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New SCOTUS Term Kicks Off & More Deals Abandoned · Bloomberg Law

0:03
Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio.
0:10
Speaker 1: The Supreme Court kicks off its new term on Monday.
0:13
Speaker 1: The justices are coming off a blockbuster term with several
0:18
Speaker 1: highly controversial decisions that divided the justices down ideological lines.
0:24
Speaker 1: The Court continues to face criticism and calls for reform
0:28
Speaker 1: after ethical controversies, and public trust in the Court has
0:32
Speaker 1: continued its downward slide to historic lows. Several blockbuster cases
0:37
Speaker 1: involving transgender rights, ghost guns, and online pornography are already
0:43
Speaker 1: scheduled for this term, but it's shaping up to be
0:46
Speaker 1: less contentious than last at least so far. More cases
0:51
Speaker 1: will be added to the docket. Joining me is former
0:53
Speaker 1: United States Solicitor General Gregory Garr, the Global Chair of
0:57
Speaker 1: the Supreme Court in appellate practice at least Nathan and
1:00
Speaker 1: Watkins greg the Supreme Court's coming off this blockbuster term
1:05
Speaker 1: some highly controversial six to three decisions. There are continuing
1:10
Speaker 1: calls for reform. Public trust is on a downward slide
1:14
Speaker 1: to historic lows, and some of the justices themselves have
1:18
Speaker 1: publicly expressed concerns about the court. What's on the line,
1:23
Speaker 1: if anything, for the Court this term.
1:25
Speaker 2: Well, I think a lots on the line. Every year
1:28
Speaker 2: for the Supreme Court is a big year. As you say,
1:30
Speaker 2: there's been some clouds surrounding the Supreme Court recently, and
1:35
Speaker 2: so they've got to go back to work and they've
1:37
Speaker 2: got to, you know, as always, work on building and
1:40
Speaker 2: sustaining the public trust. They've got twenty eight cases so far,
1:43
Speaker 2: which is light as the docket's been in recent terms.
1:46
Speaker 2: But things always heat up in October and we expect
1:49
Speaker 2: that the Court will add to its docket, and for
1:52
Speaker 2: all we know, there could be election related cases down
1:54
Speaker 2: the pipeline as well.
1:55
Speaker 1: Let's take a look at some of the cases that
1:57
Speaker 1: are coming up, starting with a few cases that are
2:00
Speaker 1: going to be argued next week. On Tuesday, the justices,
2:04
Speaker 1: we'll hear arguments in the case of Garland versus Van Derstock,
2:09
Speaker 1: a high profile case involving a challenge to the Biden
2:13
Speaker 1: administration's regulation of ghost guns. Tell us about the issue here.
2:19
Speaker 2: So, the Court has taken a number of gun cases
2:22
Speaker 2: in recent years, and they sort of fall into two dockets.
2:25
Speaker 2: One set of cases involves challenges under the Second Amendment
2:29
Speaker 2: in the individual right to bear firearms and The second
2:33
Speaker 2: involves more traditional administrative law type challenges, where the argument
2:37
Speaker 2: is that an agency has passed a rule involving guns
2:40
Speaker 2: that exceeds its statutory authority. The ghost gun case falls
2:44
Speaker 2: into that latter category. As you noted, it involves a
2:47
Speaker 2: challenge of twenty twenty two regulation by the Bureau of Alcohol,
2:51
Speaker 2: Tobacco and Firearms that defines kits that are sold with
2:55
Speaker 2: parts that can be used to assemble a gun as
2:57
Speaker 2: little as thirty minutes. And the rule says that those
3:00
Speaker 2: kits qualify as a firearm under the Gun Control Act
3:04
Speaker 2: and can be regulated as such. And that's important, the
3:07
Speaker 2: government claims, because the guns, once assembled, lack serial numbers,
3:12
Speaker 2: and so that's why they're known as ghost guns. So
3:16
Speaker 2: this case is a lot like the bump stock case
3:18
Speaker 2: that the Supreme Court decided last year Garland versus Carhill.
3:22
Speaker 2: In that case, the court invalidated a rule regulating bump
3:25
Speaker 2: stocks as going beyond the technical definition in a statute
3:29
Speaker 2: of barring machine guns. So we can expect a very
3:33
Speaker 2: technical review of the part kits and ghost guns in
3:37
Speaker 2: this case and whether that assemblage qualifies as a firearm
3:42
Speaker 2: under the Gun Control Act. The Court previously undered in
3:45
Speaker 2: order in this case, allowing the government to reinstate the
3:48
Speaker 2: rule while it was being litigated. But Justices Thomas, Alito
3:51
Speaker 2: and Gorsich and Kavanaugh all descended from that, which means
3:55
Speaker 2: that the Chief Justice and Justice Barrett likely hold the
3:58
Speaker 2: controlling votes in this case.
4:00
Speaker 1: The Fifth Circuit upheld the lower court's decision to strike
4:04
Speaker 1: down the regulation. What was the reasoning there?
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Speaker 2: Again, this is a statutory interpretation case, and it involves
4:12
Speaker 2: the technical terms of the statute, including the particular parts
4:17
Speaker 2: the frames and receivers, and whether or not the agency's
4:20
Speaker 2: interpretation of that is reasonable in light of the statutory
4:25
Speaker 2: definition of firearms. I mean, it's a gun case, but
4:27
Speaker 2: it's really a conventional statutory interpretation case.
4:31
Speaker 1: Considering that the court throughout the federal ban on bump stocks,
4:37
Speaker 1: I'm wondering why they took this case, which is similar.
4:42
Speaker 2: Well, it's a different issue, and it's a very important
4:44
Speaker 2: issue according to the sisterenor General who asked the Court
4:48
Speaker 2: to take this case. So in light of that request,
4:51
Speaker 2: it's less surprising that the Court agreed to hear it,
4:54
Speaker 2: and I think all agree that the issue is quite important.
4:57
Speaker 1: Can you read anything into the fact that the Court
5:00
Speaker 1: is allowing the rule to be enforced until it's settled
5:05
Speaker 1: at the Supreme Court.
5:06
Speaker 2: I wouldn't read too much into that June. You know,
5:09
Speaker 2: now that the case is before the Court, I think
5:11
Speaker 2: the justices will take a close look at it. I
5:13
Speaker 2: think what is significant is that in that prior order
5:16
Speaker 2: you had four justices descending, so you can expect that
5:19
Speaker 2: those justices are probably skeptical of the rule as it
5:23
Speaker 2: arrives at the Court.
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Speaker 1: The Justice is sidestepped a lot of appeals over the
5:29
Speaker 1: Second Amendment, including challenges to bands in Illinois and assault
5:33
Speaker 1: style weapons, federal bands on firearm possession by felons. Do
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Speaker 1: you think they're taking a break from the Second Amendment.
5:40
Speaker 2: I think some of them would like to take a
5:41
Speaker 2: break from the Second Amendment, but the cases keep coming.
5:45
Speaker 2: The recent decision a few terms ago in Bruin sort
5:48
Speaker 2: of re establishing the framework for evaluating Second Amendment challenges,
5:51
Speaker 2: has created a lot of litigation. There's more cases in
5:54
Speaker 2: the pipeline, so I think whether anyone likes it or not,
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Speaker 2: I think we're going to see a stream of cases
6:00
Speaker 2: arriving at the Supreme Court.
6:02
Speaker 1: Now next week on Wednesday, Oral arguments in a death
6:06
Speaker 1: penalty case Glossop versus Oklahoma, And this goes back to
6:10
Speaker 1: two thousand and four when Richard Glossip was convicted of
6:15
Speaker 1: murder and sentenced to death. Nine execution dates have been
6:18
Speaker 1: set for him, and he's had his last meal three times.
6:21
Speaker 1: According to the Death Penalty Information Center, it seems as
6:25
Speaker 1: if over the years the case against him has fallen
6:28
Speaker 1: apart in many ways.
6:30
Speaker 2: This is truly someone who has had almost nine lives already.
6:33
Speaker 2: So he was sentenced to death for a killing at
6:36
Speaker 2: a motel in Oklahoma City a couple of decades ago,
6:40
Speaker 2: in which the case really turned on the testimony of
6:44
Speaker 2: one individual who worked at the hotel and who said
6:47
Speaker 2: that Richard Glossip paid the mand to kill the victim.
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Speaker 2: And what makes this case really interesting today is that
6:55
Speaker 2: Golossop's challenge is now supported by the people who sought
6:59
Speaker 2: the death only against him, the prosecution prosecutor's attorney general
7:03
Speaker 2: in this case of Oklahoma, who now agrees, based on
7:07
Speaker 2: newly discovered evidence, that glossip conviction is tainted by constitutional errors,
7:12
Speaker 2: including a very important Brady error. Brady is the decision
7:17
Speaker 2: in which puts an obligation on the prosecution to come
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Speaker 2: forward with exculplatory evidence in criminal cases. In this case,
7:25
Speaker 2: the claim is based on the prosecution's failure to turn
7:28
Speaker 2: over exculplatory evidence that bore in the credibility of the
7:31
Speaker 2: state's star witness, again, this man who claimed that Glossip
7:35
Speaker 2: paid him to kill the victim. The Oklahoma Court of
7:37
Speaker 2: Appeals refused to set aside glossop death sentence, even notwithstanding
7:42
Speaker 2: the Attorney General's own confession of error in the case.
7:45
Speaker 2: Supreme Court, which hasn't taken many death cases in the
7:48
Speaker 2: past few years, granted review. So now it'll be really
7:52
Speaker 2: interesting to see what the Supreme Court does as it
7:55
Speaker 2: reviews glossip claims of constitutional error, again with the attorney
7:59
Speaker 2: general roll of the state separately represented, arguing alongside gloss Up,
8:05
Speaker 2: and then looking in the background of this case is
8:07
Speaker 2: the interesting question of how courts should treat a state's
8:10
Speaker 2: own confession of error in a decade's old case. On
8:14
Speaker 2: the one hand, you would think that would be a
8:15
Speaker 2: pretty compelling reason to re examine and perhaps set aside
8:18
Speaker 2: a conviction. On the other hand, there have been some
8:21
Speaker 2: concerns of political considerations that could enter the mix. As
8:24
Speaker 2: you go from one administration to the next, so that
8:27
Speaker 2: the court's going to take a close and fresh look
8:29
Speaker 2: at this case.
8:30
Speaker 1: The Court's not going to consider all the alleged errors
8:33
Speaker 1: by police and prosecutors, but just that prosecutors didn't turn
8:38
Speaker 1: over these handwritten notes that the state's key witness was
8:42
Speaker 1: suffering from a serious mental disorder.
8:46
Speaker 2: Yeah, that's exactly right. There are a lot of claims
8:48
Speaker 2: in the case, but the Supreme Court's review here is
8:51
Speaker 2: going to focus on that Brady error, which involved the
8:54
Speaker 2: failure to turn over those notes, which mister Glossip claims
8:58
Speaker 2: could have been used to impeach this witness, whose testimony
9:02
Speaker 2: The case, I think both sides agree, basically turned on.
9:05
Speaker 1: So the Supreme Court, as you mentioned, hasn't taken many
9:09
Speaker 1: death penalty cases recently, and there's a history of finding
9:14
Speaker 1: that state convictions should remain final even if there is
9:19
Speaker 1: later evidence that they may be unreliable. The Supreme Court,
9:23
Speaker 1: in a six or three decision last week, allowed Zuri
9:26
Speaker 1: to execute a man for a murder even though his
9:29
Speaker 1: conviction was contested by prosecutors. So, no matter how strong
9:34
Speaker 1: the evidence, if they stick to the idea that state
9:38
Speaker 1: convictions should be final. Will it make any difference.
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Speaker 2: I think you're right June that the Court has been
9:44
Speaker 2: hesitant to overturn state court convictions. In a way, it
9:49
Speaker 2: has to be because of the statutory law governing habeas
9:52
Speaker 2: corpus and the like. But nevertheless, here there are clean
9:57
Speaker 2: constitutional claims of error, including brain and that's something that
10:01
Speaker 2: justices on both sides of the ideological spectrum. They have
10:05
Speaker 2: taken very seriously, and the fact that this is a
10:07
Speaker 2: death case only raises the stake. So I think it's
10:11
Speaker 2: the court it looks at this record and agrees there
10:14
Speaker 2: is constitutional error here. I would surprise if it didn't
10:17
Speaker 2: take some form of corrective action. But there's no doubt
10:20
Speaker 2: that those challenging death sentences face an uphill battle before
10:24
Speaker 2: the current court.
10:26
Speaker 1: So now, perhaps the highest profile case so far on
10:29
Speaker 1: the docket involves a polarizing issue across the country. Tennessee's
10:35
Speaker 1: ban on gender transition care for miners tell us about
10:39
Speaker 1: the issue here.
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Speaker 2: So this is really the one big culture war case
10:43
Speaker 2: that's currently on the docket right now. It involves a
10:47
Speaker 2: challenge to a Tennessee law that bars gender type medical
10:50
Speaker 2: procedures or treatment for miners, including surgeries and puberty blockers
10:55
Speaker 2: and hormone treatments and the like. And it's a lot
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Speaker 2: that twenty one other states have acted right now in
11:00
Speaker 2: similar form, and several individuals, backed by the Biden administration itself,
11:05
Speaker 2: have challenged the law on the ground that it rests
11:08
Speaker 2: on a sex based classification that violates the Equal Protection Clause.
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Speaker 2: The six Circuit upheld the law below Supreme Court grant review,
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Speaker 2: and that the key question now is whether the law
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Speaker 2: triggers heightened scrutiny under the equal Protection clause or instead
11:25
Speaker 2: the much lower rational basis review. And that turns on
11:28
Speaker 2: whether you view the Tennessee laws making a classification based
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Speaker 2: on sex or instead one that is based on the
11:35
Speaker 2: regulation of access to medical care and that acts on
11:39
Speaker 2: an even handed basis among miners regardless of sex. And
11:42
Speaker 2: what's interesting about this is that question implicates a case
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Speaker 2: from a few terms ago Bostk versus Clayton County, in
11:49
Speaker 2: which the Court, in a closely divided opinion written by
11:52
Speaker 2: Justice Gorsicic joining with the more liberal justices, held the
11:55
Speaker 2: Title seven's prohibition against sex based discrimination applies to sexual orientation.
12:01
Speaker 2: So the US argues that the reason of mastak leads
12:04
Speaker 2: to the conclusion that laws concerning access to gender treatments
12:07
Speaker 2: are sex based in the sense that one who is
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Speaker 2: male at birth can get testosterone treatments, but a female
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Speaker 2: at birth can't, Whereas the state argues in this case
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Speaker 2: that the law doesn't draw any distinction based on sex
12:22
Speaker 2: because it simply applies to all minors and borrowers access
12:25
Speaker 2: to these treatments, and the case of gender type procedures
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Speaker 2: for all individuals regardless of sex. And then lurking in
12:32
Speaker 2: the background of this case is a debate over the
12:35
Speaker 2: medical importance of these treatments for those seeking access to them,
12:39
Speaker 2: which could well color the legal arguments on both sides
12:42
Speaker 2: of the case.
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Speaker 1: You mentioned that about two dozen states have laws restricting
12:47
Speaker 1: access to therapies like this, So could this decision establish
12:52
Speaker 1: a landmark legal precedent.
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Speaker 2: I think it's going to be quite important because this
12:57
Speaker 2: is one of the early cases in which the Court
13:00
Speaker 2: as confronted issue of transgender rights and laws drawing classifications
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Speaker 2: of this type. So, although I suspect that the Court's
13:10
Speaker 2: decision will be focused on the Tennessee law at issue here,
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Speaker 2: I think it could have long term implications for laws
13:18
Speaker 2: and actions dealing with this important question.
13:21
Speaker 1: Coming up next on the Bloomberg Law show cases involving
13:24
Speaker 1: flavored vapes and e cigarettes, environmental rules, and securities, fraud lawsuits.
13:30
Speaker 1: I'm June Grosso and you're listening to Bloomberg. The Supreme
13:34
Speaker 1: Court's new term starts on Monday, and I've been talking
13:38
Speaker 1: to former US Solicitor General Gregory gar about some of
13:42
Speaker 1: the noteworthy cases the justices will be deciding. Another case
13:46
Speaker 1: involving miners is Free Speech Coalition versus Paxton. It's about
13:52
Speaker 1: age verification for pornographic websites.
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Speaker 2: So Texas enacted a law that says that any website
14:00
Speaker 2: that publishes pornographic or other harmful material must require users
14:05
Speaker 2: to verify that they're eighteen years or older in order
14:08
Speaker 2: to access the site using various forms of virtual ideas.
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Speaker 2: And the argument that the plan is brought in this
14:15
Speaker 2: case is that the law violates the First Amendment by
14:18
Speaker 2: burdening adults rights to access the material on such websites
14:22
Speaker 2: by basically making it more burdens than their cumbersome to
14:25
Speaker 2: have to show an idea or the like to get
14:27
Speaker 2: onto the site. The Fifth Circuit upheld the law in
14:30
Speaker 2: the Supreme Court granted review. There's another case where the
14:32
Speaker 2: big question is how strictly the court has to review
14:36
Speaker 2: the law. Do you apply strict scrutiny or the much
14:38
Speaker 2: lower form of review rational basis, And that turns on
14:41
Speaker 2: the Court's reading of a fifty five year old case
14:44
Speaker 2: called Ginsburg versus New York in nineteen sixty eight, in
14:47
Speaker 2: which the Court held that the States may restrict miners'
14:50
Speaker 2: access to pornographic material. But in more recent cases, including
14:55
Speaker 2: case ten years or so ago in Ashcroft versus acl You,
14:58
Speaker 2: the Court is subjected laws restricting adult access to websites
15:02
Speaker 2: and the like to strict scrutiny. And this court is
15:05
Speaker 2: established itself as very pro First Amendment and arguably is
15:09
Speaker 2: one of the most pro First Amendment courts in the
15:11
Speaker 2: Court's history. So it'll be interesting to see how it
15:15
Speaker 2: analyzes this law.
15:16
Speaker 1: So the Supreme Court in April refused a request by
15:20
Speaker 1: the challengers to halt enforcement of the law while litigation
15:25
Speaker 1: in the dispute proceeds. Every time they do something like that,
15:28
Speaker 1: I say, does that indicate where they're going here?
15:31
Speaker 2: I mean, of course, if the court really hates a law,
15:34
Speaker 2: it's going to prevent it from being in forced, so
15:36
Speaker 2: that that's a strong indication it's not going to get
15:39
Speaker 2: a favorable reception when it arrives. But it's a really
15:42
Speaker 2: high standard to invalidate a law during litigation. And so
15:46
Speaker 2: I think that's, you know, one sort of tea leaf.
15:48
Speaker 2: But I think that in itself is unlikely to tell
15:50
Speaker 2: us much about how the court would resolve this case.
15:53
Speaker 2: So this this well could be a case that involves
15:55
Speaker 2: an interesting lineup in a narrow decision.
15:58
Speaker 1: So another case from the fifth This is about the
16:02
Speaker 1: FDA's efforts to curb flavored vapes and e cigarettes.
16:07
Speaker 2: And here it's a challenge to the FDA's defense of
16:11
Speaker 2: its rejection of the applications by two companies who sell
16:15
Speaker 2: flavored vaping products. And the FDA declined the application, as
16:19
Speaker 2: it has done for most similar applications, because of public
16:21
Speaker 2: health concerns stemming from the use of flavored vaping products
16:26
Speaker 2: and the attraction of minors. And so the companies argued
16:29
Speaker 2: here that the FDA had violated the Administrative Procedures Act
16:33
Speaker 2: by acting arbitrarily and capriciously in that it had engaged
16:36
Speaker 2: in sort of an unfair surprise by changing the rules
16:39
Speaker 2: for evaluating these applications in midstream with that fair notice
16:44
Speaker 2: and improperly refusing to consider certain evidence. It was something
16:48
Speaker 2: of a surprise that the Fifth Circuit here broke with
16:51
Speaker 2: other courts that had faced similar challenges and finding that
16:54
Speaker 2: the FDA had acted unlawfully into supproving these applications. And
16:58
Speaker 2: so I think that this could be a sleeper case.
17:01
Speaker 2: And it's definitely an interesting case to follow, because it's
17:05
Speaker 2: really more of a Nuts and Bolt's administrative law case
17:08
Speaker 2: than sort of an e cigarette case. But a decision
17:11
Speaker 2: by the Supreme Court in this case upholding the Fifth
17:14
Speaker 2: Circuit I think would invigorate arbitrary and capricious challenges to
17:18
Speaker 2: all sorts of rules. And one thing that we've seen
17:21
Speaker 2: in the past few years, as you know, is the
17:24
Speaker 2: Supreme Court taking an intense interest in administrative law cases
17:27
Speaker 2: and really sort of pushing back on various aspects of
17:31
Speaker 2: the administrative state. Kept off last term, of course, in
17:35
Speaker 2: the decision overturning Chevron deference.
17:38
Speaker 1: Yes, I say the Court has taken a sledgehammer to
17:41
Speaker 1: agency power. Perhaps a too intense description there, but what
17:45
Speaker 1: could be the implications of ruling against the FDA in
17:49
Speaker 1: a case like this where health of children is concerned,
17:54
Speaker 1: and you know the FDA's authority over health concerns in general,
18:00
Speaker 1: or is it just about the standard of arbitrarian capricious.
18:03
Speaker 2: In a sense, it's broader, June. I think it does
18:07
Speaker 2: raise public health implications of allowing these sorts of products
18:11
Speaker 2: which FDA is regulating. And of course, if the Supreme
18:13
Speaker 2: Court affirms the Fifth Circuit here, it doesn't mean that
18:16
Speaker 2: the applications would be granted. It would mean that the
18:18
Speaker 2: FDA would have to go back and take another look
18:20
Speaker 2: at them, presumably. But the broader implications here are if
18:24
Speaker 2: the Supreme Court agrees that the agencies acted arbitrarily here,
18:30
Speaker 2: then I think what it would mean is that courts
18:31
Speaker 2: would have to take a much closer look at agency
18:35
Speaker 2: decision making and claims that agencies have changed the rules
18:40
Speaker 2: sort of in the course of an administrative decision making process.
18:44
Speaker 2: That's the sort of claim that agencies, you know, typically
18:48
Speaker 2: at one a decade or so ago. And you know,
18:51
Speaker 2: it's tough for sledding these days. So I do think
18:53
Speaker 2: that this is a really important case to keep our
18:56
Speaker 2: eyes home.
18:57
Speaker 1: Next, let's turn to a completely different area involving standards
19:02
Speaker 1: for investor claims in shareholder lawsuits in Vidia versus e
19:08
Speaker 1: Omen j out of the Ninth.
19:10
Speaker 2: Circuit, so this is a technical securities case. The question
19:14
Speaker 2: is whether the heightened pleading requirements of the private securities
19:17
Speaker 2: litigation format apply to allegations of security fraud based on
19:21
Speaker 2: internal company documents. Such a plan of seeking to establish
19:25
Speaker 2: center using company documents have to allege the actual contents
19:30
Speaker 2: of those documents, and the question tends to come up
19:33
Speaker 2: when securities planet is claim that a company's internal documents
19:37
Speaker 2: contradict its public statements that the company's executives and the
19:41
Speaker 2: like are making two investors. But oftentimes, or sometimes at
19:44
Speaker 2: least the planets don't actually have their hands on the documents,
19:47
Speaker 2: so they're making allegations based on what they surmise are
19:49
Speaker 2: in the documents. In this case, the planeffs claim that
19:52
Speaker 2: the CEO of Navidia, a company in the manufacturer's computer chips,
19:56
Speaker 2: made public statements at odds with the company's reports about
19:59
Speaker 2: what other or crypto miners or gamers were buying their chips,
20:03
Speaker 2: which became important when NA Video's revenues dropped after the
20:07
Speaker 2: twenty eighteen crypto crash. The Planets argue that imposing a
20:11
Speaker 2: heightened pleading standard in this context is at odds with
20:14
Speaker 2: the PSLRA and the court's prior precedents, and the Supreme Court,
20:19
Speaker 2: though in prior cases, has generally sort of rigorously enforced
20:23
Speaker 2: these heightened pleading standards. There's a related question that comes
20:26
Speaker 2: up in this case which is interesting, which is whether
20:28
Speaker 2: a planeff can rely on expert testimony itself to establish
20:33
Speaker 2: the falsity of internal documents based on an assumption of
20:37
Speaker 2: what the information the documents contain. So that'll be one
20:40
Speaker 2: we want to follow as well. You know, the backdrop
20:42
Speaker 2: of this case is that business really has had something
20:46
Speaker 2: of a mixed record before this court in the past
20:48
Speaker 2: few terms. This is not a court that is reflectively
20:51
Speaker 2: ruling in favor of business, and so it will be
20:55
Speaker 2: interesting to follow this case and see where the court
20:57
Speaker 2: ends up here.
20:58
Speaker 1: So a decision here would give companies leverage for earlier
21:03
Speaker 1: dismissal of shareholder lawsuits.
21:06
Speaker 2: Exactly If the heightened pleating standards apply to these sorts
21:09
Speaker 2: of claims and internal documents, then it's going to be
21:12
Speaker 2: much harder for plantiffs to bring claims based on internal
21:16
Speaker 2: company documents because they often don't have access to the
21:19
Speaker 2: full contents of those documents.
21:21
Speaker 1: Next, let's discuss a case on water pollution in the
21:25
Speaker 1: EPA's powers. And this case involves San Francisco versus the EPA,
21:30
Speaker 1: which is not one of the cities I would expect
21:32
Speaker 1: to go against the EPA. So tell us what San
21:35
Speaker 1: Francisco's case against the EPA is.
21:37
Speaker 2: Yeah, it's kind of an indication of where we arrived
21:40
Speaker 2: with aggressive environmental enforcement, where you've got San Francisco itself
21:44
Speaker 2: taking on the EPA. So this case arises out of
21:47
Speaker 2: a permit issued by EPA under the Clean Water Act
21:50
Speaker 2: for San Francisco's discharge of sewage into the Pacific Ocean.
21:53
Speaker 2: And the question is whether the Clean Water Act authorizes
21:56
Speaker 2: EPA to impose general water quality standards in San Francisco
22:00
Speaker 2: and other jurisdictions for the quality of the receiving waters,
22:04
Speaker 2: as opposed to specific what's called effluent limitations on discharges.
22:09
Speaker 2: San Francisco itself taking on the EPA. So, San Francisco
22:12
Speaker 2: argues that the Clean Water Act was intentionally designed to
22:15
Speaker 2: enable EPA to regulate what was coming out of the
22:17
Speaker 2: pipe or what's known as point sources through these effluent
22:21
Speaker 2: limitations which impose specific limits on particular pollutants, and that
22:25
Speaker 2: you know, EPA is sort of changing the game when
22:28
Speaker 2: it's trying to impose general water quality standards on the
22:32
Speaker 2: regulated which then is much more abstract and difficult for
22:36
Speaker 2: jurisdictions to comply with. But EPA says not so fast.
22:40
Speaker 2: EPA says that that the Clean Water Act can't be
22:42
Speaker 2: interpreted that narrowly, that although it refers to effluent limitations
22:47
Speaker 2: on discharge, that it also allows EPA to regulate water
22:51
Speaker 2: quality in other ways. The case really boils down to
22:55
Speaker 2: whether EPA's interpretation violates the Administrative Proceedure Act on the
22:58
Speaker 2: ground that it contravenes the statute. Now, this is exactly
23:01
Speaker 2: the sort of thing to which EPA would have asked
23:04
Speaker 2: for and received Chevron deference a decade or so ago,
23:07
Speaker 2: and after the liver Bright decision last term, though, it's
23:10
Speaker 2: going to have to fight this one out on the
23:11
Speaker 2: level playing field.
23:13
Speaker 1: And do you think that lowber Bright and the courts,
23:17
Speaker 1: I'm going to say, tendency to eliminate environmental protections or
23:22
Speaker 1: to rule against the EPA. I mean, last term they
23:25
Speaker 1: split about blocking the EPA's good neighbor ozone emission rule.
23:30
Speaker 1: I mean, do you think that bodes ill for the
23:32
Speaker 1: EPA here?
23:33
Speaker 2: I think it could. I mean there's been something of
23:36
Speaker 2: a perfect storm where you combine aggressive agency enforcement with
23:41
Speaker 2: reliance on broad statutory provisions, which is where what we've
23:46
Speaker 2: seen come up time and again in these cases. And
23:48
Speaker 2: if that's the way the Supreme Court views this case,
23:51
Speaker 2: then EPA may be in for a fight.
23:54
Speaker 1: Thanks so much, Greg for joining me again in our
23:56
Speaker 1: yearly preview of the Supreme Court term. Former Uslicitor General
24:01
Speaker 1: Gregory Garr, a partner at Latham and Watkins. Coming up next.
24:05
Speaker 1: Why deals are collapsing? This is bloomberg. The Biden administration
24:12
Speaker 1: is touting the fact that so many potential deals are
24:15
Speaker 1: being abandoned under its policy of pushing for fewer settlements
24:20
Speaker 1: and more lawsuits. Firms attracting antitrust scrutiny are abandoning deals
24:25
Speaker 1: at their highest clip in years. Six significant merger inquiries
24:30
Speaker 1: during the first half of the year ended with the
24:32
Speaker 1: Federal Trade Commission or the Department of Justice saying the
24:35
Speaker 1: party's nixt a proposed transaction that figure exceeds yearly totals
24:41
Speaker 1: from the previous decade, according to a report from the
24:44
Speaker 1: law firm Deckert. Joining me is William Kavasik, former chair
24:48
Speaker 1: of the FTC and a professor at George Washington University
24:52
Speaker 1: Law School. I wanted to start with getting your first
24:56
Speaker 1: reaction to the report that firm attracting antitrust scrutiny are
25:02
Speaker 1: abandoning deals at the highest level in years.
25:07
Speaker 3: My sense in talking to friends who are counseling companies
25:11
Speaker 3: is that's true. It's very difficult to judge how much
25:15
Speaker 3: in which deals are being chased off. On the one hand,
25:19
Speaker 3: the commitment to litigate cases more broadly, plus a variety
25:25
Speaker 3: of other policy adjustments that basically takes settlements out of
25:30
Speaker 3: the picture or make settlements harder to achieve, not impossible,
25:34
Speaker 3: means that at the margin, more companies are deciding not
25:38
Speaker 3: to proceed with deals. And that's not just a function
25:42
Speaker 3: of the US regime. If it's a company that does business,
25:46
Speaker 3: say in the European Union and the United Kingdom, or
25:49
Speaker 3: is a global goods and services company, the risk associated
25:54
Speaker 3: with going forward has increased in the United Kingdom and
25:58
Speaker 3: in Europe, and that means means that you not only
26:01
Speaker 3: have to cope with the additional cost delay in the
26:06
Speaker 3: United States. There is the certainty of additional reviews in
26:10
Speaker 3: other countries, so that when firms are looking at the
26:14
Speaker 3: path they have to take in order to achieve the result,
26:17
Speaker 3: they have in mind that is a more perilous path
26:20
Speaker 3: than it was before, and at a minimum, it is
26:23
Speaker 3: a path that is slower and more expensive. And I
26:27
Speaker 3: think at the margin that's discouraging companies from even pursuing
26:31
Speaker 3: certain types of deals, in part because when they turn
26:35
Speaker 3: to their internal advisors, their own internal counsel, or to
26:39
Speaker 3: external counsel and say, will this deal get through, they're
26:44
Speaker 3: being told it is highly unpredictable, it's very risky. It's
26:48
Speaker 3: risky both for the buyer but certainly for the seller
26:51
Speaker 3: as well, and that additional risk, I am certain is
26:55
Speaker 3: scaring off some transactions. It's hard to tell how many.
26:59
Speaker 1: By administration has touted these trends, But do the numbers
27:05
Speaker 1: mean that the deals are anti competitive and so the
27:08
Speaker 1: firms are banning them or just because they don't want to,
27:10
Speaker 1: as you say, go through litigation with the government or
27:13
Speaker 1: this long review process.
27:15
Speaker 3: Yeah. Part of it is that in the past, where
27:18
Speaker 3: there was a perceived problem, even if the company sought
27:22
Speaker 3: the problem didn't exist or was trivial, it was possible
27:26
Speaker 3: for them to negotiate with the FTC or the DOJ
27:30
Speaker 3: a settlement that solved the problem, either with divestitures or
27:34
Speaker 3: with behavioral commitments. That flexibility has been largely rung out
27:39
Speaker 3: of the system, where although the agencies are not completely
27:43
Speaker 3: unwilling to accept settlements, and we saw a chevron and
27:47
Speaker 3: has accept such a settlement, only just recently, the government
27:52
Speaker 3: agencies have said, by and large, we think settlements don't work,
27:55
Speaker 3: that even structural solutions are often ineffective. As a consequence,
28:01
Speaker 3: because we don't believe they work, we're willing to go
28:03
Speaker 3: to court and try and block deals rather than negotiate.
28:07
Speaker 3: So even where a competitive problem existed until the relatively
28:12
Speaker 3: recent past, the government agencies were willing to bargain and
28:15
Speaker 3: to accept settlements, that flexibility to a large degree has
28:19
Speaker 3: been taken out of the system, which means that even
28:22
Speaker 3: where companies recognize that there was a competitive problem, they've
28:26
Speaker 3: lost the ability to negotiate with the government to find
28:29
Speaker 3: a solution, or if they really want the deal to
28:32
Speaker 3: be done, they have to be willing to go to
28:34
Speaker 3: court and argue to the court. We have a solution
28:38
Speaker 3: in place to solve the problem and to persuade the
28:41
Speaker 3: court that death solution is effective.
28:43
Speaker 1: So as you say, Jonathan Canter, the DOJ's antitrust head,
28:47
Speaker 1: and FTC chair Lena Khan, have said they are skeptical
28:51
Speaker 1: that settlements or consent degrees work. Do you think they work?
28:55
Speaker 1: I mean, even if they don't work, do you just
28:57
Speaker 1: give up on them completely?
28:59
Speaker 3: I think that their concerns there's somewhat exaggerated. That the
29:03
Speaker 3: concerns I've expressed are not baseless. There is a history
29:07
Speaker 3: of failed settlements and a number of sectors. There is
29:10
Speaker 3: always a danger in settlements that, for the sake of
29:13
Speaker 3: building up numbers of enforcement events and moving matters through
29:17
Speaker 3: the system, both the parties and the agencies will step
29:21
Speaker 3: forward to the world saying we accepted a solution that
29:25
Speaker 3: protects consumers. I've never read a press release from a
29:29
Speaker 3: government agency in the US or abroad that said we
29:32
Speaker 3: accepted the settlement, but there are real risks here, and
29:36
Speaker 3: if you want to watch whether or not this works,
29:38
Speaker 3: you should focus on the following factors. That press release
29:41
Speaker 3: has never written. The press release always says we spotted
29:45
Speaker 3: the problem, and like the most skillful surgeons you ever saw,
29:49
Speaker 3: we intervene to take out all of the any competitive possibilities.
29:54
Speaker 3: The patient of competition is alive and thriving. We are
29:58
Speaker 3: the most successful competition on the earth. That's the way
30:01
Speaker 3: the settlement press release reads. But that often is a
30:05
Speaker 3: fiction or not quite right. So Assistant Attorney General Canter
30:09
Speaker 3: and fair Con are exactly right that we should perhaps
30:12
Speaker 3: be more wary about settlements. But there's a spectrum of
30:15
Speaker 3: options that range from absolute skepticism and doubt to a
30:21
Speaker 3: more critical point of view that still accepts the settlements.
30:25
Speaker 3: And here I think is what's lost in the process
30:28
Speaker 3: is that let's suppose that you have a settlement that
30:30
Speaker 3: gets you ninety percent of where you want to be.
30:32
Speaker 3: That settlement allows you to move more resources to focus
30:36
Speaker 3: on deals that are manifestly any competitives and deserve litigation challenge.
30:41
Speaker 3: If you take away the flexibility to take that ninety
30:44
Speaker 3: percent solution, it means that you better be willing to
30:48
Speaker 3: fight a much larger number of deals for which you
30:51
Speaker 3: do not have the resources to carry out all of
30:53
Speaker 3: those battles, or you are going to find quiet and
30:57
Speaker 3: more subtle ways to let deals go through that may
31:01
Speaker 3: involve some informal conceptions, may involve you waving through deals
31:05
Speaker 3: that are not so visible, that aren't tech, that aren't food,
31:09
Speaker 3: that aren't energy, in order to keep your statistics balance
31:13
Speaker 3: sheet clean with no settlements, but with prohibitions or clearances
31:18
Speaker 3: being the main option. So I think their express concerns
31:22
Speaker 3: are somewhat exaggerated, and I don't think that they quite
31:25
Speaker 3: respond to the reality of what decisions an agency has
31:29
Speaker 3: to make when it has a continuing flow of filings
31:33
Speaker 3: where you have some transactions that are going to be
31:35
Speaker 3: problematic a lot or a little, you need some flexibility
31:40
Speaker 3: to accept deals for transactions to pose a more modest
31:44
Speaker 3: competitive risk where the settlement is maybe not perfect, but
31:48
Speaker 3: it might be good enough in order to allow you
31:51
Speaker 3: to mobilize resources to focus on deals that are manifestly
31:56
Speaker 3: problematic for which you have to pursue the settlements. So
32:00
Speaker 3: to some extent, I think that they have denied themselves
32:03
Speaker 3: an element of flexibility that is very important to making
32:07
Speaker 3: the entire merger review process effective.
32:10
Speaker 1: So, Bill, can you talk a little bit about how
32:13
Speaker 1: they've also stepped up enforcement in areas that previously they
32:18
Speaker 1: didn't look to so much like labor and potential competition
32:23
Speaker 1: in vertical mergers.
32:25
Speaker 3: They've unmistakably highlighted the importance of competition in markets for
32:30
Speaker 3: labor and any stress. Law for a long time has
32:32
Speaker 3: recognized that competition for labor inputs is very important, but
32:38
Speaker 3: it hasn't elevated those concerns as much as the agencies have.
32:42
Speaker 3: That happened in the DOJ, Simon and Schuster transaction, where
32:46
Speaker 3: DOJ relied very successfully on essentially a labor market theory
32:50
Speaker 3: of arms. The most interesting of all the labor cases,
32:54
Speaker 3: I think is the Albertsons Kroger transaction, where, to an
32:58
Speaker 3: extent not previously seen, the FTC has elevated the role
33:03
Speaker 3: of labor as a key input, has highlighted the impact
33:07
Speaker 3: on organized labor of the transaction, saying that the transaction
33:12
Speaker 3: will deny unions the ability to bargain as effectively as
33:15
Speaker 3: they might otherwise. That transaction is the most interesting test
33:19
Speaker 3: of the effort of the agencies to extend the frontiers
33:23
Speaker 3: where labor theories of harm are important. Unmistakably, they've also
33:28
Speaker 3: demonstrated their willingness to litigate vertical merger series of harm
33:33
Speaker 3: more than the agencies had in the past. The Trump
33:35
Speaker 3: administration did challenge the at Time Warner Deal unsuccessfully, but
33:40
Speaker 3: that was a major effort to focus on vertical series
33:43
Speaker 3: of harm. The FTC and DJ have had success, some failures,
33:48
Speaker 3: but success as well. The FTC's challenged to illuminate Grail
33:52
Speaker 3: vertical transaction, where the FDC was largely successful. What happened
33:56
Speaker 3: is that the agencies, because of their skepticism of seven,
34:00
Speaker 3: have cast aside the previous practice of resolving vertical concerns
34:05
Speaker 3: by taking supplements. It's not as though the agencies before
34:08
Speaker 3: twenty twenty or before the Ate and Time Warner Deal
34:12
Speaker 3: ignored vertical issues, but those vertical issues usually were resolved
34:16
Speaker 3: with settlements that imposed behavioral controls on the firms, especially
34:20
Speaker 3: controls that said that you won't discriminate against third parties
34:24
Speaker 3: with respect to access to an asset or an output
34:27
Speaker 3: that you now control. So what we've seen is what's
34:30
Speaker 3: interesting and distinctive about the modern practice is that the
34:34
Speaker 3: agencies have been willing to litigate those deals to block
34:38
Speaker 3: them again, not with complete success, but firms now realize
34:43
Speaker 3: that a vertical merger is much more likely to show
34:46
Speaker 3: up in the courtroom in a litigated challenge rather than
34:49
Speaker 3: result in a somewhat predictable behavioral fix. That means that
34:54
Speaker 3: vertical deals are riskier now than they used to be.
34:57
Speaker 3: And on the question of nascent competition, both agencies are
35:02
Speaker 3: approaching the acquisition of upstart firms or smaller firms with
35:07
Speaker 3: interesting ideas with a lot more skepticism than their predecessors.
35:11
Speaker 3: They believe that a grievous failure of anti trust policy
35:16
Speaker 3: in the previous decades was not to bear down on
35:19
Speaker 3: acquisitions by established incumbents of smaller upstarts. So they've decided that,
35:27
Speaker 3: especially for big tech, that acquisitions of small upstarts in
35:31
Speaker 3: a variety of different areas could pose a competitive threat,
35:35
Speaker 3: both because the upstart has the capability to grow into
35:39
Speaker 3: an independent source of rivalry to the incumbent dominant firms,
35:43
Speaker 3: or that the upstart has a complementary capability which, when
35:47
Speaker 3: added to the portfolio of the incumbent, gives it a
35:50
Speaker 3: greater ability to resist entry and expansion by other firms. Now,
35:55
Speaker 3: those series of harm have been somewhat harder to establish.
35:58
Speaker 3: The courts have been somewhat more resistant to those theories,
36:01
Speaker 3: in particular because they feel the government has lacked proof
36:06
Speaker 3: that shows that the acquisition of the nascent threat is
36:09
Speaker 3: likely to be harmful. They accept the theory that the
36:12
Speaker 3: acquisition could be harmful. They haven't repudiated the government with
36:16
Speaker 3: respect to the theory, but they've said, you have an
36:18
Speaker 3: interesting hypothesis about what might happen if this smaller upstart
36:23
Speaker 3: firm is acquired. Do you have more facts to show
36:27
Speaker 3: to give us confidence that that hypothesis is likely to
36:31
Speaker 3: be true?
36:31
Speaker 1: Finally, the Biden administration formalized its enforcement approach in merger guidelines.
36:38
Speaker 1: What's your take on those merger guidelines?
36:40
Speaker 3: The merger guidelines unmistakably stake out a broader perimeter of enforcement.
36:46
Speaker 3: They embrace a wider range of theories of harm. They
36:50
Speaker 3: announced that the government will review horizontal mergers at lower
36:54
Speaker 3: concentration thresholds than they had announced that they would in
36:58
Speaker 3: the previous guidelines issued twenty ten. They spell out greater
37:02
Speaker 3: skepticism about efficiencies as justification for mergers. So in a
37:08
Speaker 3: very general way, the twenty twenty three government merger guidelines
37:12
Speaker 3: announce a decided effort to extend the frontiers of enforcement
37:17
Speaker 3: beyond the boundaries at which they've been set certainly since
37:20
Speaker 3: twenty ten. The real effect of those guidelines, and all
37:25
Speaker 3: government guidelines, depends on their absorption in the courts. The
37:28
Speaker 3: guidelines are important as an indication of what the government
37:32
Speaker 3: means to do, but it's only when federal judges look
37:35
Speaker 3: at those guidelines and say these make sense as a
37:39
Speaker 3: principle for merger control and adopt the reasoning in published opinions.
37:46
Speaker 3: There are several cases now in litigation that will give
37:49
Speaker 3: judges an opportunity to do that. Albertson's Kroger is one.
37:54
Speaker 3: The Tapestry Capri case is another, involving accessories handbags. The
38:00
Speaker 3: temper Steally Mattress merger case is a third that's in litigation.
38:05
Speaker 3: There are a couple of others at the fringes of litigation. Now.
38:09
Speaker 3: Those cases are interesting to watch because they will tell
38:12
Speaker 3: us how rapid this rate of absorption is. You need
38:16
Speaker 3: a critical mass of district judge or Court of Appeals
38:20
Speaker 3: pinions that say we don't have to follow these guidelines.
38:23
Speaker 3: They don't bind us, but we find their reasoning compelling,
38:26
Speaker 3: and we are going to embrace and rely upon the
38:29
Speaker 3: analytical approach that they've set out. So over the next
38:33
Speaker 3: eighteen twenty four months, we will see if that judicial
38:37
Speaker 3: uptake is happening.
38:38
Speaker 1: Thanks so much for sharing those insights with us. Bill.
38:41
Speaker 1: That's William Klevasik, former chair of the FTC and a
38:45
Speaker 1: professor at GW Law School. And that's it for this
38:49
Speaker 1: edition of the Bloomberg Law Podcast. Remember you've can always
38:52
Speaker 1: get the latest legal news by subscribing and listening to
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Speaker 1: the show on Apple Podcasts, Spotify, and at Bloomberg dot com,
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Speaker 1: slash podcast, Slash Law. I'm June Grosso and this is
39:03
Speaker 1: Bloomberg