 00:30:26,120
Speaker 5: if we're talking about an environmental issue, but here it's

509
00:30:26,280 --> 00:30:30,200
Speaker 5: more of the floodgate of when and to what extent

510
00:30:30,440 --> 00:30:35,640
Speaker 5: can an investor put forth a proposal? How many proposals

511
00:30:35,720 --> 00:30:38,680
Speaker 5: should a company have to address, how do they address them,

512
00:30:39,240 --> 00:30:42,080
Speaker 5: what will be the voting? It can become unwieldy.

513
00:30:43,600 --> 00:30:46,920
Speaker 2: So how likely is it that a judge is going

514
00:30:47,000 --> 00:30:52,320
Speaker 2: to grant Exxon's request or might the judge say you

515
00:30:52,360 --> 00:30:53,880
Speaker 2: should have taken this to the sec.

516
00:30:55,080 --> 00:30:59,040
Speaker 5: That's difficult for me to predict. It hasn't been a

517
00:30:59,280 --> 00:31:04,280
Speaker 5: very common in practice for companies to go directly to court,

518
00:31:04,360 --> 00:31:08,960
Speaker 5: although it certainly has occurred in the past, And for example,

519
00:31:09,920 --> 00:31:16,120
Speaker 5: in twenty ten, Apache Corporation went directly to court instead

520
00:31:16,120 --> 00:31:20,680
Speaker 5: of to the no action process to ask that the

521
00:31:20,800 --> 00:31:25,800
Speaker 5: court determined that a proposal from a very active gadfly

522
00:31:25,880 --> 00:31:29,959
Speaker 5: investor not be submitted to their shareholders, and they won

523
00:31:30,080 --> 00:31:34,200
Speaker 5: that suit. But there have been other cases where the

524
00:31:34,280 --> 00:31:39,680
Speaker 5: courts have turned down corporations and dismissed the lawsuit. And

525
00:31:39,840 --> 00:31:41,000
Speaker 5: so it's hard.

526
00:31:40,800 --> 00:31:43,160
Speaker 2: To say at this point do you see this as

527
00:31:43,200 --> 00:31:46,480
Speaker 2: a contentious particularly contentious proxy season.

528
00:31:47,520 --> 00:31:49,840
Speaker 5: It is a challenging proxy season.

529
00:31:49,960 --> 00:31:50,200
Speaker 3: June.

530
00:31:50,280 --> 00:31:57,400
Speaker 5: We have so many situations where there are investors who

531
00:31:57,520 --> 00:32:02,320
Speaker 5: are active in the companies in which they own, we

532
00:32:02,440 --> 00:32:08,640
Speaker 5: are experiencing some potential proxy fights at very large companies,

533
00:32:08,720 --> 00:32:15,280
Speaker 5: including Starbucks and Disney, And we're also seeing shareholders make

534
00:32:15,400 --> 00:32:19,640
Speaker 5: use of this fourteen A eight process to submit proposal

535
00:32:19,800 --> 00:32:24,600
Speaker 5: dealing with environmental matters and social matters and governance matters

536
00:32:25,040 --> 00:32:29,400
Speaker 5: and political matters, And so it will be an active year.

537
00:32:29,440 --> 00:32:33,320
Speaker 5: And because we are in a year where there are

538
00:32:34,320 --> 00:32:39,240
Speaker 5: great disagreements in the political sphere and some of the

539
00:32:39,560 --> 00:32:44,720
Speaker 5: business matters have become political, there'll be a lot to see.

540
00:32:45,160 --> 00:32:53,760
Speaker 2: As far as opposition to some investors' recent emphasis on ESG, environmental, social,

541
00:32:54,280 --> 00:32:57,560
Speaker 2: and governance issues, is that coming up a lot.

542
00:32:58,480 --> 00:33:02,720
Speaker 5: Well, it's a very interesting time to talk about ESG

543
00:33:02,920 --> 00:33:08,040
Speaker 5: together because the concepts of putting the E and the

544
00:33:08,120 --> 00:33:12,080
Speaker 5: S and the G together for some investors, create a

545
00:33:12,200 --> 00:33:17,320
Speaker 5: construct that is problematic, and for other investors there have

546
00:33:17,480 --> 00:33:21,920
Speaker 5: been evolution in thoughts. So a few years ago it

547
00:33:22,000 --> 00:33:27,560
Speaker 5: was very significant to many investors that companies were able

548
00:33:27,600 --> 00:33:32,320
Speaker 5: to address the issues that were combined in an ESG basis.

549
00:33:32,960 --> 00:33:37,280
Speaker 5: Governance is always important in the corporate realm, and I

550
00:33:37,440 --> 00:33:42,640
Speaker 5: believe that there is agreement among almost all participants that

551
00:33:42,800 --> 00:33:47,280
Speaker 5: a well governed company is also a company that will

552
00:33:47,440 --> 00:33:52,080
Speaker 5: ultimately achieve value for its shareholders. The issues on the

553
00:33:52,120 --> 00:33:57,240
Speaker 5: E and S side are ones that create more contention

554
00:33:57,520 --> 00:34:03,320
Speaker 5: because there are vests who will say that we want

555
00:34:03,360 --> 00:34:07,760
Speaker 5: to know when a situation will create a risk to value,

556
00:34:08,600 --> 00:34:13,360
Speaker 5: and in those instances we could be very supportive of

557
00:34:13,480 --> 00:34:20,760
Speaker 5: a proposal that deals with natural resources or environmental matters.

558
00:34:21,239 --> 00:34:26,760
Speaker 5: Same could be said for the S component. Whether human

559
00:34:26,840 --> 00:34:30,560
Speaker 5: capital matter, a workforce matter, a labor issue can create

560
00:34:30,800 --> 00:34:36,080
Speaker 5: risk to value for a company, then investors can be supportive.

561
00:34:36,400 --> 00:34:41,160
Speaker 5: But there is this also a view, this antiesgview that

562
00:34:41,280 --> 00:34:46,640
Speaker 5: says the proposals are decoupled from value creation in the company,

563
00:34:47,000 --> 00:34:51,840
Speaker 5: and then those investors won't be supportive. We as a

564
00:34:52,239 --> 00:34:57,720
Speaker 5: firm that reaches out to shareholders and effectively runs election

565
00:34:57,960 --> 00:35:02,640
Speaker 5: campaigns on behalf of company. He's an investor, We experience

566
00:35:02,840 --> 00:35:06,879
Speaker 5: the views of all of these participants and we help

567
00:35:06,920 --> 00:35:13,080
Speaker 5: our clients understand the most effective methodology for achieving their goals.

568
00:35:13,719 --> 00:35:16,759
Speaker 2: Do you think that if Exxon succeeds here, more companies

569
00:35:16,840 --> 00:35:17,680
Speaker 2: will go to court?

570
00:35:18,360 --> 00:35:22,880
Speaker 5: Undoubtedly. If there is one thing that you do notice

571
00:35:23,320 --> 00:35:28,120
Speaker 5: in the corporate world, a successful campaign potentially leads to

572
00:35:28,440 --> 00:35:29,520
Speaker 5: another campaign.

573
00:35:29,800 --> 00:35:34,000
Speaker 2: Thanks so much. Bruce. That's Bruce Golfar, president and CEO

574
00:35:34,040 --> 00:35:38,160
Speaker 2: of ot Copy Partners. In Supreme Court news today, March

575
00:35:38,280 --> 00:35:41,160
Speaker 2: is shaping up to be a blockbuster month at the Court.

576
00:35:41,600 --> 00:35:44,799
Speaker 2: The battle over the availability of medical abortion will be

577
00:35:44,960 --> 00:35:47,719
Speaker 2: argued at the Court on March twenty sixth, one of

578
00:35:47,800 --> 00:35:51,279
Speaker 2: several high profile cases the justices will hear during their

579
00:35:51,360 --> 00:35:54,759
Speaker 2: March sitting, they'll consider whether the federal government went too

580
00:35:54,920 --> 00:35:58,239
Speaker 2: far in easing access to mif apristone, one of two

581
00:35:58,360 --> 00:36:01,760
Speaker 2: drugs used to end early to abortions. In the calendar

582
00:36:01,800 --> 00:36:05,920
Speaker 2: release today, the Justice has also scheduled arguments for March

583
00:36:05,960 --> 00:36:09,520
Speaker 2: eighteenth in a dispute over the Biden administration's efforts to

584
00:36:09,640 --> 00:36:15,040
Speaker 2: combat online misinformation regarding COVID election fraud and other hot

585
00:36:15,080 --> 00:36:18,960
Speaker 2: button issues. A group of social media users and states

586
00:36:19,000 --> 00:36:24,280
Speaker 2: say federal officials coers social media platforms to censor certain content.

587
00:36:24,960 --> 00:36:28,360
Speaker 2: And also on March eighteenth, they'll hear a First Amendment

588
00:36:28,400 --> 00:36:32,759
Speaker 2: dispute involving the National Rifle Association, and it's the Progressive

589
00:36:32,800 --> 00:36:36,840
Speaker 2: American Civil Liberties Union that's representing the NRA in a

590
00:36:36,960 --> 00:36:40,719
Speaker 2: challenge to New York officials alleged attempts to pressure insurance

591
00:36:40,760 --> 00:36:45,680
Speaker 2: companies and other financial institutions into blacklisting the gun rights group.

592
00:36:45,960 --> 00:36:48,600
Speaker 2: And that's it for this edition of the Bloomberg Law Podcast.

593
00:36:48,960 --> 00:36:51,319
Speaker 2: Remember you can always get the latest legal news by

594
00:36:51,360 --> 00:36:55,200
Speaker 2: subscribing and listening to the show on Apple Podcasts, Spotify,

595
00:36:55,480 --> 00:36:59,319
Speaker 2: and at Bloomberg dot com, slash podcast, slash Law. I'm

596
00:36:59,400 --> 00:37:01,799
Speaker 2: June Grosse and this is Bloomberg