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Weekend Law: Fed Legal Fight, Flag Burning & Grant Cuts · Bloomberg Law

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Speaker 2: Bloomberg Law with June Grosso from Bloomberg Radio.
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Speaker 5: Welcome to the Bloomberg Law Show. I'm June Grosso. Ahead
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Speaker 5: in this hour, President Trump's battle with the Fed escalates
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Speaker 5: into an emergency court hearing. Can Trump jail protesters who
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Speaker 5: burn the American flag? And the Supreme Court allows the
1:01
Speaker 5: administration to do what it wants again. It's an unprecedented
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Speaker 5: legal battle that could reshape the Federal Reserve's longstanding political independence.
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Speaker 5: President Trump is the first president in history to try
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Speaker 5: to oust a sitting FED governor. Trump says he's firing
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Speaker 5: Lisa Cook, the first black woman to serve as a
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Speaker 5: FED governor because she committed mortgage fraud by listing homes
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Speaker 5: in both Michigan and Georgia as her primary residence is
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Speaker 5: when she got mortgages in twenty twenty one.
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Speaker 1: She seems to have had an infraction, and she can't
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Speaker 1: have an infraction, especially that infraction, because she's in charge of,
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Speaker 1: if you think about it, mortgages, and we need people
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Speaker 1: that are one hundred percent above board.
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Speaker 5: Cook is fighting back by filing a lawsuit saying Trump
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Speaker 5: doesn't have the power to remove her from office and
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Speaker 5: that he violated the federal law that allows him to
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Speaker 5: remove a FED governor only for cause. Cook's lawsuit is
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Speaker 5: a major escalation in the growing clash between the White
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Speaker 5: House and the FED, which has resisted Trump's demands for
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Speaker 5: lower interest rates. It presents novel issues and will almost
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Speaker 5: certainly end up at the Supreme Court. It's just a
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Speaker 5: matter of when. Cook is seeking an emergency in junction
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Speaker 5: to block her firing and confirm her status as a
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Speaker 5: member of the Fed's governing board. Federal Judge Ga Cobb
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Speaker 5: held an emergency hearing on Friday, but her decision isn't
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Speaker 5: likely until next week or perhaps even later joining me
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Speaker 5: is Bloomberg Intelligence senior litigation analyst Elliott Stein. Elliot tell
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Speaker 5: us about Cook's arguments for why Trump can't fire her
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Speaker 5: for these mortgage fraud allegations that took place before she
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Speaker 5: became a Fed governor.
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Speaker 6: Well, the first argument is that the four cause requirement
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Speaker 6: hasn't been met. And their argument is that cause requires
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Speaker 6: more than mere allegations on truth's social that you know,
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Speaker 6: you look to the Humphreys executor's standard, which is that
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Speaker 6: there has to be some sort of inefficiency, neglective duty,
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Speaker 6: or malfeasance in office. These allegations don't rise. So that
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Speaker 6: and in any event, she wasn't given an opportunity to
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Speaker 6: be heard on this and to contest the allegations. End
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Speaker 6: is that she has a right to receive notice of
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Speaker 6: the accusations and to contest them.
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Speaker 5: And is the administration's main argument that basically the president
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Speaker 5: is the president and the courts have to defer to him.
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Speaker 6: Yeah, that's a lot of it. I mean, their argument
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Speaker 6: first is that the statutory text only refers to cause,
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Speaker 6: it doesn't refer to inefficiency, neglective duty, or malfeasance in office,
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Speaker 6: So that gives him a broader removal authority, and then
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Speaker 6: there's also nothing in the statute. The case law is
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Speaker 6: their argument that a court can even review that determination.
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Speaker 6: That the statute gives the president the right to determine
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Speaker 6: if there was cause, and that's not reviewable, and that
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Speaker 6: there's also nothing about giving the person the notice or
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Speaker 6: an opportunity to be heard. And in fact, the case law,
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Speaker 6: they argue, goes against Liza Cook's argument on that. And
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Speaker 6: if notice was required, she got noticed because she was
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Speaker 6: aware for several days about these allegations before she was
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Speaker 6: actually terminated, and she never tried to rebut the allegations factually,
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Speaker 6: and in that event, you know, a hearing. This is
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Speaker 6: the government's argument. The hearing seems like it would be
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Speaker 6: unnecessary because she hasn't even contested the allegations and given
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Speaker 6: a reason for why these documents would have been filled
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Speaker 6: out in the way that they were.
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Speaker 5: The only sort of explanation she gave in her papers
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Speaker 5: was that there might have been an unintentional clerical error
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Speaker 5: in her mortgage application, a mislabeling, but no real life
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Speaker 5: explanation beyond that. And as far as the administration's claimed
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Speaker 5: that Trump's truth, social posts constituted notice of the allegations.
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Speaker 5: Judge Cobbs said to the government's lawyer, you're not suggesting
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Speaker 5: what happened would satisfy due process requirements, and he replied
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Speaker 5: that he was.
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Speaker 6: Yeah. Their argument is that the truth Social posts do
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Speaker 6: provide sufficient notice, and as a result, if notice is required,
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Speaker 6: they satisfied it. And Abby Lowell had a sort of
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Speaker 6: funny line, you know, he said, notice shouldn't require having
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Speaker 6: to sign up for truth Social in order to see
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Speaker 6: the president's truth Social posts directly. And Abbie Lowell's argument is,
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Speaker 6: you know, it has to be something a little more
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Speaker 6: formal than that, not necessarily, you know, full blown investigation,
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Speaker 6: but some opportunity to butt the allegations.
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Speaker 5: In May, the Supreme Court blocked the reinstatement of nlr
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Speaker 5: the and Merit Systems Protection Board commissioners while their suits
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Speaker 5: played out, and did the same for Consumer Product Safety
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Speaker 5: Commission heads in July. So was there an argument that
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Speaker 5: this judge should follow that precedent here?
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Speaker 6: That did come up in a few contexts, one of
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Speaker 6: which was the irreparable harm argument, because you know, Lisa
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Speaker 6: Cook's argument is that if she can't continue to serve
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Speaker 6: on the Federal Reserve Board while the litigation plays out,
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Speaker 6: she'll be irreparably harmed because you know, she's unable to
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Speaker 6: perform her duties that she was appointed and confirmed to perform.
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Speaker 6: And the government cited all these cases, including Wilcox right
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Speaker 6: where the NRB and the Emerit Systems Protection Board commissioners
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Speaker 6: were not reinstated by the Supreme Court while those cases
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Speaker 6: played out, And you know, the government argued those cases
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Speaker 6: stand for the proposition that it's harmful to the president
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Speaker 6: if you know he's unable to perform his statutory duties
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Speaker 6: to remove federal officers. You know, the Wilcos case. Really
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Speaker 6: it's a good example of how it can be by
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Speaker 6: both sides to support their argument.
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Speaker 5: But a different factor here is the independence of the
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Speaker 5: Fed and that was a highlight of Cook's complaint. Did
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Speaker 5: it play in the hearing as well.
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Speaker 6: Judge cob herself alluded to it. It came up obviously
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Speaker 6: several times in Abby Lowell's arguments as well. And I
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Speaker 6: think you know it's relevant because the Supreme Court in
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Speaker 6: May and Wilcox sort of alluded to it in the
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Speaker 6: sense that the Federal Reserve is more of a quasi
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Speaker 6: private uniquely structured institution, whereas so much of the case
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Speaker 6: law deals with agencies, some of which don't even exist anymore.
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Speaker 6: The cases are from more than one hundred years ago,
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Speaker 6: so the context may be a little different. We'll just
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Speaker 6: see how much that actually matters to the various judges
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Speaker 6: that are going to hear this.
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Speaker 5: This was an emergency hearing. What turned it into not
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Speaker 5: so much of an emergency?
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Speaker 6: Yeah, well, where one side seeks a TRO a temper
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Speaker 6: or restaining order, but they're only good if they're granted.
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Speaker 6: They're only good for like ten days, maybe two weeks,
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Speaker 6: and then the party has to seek a preliminary injunction
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Speaker 6: in order to basically keep the status quo in place
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Speaker 6: for the rest of the litigation. And what often happens
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Speaker 6: I think is probably going to happen here is because
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Speaker 6: the issues are so similar per a tro and a
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Speaker 6: preliminary junction, the parties don't want to have to go
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Speaker 6: through the same motions twice. So the way the court
8:22
Speaker 6: left it was that they're going to finish briefing the
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Speaker 6: tro on Tuesday at Leasta Cook will file her reply
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Speaker 6: to the President Trump's papers, and in the meantime, the
8:32
Speaker 6: parties will talk about potentially basically converting the tro motion
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Speaker 6: to a preliminary in junction motion again, because the issues
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Speaker 6: basically are the same, and it would just allow the
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Speaker 6: ruling to stay in place longer, and it would allow
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Speaker 6: the rulining to be appealed.
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Speaker 5: We're at a very early stage of this litigation, But
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Speaker 5: after the hearing, do you think Trump or Cook has
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Speaker 5: the edge?
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Speaker 6: Well, this is such a close case. I think President
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Speaker 6: Trump has very good arguments based on the text of
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Speaker 6: the Federal Reserve Act, which only says for cause and
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Speaker 6: doesn't say anything more than that case law. I think
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Speaker 6: also in large measure helps President Trump. But you have
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Speaker 6: to overlay over all that that we're talking about the
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Speaker 6: Federal Reserve here, and the Supreme Court in the Wilcox
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Speaker 6: decision in May, went out of its way to distinguish
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Speaker 6: the Federal Reserve when it comes to a lot of
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Speaker 6: these issues, and so much of the case law that
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Speaker 6: is being discussed deals with agencies that really fall more
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Speaker 6: clearly under executive authority. So it's going to really be
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Speaker 6: up to the various courts that are going to hear
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Speaker 6: this to decide how much they want to distinguish the
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Speaker 6: Federal Reserve from all that precedent, and you know, I
9:53
Speaker 6: think Judge Cobb alluded to that. You know, she said
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Speaker 6: she has to map Federal Reserve independence over all these issues.
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Speaker 6: To me, that suggests Lisa Cook has a good shot
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Speaker 6: at winning before Judge Cobb, at least at this early stage.
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Speaker 6: And then you know, from there, we'll go up to
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Speaker 6: the DC Circuit and then the Supreme Court, and we'll
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Speaker 6: see how they deal with their Wilcox decision. From May
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Speaker 6: Elliott tell.
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Speaker 5: Us what the fed's response to the lawsuit has been.
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Speaker 6: The FED is sort of staying silent and not picking
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Speaker 6: aside and saying they'll bide by any court decision, which
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Speaker 6: is why Lisa Cook's complaint names the Federal Reserve Board governors,
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Speaker 6: both collectively and in their individual capacity as defendants, along
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Speaker 6: with FED chair J. Powell.
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Speaker 5: Explain why timing might be important for Trump here in.
10:41
Speaker 6: The near term. You have an FMC meeting in mid September,
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Speaker 6: right where everyone's expecting some sort of rate cuts. It
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Speaker 6: seems I actually don't think that's the most important date
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Speaker 6: because for that date, Lisa Cook is just one seat
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Speaker 6: on the FMC out of twelve. In July, when they
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Speaker 6: met and they did at lower rates. You only had
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Speaker 6: two dissenting votes, So I don't think her vote is
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Speaker 6: necessarily going to sway anything in September. But to me,
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Speaker 6: the more important dates to keep in mind are the
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Speaker 6: end of February, when the Federal Reserve Board gets to
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Speaker 6: reappoint or block reappointment of the regional Federal Reserve Bank
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Speaker 6: presidents who rotate onto the FOMC. So if the President
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Speaker 6: can elst least a cook by February, he essentially on
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Speaker 6: the Federal Reserve Board will have three sympathetic votes and
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Speaker 6: on the other side, you'd have three votes you know
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Speaker 6: that probably don't align with the President Powell, Michael Barr,
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Speaker 6: and Vice Jared Jefferson, and you wouldn't have all these
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Speaker 6: other Regional Reserve Bank presidents who for the most part
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Speaker 6: have been voting consistently with Jay Powell against lowering rates.
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Speaker 6: So you know, February is important because it starts to
11:54
Speaker 6: potentially change the composition of the FOMC in a direction
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Speaker 6: that's more fai or both to President Trump.
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Speaker 5: And Trump is continuing to fire board members. On Wednesday,
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Speaker 5: he fired one of two Democratic members of the US
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Speaker 5: Service Transportation Board to break a two to two tie
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Speaker 5: before the board considers the largest railroad merger ever proposed.
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Speaker 6: You know, I think the hallmark of this when the
12:20
Speaker 6: history books are written, is its efforts to expand executive
12:24
Speaker 6: authority over almost every aspect of the government. You know,
12:28
Speaker 6: we do have this Supreme Court decision in May that
12:30
Speaker 6: suggested the Federal Reserve is a little different. We'll sort
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Speaker 6: of see how that plays out.
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Speaker 5: Thanks, Elliot. That's Bloomberg Intelligence senior litigation analyst Elliott Stein.
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Speaker 5: Coming up next. Trump wants to jail flag burners. I'm
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Speaker 5: June Grosso. When you're listening to Bloomberg.
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Speaker 2: This is Bloomberg Law with June Grossel from Bloomberg Radio, and.
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Speaker 7: What the penalty is going to be. If you burn
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Speaker 7: a flag, you get one year in jail, no early exits,
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Speaker 7: no nothing. You get one year in jail. If you're
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Speaker 7: burn a flag, you get And what it does is
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Speaker 7: insight to write it.
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Speaker 5: President Trump signed an executive order on Monday directing the
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Speaker 5: US Attorney General to prosecute people for burning the American flag.
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Speaker 5: But flag burning is protected under the First Amendment under
13:35
Speaker 5: well settled Supreme Court precedence. In fact, none other than
13:39
Speaker 5: the late Justice Antonin Scalia, a conservative icon, was part
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Speaker 5: of the majority in the nineteen eighty nine case that
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Speaker 5: established that the Constitution protects burning the flag as a
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Speaker 5: form of symbolic speech.
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Speaker 8: Yeah, if I were king, I would not allow people
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Speaker 8: to go about burning the American flag. However, we have
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Speaker 8: a First Amendment which says that the right of free
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Speaker 8: speech shall not be abridged, and it is addressed in
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Speaker 8: particular to speech critical of the government. I mean that
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Speaker 8: was the main kind of speech that tyrants would seek
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Speaker 8: to suppress. Burning the flag is a form of expression.
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Speaker 5: Trump call the justices who made that decision a quote
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Speaker 5: very sad court. And the order directs the Attorney General
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Speaker 5: to pursue litigation to challenge that. Nineteen eighty nine President,
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Speaker 5: you get.
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Speaker 7: One year in jail, and it goes on your record,
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Speaker 7: and you will see flag burning stopping immediately.
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Speaker 5: But just two hours later, a combat veteran burned an
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Speaker 5: American flag across the street from the White House to
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Speaker 5: protest the executive order targeting flag burning.
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Speaker 6: I'm burning flag the progress that illegal fast as president,
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Speaker 6: that's sits.
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Speaker 9: In that house.
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Speaker 5: My guest is David Cole, a professor at Georgetown law.
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Speaker 5: He represented the men who burned the flags in the
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Speaker 5: two leading Supreme Court cases. David, there's a long history
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Speaker 5: in this country of desecrating or burning the flag as
15:13
Speaker 5: a form of political protest that goes back to the
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Speaker 5: Civil War. But states and even Congress have passed laws
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Speaker 5: to prevent flag burning. Tell us about the Seminole case
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Speaker 5: the Supreme Court decided in nineteen eighty nine, where you
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Speaker 5: represented Gregory Lee Johnson.
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Speaker 3: Sure so. Gregory Johnson burned an American flag in Dallas, Texas,
15:35
Speaker 3: in a protest outside of the Republican National Convention that year,
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Speaker 3: and was prosecuted under a Texas statute that made it
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Speaker 3: a crime to burn the flag in a way that
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Speaker 3: would deeply offend onlookers. He was convicted in the trial court.
15:52
Speaker 3: That conviction was overturned by the highest court in Texas,
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Speaker 3: but Texas took the case up to the Supreme Court,
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Speaker 3: and the Supreme Court in Texas versus Johnson, ruled that
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Speaker 3: the government may not criminalize expression through the burning of
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Speaker 3: a flag simply because people find that message offensive.
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Speaker 5: It was a five to four decision, but it didn't
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Speaker 5: divide the court down ideological lines. In fact, conservative icon
16:21
Speaker 5: Justice Antonin Scalia was in the majority. Why do you
16:24
Speaker 5: think it didn't go down ideological lines?
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Speaker 3: So that's a great question. We won the case with
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Speaker 3: the votes of two Republican appointees, Justice Kennedy and Justice Scalia.
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Speaker 3: Both of them, I think, you know, over time, showed
16:38
Speaker 3: themselves to be committed to the First Amendment. Justice Stevens
16:42
Speaker 3: also a committed First Amendment. Justice dissented. I think in
16:46
Speaker 3: his case it came down to the fact that he
16:49
Speaker 3: was a veteran World War Two. He clearly was deeply
16:54
Speaker 3: offended by the very practice of burning a flag and
16:58
Speaker 3: therefore dissented. But over time, I think, you know, if
17:01
Speaker 3: you look back at the cases that preceded Texas sersus. Johnson,
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Speaker 3: many justices, including liberal justices, expressed some reservation about whether
17:12
Speaker 3: or not flag burning should be protected by the First Amendment.
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Speaker 3: So it's not something that has divided the country along
17:19
Speaker 3: partisan lines.
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Speaker 5: And will you explain the thinking of the justices in
17:23
Speaker 5: the majority and in the descent.
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Speaker 3: So the majority held that the justification for throwing someone
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Speaker 3: in jail for burning the flag is that the message
17:36
Speaker 3: sent by engaging in that conduct is offensive. And the
17:40
Speaker 3: court held that under the First Amendment. The government has
17:44
Speaker 3: to maintain neutrality in the field of expression. Can't punish
17:49
Speaker 3: speech simply because it or a majority of people find
17:54
Speaker 3: a particular message to be offensive. Once you go down
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Speaker 3: that road, virtually anything can be prohibited by the government
18:02
Speaker 3: because one man's offense is another man's truth. The dissent argued, well,
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Speaker 3: this is really not so essential a form of expression.
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Speaker 3: Chief Justice Rank was called flag burning quote an inarticulate grunt.
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Speaker 3: And there's a very powerful interest in preserving the unity
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Speaker 3: that the symbol expresses, and therefore states should be permitted
18:27
Speaker 3: to prescribe how people can use the flag. They can
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Speaker 3: waive it, but they can't burn it.
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Speaker 5: So President Trump is also with this executive order calling
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Speaker 5: for Attorney General Pam Bondi to pursue litigation to challenge
18:42
Speaker 5: the Supreme Court's ruling in nineteen eighty nine. This Supreme
18:46
Speaker 5: Court is very different from that Supreme Court. Do you
18:50
Speaker 5: think that they would still uphold the president.
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Speaker 3: Yes, this court is different from the court from nineteen
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Speaker 3: eighty nine to nineteen ninety but if anything, an even
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Speaker 3: stronger pro First Amendment court and Texas versus Johnson is
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Speaker 3: not just the kind of one off It is cited
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Speaker 3: again and again and again for this basic premise, probably
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Speaker 3: the most fundamental premise of pre speech law, which is
19:17
Speaker 3: the fact that speech offends somebody is not a justification
19:21
Speaker 3: for the government to throw the speaker in jail. And
19:24
Speaker 3: that's ultimately what punishing flag burners is about. It's about
19:28
Speaker 3: throwing them in jail because we would be, you know,
19:32
Speaker 3: very pleased if they waive the flag. We are very
19:35
Speaker 3: upset if they burn the flag. But either way, you
19:38
Speaker 3: are using the flag to express a message, and the
19:41
Speaker 3: government is not allowed to tell us what messages we
19:45
Speaker 3: can and cannot express through symbolic speech or otherwise.
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Speaker 5: Now, Trump's executive order doesn't direct the Attorney General to
19:54
Speaker 5: prosecute those who burn flags for the flag burning itself,
19:58
Speaker 5: but it says the Justice this Department should bring cases
20:01
Speaker 5: quote against acts of American flag desecration that violate applicable
20:06
Speaker 5: content neutral laws while causing harm unrelated to expression, consistent
20:12
Speaker 5: with the First Amendment. So the cases are going to
20:15
Speaker 5: be limited to those where there's a violation of other laws.
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Speaker 3: So this executive order is I suppose, as befitting something
20:25
Speaker 3: that is ultimately about symbols, almost entirely symbolic because it acknowledges,
20:30
Speaker 3: as it must, that the Supreme Court has decisively ruled
20:34
Speaker 3: that you can't punish someone for burning a flag. And
20:38
Speaker 3: what it does is says, well, there may be some
20:41
Speaker 3: circumstances in which one could where the reason you're engaged
20:46
Speaker 3: in the prosecution is not the burning of the flag
20:50
Speaker 3: per se, but some other interests altogether. So, for example,
20:55
Speaker 3: many towns and cities prohibit burning of anything in public
21:00
Speaker 3: without a permit. You can't burn leaves, you can't burn
21:03
Speaker 3: wood in public without a permit. That law can be
21:06
Speaker 3: applied to the burning of an American flag because the
21:09
Speaker 3: law is not about speech. It's not about what burning
21:13
Speaker 3: a flag communicates. It's an environmental law or fire safety
21:18
Speaker 3: law that is neutral as to speech. And it's long
21:20
Speaker 3: been the case that that kind of law. In fact,
21:23
Speaker 3: the Supreme Court is said that kind of law would
21:25
Speaker 3: be perfectly permissible. It is very rare that that is
21:29
Speaker 3: sphasis for a flag desecration prosecution. However, and the other
21:33
Speaker 3: example that Trump puts forth these as well, if somebody
21:36
Speaker 3: burned a flag in such a way as it constituted
21:39
Speaker 3: incitement to imminent lawless action or fighting words, those are
21:44
Speaker 3: not protected by the First Amendment. Even pure speech, if
21:48
Speaker 3: it constitutes incitement to eminent law of action or fighting words,
21:52
Speaker 3: is not protected by the First Amendment. So if flag
21:55
Speaker 3: burning fell into those very, very narrow categories, you could
21:59
Speaker 3: probably that's true, but sort of trivial and largely irrelevant,
22:04
Speaker 3: because people burn flags not to engage in fighting words,
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Speaker 3: not to incite some imminent lawless action, but to protest
22:14
Speaker 3: what the American government is doing. That's why they burn flags,
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Speaker 3: and that is exactly why flag desecration laws were enacted,
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Speaker 3: and that the Supreme Court is held is an impermissible
22:27
Speaker 3: justification for targeting any form of speech. So, yeah, if
22:31
Speaker 3: you come up with a case, and I've not seen
22:34
Speaker 3: one in my entire lifetime where someone burns a flag
22:37
Speaker 3: in order to send a signal to some group that
22:41
Speaker 3: is steeled to action to engage in illegal conduct, well sure,
22:46
Speaker 3: just as you could criminalize that person from raising his
22:50
Speaker 3: hand to incite that lawless action, you could penalize burning
22:55
Speaker 3: a flag if it's being used for that purpose. But
22:58
Speaker 3: it's really a null set And so I think at
23:00
Speaker 3: the end of the day, Trump's executive order is itself
23:05
Speaker 3: a kind of a nullity. It's a political act. It's
23:08
Speaker 3: not going to have any real world effects, and it's
23:11
Speaker 3: essentially theater engaged in by the president. Because it's good politics.
23:17
Speaker 3: It's easy to be on the side of condemning the
23:20
Speaker 3: burning of the American flag. That's why Democrats and Republicans
23:24
Speaker 3: have done that for a long time. That's why forty
23:27
Speaker 3: nine state legislatures voted to amend the Constitution after Texas
23:32
Speaker 3: versus Johnson and the United States versus Aikman, and the
23:35
Speaker 3: amendment effort only failed by a few votes in the Senate.
23:39
Speaker 3: Because the easy political act is to condemn these kinds
23:44
Speaker 3: of expressions. The hard thing, the courageous thing, is to
23:47
Speaker 3: protect them, even if we find them, and even because
23:51
Speaker 3: we find them detestable and offensive.
23:53
Speaker 5: A combat veteran burned a flag outside the White House
23:57
Speaker 5: on Monday in protest of Trump's executive order targeting flag burning.
24:03
Speaker 5: He was detained by Secret Service for igniting an object,
24:06
Speaker 5: then turned over the US Park Police and arrested. He
24:10
Speaker 5: was issued two citations, not for burning the flag, but
24:13
Speaker 5: for setting a fire in an unsecured place and for
24:17
Speaker 5: damaging park property. Does he have a defense that he's
24:21
Speaker 5: being selectively prosecuted or is that a straightforward citation?
24:27
Speaker 3: So I think in the absence of Trump's executive order,
24:30
Speaker 3: it would be a straightforward citation. That is, of course,
24:34
Speaker 3: the federal government is permitted to ban burning things on
24:37
Speaker 3: federal property, and it can ban burning flags along with
24:41
Speaker 3: burning leaves or anything else on federal property, and that
24:44
Speaker 3: wouldn't raise a serious First Amendment objection even if someone
24:48
Speaker 3: burned a flag for protest. But now that Trump has
24:51
Speaker 3: issued this executive order and basically announced as the president
24:55
Speaker 3: I states, I am directing the Justice Department to prosecute
24:59
Speaker 3: flag Why because flag burning expresses an offensive message that
25:05
Speaker 3: essentially gives this protester evidence of selective prosecution. He can
25:11
Speaker 3: introduce as exhibit A in his defense the fact that
25:14
Speaker 3: the President announced the day before he was arrested that
25:19
Speaker 3: the government would target people who burn flags using other laws,
25:24
Speaker 3: but doing so because the President disapproves of the message
25:28
Speaker 3: that is sent. And so he now has a defense
25:31
Speaker 3: that he wouldn't have had had the President not issued
25:34
Speaker 3: that executive order.
25:35
Speaker 5: And he already has a lawyer and says he welcomes
25:38
Speaker 5: the legal challenge. Thanks so much, David. That's Georgetown law
25:42
Speaker 5: professor David Cole coming up next. The Supreme Court hands
25:45
Speaker 5: Trump another victory. I'm June GROSSEO. When you're listening to Bloomberg.
25:52
Speaker 2: This is Bloomberg Law with June Grossel from Bloomberg Radio.
25:58
Speaker 9: I ordered the end to all of the lawless diversity
26:01
Speaker 9: equity and inclusion nonsense policies across the government and all
26:07
Speaker 9: across the private sector and the military.
26:10
Speaker 5: President Trump has tried to wipe out diversity, equity and
26:14
Speaker 5: inclusion programs in both the public and private sectors, and
26:19
Speaker 5: early this year, the National Institutes of Health began terminating
26:23
Speaker 5: thousands of medical research grants that don't align with the
26:27
Speaker 5: president's policies. On DEI, more than a dozen states researchers, universities,
26:32
Speaker 5: and public health organizations sued, saying the cuts would set
26:36
Speaker 5: back crucial research by years, if not decades. They won
26:41
Speaker 5: at the district court level and at the appellate court level,
26:45
Speaker 5: but the Supreme Court, in a five to four decision,
26:48
Speaker 5: sided with the Trump administration, clearing the way for it
26:51
Speaker 5: to cut nearly eight hundred million dollars in medical research grants.
26:56
Speaker 5: While legal battles over the funding play out in the
26:59
Speaker 5: lower courts, sorts joining me is constitutional law expert David super,
27:03
Speaker 5: a professor at Georgetown Law. David what kinds of grants
27:07
Speaker 5: were cut here?
27:09
Speaker 4: The administration canceled thousands of grants the NIH had provided
27:17
Speaker 4: for research on a wide range of topics. Ostensibly, these
27:23
Speaker 4: grants were cut off because they related to diversity, equity,
27:29
Speaker 4: and inclusion, or because they related to gender or gender
27:34
Speaker 4: identity as understood by the administration. In fact, it took
27:39
Speaker 4: little more than having the word diversity or equity in
27:43
Speaker 4: the name of the project to get it cut off.
27:47
Speaker 4: Some projects that had nothing to do with race or
27:51
Speaker 4: racial equity or racial inclusion were cut off, but the
27:56
Speaker 4: district court found that disproportionately research into health problems that
28:01
Speaker 4: affect people of color were target of this cutoff.
28:05
Speaker 5: Federal Judge William Young, a Reagan appointee, said, following a
28:09
Speaker 5: bench trial, this represents racial discrimination and discrimination against America's
28:14
Speaker 5: LGBTQ community. I would be blind not to call it out.
28:18
Speaker 6: Yes.
28:19
Speaker 4: He also found that the cutoffs showed remarkable insensitivity to
28:25
Speaker 4: the health problems affecting women.
28:28
Speaker 5: In the past, have administrations cut off grants for arbitrary
28:33
Speaker 5: reasons or because they don't comply with the administration's objectives.
28:37
Speaker 4: This is almost unheard of. Sure, if someone is taking
28:41
Speaker 4: a grant and they're not doing the work, they get
28:43
Speaker 4: cut off. But the notion that we wouldn't have given
28:47
Speaker 4: this grant, so we're simply going to cut it off
28:50
Speaker 4: is extraordinarily wasteful, and administrations at both parties in the
28:54
Speaker 4: past have refrained from doing it.
28:56
Speaker 5: Explain the Supreme Court's ruling, which was five to four.
29:00
Speaker 4: The question came to the Supreme Court whether to stay
29:04
Speaker 4: whether to suspend the order that the District Court judge
29:09
Speaker 4: had issued. And the District Court judge did two things.
29:12
Speaker 4: He struck down the policy guidance the administration based its
29:17
Speaker 4: terminations on, and it struck down the terminations. It fell
29:22
Speaker 4: four justices, the three Liberals and the Chief Justice voted
29:26
Speaker 4: to deny any interference with the District Court's order to
29:31
Speaker 4: let the order take effect. Four justices voted to stay
29:36
Speaker 4: the entirety of the court order, and the deciding vote
29:39
Speaker 4: was cast by Justice Barrett, who said that she wanted
29:45
Speaker 4: to stay the resumption of funding, but would not interfere
29:51
Speaker 4: with the finding that the policy guidance was illegal.
29:55
Speaker 5: And what was the reasoning of the majority in all
30:00
Speaker 5: allowing the government to withhold the grant money.
30:03
Speaker 4: Their reasoning was that anyone who'd had their grant cutoff
30:08
Speaker 4: should have gone to the Court of Federal Claims, not
30:11
Speaker 4: federal district court, and that's the place that it is
30:15
Speaker 4: proper to pursue depths from the federal government.
30:19
Speaker 5: Will you explain why? Justice Barrett came down differently on
30:24
Speaker 5: the nih cutting the grants and on the policy.
30:29
Speaker 4: Justice Barrett held that the federal district courts are completely
30:34
Speaker 4: proper places to challenge the legality of guidance that is
30:39
Speaker 4: issued by the administration. So if the challenge is that
30:43
Speaker 4: this guidance is without solid legal basis, that it's contrary
30:48
Speaker 4: to the federal government's legal obligations, that it violate civil
30:51
Speaker 4: rights laws, those are proper claims to bring in federal
30:55
Speaker 4: district court into get an injunction, she said. But she
30:58
Speaker 4: said that if you actually we want money, that has
31:01
Speaker 4: to come from the Court of Federal claim So.
31:04
Speaker 5: That means that the challenges here would have to go
31:06
Speaker 5: to two separate courts and bring two separate actions.
31:10
Speaker 4: Yes, she said, there's precedent for that, and she asserted
31:14
Speaker 4: that that was the result of Congress's passing the jurisdictional
31:19
Speaker 4: statues they have and the Supreme Court's prior interpretations, the.
31:23
Speaker 5: Court of Federal Claims is, to say the least, not
31:27
Speaker 5: well known. Do you think Barrett and the other four
31:30
Speaker 5: Conservatives were right about its jurisdiction.
31:33
Speaker 4: No, I don't. The Court of Federal Claims is there
31:37
Speaker 4: to handle a lot of routine matters where there's a
31:42
Speaker 4: question about the quality of the paint job that was
31:45
Speaker 4: done on a federal office building and the federal government's
31:48
Speaker 4: refusing to pay, and the painting contractor wants to be paid.
31:52
Speaker 4: There's a need for that, But that's very different from
31:55
Speaker 4: a systematic violation of thousands of contract asserting a power
32:02
Speaker 4: that has never previously been recognized. Those are the kinds
32:06
Speaker 4: of statutory and constitutional issues that have long been the
32:11
Speaker 4: province of the general federal court system, the district courts,
32:15
Speaker 4: and the circuit courts of appeal.
32:16
Speaker 5: Can the groups here, now that they have this decision
32:20
Speaker 5: on the policy, can they now go to the Court
32:22
Speaker 5: of Federal Claims and get the money?
32:25
Speaker 4: If only it were that simple. This was not a
32:28
Speaker 4: decision on the merits of those policies. It was simply
32:32
Speaker 4: about how the litigation should proceed, and Justice Barrett, joining
32:37
Speaker 4: with the Chief Justice and the three Liberals, held that
32:41
Speaker 4: the litigation can continue in the first Circuit Court of
32:46
Speaker 4: Appeals about whether or not those policy documents are legal,
32:52
Speaker 4: and if they are struck down again in that court,
32:58
Speaker 4: the Trump administration could appeal bater active Supreme Court on
33:01
Speaker 4: the merits. She indicated that there were some open questions
33:05
Speaker 4: in her mind that would need to be resolved before
33:08
Speaker 4: a final decision could be made about the legitimacy of
33:12
Speaker 4: those policy documents, so she was only keeping the litigation alive,
33:16
Speaker 4: she wasn't resolving it in the favor of the challengers.
33:20
Speaker 5: And the majority found that the government would be irreparably
33:23
Speaker 5: harmed if it had to pay out this money.
33:26
Speaker 4: How so, yes, that's a particularly disturbing part of it.
33:31
Speaker 4: They said that because the recipients wouldn't be able to
33:35
Speaker 4: repay the government if it was ultimately found that the
33:39
Speaker 4: money was not owing, that the federal government shouldn't have
33:42
Speaker 4: to pay out the money until after a final judgment
33:46
Speaker 4: is issued, which, once appeals are accounted for, it could
33:49
Speaker 4: take several years. This is treating the entire matter as
33:53
Speaker 4: a debt collection issue rather than an issue of democratic governance.
33:59
Speaker 4: It could be that at the end of the day,
34:01
Speaker 4: the parties entitled to money will get some money, but
34:05
Speaker 4: the research will long since has been abandoned, the employees
34:10
Speaker 4: long since has been laid off. Many of the nonprofits
34:13
Speaker 4: will have been bankrupted by the long delay. And this
34:18
Speaker 4: is essentially saying that the federal government is too big
34:22
Speaker 4: to comply rather than too big to fail. Too big
34:25
Speaker 4: to comply because the size of the grants it gives
34:28
Speaker 4: out and the importance of the grants it gives out
34:31
Speaker 4: are such that the recipients don't have the money to
34:34
Speaker 4: pay it back.
34:35
Speaker 5: Justice Neil Gorse had sort of scolded the lower court
34:38
Speaker 5: judges here for not following the Supreme Court's emergency ruling
34:43
Speaker 5: in April that allowed the Trump administration to cancel sixty
34:47
Speaker 5: five million dollars in teaching grants. Quote. Lower court judges
34:51
Speaker 5: may sometimes disagree with this Court's decisions, but they are
34:56
Speaker 5: never free to defy them. He also complained about two
34:59
Speaker 5: other strict courts not following Supreme Court rulings quote. So
35:04
Speaker 5: this is now the third time in a matter of
35:06
Speaker 5: weeks this Court has to intercede in a case squarely
35:10
Speaker 5: controlled by one of its precedents. But he's referring to
35:13
Speaker 5: rulings on the shadow docket where there aren't full briefings
35:17
Speaker 5: or oral arguments or sometimes even opinions.
35:21
Speaker 4: Well, it's a very curious position they're taking. Most of
35:25
Speaker 4: the history the Supreme Court has been through formal consideration
35:30
Speaker 4: of cases, oral arguments, briefs, and thorough opinions from the justices.
35:35
Speaker 4: Increasingly under the first Trump administration, the Bodi administration, and
35:42
Speaker 4: now the Supreme Court is not accepting full briefs, not
35:46
Speaker 4: listening to oral argument, not writing full opinion, sometimes not
35:50
Speaker 4: writing any opinions at all. And what justice goursa you're
35:53
Speaker 4: saying is, even when the Supreme Court is issuing an
35:57
Speaker 4: emergency order, and even when it's not at all clear
36:00
Speaker 4: what the basis for that order is, the lower courts
36:03
Speaker 4: somehow must read the Supreme Court's mind. If the Supreme
36:07
Speaker 4: Court wants lower courts to follow it, it needs to
36:10
Speaker 4: tell them what it's doing.
36:11
Speaker 5: Chief Justice Roberts joined the liberals in the case involving
36:16
Speaker 5: the teaching related grants. And in this case, is that
36:19
Speaker 5: surprising in any respect?
36:21
Speaker 1: No.
36:22
Speaker 4: Chief Justice Roberts has been very concerned about business climate
36:26
Speaker 4: and allowing businesses to function freely, and the federal government
36:30
Speaker 4: that isn't bound to comply with its contract is very
36:33
Speaker 4: bad for business. Throughout the country's history, contract has been
36:39
Speaker 4: a central part of its law and the notion that
36:42
Speaker 4: the government above all complies with its contracts. It's been central.
36:47
Speaker 4: We have a new administration that doesn't want to and
36:50
Speaker 4: rather than bringing it to heal, this court has been
36:53
Speaker 4: over backwards to accommodate it. If I were a private
36:57
Speaker 4: business person, I would be doing anything I could to
37:00
Speaker 4: avoid having a contract with the federal government because the
37:03
Speaker 4: effect of these decisions isn't The contract isn't worth anything.
37:07
Speaker 5: Is there any other avenue that the researchers and the
37:10
Speaker 5: organizations and the states can pursue or is it just
37:15
Speaker 5: the Court of Federal Claims?
37:17
Speaker 4: They can go to the Court of Federal Claims, there
37:20
Speaker 4: are significant obstacles to getting relief from that court. It's
37:25
Speaker 4: a real court. People do win real judgments there. I
37:28
Speaker 4: don't mean to disparage it in that way, but it's
37:31
Speaker 4: going to be a very difficult way to proceed. Lots
37:34
Speaker 4: of money that is owed probably will never be ordered
37:37
Speaker 4: to be paid out of that court, and the result
37:41
Speaker 4: of all of this is likely to be that many
37:45
Speaker 4: of these programs are indeed disbanded.
37:48
Speaker 5: Between this decision and the April decision. It's not good
37:52
Speaker 5: news for those who have grants.
37:54
Speaker 4: This isn't really a liberal conservative thing. This is just
37:57
Speaker 4: a rule of law thing. And if the govern it
38:00
Speaker 4: doesn't have to keep its contracts, no one should do
38:03
Speaker 4: business with it.
38:04
Speaker 5: It's always a pleasure, David, thanks so much. That's Professor
38:07
Speaker 5: David Super of Georgetown Law. And that's it for this
38:11
Speaker 5: edition of the Bloomberg Law Show. Remember you can always
38:14
Speaker 5: get the latest legal news by listening to our Bloomberg
38:17
Speaker 5: Law podcasts. You can find them on Apple Podcasts, Spotify,
38:21
Speaker 5: and at Bloomberg dot com slash podcast Slash Law. I'm
38:25
Speaker 5: June Grosso. Stay with us. Today's top stories and global
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Speaker 5: business headlines are coming up right now.