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Kalshi Win & DOJ Tries to Shield Its Lawyers · Bloomberg Law

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  Speaker 1: This is Bloomberg Law with June Grosseo from Bloomberg Radio.
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  Speaker 2: Calshi won the first appellate court victory in the battle
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  Speaker 2: over who gets to oversee the fast growing prediction markets,
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  Speaker 2: the States or the Commodity Futures Exchange Commission. In a
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  Speaker 2: two to one decision, the Third Circuit Court of Appeals
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  Speaker 2: told New Jersey state officials that the CFTC regulates the platform.
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  Speaker 2: Calshy has had mixed results in lower courts arguing that
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  Speaker 2: it should be overseen by the CFTC rather than state officials.
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  Speaker 2: But this is just the first appellate court decision on
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  Speaker 2: an issue that's likely to reach the Supreme Court. Joining
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  Speaker 2: me is Elliott Stein, senior litigation analyst at Bloomberg Intelligence.
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  Speaker 2: Elliott tell us about the legal battle that's been going
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  Speaker 2: on between the prediction markets and the states.
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  Speaker 1: Yeah, this litigation has been going on for over eight
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  Speaker 1: year now, and we have cases all over the country
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  Speaker 1: in multiple state courts, multiple federal courts. And essentially it
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  Speaker 1: started when states started sending season desist letters. Some states
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  Speaker 1: started sending season desist letters to the prediction markets like
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  Speaker 1: Calshie Speaking to stop them from operating in those states.
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  Speaker 1: Because the States viewed those products is gambling, and the
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  Speaker 1: prediction markets, in particular Calci at that point sued the
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  Speaker 1: States sort of preemptively to stop the States from filing
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  Speaker 1: an enforcement action against them, and the prediction markets argument
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  Speaker 1: is that these are derivatives that should be regulated by
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  Speaker 1: the CFTC, and under the Commodity Exchange Act, states are
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  Speaker 1: preempted from regulating them as gambling. And the States of
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  Speaker 1: course take the position that these products are really gambling
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  Speaker 1: in effect and they should be regulated as such.
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  Speaker 2: How are they not gambling? I mean you're placing a
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  Speaker 2: wager on an outcome.
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  Speaker 1: I mean there are some differences. And the event contracts
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  Speaker 1: that the prediction markets offer, you really have two sides
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  Speaker 1: to the contract. You you know, parties on both sides,
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  Speaker 1: as opposed to your traditional gambling and betting apps where
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  Speaker 1: consumer is really betting against the house. And event contracts,
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  Speaker 1: like other derivatives, are you know, contracts that you can
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  Speaker 1: get in and out of and sell, which is also
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  Speaker 1: a difference, you know, But really it comes down to
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  Speaker 1: the statutory language and the Commodity Exchange Act and whether
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  Speaker 1: these event contracts fall into the definition of swaps, which
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  Speaker 1: is very broad in the Commodity Exchange Act, and then
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  Speaker 1: related to that is whether Congress intended to preempt states
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  Speaker 1: from regulating these products.
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  Speaker 2: There are different decisions in courts around the country. I mean,
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  Speaker 2: which side is winning more of those lower court arguments.
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  Speaker 1: Like you said, we have multiple decisions now at the
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  Speaker 1: trial court level. It's funny. The first decisions came almost
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  Speaker 1: exactly a year ago in April of twenty twenty five
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  Speaker 1: with respect to these sports event contracts, and Calci won those.
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  Speaker 1: They want a preliminary injunction in Nevada, they want a
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  Speaker 1: preliminary injunction in New Jersey, and so you know, they
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  Speaker 1: sort of came out of the gate winning. Then shortly thereafter,
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  Speaker 1: in August, I believe a federal court in Maryland ruled
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  Speaker 1: against Calci and ruled in the states favor. And since
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  Speaker 1: then we've had probably more trial court rulings going in
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  Speaker 1: favor of the states, because you've had decisions in Ohio
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  Speaker 1: and in Michigan. I believe in favor of the states.
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  Speaker 1: You had a state court in Massachusetts issue of preliminary
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  Speaker 1: in junction in favor of the state against Calshi as well.
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  Speaker 1: So I would say, you know, up until yesterday's decision
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  Speaker 1: by the Third Circuit Court of Appeals, you sort of
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  Speaker 1: had more federal courts ruling in favor of the states,
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  Speaker 1: but you did have some like I mentioned New Jersey
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  Speaker 1: and also Tennessee ruined favor of Calci. Then a bad
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  Speaker 1: decision I mentioned earlier was interesting because the judge there,
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  Speaker 1: even though a year ago he ruled in favor of Calci,
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  Speaker 1: more recently in October, he sort of changed his mind
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  Speaker 1: and ruled in favor of Nevada, and that set off
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  Speaker 1: sort of a cascading series of events in Nevada litigation,
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  Speaker 1: which is all going to be tied up in the
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  Speaker 1: Ninth Circuit next week.
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  Speaker 2: Tell us what the Third Circuit decided in a two
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  Speaker 2: to one.
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  Speaker 1: Decision, So, like you said, this is a split decision,
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  Speaker 1: but the majority ruled that the definition of swaps under
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  Speaker 1: the Commodity Exchange Act is very broad and is broad
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  Speaker 1: enough to encompass event contracts like those that are offered
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  Speaker 1: by the likes of Calci and other designated contract markets dcms,
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  Speaker 1: and that under the Commodity Exchange Act, the CFTC has
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  Speaker 1: exclusive jurisdiction over swaps that are traded on designated contract markets.
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  Speaker 1: And as a result, states are preempted from regulating them
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  Speaker 1: as gambling. Those are like sort of the two main issues,
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  Speaker 1: and those are the same issues that we see decided
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  Speaker 1: in the trial court. But yesterday's decision by the Third
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  Speaker 1: Circuit is the first time that we have very federal
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  Speaker 1: appeals court rule on these issues in any sort of substance.
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  Speaker 2: The dissenting judge, Jane Richards Roth wrote that Calsh's actions
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  Speaker 2: are a performative slight meant to obscure the reality that
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  Speaker 2: Calshe's products are sports gambling, and she said that their
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  Speaker 2: offerings were virtually indistinguishable from the betting products available on
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  Speaker 2: online sports books like DraftKings and FanDuel.
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  Speaker 1: Is she right, Well, it depends how you asked. Right,
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  Speaker 1: Obviously the states that are trying to regulate these products
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  Speaker 1: as game when thinks she's right. Obviously the prediction markets
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  Speaker 1: thinks she's wrong. The majority of the judges on that
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  Speaker 1: panel yesterday disagreed with her. But you know, she also
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  Speaker 1: cited a presumption against preemption for things that states usually regulate,
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  Speaker 1: like gambling. But you know, I tend to think the
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  Speaker 1: prediction markets actually have the better statutory argument here. I
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  Speaker 1: think the mood of the Exchange Act is pretty clear
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  Speaker 1: that the CFCC has exclusive jurisdiction over swaps that are
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  Speaker 1: traded on designated contact markets. You know, that doesn't mean
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  Speaker 1: that states can't regulate your more traditional forms of gambling
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  Speaker 1: because the Commodity Exchange Act doesn't stop them from doing that.
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  Speaker 2: The Third Circuit covers Delaware, New Jersey, and Pennsylvania. Other
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  Speaker 2: jurisdictions don't have to follow this ruling. So how important
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  Speaker 2: is it.
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  Speaker 1: It's important because it's the first federal appeals court to
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  Speaker 1: weigh in on these issues, but it's not going to
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  Speaker 1: be the last, right I mean, I mentioned earlier that
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  Speaker 1: next week the Ninth Circuit is going to hold argument
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  Speaker 1: in cases in Nevada concerning Calcey, robin Hood and poly Market.
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  Speaker 1: The Maryland case that I mentioned earlier is going to
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  Speaker 1: be argued in the Fourth Circuit next month in May.
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  Speaker 1: The Massachusetts preliminary in junction that I mentioned earlier is
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  Speaker 1: going to be argued in the Massachusetts Supreme Court also
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  Speaker 1: next month in May. And then in the Sixth Circuit,
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  Speaker 1: we have conflicting ruins from federal trial courts in Ohio
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  Speaker 1: and Tennessee that is going to be argued sometime probably,
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  Speaker 1: you know, in the second half of the year. So
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  Speaker 1: we're going to have multiple decisions from multiple federal circuit courts,
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  Speaker 1: and inevitably these cases are destined for the Supreme Court
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  Speaker 1: because you're probably going to get conflicting rulings from some
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  Speaker 1: of the circuit courts. And we're talking about issues of
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  Speaker 1: federal preemption, which is a really important issue that the
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  Speaker 1: Supreme Court likes to weigh in on.
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  Speaker 2: In twenty eighteen, the Supreme Court freed the states to
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  Speaker 2: legalize gambling on individual sporting events and struck down a
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  Speaker 2: federal law that had barred single game gambling in most
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  Speaker 2: of the country, saying it unconstitutionally forced states to maintain
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  Speaker 2: their prohibitions. I mean, do you think that is an
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  Speaker 2: indication of where the Supreme Court might stand on the
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  Speaker 2: state's traditional role in regulating gambling.
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  Speaker 1: I don't think so, because I think the issues here
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  Speaker 1: are slightly different and have to do with what the
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  Speaker 1: Commodity Exchange Act provides for and what Congress intended with
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  Speaker 1: the Commodity Exchange Act going back multiple decades. And then
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  Speaker 1: in nineteen seventy four, Congress basically gave the CFTC exclusive
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  Speaker 1: jurisdiction over derivatives that trade on federally regulated exchanges. They
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  Speaker 1: removed language that would have given states concurrent jurisdiction over
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  Speaker 1: those products. And then in twenty ten you get the
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  Speaker 1: Dodd Frank Act, which adds swaps to that language and
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  Speaker 1: very clearly includes event contracts in the definition of swaps
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  Speaker 1: and also gives the CFTC authority and discretion to ban
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  Speaker 1: or reject event contacts that might be against the public interests.
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  Speaker 1: So I think that's really what the focus is going
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  Speaker 1: to be at the Supreme Court when these cases reached there,
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  Speaker 1: just like it's been in the lower court.
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  Speaker 2: So has the CFTC been regulating any of these prediction markets?
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  Speaker 2: Have they done anything?
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  Speaker 1: So the CFTC under the Biden administration actually they proposed
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  Speaker 1: a rule that would have essentially banned contracts related to
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  Speaker 1: elections and sports. When Kelsey first started offering election contracts
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  Speaker 1: leading up to the twenty twenty four presidential election, the
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  Speaker 1: Biden administration's CFTC tried to stop those. That was litigated
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  Speaker 1: CALC won in the trial court and never really got
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  Speaker 1: litigated fully in the Peals Court because then you had
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  Speaker 1: the Trump administration come in and so the case sort
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  Speaker 1: of went away, and it was around that time that
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  Speaker 1: CALCI also started getting into sports event contracts, and the
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  Speaker 1: CFTC at that point was a little bit in flux
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  Speaker 1: as leadership was changing. It didn't do much until really
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  Speaker 1: very recently in the last couple of months, where it
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  Speaker 1: first revoked the Biden administration's proposed rule and then started
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  Speaker 1: going down a path where it would read to its
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  Speaker 1: own rule making. It issued staff advisory talking about, you know,
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  Speaker 1: contacts that might be susceptible to manipulation and how the
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  Speaker 1: exchanges have to be careful not to offer those and
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  Speaker 1: should really consult maybe with the CFTC before listing those,
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  Speaker 1: and it also issued an advanced Notice of proposed rule making,
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  Speaker 1: which is the first step towards further rule making. So
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  Speaker 1: the CFTC has started to get involved in this. It
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  Speaker 1: has taken the side of the prediction markets and the
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  Speaker 1: litigation in the Ninth Circuit it's filed. It's in the
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  Speaker 1: amicus brief in support of the prediction markets because the
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  Speaker 1: CFTC takes a position that these event contracts should be
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  Speaker 1: regulated by the CFTC, not by the States. The CFTC
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  Speaker 1: just last week sued three states to stop them from
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  Speaker 1: trying to regulate these products as gambling. And so, you know,
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  Speaker 1: we should see more developments in the area of rule
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  Speaker 1: making as well in the coming months.
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  Speaker 2: I would say, So, I mean, why is the CFTC
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  Speaker 2: suing the States? Why isn't it leaving it up to
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  Speaker 2: the prediction markets to sue.
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  Speaker 1: Yeah, it's a little bit of a pile on. I
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  Speaker 1: would say, I'm not sure that their lawsuits add much,
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  Speaker 1: you know, beyond what the prediction markets lawsuits already are
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  Speaker 1: trying to do. But you know, it's just a further
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  Speaker 1: thumb on the scale, I think. But I'm not sure
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  Speaker 1: it's going to change the outcome of the cases all
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  Speaker 1: that much.
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  Speaker 2: Thanks for joining me, Elliott. That's Bloomberg Intelligence seed litigation
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  Speaker 2: analyst Elliott Stein coming up next on the Bloomberg Law Show.
• 11:38
  Speaker 2: The Department of Justice wants to put its attorneys above
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  Speaker 2: state law. You're listening to Bloomberg With a new move,
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  Speaker 2: the Justice Department appears to be attempting to get around
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  Speaker 2: the scrutiny of their attorneys in disciplinary proceedings by state
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  Speaker 2: bar associations. Under a proposed rule, the Attorney General could
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  Speaker 2: pause or block state bar investigations into current and former
• 12:03
  Speaker 2: DOJ lawyers and former federal judges are warning that the
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  Speaker 2: proposal violates the Constitution and would put Justice Department lawyers
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  Speaker 2: above the ethical rules that govern every other attorney in
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  Speaker 2: the country. Joining me is former federal judge Jeremy Fogel.
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  Speaker 2: He was a District Court judge of the US District
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  Speaker 2: Court for the Northern District of California. Judge Fogel, licensing
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  Speaker 2: and regulation of lawyers has been the responsibility of the states.
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  Speaker 2: Will you explain the legal basis for that and why
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  Speaker 2: you think it's important.
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  Speaker 3: It actually goes back to the constitutions. It's in the
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  Speaker 3: tenth Amendment, and the tenth Amendment is one of the
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  Speaker 3: amendments doesn't often get as much attention as some of
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  Speaker 3: the others, but it's actually very important. And what it says,
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  Speaker 3: in pretty plain language is that if the Constitution doesn't
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  Speaker 3: give the federal government power to do something, then as
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  Speaker 3: the power belong to the states, or it belongs to
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  Speaker 3: the people. And there's lots of examples of that. You know,
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  Speaker 3: Congress has the power to tax, Congress has the power
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  Speaker 3: to regulate commerce. Congress has the power to wage war.
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  Speaker 3: I mean, there's all these different things that Congress is
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  Speaker 3: empowered to do in the Constitution. But if it's not
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  Speaker 3: enumerated in there, or if it's not closely related to
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  Speaker 3: one of the enumerated powers, then the Tenth Amendment says
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  Speaker 3: that that is a power that belongs to the states.
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  Speaker 3: The regulation of professions, including the legal profession, is not
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  Speaker 3: mentioned anywhere in the Constitution. It's not a power that's
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  Speaker 3: given to Congress. It's not a power that's given to
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  Speaker 3: the president. So it is by constitutional order. It's a
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  Speaker 3: power that belongs to the states. And historically it is
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  Speaker 3: something that the states have always done. The states licensed lawyers,
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  Speaker 3: the state's licensed doctors, the state's licensed teachers. You know,
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  Speaker 3: any profession you can think of that requires licensing. The
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  Speaker 3: licensing is done by the states, not by the federal government.
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  Speaker 3: So that's the point. And it's not it's not in
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  Speaker 3: a statute or anything like that. It's actually in the Constitution.
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  Speaker 3: It's the way the Constitution divides the different powers of
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  Speaker 3: the government.
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  Speaker 2: What is the Justice Department proposing to do about ethical
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  Speaker 2: violations by its attorneys.
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  Speaker 3: Well, what they're proposing is that before a state can
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  Speaker 3: conduct a disciplinary proceeding with regard to a DOJ lawyer,
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  Speaker 3: to a federal lawyer, that they the Department of Justice
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  Speaker 3: has the right to vet that complaint, to decide for
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  Speaker 3: itself what the merits of the complaint are and whether
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  Speaker 3: the complaint is justified or not. And while that's going on,
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  Speaker 3: while they're doing that, the state is not empowered to
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  Speaker 3: proceed against the lawyer. So it's kind of a pre
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  Speaker 3: evaluation of what would be going on in the States,
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  Speaker 3: and it can constitute interference depending on how long it takes.
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  Speaker 3: So you know, they could look at it and say, well,
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  Speaker 3: we're going to turn this around forty eight hours and
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  Speaker 3: say we got some concerns. But what the regulation would
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  Speaker 3: do is it simply says that it's up to the
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  Speaker 3: Justice Department to conduct a review, doesn't provide how long
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  Speaker 3: that review would take, even what kind of review would be.
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  Speaker 3: And while that review is taking place, the states, the
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  Speaker 3: other disciplinary authorities can't proceed to do anything with regard
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  Speaker 3: to the lawyers that is unprecedented with regard to any
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  Speaker 3: other kind of lawyer. So, you know, let's say it's
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  Speaker 3: the law firm said, well, we don't want any of
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  Speaker 3: our law firm members any of our partners or any
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  Speaker 3: of our associates being disciplined by a state disciplinary body
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  Speaker 3: until we've had a chance to do an internal investigation.
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  Speaker 3: I don't think that would get very far. I mean,
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  Speaker 3: I don't think there's any precedent for that. There's no
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  Speaker 3: precedent that I'm aware of that gives a client, which
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  Speaker 3: in this case is the federal government, gives the client
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  Speaker 3: a right to conduct its own determination as to whether
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  Speaker 3: there's been any ethical wrongdoing by one of its lawyers.
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  Speaker 3: Every lawyer who works for the Department of Justice, to
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  Speaker 3: my knowledge, is licensed by somebody, and they can't be
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  Speaker 3: in are not licensed by the federal government. They're licensed
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  Speaker 3: by a stay entity. For instance, in d C, which
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  Speaker 3: is I think where a lot of this controversy is focused.
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  Speaker 3: The lawyers who work for the federal government in DC
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  Speaker 3: are licensed by the District of Columbia, and they have
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  Speaker 3: their own bar association, and they have their own disciplinary authority.
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  Speaker 3: And that's true in all of the other states. So
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  Speaker 3: the idea that a client in this case, the federal
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  Speaker 3: agencies that are represented by the Department of Justice and
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  Speaker 3: the Department of Justice itself would have some right to
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  Speaker 3: delay indefinitely the review of the actions of its own lawyers.
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  Speaker 3: There is no precedent for that. And I think the concern,
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  Speaker 3: certainly that our group, our Judges coalition has, and I
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  Speaker 3: think that many judges have and many lawyers groups have,
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  Speaker 3: is that that is simply an appropriate intrusion into the
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  Speaker 3: power of states to regulate the lawyers who practiced there.
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  Speaker 3: I think that's the that's the problem.
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  Speaker 2: We've come to a time where recently there have been
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  Speaker 2: actually hundreds of instances of Justice Department lawyers being scolded
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  Speaker 2: by judges for making false, misleading or incomplete representations and
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  Speaker 2: defense of some of the government's policies, you know, unprofessional conduct,
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  Speaker 2: even failing to comply with court orders. Do you think
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  Speaker 2: that this rule from the Justice Department, or the proposed
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  Speaker 2: rule has anything to do with what's been happening in
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  Speaker 2: federal courts.
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  Speaker 1: I do.
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  Speaker 3: And the reason I think that is that this move
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  Speaker 3: to establish this regulation arose in the context of the
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  Speaker 3: kinds of complaints that you're talking about. In other words,
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  Speaker 3: that there were actions taken by federal judges, by federal
• 17:58
  Speaker 3: courts to raise the issue of non compliance with court
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  Speaker 3: orders or unprofessional conduct or other things that DOJ lawyers
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  Speaker 3: are alleged to have done, and it was in the
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  Speaker 3: context of those kinds of complaints that this proposal emerged.
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  Speaker 3: I don't know what was in the minds of the
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  Speaker 3: Justice Department people who propose it. I'm not a mind reader,
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  Speaker 3: but there certainly is a proximity in time to the
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  Speaker 3: complaints and the emergence of this proposal. And one of
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  Speaker 3: the things that happened was that the disciplinary entity in
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  Speaker 3: the district of Columbia, where a lot of these lawyers
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  Speaker 3: are licensed, began acting on some of these complaints. And
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  Speaker 3: the response from the Justice Department was, Oh, this is
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  Speaker 3: a political witch hunt. This is weaponization of the dissiplinary process.
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  Speaker 3: They just don't like the way we're representing the president.
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  Speaker 3: They don't like the way we're representing the Department of
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  Speaker 3: Justice or the federal government, and so they're using disciplinary
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  Speaker 3: proceedings as a tool, as a weapon to keep us
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  Speaker 3: from doing the kind of work we want to do
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  Speaker 3: for our clients. I think that's the rhetoric that has
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  Speaker 3: accompanied the proposal, at least from some quarters, and I
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  Speaker 3: can't read the minds of the regulatory authorities either. All
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  Speaker 3: I can say is that the way the Constitution devised
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  Speaker 3: these responsibilities. It's not the responsibility of the Department of
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  Speaker 3: Justice to decide and make its own independent determination about
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  Speaker 3: whether a complaint is justified and have that complaint be
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  Speaker 3: a barrier to any discipline taking place. It's incumbent on
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  Speaker 3: the disciplinary authorities to act responsibly and professionally in accordance
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  Speaker 3: with the rules. And if there is some violation of
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  Speaker 3: the rights of the lawyers, the lawyers have remedies. They
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  Speaker 3: can go to court and say that they were denied
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  Speaker 3: a fair hearing, they were denied due process, there wasn't evidence.
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  Speaker 3: I mean my background as a legal ethics person that
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  Speaker 3: goes back a long way. You know, certainly there have
• 19:48
  Speaker 3: been opportunities when lawyers feel that the discipline imposed on
• 19:51
  Speaker 3: them was excessive or unfair or not based on evidence.
• 19:56
  Speaker 3: They have remedies and sometimes they can get relief from
• 19:59
  Speaker 3: the court that oversee judicial discipline. So it's not that
• 20:03
  Speaker 3: they're without a remedy. But the idea is like, where
• 20:05
  Speaker 3: do you start and the history for two hundred and
• 20:09
  Speaker 3: fifty Well, we've been a country for a little less
• 20:11
  Speaker 3: two hundred and fifty years, but I mean throughout our
• 20:13
  Speaker 3: existence as a country that the regulation of lawyers is
• 20:15
  Speaker 3: done by state disciplinary bodies. If there's been some showing
• 20:20
  Speaker 3: that a lawyer's rights are violated, they have remedies, they
• 20:23
  Speaker 3: have appellate remedies in the disciplinary process, they have remedies
• 20:27
  Speaker 3: in court. So I think they're just turning it around
• 20:29
  Speaker 3: and they're saying, well, because we're right and the discilinary
• 20:32
  Speaker 3: authorities don't like what we're doing, we have the right
• 20:35
  Speaker 3: to stop them from acting. And I just I think
• 20:37
  Speaker 3: that's very problematic.
• 20:39
  Speaker 2: It would put Justice Department lawyers on a different level
• 20:43
  Speaker 2: than you know, every other lawyer appearing in court. So
• 20:46
  Speaker 2: would that be a violation of the McDaid Amendment.
• 20:49
  Speaker 3: Yes, that's why the McDade Amendment. That's that was its origins.
• 20:53
  Speaker 3: You know, it's a real privilege and an honor to
• 20:55
  Speaker 3: represent the United States government too. I mean, the DJ
• 20:58
  Speaker 3: has always enjoyed a very, very reputation. When I was
• 21:01
  Speaker 3: a federal judge, I was always very aware of that.
• 21:04
  Speaker 3: But that doesn't mean that you put any lawyer, whether
• 21:07
  Speaker 3: they work for DJ or whether they work for the
• 21:10
  Speaker 3: law firm of Smith and Jones, you don't put them
• 21:12
  Speaker 3: on a pedestal by virtue of who they represent, or
• 21:16
  Speaker 3: the kinds of cases they have, or the kinds of
• 21:18
  Speaker 3: positions they take. There are ethical responsibilities that lawyers have.
• 21:23
  Speaker 3: They apply equally to all lawyers in a particular jurisdiction.
• 21:26
  Speaker 3: And the whole point of McDade, and the whole point
• 21:29
  Speaker 3: of the history of this conversation is that the lawyers
• 21:33
  Speaker 3: of the DJ at the very least have the same
• 21:36
  Speaker 3: ethical responsibilities as every other lawyer. And I think culturally,
• 21:40
  Speaker 3: in terms of what the aspirations of DJ have been historically,
• 21:44
  Speaker 3: they try to be better. They try to really be
• 21:46
  Speaker 3: the model, the positive model for other lawyers. And I
• 21:51
  Speaker 3: have to say, and I've said this before, I always
• 21:53
  Speaker 3: have had a very high opinion of the DOJ lawyers
• 21:57
  Speaker 3: and the work that they do, and I know a
• 21:59
  Speaker 3: lot of other federal judg just do as well. I
• 22:01
  Speaker 3: think we've been very privileged to have that kind of
• 22:04
  Speaker 3: representation in our courts, and I think this particular controversy
• 22:09
  Speaker 3: really does not reflect well on DJ. There have been
• 22:12
  Speaker 3: instances of judges, even very conservative judges. I have to say,
• 22:16
  Speaker 3: this is not political. Some of the most withering criticisms
• 22:19
  Speaker 3: of DJ lawyers have come from very conservative judges, and
• 22:22
  Speaker 3: so the idea that they would have greater protection, or
• 22:25
  Speaker 3: that they would enjoy not a free pass, but at
• 22:28
  Speaker 3: least something that would allow them to prevent or slow
• 22:31
  Speaker 3: down a disciplinary process. I think that's very much anathetical
• 22:35
  Speaker 3: to the way DOJ has been regarded over the decades.
• 22:39
  Speaker 2: I wonder how this, if it would affect what happens
• 22:43
  Speaker 2: in the courtroom, because individual judges can still find Justice
• 22:48
  Speaker 2: Department lawyers in contempt, right, So would this kind of
• 22:52
  Speaker 2: a rule have any effect, you know, at the ground
• 22:55
  Speaker 2: level what happens in the courtroom.
• 22:58
  Speaker 3: Well, that's a really good question, and I think think
• 23:00
  Speaker 3: to be fair that the judges do retain their contempt powers.
• 23:04
  Speaker 3: There's nothing in this proposal that would take that away
• 23:07
  Speaker 3: from the courts. I have to say that the contempt
• 23:09
  Speaker 3: power is a very very significant power that judges have.
• 23:13
  Speaker 3: It's very rarely exercised if you look at the cases
• 23:16
  Speaker 3: where it's been threatened even I mean some of the
• 23:18
  Speaker 3: cases I can think of, and you probably can think
• 23:20
  Speaker 3: of too, where people were supposed to be brought to
• 23:23
  Speaker 3: court and the government said well, I'm sorry, they're in
• 23:25
  Speaker 3: El Salvador, they're in unto rest or something like that.
• 23:28
  Speaker 3: They were taken out of the country without the court's
• 23:30
  Speaker 3: knowledge or permission. Those are very tricky situations. Even in
• 23:34
  Speaker 3: those cases, the judges have used their contempt power in
• 23:38
  Speaker 3: a way to try to get a compliance. But as
• 23:40
  Speaker 3: far as I know, no government lawyer to my knowledge,
• 23:43
  Speaker 3: has actually been held in contempt. It's a very technical procedure.
• 23:47
  Speaker 3: It is used very rarely. It's not that it couldn't
• 23:50
  Speaker 3: be used, But I think one of the values of
• 23:53
  Speaker 3: the state disciplinary proceedings is that it isn't a question
• 23:57
  Speaker 3: of well, did you commit a contempt? Are you going
• 23:59
  Speaker 3: to be put in jail or or are you going to
• 24:00
  Speaker 3: be fine? There are other things that the state disciplinary
• 24:04
  Speaker 3: authorities can do to improve performance. They're really not meant
• 24:07
  Speaker 3: to be futative. I mean, if somebody does a really
• 24:11
  Speaker 3: bad thing and you know, they steal from clients or
• 24:13
  Speaker 3: they you know, they do things like that that are
• 24:16
  Speaker 3: completely inappropriate, there's no defense for it. They can be disbarred,
• 24:19
  Speaker 3: they can be prived of their right to practice law,
• 24:21
  Speaker 3: they can be suspended. But a lot of what state
• 24:24
  Speaker 3: disciplinary bodies do is they try to figure out what's
• 24:26
  Speaker 3: going on with the lawyer, Why do they do this,
• 24:28
  Speaker 3: what kind of remedial procedures can be put in place.
• 24:31
  Speaker 3: They have a much wider range of options in the
• 24:34
  Speaker 3: disciplinary process then there is in a formal contemp proceeding.
• 24:37
  Speaker 3: So the premise of your question is right. The courts
• 24:40
  Speaker 3: still have the power to impose direct discipline. The problem
• 24:43
  Speaker 3: is that not every case is one where you want
• 24:44
  Speaker 3: to hold a lawyer in contempt. Sometimes it's just a
• 24:46
  Speaker 3: matter of saying, you know, when you make reponitisment presentations
• 24:50
  Speaker 3: to the court, when you cite cases that don't exist,
• 24:53
  Speaker 3: when you claim ignorance of something that you actually know about,
• 24:58
  Speaker 3: you know, things like that needs to be some way
• 25:01
  Speaker 3: to get accountability for that. And that's traditionally what the
• 25:05
  Speaker 3: role of state disciplinary authorities has been.
• 25:10
  Speaker 2: Twenty state attorneys general submitted a letter to the Justice
• 25:14
  Speaker 2: Department on Monday laying out their opposition to a new
• 25:17
  Speaker 2: proposed rule by the department. Under the proposed rule, the
• 25:21
  Speaker 2: attorney general could pause or block state bar investigations into
• 25:26
  Speaker 2: current and former DOJ lawyers. The state attorneys general said
• 25:30
  Speaker 2: that would allow the DOJ to insulate employees accused of
• 25:34
  Speaker 2: professional misconduct and would infringe on the state's power to
• 25:39
  Speaker 2: discipline attorneys licensed in their jurisdictions. I've been talking to
• 25:43
  Speaker 2: former federal judge Jeremy Fogel, so, I mean, what's next
• 25:48
  Speaker 2: for this rule. Can the DOJ just you know, implement
• 25:52
  Speaker 2: it on its own and then I don't know, lawsuits.
• 25:56
  Speaker 3: Yeah, no, I think that's right. They've asked for comment.
• 25:59
  Speaker 3: They have to the federal law requires notice in comment period.
• 26:03
  Speaker 3: They've received thousands of comments, tens of thousands of comments.
• 26:07
  Speaker 3: They have been overwhelmingly negative, and they have made many
• 26:12
  Speaker 3: of the same points that I've tried to make with
• 26:14
  Speaker 3: you now and then some I think there's a sense
• 26:17
  Speaker 3: that this simply is not going to do. There have
• 26:20
  Speaker 3: been bar associations from around the country that have issued
• 26:24
  Speaker 3: statements saying how inappropriate this is. There have been disciplinary
• 26:28
  Speaker 3: bodies that have made the constitutional point that I tried
• 26:32
  Speaker 3: to make earlier. There's a sense that this simply is
• 26:35
  Speaker 3: not what the constitutional order requires in terms of the
• 26:38
  Speaker 3: regulation of lawyers. I have no knowledge as to whether
• 26:41
  Speaker 3: there are any favorable comments, but I mean there's certainly
• 26:44
  Speaker 3: an overwhelmingly negative reaction to the proposal that said DALJ
• 26:49
  Speaker 3: can implement it. They've asked for comments. They can decide
• 26:52
  Speaker 3: to ignore the comments or they can write the comments
• 26:54
  Speaker 3: off in some way and say that the result of
• 26:57
  Speaker 3: an organized political campaign or something like that. They can
• 27:00
  Speaker 3: implement it, and then I think somebody will litigate it
• 27:04
  Speaker 3: because it raises a constitutional issue, and I think, you know,
• 27:08
  Speaker 3: then we would see what happens with that. I'm pretty
• 27:11
  Speaker 3: comfortable with the tenth Amendment analysis they gave you before,
• 27:14
  Speaker 3: but I mean that would be up for an actual court.
• 27:16
  Speaker 3: I mean, I'm retired judge, I'm not a sitting judge.
• 27:18
  Speaker 3: It would be up to a sitting judge and appellate
• 27:20
  Speaker 3: courts if necessary, to review that issue. But I think
• 27:23
  Speaker 3: that is what would happen if they adopt the regulation.
• 27:26
  Speaker 2: We see instances of the Justice Department not obeying court orders.
• 27:31
  Speaker 2: You have judges giving specific orders nowadays. For example, a
• 27:35
  Speaker 2: person released from ice, you can't just release him outside
• 27:39
  Speaker 2: the facility he orsue. Has to be taken back to
• 27:42
  Speaker 2: their state and they have to be released with their belongings,
• 27:45
  Speaker 2: and you know, judges making these really specific orders in
• 27:49
  Speaker 2: order to ensure compliance. But still there seems to be
• 27:53
  Speaker 2: a lot of non compliance with judges orders. And you know,
• 27:57
  Speaker 2: as we talked about, there are either intentional or unintentional
• 28:01
  Speaker 2: misrepresentations made to judges. Have you ever seen a situation
• 28:05
  Speaker 2: like this before where it seems so pervasive through the system.
• 28:10
  Speaker 3: No, I have not, and I want to say two
• 28:12
  Speaker 3: things about that. First of all, we're talking in the
• 28:16
  Speaker 3: context of a particular view of what's happening. I think
• 28:18
  Speaker 3: people who would defend what the Justice Department is doing
• 28:22
  Speaker 3: would say that they're simply trying to do the right
• 28:24
  Speaker 3: thing with regard to immigration. And most of these things
• 28:27
  Speaker 3: have arisen in the context of immigration, not all of them,
• 28:30
  Speaker 3: but they're trying to do the right thing and the
• 28:32
  Speaker 3: courts are interfering. That's the way they're characterizing the situation
• 28:37
  Speaker 3: that we're in. They're just trying to get all the
• 28:39
  Speaker 3: people who don't have a right to be here out
• 28:40
  Speaker 3: of the country. And if there are some missed connections
• 28:44
  Speaker 3: or some information that doesn't get relayd I mean, it's
• 28:47
  Speaker 3: all in the context of the policy that they're trying
• 28:50
  Speaker 3: to enforce, and the courts are walking the policy that
• 28:53
  Speaker 3: the government wants to enforce and the president wants to report.
• 28:55
  Speaker 3: So there are people who see it that way, and
• 28:58
  Speaker 3: it's not like they're sitting around and saying, well, you know,
• 29:00
  Speaker 3: let's just ignore this court. Let's go out and violate
• 29:03
  Speaker 3: a court order. You know, they really think that what
• 29:04
  Speaker 3: they're doing is the right thing. I think you put
• 29:08
  Speaker 3: that up against the experience that judges have, which is
• 29:12
  Speaker 3: it kind of doesn't matter what your motivations are. You know,
• 29:15
  Speaker 3: when you are given a particular obligation to comply with,
• 29:19
  Speaker 3: you may not deport this person or you have to
• 29:22
  Speaker 3: produce this person in court within X number of hours
• 29:25
  Speaker 3: or days. And there's very specific and there's orders that
• 29:28
  Speaker 3: people can comply with. I think judges are not used
• 29:31
  Speaker 3: to having that not happen. And I think what you're
• 29:35
  Speaker 3: seeing is and again I want to stress this is
• 29:39
  Speaker 3: not just the Democrat appointed judges. I mean there are
• 29:42
  Speaker 3: some very conservative Republican appointed judges who have expressed exactly
• 29:46
  Speaker 3: these same frustrations. This is a sort of an across
• 29:49
  Speaker 3: the board concern. And you know, and I'll just make
• 29:53
  Speaker 3: this somewhat personal. I mean, I was a federal judge
• 29:55
  Speaker 3: for twenty years. As I said earlier, I trusted the
• 29:58
  Speaker 3: DJI had respected lawyers. It was hard to become an
• 30:02
  Speaker 3: assistant US attorney was a very competitive job, and they
• 30:05
  Speaker 3: got they got the best lawyers and most capable lawyers,
• 30:08
  Speaker 3: and I really trust them. And I think what I'm
• 30:10
  Speaker 3: what I'm hearing from so many former colleagues is I
• 30:13
  Speaker 3: don't trust them if they're telling me that defendant X
• 30:17
  Speaker 3: is going to be produced, the court wants defend and
• 30:19
  Speaker 3: X produced in court tomorrow, and then they come in
• 30:22
  Speaker 3: tomorrow and they say, oh, sorry, we can't find him,
• 30:25
  Speaker 3: or you know, we just found out that he's in
• 30:27
  Speaker 3: Al salbat, or we have no idea how that happened,
• 30:29
  Speaker 3: you know. And when that gets said, I think judges
• 30:33
  Speaker 3: are having a very very hard time believing that. And
• 30:36
  Speaker 3: so you can get I'm not going to mention judges
• 30:39
  Speaker 3: by namebody, you can get people across the spectrum philosophically
• 30:44
  Speaker 3: who say I made a really specific order, I made
• 30:46
  Speaker 3: a really specific request, and you came into court and
• 30:49
  Speaker 3: you didn't tell me the truth. You know that that
• 30:51
  Speaker 3: is a serious concern within the judiciary. And that's the
• 30:56
  Speaker 3: other side of the context. I mean, you have the
• 30:57
  Speaker 3: people saying, you know, why are these federal judges blocking
• 31:01
  Speaker 3: the president's agenda, And then you have the federal judges saying, hey,
• 31:03
  Speaker 3: wait a minute. You know we've got a court to
• 31:05
  Speaker 3: round here. We've got rules. We have ethical responsibilities that
• 31:08
  Speaker 3: lawyers have, and when they don't meet them, that's a
• 31:12
  Speaker 3: fundamental challenge to the system. So I think that's sort
• 31:16
  Speaker 3: of the context in which this is happening and thinks
• 31:20
  Speaker 3: why it matters so much.
• 31:21
  Speaker 2: Thanks so much, Judge Fogel. I appreciate your taking the
• 31:23
  Speaker 2: time to talk to me. That's former federal judge Jeremy Fogel,
• 31:27
  Speaker 2: and that's it for this edition of The Bloomberg Law Show.
• 31:30
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• 31:32
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• 31:37
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• 31:45
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