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Weekend Law: Trump Sentenced & TikTok Ban · Bloomberg Law

0:02
Speaker 1: This is Bloomberg Law with June Grosso from Bloomberg Radio.
0:08
Speaker 2: What a difference a day makes. On Thursday, President elect
0:12
Speaker 2: Donald Trump appeared at the National Cathedral, sitting with every
0:16
Speaker 2: other living president at the funeral for President Jimmy Carter.
0:20
Speaker 3: Mister Trump, you appeared before this court today to conclude
0:24
Speaker 3: this criminal proceeding by the imposition of sentence.
0:27
Speaker 2: But on Friday he appeared virtually in a Manhattan courtroom
0:31
Speaker 2: to be sentenced for his criminal conviction on thirty four
0:35
Speaker 2: felon accounts in the hush money case. Trump addressed Judge
0:39
Speaker 2: wanmer Shan for about six minutes, saying he did nothing
0:43
Speaker 2: wrong and repeating familiar complaints about the case, the DA
0:47
Speaker 2: and the weaponization of government.
0:50
Speaker 4: I get indicted for business records.
0:51
Speaker 2: Everybody should be so accurate.
0:55
Speaker 5: It's been a political witch hunt.
0:56
Speaker 2: It was done to damage my reputation so that I'd
1:00
Speaker 2: lose the election, and obviously that didn't work. The judge
1:03
Speaker 2: explained that he was giving Trump an unconditional discharge, a
1:07
Speaker 2: rare sentence which carries no prison time or penalty because
1:12
Speaker 2: of the extraordinary legal protections given to a president.
1:16
Speaker 3: However, despite the extraordinary breath of those protections.
1:21
Speaker 4: One power they do not provide is the power to
1:24
Speaker 4: erase at ury verdict.
1:25
Speaker 2: Trump had tried to delay the largely symbolic sentencing with
1:29
Speaker 2: a series of rapid fire legal challenges, including one to
1:33
Speaker 2: the Supreme Court, but they all failed, and now he'll
1:37
Speaker 2: be the first convicted felon to take office as president
1:40
Speaker 2: of the United States.
1:42
Speaker 3: Therefore, at this time, I impose that sentence to cover
1:47
Speaker 3: all thirty four accounts, sir, I wish he.
1:50
Speaker 4: Got speed as you assumed second term in office.
1:53
Speaker 2: Joining me is litigator Dave Ahrenberg, former Palm Beach County
1:56
Speaker 2: state attorney. They've put this historic sentencing in context.
2:01
Speaker 6: Trump cares about his legacy deeply, and this is going
2:03
Speaker 6: to bother him, and that's why he wanted the Supreme
2:07
Speaker 6: Court to intervene even before the sentencing happens. That's not
2:11
Speaker 6: how any of this is supposed to work. The normal
2:13
Speaker 6: procedure for any other criminal defendant is you wait till
2:17
Speaker 6: after sentencing, then you appeal. But Trump wanted to be
2:21
Speaker 6: treated differently this time. He was not, and it surprised
2:24
Speaker 6: even Trump, especially when one of his appointees, Justice Amy
2:28
Speaker 6: Cony Barrett, ruled with the liberals, along with Chief Justice Roberts,
2:32
Speaker 6: to deny him his requests for an appeal and an
2:37
Speaker 6: end to the sentencing, or at least a post moment
2:39
Speaker 6: until twenty twenty nine. So Trump can still appeal, but
2:43
Speaker 6: he's going to go into the White House as a
2:45
Speaker 6: convicted felon.
2:46
Speaker 2: I have to say, I was surprised that he got
2:48
Speaker 2: four votes to stay the sentencing, even from this Supreme
2:52
Speaker 2: Court that has been friendly to him of late. They
2:55
Speaker 2: would have been extending they're already controversial grant of president
3:00
Speaker 2: immunity from prosecution for official conduct to a president elect.
3:05
Speaker 6: Well, there is some ground to say that the transition
3:08
Speaker 6: period is something that is to be respected, where you
3:12
Speaker 6: want to ensure that there's nothing that would interfere with
3:16
Speaker 6: the president's transition. And here that was a consideration for
3:21
Speaker 6: amy Cony Barrett and for Chief Justice Robberts. But they
3:23
Speaker 6: said that because Judge Murshan said in advance that he
3:26
Speaker 6: would not give Trump any penalty, meaning he's just going
3:30
Speaker 6: to let him walk without even probation, then the level
3:33
Speaker 6: of intrusion upon the power of the presidency and the
3:36
Speaker 6: transition period is negligible. And because of that they let
3:40
Speaker 6: it go. On. But had Judge Murshan not said in
3:43
Speaker 6: advance that he would essentially let Trump walk, then I
3:47
Speaker 6: do think the Supreme Court would have stepped in, and
3:49
Speaker 6: I do think they would have put the cabash on
3:51
Speaker 6: this sentencing. You can sort of read the writing on
3:54
Speaker 6: the wall by their one page statement that addressed that
3:57
Speaker 6: very issue. So for those of us who believe in
3:59
Speaker 6: the rule of law, in equal justice under the law,
4:02
Speaker 6: we praised Josh Marshan for being so shrewd, smart and
4:06
Speaker 6: savvy to make that statement in advance. It was a
4:08
Speaker 6: game changer.
4:09
Speaker 2: Trump was treated differently from other defendants. This unconditional discharge
4:16
Speaker 2: is rare. He was convicted on thirty four felonies and
4:18
Speaker 2: didn't get any kind of punishment at all. Even the
4:22
Speaker 2: delays in the sentencing. Everything was because he was in
4:26
Speaker 2: this special position of running for president and now being
4:30
Speaker 2: the president elect.
4:31
Speaker 6: Totally. Trump supporters have said that there are two standards
4:35
Speaker 6: of justice in this country, and they're not wrong, but
4:37
Speaker 6: it's not in the way they think it is. It's
4:39
Speaker 6: because Trump was treated better than any other criminal defendant.
4:44
Speaker 6: The one time he was treated the same was just
4:46
Speaker 6: now with the Supreme Court, and then it was five
4:48
Speaker 6: to four. By the skin of their nose. Equal justice prevailed.
4:52
Speaker 6: But Trump was treated differently. Number One, look at the
4:56
Speaker 6: number of times he violated the Court's gag order ten
4:59
Speaker 6: times given any real punishment. Think about how he was
5:02
Speaker 6: treated from the beginning in this case. Now, you can
5:04
Speaker 6: make the case that if he was not Donald Trump,
5:06
Speaker 6: that he would never have been brought up on those
5:08
Speaker 6: charges in New York. And actually you could debate that,
5:11
Speaker 6: but as far as the DC election interference case, as
5:14
Speaker 6: far as the Marlago Document's case, anyone would have been
5:17
Speaker 6: charged with that, and other people had been charged with
5:19
Speaker 6: those things. So Trump was treated better because the Supreme
5:23
Speaker 6: Court stepped in, put his thumb on the scale and
5:25
Speaker 6: said no, we're not going to let this case go
5:28
Speaker 6: forward in DC. They knowingly delayed it so that he
5:31
Speaker 6: could not be tried before the election. And then you
5:33
Speaker 6: had Judge Cannon in South Florida, who was appointed by
5:37
Speaker 6: Donald Trump, who dismissed the whole Marlago Document's case entirely
5:41
Speaker 6: based on a strange legal theory that no other court
5:45
Speaker 6: has even recognized relating to the constutionality of the Special Council.
5:50
Speaker 6: So yes, I don't know how you can come up
5:52
Speaker 6: to an explanation other than he was treated differently in
5:54
Speaker 6: this system.
5:55
Speaker 2: For the most part, Trump had argued to the Supreme
5:58
Speaker 2: Court that allowing to send it to go forward would
6:01
Speaker 2: be a distraction to his presidential transition, and that the
6:05
Speaker 2: trial was tainted by evidence that would have been barred
6:09
Speaker 2: under the new standard on presidential immunity they handed down
6:13
Speaker 2: last July. Tell us about that five to four decision
6:16
Speaker 2: turning Trump down.
6:18
Speaker 6: The Court said that we can deal with the problems,
6:22
Speaker 6: if any, in the New York trial after the sentencing,
6:27
Speaker 6: because that's how it's normally supposed to be done. And
6:29
Speaker 6: as far as the claim that going to New York,
6:33
Speaker 6: appearing via zoom, having a one hour hearing and not
6:38
Speaker 6: even receiving a sentence a penalty, other than you're free
6:41
Speaker 6: to go. You're just a convicted felon from here on out.
6:43
Speaker 6: That that does not intrude upon the powers of the presidency,
6:46
Speaker 6: That doesn't even detract from your transition. It's an hour
6:49
Speaker 6: out of your day. So we'll deal with this later. Now,
6:52
Speaker 6: he may ultimately succeed in overturning the New York conviction
6:56
Speaker 6: based on the immunity decision, but that would be down
6:59
Speaker 6: the line. So essentially, the Court said, you may not
7:02
Speaker 6: be wrong, mister President elect, but you're early.
7:06
Speaker 2: Trump was unusually gracious about the Supreme Court's decision. He
7:13
Speaker 2: said that I read it, and I thought it was
7:15
Speaker 2: a fair decision. Actually, do you think he's looking ahead
7:19
Speaker 2: to possible fields to the Supreme Court during the next
7:23
Speaker 2: four years?
7:24
Speaker 6: Definitely. Trump is transactional. He knows Supreme Court has unique
7:30
Speaker 6: power in this country and doesn't want to upset them
7:33
Speaker 6: in the way that he attacks other judges, especially when
7:37
Speaker 6: you have the swing justices on the Supreme Court when
7:39
Speaker 6: appointed by him, and the other Chief Justice Roberts, who
7:42
Speaker 6: had been moving in his direction. He's the one, after all,
7:45
Speaker 6: who wrote the immunity decision. So I don't think he
7:48
Speaker 6: wanted to go after people who he would depend on
7:51
Speaker 6: in the next four years to rule his way. He
7:54
Speaker 6: was playing the long game here.
7:56
Speaker 2: Going back to things that make him different from other defendants.
8:00
Speaker 2: Trump called Justice Alito on his cell phone on Tuesday,
8:05
Speaker 2: hours before his lawyers filed their request with the court
8:09
Speaker 2: to ask him about a former clerk who's under consideration
8:12
Speaker 2: for a job in the new administration. Alito says they
8:16
Speaker 2: didn't discuss Trump's case, but many are saying that Alito
8:20
Speaker 2: should have recused himself because of the appearance of impropriety,
8:26
Speaker 2: even if it was just the future president of the
8:28
Speaker 2: United States asking a Supreme Court justice about a job reference.
8:34
Speaker 6: Well, the president doesn't check references for people who apply
8:38
Speaker 6: to the White House. Is that where you're saying that
8:40
Speaker 6: June that I'm saying that it's preposterous And it just
8:42
Speaker 6: shows you why people have such a dim view of
8:45
Speaker 6: the Supreme Court. When you have a Supreme Court justice
8:47
Speaker 6: like Alito, who has flown the American flag upside down
8:50
Speaker 6: his house. He blamed it on his wife, who has
8:52
Speaker 6: flown the flag that the January sixth insurrectionists flew. When
8:57
Speaker 6: you have someone who speaks to the president elect on
9:00
Speaker 6: the day that a matter is filed with the court,
9:02
Speaker 6: and even if they didn't specifically talk about that matter,
9:06
Speaker 6: it is improper because Trump, as Michael Cohen said Hoffen,
9:11
Speaker 6: talks like a mob boss where he doesn't go directly
9:13
Speaker 6: to it. He talks around a subject. Alito knows what's
9:16
Speaker 6: going on, and for him to say, oh, he was
9:19
Speaker 6: just checking references, like doesn't he have someone underneath him
9:22
Speaker 6: to do that. Doesn't he have like staff who could
9:24
Speaker 6: do that. It just shows you how much the Supreme
9:27
Speaker 6: Court needs ethics reform. And if Chief Justice Roberts won't
9:31
Speaker 6: do it, then the reputation of the Supreme Court is
9:33
Speaker 6: going to continue to be in the sewer.
9:36
Speaker 2: I think we know from the many motions made in
9:39
Speaker 2: this case, some of the arguments that will come up
9:41
Speaker 2: on appeal. Does he have a chance on appeal?
9:44
Speaker 6: Like I said, it's not crazy for him to say
9:46
Speaker 6: that had he not been President Trump, then he would
9:50
Speaker 6: never have been prosecuted for it. Alvin Bragg, when he
9:53
Speaker 6: was running for DA had mentioned going after Trump, and
9:55
Speaker 6: so prosecutors need to be careful when you campaign. Targeting
9:59
Speaker 6: into it gives grist to that individual to then claim
10:03
Speaker 6: it was a politically motivated prosecution. But keep in mind
10:06
Speaker 6: that a jury found him guilty unanimously beyond a reasonable doubt.
10:10
Speaker 6: The evidence was strong. Now, maybe because of the Supreme
10:13
Speaker 6: Court's immunity decision, he'll get that case overturned. Because of
10:17
Speaker 6: the admission into evidence of Hopepix and Madeline Westerhot, who
10:21
Speaker 6: are two White House employees who testified on minor matters.
10:24
Speaker 6: They were minor witnesses, but because they were included, it
10:27
Speaker 6: violated the Supreme Court's immunity decision. I think it's harmless
10:31
Speaker 6: error and they should just let the conviction stand. But
10:33
Speaker 6: we'll see what the Supreme Court says.
10:34
Speaker 2: Mind you, Trump walked down of the courtroom a convicted felon,
10:39
Speaker 2: but he's not unlike other Americans. He's not going to
10:42
Speaker 2: be looking for a job where they're going to be
10:43
Speaker 2: asking him about his felony conviction. Is there any kind
10:47
Speaker 2: of repercussions for him from this.
10:51
Speaker 6: Well, he will, other than reputational damage, have to deal
10:55
Speaker 6: with possibly losing the right to vote. That in Florida
10:58
Speaker 6: happens when you are a convict. It's felon, and in
11:02
Speaker 6: Florida you can rest assured that if that does happen,
11:06
Speaker 6: then Governor Santis will step in and make sure that
11:10
Speaker 6: his voting rights will be immediately restored. Yet another example
11:14
Speaker 6: of comp being treated differently than everyone else. So even
11:17
Speaker 6: though he walks free without any real repercussions, he has
11:20
Speaker 6: to deal with the matter of history. His permanent record
11:23
Speaker 6: will always reflect he's a fellon unless it's overturned on appeal.
11:27
Speaker 6: And yeah, there are potential civil rights voting rights implication.
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Speaker 2: It's a saga that has not really ended yet. Thanks
11:34
Speaker 2: so much, Dave. That's former Palm Beach County State Attorney
11:37
Speaker 2: Dave Ehrenberg, coming up next on the Bloomberg Law Show.
11:41
Speaker 2: The Supreme Court heard oral arguments on the TikTok band
11:44
Speaker 2: today and it seems likely the justices will uphold the ban.
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Speaker 2: I'm June Grosso when you're listening to Bloomberg. The future
11:52
Speaker 2: of the wildly popular social media platform TikTok rides on
11:57
Speaker 2: the US Supreme Court. After the oral arguments on Friday,
12:02
Speaker 2: its future looks cloudy. Under a federal law set to
12:06
Speaker 2: take effect on January nineteenth, TikTok will be banned in
12:10
Speaker 2: the US if it isn't so by its Chinese parent company.
12:14
Speaker 2: The legal arguments pit national security against free speech, and
12:19
Speaker 2: a majority of justice has suggested that national security concerns
12:24
Speaker 2: override the free speech interests of the companies and content creators.
12:28
Speaker 2: Here are Chief Justice John Roberts and Justice is Brett
12:32
Speaker 2: Kavanaugh and Katanji Brown Jackson.
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Speaker 1: So are we supposed to ignore the fact that the
12:37
Speaker 1: ultimate parent is in fact subject to doing intelligence work
12:41
Speaker 1: for the Chinese government.
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Speaker 4: I think Congress and the President were concerned that China
12:47
Speaker 4: was accessing information about millions of Americans, tens of millions
12:51
Speaker 4: of Americans, including teenagers, people in their twenties, that they
12:56
Speaker 4: would use that information over time developed spies to turn
13:02
Speaker 4: people to blackmail people, people who a generation from now
13:06
Speaker 4: will be working in the FBI or the CIA.
13:10
Speaker 2: But why cann't Congress prohibit Americans from associating with certain
13:16
Speaker 2: foreign organizations that have interests that are hostile to the
13:19
Speaker 2: United States. In fact, it seemed like Justice Neil Gorsuch
13:23
Speaker 2: was the only likely vote to strike down the law,
13:26
Speaker 2: calling the government's defense of the band paternalistic and asking
13:30
Speaker 2: why Congress couldn't just have required TikTok to post a disclaimer.
13:35
Speaker 3: I mean, don't we normally assume that the best remedy
13:40
Speaker 3: for problematic speech is counter speech? And TikTok says that
13:46
Speaker 3: could even live with a disclaimer on its website, saying
13:49
Speaker 3: this can be covertly manipulated by China.
13:53
Speaker 2: Joining me is Matthew Shettenhelm, Bloomberg Intelligence litigation and government analyst. Matt,
13:58
Speaker 2: you're at the oral argan. Was there one issue that
14:02
Speaker 2: dominated that two and a half hours.
14:04
Speaker 1: I didn't take away any one single issue other than
14:09
Speaker 1: it looked a lot like the argument at the DC Circuit,
14:13
Speaker 1: when a majority of the justices seemed inclined to defer
14:19
Speaker 1: to Congress's decision on national security and really not that
14:24
Speaker 1: concern that this was a major First Amendment problem for
14:29
Speaker 1: a US company, and I think really focused on the
14:33
Speaker 1: idea that, hey, this is regulating byte edance because it's
14:38
Speaker 1: located in China, and so overall, there was a sense
14:41
Speaker 1: that the justices weren't that concerned about a major change
14:46
Speaker 1: in First Amendment law because of the unique setup here,
14:51
Speaker 1: that this really was about regulating corporate structure, because of
14:55
Speaker 1: the unique situation of this company.
14:58
Speaker 2: Were there any justices who were simple to the idea
15:01
Speaker 2: that the free speech rights of a one hundred and
15:04
Speaker 2: seventy million Americans are going to be affected if this
15:07
Speaker 2: platform shuts down.
15:09
Speaker 1: Let me first say, I think Justice gorsicch I think
15:12
Speaker 1: is the most likely vote for TikTok on this, and
15:15
Speaker 1: he expressed a number of concerns, mostly about whether Congress
15:20
Speaker 1: had tailored its response to this issue properly, whether they
15:25
Speaker 1: are too disruptive to speech when they could have done
15:28
Speaker 1: something that didn't need to go that far, and I
15:32
Speaker 1: think he was most sympathetic to TikTok's view. Generally, I
15:35
Speaker 1: think there were a number of justices knowing that this
15:39
Speaker 1: decision is going to announce the law of the First
15:42
Speaker 1: Amendment going forward, and they want to be careful about
15:45
Speaker 1: how they write it. And I think because this case
15:49
Speaker 1: involves both a concern about access to US data but
15:54
Speaker 1: also concerns about propaganda, and that's where the First Amendment
15:58
Speaker 1: concerns are sort of the large just where we're regulating
16:02
Speaker 1: content of a message, and a number of justices express
16:05
Speaker 1: concern about how do we address that. Should it be
16:10
Speaker 1: strict scrutiny or should it be intermediate scrutiny. I think
16:14
Speaker 1: they want to get the law right on that so
16:17
Speaker 1: that they announced the First Amendment standard properly. But I
16:21
Speaker 1: didn't read a lot of concern about ruling against the
16:25
Speaker 1: US for that reason, and what kind.
16:27
Speaker 2: Of scrutiny did the DC Circuit use in upholding the law?
16:31
Speaker 1: So the DC Circuit said, we're going to assume we
16:35
Speaker 1: need to apply strict scrutiny. We think it will pass
16:38
Speaker 1: any standard. But they wrote their decision assuming they had
16:42
Speaker 1: to apply the highest level of scrutiny strict scrutiny, and
16:46
Speaker 1: they said the law passes that standard. Judge shrishn Avasen
16:50
Speaker 1: wrote a concurrence and said, I would apply intermediate scrutiny.
16:54
Speaker 1: I don't think we need to go to strict scrutiny
16:57
Speaker 1: because this law focuses on on the data security, which
17:02
Speaker 1: really doesn't raise First Amendment issues in the same way.
17:05
Speaker 1: And so for that reason, we don't need to focus
17:07
Speaker 1: on strict scrutiny. Let's do intermediate scrutiny. And this has
17:10
Speaker 1: an important justification. That's enough. I think you'll see something
17:13
Speaker 1: similar from the Supreme Court. Some justices probably will want
17:17
Speaker 1: to apply strict scrutiny, some of them will say we
17:19
Speaker 1: should apply intermediate scrutiny. Either way, it's hard to do
17:23
Speaker 1: the math to get TikTok up to five justices on
17:26
Speaker 1: its side.
17:27
Speaker 2: In the congressional hearings and in the DC Circuit hearings,
17:31
Speaker 2: there's been no evidence presented that China is using TikTok
17:35
Speaker 2: to spy on Americans, or using Americans data or manipulating
17:41
Speaker 2: the content where any of the justice is concerned about
17:45
Speaker 2: this supposedly secret evidence.
17:47
Speaker 1: Justice gorse Its raised that most directly, and I think
17:50
Speaker 1: Chief Justice Roberts did mention it as well. And I
17:54
Speaker 1: think there was some concern less to do with this case.
17:58
Speaker 1: It didn't seem like it was going to be a
18:00
Speaker 1: reason for the justices to overturn this decision, but it
18:03
Speaker 1: was kind of a signal to Congress and to the
18:06
Speaker 1: United States Justice Department. Maybe the secret law stuff where
18:11
Speaker 1: you don't even let the other side see the evidence,
18:14
Speaker 1: Let's not keep going down that road. I think Justice
18:17
Speaker 1: Gorsicch at one point even said, Hey, this might be
18:19
Speaker 1: something Congress should address that we don't start going down
18:22
Speaker 1: the road of using secret evidence. But generally, I don't
18:26
Speaker 1: think that was really driving the court in TikTok's favor.
18:30
Speaker 1: I think there was an overall concern that you know,
18:33
Speaker 1: the United States has stressed this is not about hard
18:35
Speaker 1: evidence of China actually doing this. This is about avoiding
18:39
Speaker 1: the risk of China potentially doing this. And TikTok can
18:44
Speaker 1: continue to operate, it just needs to continue to operate
18:48
Speaker 1: without an owner that's located in China, where this risk
18:53
Speaker 1: is at its greatest.
18:54
Speaker 2: And what about that that was mentioned as a possibility,
18:58
Speaker 2: But as far as I understand, China won't sell or
19:01
Speaker 2: won't sell its algorithm.
19:03
Speaker 1: That's the big hang up. Potentially, the law gives TikTok
19:06
Speaker 1: a path to continue operating if byte Dance is willing
19:10
Speaker 1: to do a sale, but there's no indication so far
19:14
Speaker 1: that byte Dance is willing to do that, and if
19:18
Speaker 1: they won't, there really aren't many options. If China is
19:22
Speaker 1: concerned about the sale of the algorithm, it's possible that
19:27
Speaker 1: there's no path forward after January nineteenth because the company's
19:32
Speaker 1: not willing to do a divestiture.
19:34
Speaker 2: The idea of slapping a disclaimer on TikTok came up.
19:38
Speaker 2: Did that go very far?
19:39
Speaker 1: As I said, Justice Gorsch is most willing to rule
19:43
Speaker 1: for TikTok and say, look, maybe you didn't tailor this
19:46
Speaker 1: law as closely as you should have. Maybe you should
19:48
Speaker 1: have considered things that were less disruptive. I think disclosure
19:51
Speaker 1: would probably be on his list of things that Congress
19:55
Speaker 1: should have looked at first, making them maybe put a
19:58
Speaker 1: message on their screen that hey, there's a risk of
20:01
Speaker 1: interference by China here, and the company pushed that message
20:04
Speaker 1: a lot. I didn't see other than, as I said
20:06
Speaker 1: Justice Gorsic, I didn't really see it catching on with
20:09
Speaker 1: very many justices.
20:11
Speaker 2: It is surprising to me that there wasn't more expression
20:14
Speaker 2: of real concerns, real free speech First Amendment concerns, when
20:19
Speaker 2: this would be the first time that Congress is shutting
20:22
Speaker 2: down a platform for free speech.
20:25
Speaker 7: Right.
20:25
Speaker 1: There were excellent briefs files in this case, and a
20:28
Speaker 1: number of them raised exactly the point that you're making
20:32
Speaker 1: right now, that this is a novel application of US law,
20:36
Speaker 1: that one hundred and seventy million users expressing themselves are
20:41
Speaker 1: suddenly going to get knocked off this platform. Not suddenly,
20:44
Speaker 1: I shouldn't say that it's not going to be a
20:45
Speaker 1: sudden death, but it is disruptive to speech in a
20:49
Speaker 1: way that US law has never done before. And so
20:52
Speaker 1: there was a pretty compelling First Amendment argument to make.
20:56
Speaker 1: It just didn't get a lot of traction when you
20:59
Speaker 1: weigh the fact that Congress, on a bipartisan basis, said, look,
21:03
Speaker 1: this is a national security risk we need to address.
21:07
Speaker 1: Judges struggled to get in the middle of that because
21:09
Speaker 1: they're not experts on national security, and so I think
21:12
Speaker 1: they were hesitant to second guest Congress on that. I
21:15
Speaker 1: think it's going to make them struggle to rule for TikTok.
21:18
Speaker 2: Here, President elect Trump submitted a brief asking the court
21:23
Speaker 2: to put it off until he comes in. There were
21:25
Speaker 2: no constitutional arguments, but there were arguments about his being
21:28
Speaker 2: a savvy businessman, who is the one who can solve
21:31
Speaker 2: this right? So what about the possibility of the court
21:35
Speaker 2: issuing a stay of the effective date?
21:38
Speaker 1: That came up directly? I think Justice Kavanaugh at one
21:41
Speaker 1: point asked about it, and I think the Solicitor General's
21:45
Speaker 1: point was the only way to do that. As you said,
21:48
Speaker 1: President Trump didn't address the legal standard to do that.
21:51
Speaker 1: But the legal standard really runs to is TikTok likely
21:55
Speaker 1: to win this case? And as we've talked about, TikTok
21:57
Speaker 1: is not likely to win this case if you're applying
22:00
Speaker 1: that legal standard. The test for issuing a stay of
22:04
Speaker 1: a deadline that Congress set is not that President Trump
22:07
Speaker 1: has a warm spot in his heart for a company
22:09
Speaker 1: and would like it that way. It is whether the
22:13
Speaker 1: company is likely to prevail because this violates the law.
22:17
Speaker 1: And I don't see any way that five Supreme Court
22:20
Speaker 1: justices are going to say that TikTok is likely to
22:23
Speaker 1: succeed on that argument. So for that reason, a stay
22:26
Speaker 1: doesn't really make sense. They don't issue stays just because
22:29
Speaker 1: the next administration wishes Congress had set a different date.
22:33
Speaker 2: If the court rules against TikTok, as we now expect
22:36
Speaker 2: after these oral arguments, is there any hope for TikTok?
22:40
Speaker 1: So it's going to get really interesting there because of
22:44
Speaker 1: what President Trump has said. So, if I'm a company
22:48
Speaker 1: that hosts TikTok and this law takes effect on January nineteenth,
22:53
Speaker 1: I am very concerned about accruing substantial liability on that day.
22:58
Speaker 1: The law subjects those companies to five thousand dollars per user,
23:03
Speaker 1: and as we said, one hundred and seventy million users
23:05
Speaker 1: in the United States. The math is astronomical in terms
23:08
Speaker 1: of the potential liability for hosting TikTok on January nineteenth,
23:13
Speaker 1: which is before President Trump takes office. So I think
23:16
Speaker 1: there's real risk for those companies to continue hosting TikTok.
23:19
Speaker 1: It's possible President Trump comes in and says, don't worry
23:22
Speaker 1: about that law. I'm not going to enforce it. But
23:26
Speaker 1: if you're a company facing the appruval of that much liability,
23:31
Speaker 1: are you willing to take that chance? Are you willing
23:34
Speaker 1: to potentially give him leverage over your company if he
23:37
Speaker 1: wants to change his mind.
23:38
Speaker 6: Do you want to.
23:39
Speaker 1: Litigate over whether that would violate due process for him
23:42
Speaker 1: to change his mind? I don't think so. That's a
23:44
Speaker 1: big dollar amount. So the best path forward for TikTok
23:47
Speaker 1: would be convincing Congress to reverse itself and maybe getting
23:52
Speaker 1: President Trump to push that idea or some alternative have
23:56
Speaker 1: Congress pass the new law. But short of that, it's
23:58
Speaker 1: really hard to see a path.
24:00
Speaker 2: It does look quite bleak for TikTok, and we should
24:03
Speaker 2: get a decision on this from the Supreme Court next
24:06
Speaker 2: week before the TikTok ban goes into effect on January nineteenth.
24:11
Speaker 2: Thanks so much, Matt. That's Bloomberg Intelligence, litigation and government
24:16
Speaker 2: analyst Matthew Shettenhelm, coming up next on the Bloomberg Lawn Show.
24:21
Speaker 2: Nippon Steel and US Deal are suing the Biden administration
24:25
Speaker 2: in a last ditch effort to save their merger. I'm
24:29
Speaker 2: June Grosso and you're listening to Bloomberg. Nippon Steele is
24:33
Speaker 2: standing firm on its plans to acquire US Steal, with
24:37
Speaker 2: both companies suing the Biden administration this week in a
24:40
Speaker 2: last ditch effort to save the fifteen billion dollar merger.
24:44
Speaker 2: President Biden blocked the deal citing a risk to national security,
24:49
Speaker 2: but the companies say the review by the Committee on
24:52
Speaker 2: Foreign Investment in the United States was a sham and
24:56
Speaker 2: that Biden blocked the deal for purely political reasons, that is,
25:00
Speaker 2: to gain favor with union steel workers in Pennsylvania in
25:04
Speaker 2: his re election bid. The President had announced his opposition
25:08
Speaker 2: to the deal in March, before the Scyphius review even began,
25:13
Speaker 2: and in April at the US Steel headquarters in Pittsburgh,
25:16
Speaker 2: Biden made this promise to the union workers.
25:20
Speaker 5: US still has been an iconic American company for more
25:23
Speaker 5: than a century, and it should remain a totally American company,
25:30
Speaker 5: American owned, American operated by American union steel workers, the
25:34
Speaker 5: best of the world, and that's going to happen, I
25:37
Speaker 5: promise you.
25:39
Speaker 2: Joining me is John Kabilo, a Washington, DC attorney who
25:43
Speaker 2: specializes in cross border transactions. John. Since nineteen ninety, only
25:49
Speaker 2: eight other foreign transactions have been blocked by presidents, according
25:53
Speaker 2: to the Congressional Research Service, and here President Biden reportedly
25:58
Speaker 2: went against his top national security aids in blocking the
26:02
Speaker 2: sale to a Japanese company, even though Japan is a
26:06
Speaker 2: longstanding ally of our country.
26:09
Speaker 7: Right, it is extraordinarily rare for a president to formally
26:14
Speaker 7: block any investment via syfius. I think it's unprecedented that
26:18
Speaker 7: a president would block a transaction like this, an investment
26:22
Speaker 7: coming from an allied nation, a critical allied nation, and
26:26
Speaker 7: in particular where there's no clear national security threat posed
26:30
Speaker 7: by the investment.
26:32
Speaker 2: I'm confused about what Biden says is a national security threat.
26:36
Speaker 2: Is it a national security threat as you know, the
26:39
Speaker 2: average person might see it, or is it a threat
26:41
Speaker 2: to the domestic steel industry.
26:43
Speaker 7: That's a great question, and part of that gets at
26:46
Speaker 7: the evolution of pythias over the years. You know, ten, fifteen,
26:50
Speaker 7: twenty years ago, things that were thought of as quote
26:53
Speaker 7: unquote national security issues. That really was a limited set
26:58
Speaker 7: of things, and it related to weapons, system and telecommunications
27:03
Speaker 7: networks in big pretty clearly strategic assets in the United States.
27:08
Speaker 7: It is true that the notion of national security has
27:12
Speaker 7: expanded some over time, and now it includes things like
27:16
Speaker 7: the personal data of US citizens. Certainly, software and things
27:20
Speaker 7: like that have been lumped into this concept of things
27:24
Speaker 7: that can cause national security concerns. Feel itself obviously is
27:28
Speaker 7: useful to the military, but there's no evidence that in
27:33
Speaker 7: this transaction, Knepon Steel was going to do anything other
27:36
Speaker 7: than expand production in the United States and bring more
27:40
Speaker 7: investment and frankly, better steelmaking technology into the United States.
27:44
Speaker 7: So it's hard to say that there's any sort of
27:47
Speaker 7: threat to steelmaking in the United States because of the transaction.
27:52
Speaker 7: And ultimately it looks like it boils down to just
27:55
Speaker 7: kind of a US centric notion that this company that's
27:58
Speaker 7: an iconic company in the United States, it should be
28:02
Speaker 7: owned by US persons and not owned by a foreign company.
28:06
Speaker 7: And that's really not at all what Syphius was set
28:10
Speaker 7: up to do. And so what we're looking at is
28:12
Speaker 7: the President is sort of abusing his authorities under Sythius
28:15
Speaker 7: to achieve a political.
28:16
Speaker 2: Outcome that sort of echoes some of the claims the
28:19
Speaker 2: steel companies are making in their lawsuit that argues that
28:23
Speaker 2: Biden violated the Constitution in blocking the merger. Tell us
28:27
Speaker 2: more about their arguments.
28:29
Speaker 7: So SIPIUS is an authority, it's under the Defense Production
28:32
Speaker 7: Act of nineteen fifty and its authorities were just expanded
28:35
Speaker 7: recently in twenty eighteen. But really what the law says
28:39
Speaker 7: is that first and foremost, the US is intended to
28:43
Speaker 7: have an open investment environment that allows foreign direct investment
28:47
Speaker 7: into the United States, and what Syphius is empowered to
28:51
Speaker 7: do is review investments from foreign parties. Syphius has the
28:55
Speaker 7: ability to approve those transactions, but if a transaction may
29:00
Speaker 7: pose a threat to the US national security, then Sophius
29:04
Speaker 7: can negotiate conditions and require an investor to comply with
29:09
Speaker 7: whatever conditions it needs before it approves the transaction. Only
29:12
Speaker 7: in the rarest of circumstances. If there's a threat that
29:16
Speaker 7: is so great and Sifius can't find a way to
29:19
Speaker 7: solve the threat, then it goes to the president, and
29:21
Speaker 7: the president has the authority to block the transaction. With
29:25
Speaker 7: that is background, what the lawsuit essentially is saying is
29:28
Speaker 7: that the process and the requirements necessary for a president
29:32
Speaker 7: to block the transaction were never followed. Before Sophius even
29:36
Speaker 7: began to review the transaction, President Biden, vice President Harris,
29:40
Speaker 7: and Secretary Yellen had already gone public saying that the
29:44
Speaker 7: transaction should not go through, that US Steel needed to
29:47
Speaker 7: remain domestically owned, and Biden even told the steel workers
29:51
Speaker 7: that he guaranteed that the transaction was not going to
29:54
Speaker 7: go through. And again, this is before the Sifius process
29:57
Speaker 7: had started. I think fundamentally shows that they had no
30:00
Speaker 7: intention of sort of looking at the facts or following
30:04
Speaker 7: the requirements of the law. They had essentially looked at
30:07
Speaker 7: the transaction and knew that it was a political hot
30:10
Speaker 7: potato and we're currying favor with voters in a swing
30:14
Speaker 7: state by saying, you know, we're never going to let
30:15
Speaker 7: this go forward. But that's not what the law allows
30:19
Speaker 7: the president to do.
30:21
Speaker 2: The steel companies say that the Scythius panel sent a
30:24
Speaker 2: seventeen page letter of security concerns Riddle with inaccuracies over
30:30
Speaker 2: the Labor Day weekend and only gave them one business
30:33
Speaker 2: day to respond, and they claimed that the scipious staff
30:38
Speaker 2: were told not to offer counter proposals or engage in discussions. That,
30:44
Speaker 2: on its face, if true, seems to support the steel
30:48
Speaker 2: company's arguments.
30:50
Speaker 7: I think that's right, and I think it's important to
30:52
Speaker 7: draw out that distinction, which is that the President did
30:56
Speaker 7: this to Knipon Steel and US Steel, and the President
30:59
Speaker 7: also did the Pacifius itself. You know, I think the
31:02
Speaker 7: career staff at Syphius. They are quite good at running
31:05
Speaker 7: their process, and so when you see things like a
31:09
Speaker 7: seventeen page letter that again allegedly was riddled with factual inaccuracies,
31:15
Speaker 7: that's not the type of thing that you would ordinarily
31:17
Speaker 7: see out of Pythias, and I think it would show
31:19
Speaker 7: you that Siphius was being ordered to do something that
31:22
Speaker 7: it really didn't have evidence or justification to do, and
31:25
Speaker 7: so they were sort of put in a position where
31:27
Speaker 7: they had to stretch to meet the directive from above.
31:30
Speaker 2: Presidents have brought authority to determine what constitutes a national
31:35
Speaker 2: security threat. Can the president's authority here be challenged successfully
31:40
Speaker 2: in court?
31:42
Speaker 6: This is the.
31:42
Speaker 7: Novel issue here, which is, you know, courts historically for
31:46
Speaker 7: centuries have deferred to the president on questions of national security,
31:51
Speaker 7: you know, the substantive decision making regarding what counts as
31:54
Speaker 7: a national security threat and what does not. So in
31:57
Speaker 7: that regard, the president does have broad authorities and it's
31:59
Speaker 7: hard to challenge them. But here, I think what the
32:02
Speaker 7: parties are saying is that the process itself was still flawed.
32:04
Speaker 7: They were denied their rights from the beginning, and ultimately
32:07
Speaker 7: what the president was doing was not making a national
32:10
Speaker 7: security determination. What the president was doing was making a
32:13
Speaker 7: political determination. And so I think that's the really interesting issue,
32:17
Speaker 7: at least in my mind, that the courts are going
32:19
Speaker 7: to have to consider, is, you know, when a president
32:23
Speaker 7: pretty clearly is engaged in political behavior but just claiming
32:28
Speaker 7: that it's national security decision making, what degree of deference
32:31
Speaker 7: does a court have to give the president in those situations?
32:34
Speaker 7: And I think that's a nuanced and a novel question,
32:37
Speaker 7: in one where I think the parties may have more
32:40
Speaker 7: traction than if it were, you know, pretty clearly a
32:43
Speaker 7: standard national security type decision that maybe the parties didn't
32:47
Speaker 7: like or maybe they thought that the president was going
32:49
Speaker 7: too far. But I don't even think there was really
32:52
Speaker 7: much of an attempt to call this, you know, national security.
32:55
Speaker 7: This was economic nationalism, This was election year politics, This
32:59
Speaker 7: was all sorts of things, but it was not national security.
33:02
Speaker 2: The companies here are basically making a due process argument.
33:07
Speaker 2: And nearly a decade ago, there was a court challenge
33:10
Speaker 2: to the Sifius review process and the president's authority over
33:15
Speaker 2: foreign business deals that concerned a Chinese owned company, and
33:19
Speaker 2: a federal appeals court ruled that the company's due process
33:22
Speaker 2: rights were violated by the Scifius review, but still the
33:26
Speaker 2: court didn't overturn President Barack Obama's order that the Chinese
33:30
Speaker 2: company had to sell. Does that case have relevance here?
33:34
Speaker 4: Right?
33:34
Speaker 7: That was a little different. I think that case is
33:37
Speaker 7: instructive in that, first of all, due process challenges can
33:41
Speaker 7: be successful when the Syfius process itself is corrupted. And
33:45
Speaker 7: so in that case, Fifius pursued an action against a
33:49
Speaker 7: Chinese acquirer of wind farms that were next to military
33:52
Speaker 7: airspace that was used to train unman burial vehicles, and
33:56
Speaker 7: Sifias issued an interim ortar very early in the process.
34:00
Speaker 7: They ordered the deconstruction of windmills, they ordered that the
34:04
Speaker 7: acquirer not access to property, They ordered all sorts of
34:07
Speaker 7: extremely onerous things. And what the parties argued there was
34:10
Speaker 7: that essentially the order from Syphius was so onerous that
34:14
Speaker 7: it was equivalent to blocking the transaction, and really only
34:18
Speaker 7: the President of the United States has the authority to
34:20
Speaker 7: block a transaction. And so I think there they got
34:23
Speaker 7: a lot of traction on that angle, which was that
34:26
Speaker 7: there are limitations to what Syphius as a committee can do.
34:29
Speaker 7: And then additionally they got some traction on the notion
34:32
Speaker 7: that SPHIUS does have to provide some information about its
34:36
Speaker 7: decision making process when it's going to take an adverse
34:39
Speaker 7: action against the party. And then again when that process
34:43
Speaker 7: was rerun and when the decision was in Obama's hands,
34:46
Speaker 7: there was not a substantive way to challenge a president's
34:51
Speaker 7: decision on national security grounds. But the parties did make
34:54
Speaker 7: a lot of progress on the procedural violations.
34:57
Speaker 2: So do you think it's possible that a court would
35:01
Speaker 2: order another review by Ciphius here?
35:03
Speaker 7: Yeah, I think it's possible that a court would order
35:05
Speaker 7: another review. It's clear that the process was corrupted from
35:09
Speaker 7: even before day one, and so in that regard, whatever
35:12
Speaker 7: sort of the maximal remedy for due process violations is,
35:17
Speaker 7: any court should provide that remedy, you know. And then
35:19
Speaker 7: I think the next question, which is, Okay, there's going
35:22
Speaker 7: to be a new administration in town. The next president
35:25
Speaker 7: has come out against this transaction. What happens there? And
35:29
Speaker 7: this is just sort of crystal ball talk here, but
35:31
Speaker 7: I do think that the parties are presented with an
35:34
Speaker 7: opportunity to actually reach some kind of a deal with
35:37
Speaker 7: the new administration. When you look at all of the
35:39
Speaker 7: commitments that Nipon Steel was willing to make to get
35:43
Speaker 7: the deal done. I think ultimately that transaction was really
35:47
Speaker 7: really good for the steel workers and for US steel,
35:51
Speaker 7: and for our domestic steel industry and for our supply
35:56
Speaker 7: chain security. I think that the parties may well be
35:59
Speaker 7: able to make a compelling pitch to the next administration
36:03
Speaker 7: and find a way to get a deal done the
36:04
Speaker 7: next administration, you know. I think they pride themselves in
36:07
Speaker 7: finding ways to get deals done, and I think when
36:09
Speaker 7: they look at what's being offered, they may find something
36:11
Speaker 7: very compelling.
36:12
Speaker 2: At that and if all else fails, might assert petition
36:16
Speaker 2: to the Supreme Court be ahead.
36:18
Speaker 7: There are some novel legal questions here that I would
36:21
Speaker 7: love to see in the hands of the Supreme Court,
36:23
Speaker 7: because I think it's really critical, really really critical, not
36:28
Speaker 7: just for the scipious process and not just for transaction parties,
36:32
Speaker 7: but I really think for everyone. It's important that we
36:35
Speaker 7: come up with some idea that no president can just
36:37
Speaker 7: you know, wave a wand and call something national security
36:40
Speaker 7: and then be exempt from all scrutiny. More and more
36:43
Speaker 7: things are being called national security, and at some point
36:47
Speaker 7: we have to have some guardrails.
36:48
Speaker 2: Thanks so much for joining me on the show. John.
36:51
Speaker 2: That's John Kabilo, who specializes in cross border transactions. And
36:56
Speaker 2: that's it for this edition of The Bloomberg Law Show.
36:58
Speaker 2: Remember you can always get the LA legal news on
37:01
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37:05
Speaker 2: and at www dot Bloomberg dot com slash podcast Slash Law,
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Speaker 2: And remember to tune into The Bloomberg Law Show every
37:13
Speaker 2: weeknight at ten pm Wall Street Time. I'm June Grosso
37:17
Speaker 2: and you're listening to Bloomberg