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Musk Loses to Altman & NLRB Rocked b y Decision · Bloomberg Law

0:02
Speaker 1: This is Bloomberg Law with June Brossel from Bloomberg Radio.
0:08
Speaker 2: It's a huge win for Sam Altman and a massive
0:12
Speaker 2: defeat for Elon Musk. Today, a jury rejected Musk's claims
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Speaker 2: that open Ai, under Altman's leadership, betrayed its mission to
0:22
Speaker 2: benefit the public by morphing into a for profit business,
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Speaker 2: with a verdict finding that Musk waited too long to
0:30
Speaker 2: sue the company. The jury didn't reach the merits of
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Speaker 2: Musk's claims, but decided the case on a procedural point
0:37
Speaker 2: involving the statute of limitations. Musk intends to appeal the decision.
0:43
Speaker 2: Joining me is Bloomberg Legal reporter Madelin Meckelberg who covered
0:46
Speaker 2: the trial. Madlin. So, this was a unanimous verdict by
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Speaker 2: a nine member jury, tell us about it.
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Speaker 3: The jury in Oakland delivered a verdict after I think
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Speaker 3: about two hours, maybe less than two hours of deliverys
1:00
Speaker 3: on Monday morning, and that verdict was that Elon Musk
1:04
Speaker 3: had waited too long to bring his claims against open Ai,
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Speaker 3: Sam Altman, Greg Brockman and Microsoft.
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Speaker 2: It was a three year statute of limitations. Explain what
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Speaker 2: the factual dispute was about when the statute started running.
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Speaker 3: Jurors were told by Judge Evon Gonzalez Rodriguez, who's presiding
1:23
Speaker 3: over this case, that the way they should assess statute
1:25
Speaker 3: of limitations is whether or not Elon Musk should have
1:30
Speaker 3: known about the conduct that he's alleging at an earlier date,
1:34
Speaker 3: and whether a reasonable person would have known. You know,
1:36
Speaker 3: there's a lot of qualifiers in there, a reasonable person
1:39
Speaker 3: given the circumstances. Basically, they're saying he should have known
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Speaker 3: about this well before he did. This was something we
1:45
Speaker 3: heard about a bit at trial. They were really attempting
1:47
Speaker 3: to build out kind of a timeline of communications because
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Speaker 3: Elon left Open Ai in twenty eighteen, he formed his
1:55
Speaker 3: own AI company in twenty twenty three, and then he
1:58
Speaker 3: brought this lawsuit in twenty twenty five, and as he
2:01
Speaker 3: described it to jurors, his feelings towards his co founders
2:04
Speaker 3: and the company they changed over time. So he described
2:07
Speaker 3: how he started to lose faith in them, lose confidence,
2:09
Speaker 3: and then he only became convinced that they stole a charity,
2:13
Speaker 3: as he describes it much later on. But I think
2:16
Speaker 3: jurors obviously were not buying that explanation based on this verdict,
2:20
Speaker 3: I think it would be fair to suggest that they
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Speaker 3: probably believed that if he was genuinely concerned about this,
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Speaker 3: this is something that he would have filed much sooner.
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Speaker 4: That's ultimately what this boils down to.
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Speaker 2: So you have three weeks about of testimony and they
2:35
Speaker 2: never reached the merits of Musk's claim but went off
2:38
Speaker 2: on a procedural issue.
2:40
Speaker 4: That's right.
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Speaker 3: So the jury did not issue a verdict on any
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Speaker 3: of the specific claims that Musk brought forward. All they
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Speaker 3: said was he didn't sue soon enough. Those were the
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Speaker 3: first three questions on the verdict form, and so.
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Speaker 4: You know, all the other things are muted.
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Speaker 3: If he didn't sue early enough, then there's no reason
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Speaker 3: for them to go through the rest of the forum.
3:00
Speaker 3: I know we've talked previously the way that this case
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Speaker 3: was set up. The jury verdict was going to be
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Speaker 3: an advisory verdict, so in something non binding for the
3:08
Speaker 3: judge to take back to her chamber's mule and decide later.
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Speaker 3: But after they handed down their verdict, she said, immediately,
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Speaker 3: I'm going to accept the jury's verdict. I'm dismissing these charges,
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Speaker 3: and that's the end of it and kind of wiped
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Speaker 3: her hands of this phase of the litigation.
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Speaker 2: I understand that one of Musk's lawyers said they were
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Speaker 2: going to appeal.
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Speaker 3: That should come as no surprise to anybody who's followed
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Speaker 3: Elon Musk or any of his litigation in the past. Yes,
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Speaker 3: they are planning to file an appeal in this case.
3:38
Speaker 3: They believe that the jury and the judge got it wrong.
3:40
Speaker 3: So this is not the last that we're going to
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Speaker 3: hear from them. And I think eagle eyed watchers of
3:45
Speaker 3: the docket in this case might remember that there are
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Speaker 3: actually a few other live claims that didn't make it
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Speaker 3: to trial, and those are antitrust claims that Musk filed
3:55
Speaker 3: against open Ai and Microsoft. And what happened here is
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Speaker 3: the judge basically said, there's too much going on in
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Speaker 3: this case. We're going to separate it into a few
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Speaker 3: different phases. This first one is going to be focused
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Speaker 3: just on the breach of charitable trust and unjust enrichment.
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Speaker 3: So now that this phase is done, you know, pending
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Speaker 3: the outcome of these appeals, now they're going to have
4:14
Speaker 3: to figure out how to deal with these other anti
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Speaker 3: trust claims. Some might be thinking that it would make
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Speaker 3: logical sense for the open Aye lawyers to now argue, well,
4:23
Speaker 3: if the statute of limitations was in play here, surely
4:27
Speaker 3: that should apply to these claims as well.
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Speaker 4: And I think that's still an open ended question. So
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Speaker 4: this is far from the last word.
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Speaker 3: In the Musk Altman feud showdown, however you want to
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Speaker 3: describe it.
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Speaker 4: We've got a lot more litigating to.
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Speaker 2: Go, So let's talk about the trial a little bit.
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Speaker 2: Was it a test of the credibility of Mosque versus
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Speaker 2: the credibility of Altman? Or was it more than that?
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Speaker 3: I mean, legally speaking, No, it's not about credibility. It's
4:54
Speaker 3: about what did the contract say, what did the papers say? Like,
4:57
Speaker 3: it's about these legal statutes that they're fighting over. But
5:00
Speaker 3: I think attorneys on both sides kind of in their
5:03
Speaker 3: closing statements, we heard from them very clearly that they
5:06
Speaker 3: do believe that this is a case of credibility. Again,
5:08
Speaker 3: the jury didn't really get to this by talking about
5:11
Speaker 3: the statute of limitations, but that was their their argument
5:14
Speaker 3: on both sides. There's some fundamental facts about this that
5:18
Speaker 3: we can't really dispute. We know what happened kind of
5:21
Speaker 3: on paper, we know who gave money, how much money,
5:24
Speaker 3: But what we don't know and what we have to
5:27
Speaker 3: rely on the witnesses for is filling in some of
5:29
Speaker 3: those gaps. How were people feeling, what were the intentions
5:32
Speaker 3: behind making certain moves, And so, of course the open
5:36
Speaker 3: Aye attorneys say that you need to trust Sam Altman's
5:38
Speaker 3: version of events. They stressed the jury that there's no
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Speaker 3: documents or emails or any testimony that they heard in
5:45
Speaker 3: court that backs up what Elon Musk said. And then
5:49
Speaker 3: Musk's lawyers spent a huge portion of their time presenting
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Speaker 3: their case in trying to poke holes in Altman's credibility
5:56
Speaker 3: and questioning people about his ouster in twenty twenty three,
6:00
Speaker 3: and just kind of trying to really make a go
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Speaker 3: at his reputation and repeatedly calling him a liar and
6:05
Speaker 3: saying he's untrustworthy. So I think at the end of
6:08
Speaker 3: the day, they wanted it to be kind of a
6:10
Speaker 3: character contest between these guys.
6:12
Speaker 2: I think when the trial first started, I said, why
6:15
Speaker 2: are they such bitter enemies after they were friends? So
6:19
Speaker 2: can you explain what the trial revealed about that?
6:22
Speaker 3: Right? The trial kind of gave us a look behind
6:25
Speaker 3: the curtain at a lot of things like this is
6:27
Speaker 3: a story that you know, if you're following tech and
6:30
Speaker 3: AI is kind of AI started as this scrappy startup
6:34
Speaker 3: and now is you know, estimated to be worth the
6:36
Speaker 3: trillion dollars or whatever. You know, this gave us a
6:39
Speaker 3: look at what actually happened there, and I think a
6:42
Speaker 3: lot of it boiled down to disagreements about the future
6:46
Speaker 3: of open AI very generally, but it was very personal.
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Speaker 4: For these guys. I think, like for Elon Musk, he's
6:52
Speaker 4: really made.
6:53
Speaker 3: AI and this AI safety, he's trying to make that
6:57
Speaker 3: a really big part of who he is, what's important
6:59
Speaker 3: to him, what he's fighting for, And the same goes
7:02
Speaker 3: for these other guys. They've really put all of their
7:04
Speaker 3: focus and attention on building this company.
7:07
Speaker 4: And the twenty seventeen.
7:09
Speaker 3: Scuffle over the power struggle essentially between these guys about
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Speaker 3: who should actually control open AI, I think that's what
7:17
Speaker 3: got us to where we are today, where there's such animosity.
7:22
Speaker 3: I think if you talk to Musk critics, they might
7:24
Speaker 3: paint this as someone who regrets kind of while picking
7:28
Speaker 3: up his marbles and walking out the door when he
7:30
Speaker 3: did because of course, in twenty seventeen, they wouldn't have
7:33
Speaker 3: known what a tremendous success Open AI would become, and
7:37
Speaker 3: Elon Musk gets no part of that pie now, and
7:41
Speaker 3: so I think there's certainly some element of that and
7:44
Speaker 3: kind of hindsight, you know, you can see the full picture.
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Speaker 4: But now that Elon Musk has.
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Speaker 3: Emerged as a competitor in the AI space, I think
7:51
Speaker 3: that's only adding kind of fuel to the fire. And
7:54
Speaker 3: certainly he's been doing his best to continue kind of
7:58
Speaker 3: throwing elbows at open ama I as things have moved forward,
8:01
Speaker 3: and Opening Eye doesn't take it quietly.
8:03
Speaker 4: You know, they push back, Altman pushes back. This is
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Speaker 4: not a one way feud.
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Speaker 3: They definitely both have a lot of animosity towards each
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Speaker 3: other that this is not going to resolve.
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Speaker 2: Outside of Musk and Altman, who were the main witnesses.
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Speaker 3: I think Greg Brockman was a really important witness, and
8:19
Speaker 3: he's someone who often gets overwritten in the headlines because it's,
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Speaker 3: you know, Musk versus Altman, but it's also Musk versus
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Speaker 3: Greg Brockman, who's the president of open AI. He's also
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Speaker 3: one of the co founders, and he had a really
8:32
Speaker 3: I think important perspective. He was on the stand for
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Speaker 3: quite some time, and one of the most interesting things
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Speaker 3: that I think he was talking about was his concerns
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Speaker 3: about what Elon did or didn't know about AI and
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Speaker 3: kind of raising doubts that he had the chops and
8:47
Speaker 3: the vision necessary to be a leader. But he was
8:50
Speaker 3: also an important witness, I think for Musk's case because
8:53
Speaker 3: we got to see a lot of his personal journal
8:55
Speaker 3: entries from this time period where he would document conversations
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Speaker 3: he had with people and kind of weigh out of
9:01
Speaker 3: pros and cons of just different decisions that he was making.
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Speaker 3: And I think, you know, there wasn't really like a
9:07
Speaker 3: big key piece of evidence was like, oh my gosh
9:09
Speaker 3: in this case. But he had one line in his
9:12
Speaker 3: journal where he was talking about what will it take
9:14
Speaker 3: to get me to one billion dollars? And that's something
9:16
Speaker 3: that Musk's lawyers like really zeroed in on because they
9:20
Speaker 3: were trying to show that they were motivated by money
9:23
Speaker 3: and enriching themselves and not by promoting the mission of
9:27
Speaker 3: open AYE. So I think he was a really valuable
9:29
Speaker 3: witness in that he got in some good jobs for
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Speaker 3: open AI, but he also exposed some vulnerability for kind
9:35
Speaker 3: of Musk's perspective there.
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Speaker 2: Microsoft was part of this trial, though you'd never know
9:40
Speaker 2: it to see the coverage of it. I mean, did
9:43
Speaker 2: they put on any witnesses.
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Speaker 3: We heard very little from Microsoft, and their lawyer actually
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Speaker 3: joked about that during the closing arguments. He was like,
9:51
Speaker 3: you hardly heard from us during the course of this trial,
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Speaker 3: and I don't think I have to tell you why.
9:55
Speaker 3: Like that's kind of their whole argument is like, this
9:58
Speaker 3: has nothing to do with us, like us out of it.
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Speaker 3: We did hear from Microsoft's CEO Satynadella at one point
10:05
Speaker 3: kind of talking about his decision to make those early
10:08
Speaker 3: investments in open ai and why it was something the
10:11
Speaker 3: company valued, and we heard from a handful of other
10:13
Speaker 3: people at the company. I think at the end of
10:16
Speaker 3: the day, it isn't there bite. I don't think they're
10:20
Speaker 3: wrong about that legally, like certainly they're part of this.
10:23
Speaker 3: They've contributed significant amount of money to open ai and
10:26
Speaker 3: have this unique partnership with them. But even when we're
10:29
Speaker 3: talking about the jury verdict, where they're talking about the
10:32
Speaker 3: statute of limitations, there are three questions. You know, the
10:35
Speaker 3: statute of limitations for breach of charitable trust for unjustin Richmond,
10:39
Speaker 3: but also for Microsoft aiding and abetting the breach of
10:42
Speaker 3: charitable trust. And they didn't even answer that one because
10:45
Speaker 3: if they decided there's no breach of charitable trust, you know,
10:48
Speaker 3: claim to be considered in.
10:49
Speaker 4: The first place, then they don't have to get into that.
10:52
Speaker 3: So definitely Microsoft was taking a backseat in this one,
10:55
Speaker 3: and I think they were, you know, probably okay with that.
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Speaker 2: So finally this gives open ai the go ahead to
11:03
Speaker 2: go public.
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Speaker 3: I don't know if this is something that they were
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Speaker 3: necessarily waiting for. I don't have any special insights into that. Essentially, though,
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Speaker 3: it's that it should have been business as usual for them.
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Speaker 4: Hard to say what's ahead.
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Speaker 2: Thanks so much, Madlin for your reporting throughout the trial.
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Speaker 2: That's Bloomberg Legal reporter Madlein Meckelberg coming up next on
11:22
Speaker 2: the Bloomberg Law Show. The National Labor Relations Board wants
11:27
Speaker 2: the full Sixth Circuit to review a decision that dampens
11:31
Speaker 2: its power. It's a case that's likely headed to the
11:34
Speaker 2: Supreme Court. I'm June Grosso and you're listening to Bloomberg.
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Speaker 2: The US Court of Appeals for the Sixth Circuit rocked
11:45
Speaker 2: the National Labor Relations Board with a recent ruling that
11:49
Speaker 2: threatens the NLRB's power to establish labor policy through individual
11:54
Speaker 2: case decisions, potentially disrupting the way the agency has operated
11:59
Speaker 2: for more than nine years. In a three to two decision,
12:02
Speaker 2: the Appellate Court ruled that the Board overstepped its authority
12:06
Speaker 2: by creating a new framework aimed at better policing union elections.
12:12
Speaker 2: The Board is asking the full Circuit to review the
12:15
Speaker 2: decision on bank My guest is an expert in labor
12:19
Speaker 2: law and Lofosso a professor at the University of Cincinnati
12:23
Speaker 2: Law School, and tell us about the case itself.
12:26
Speaker 1: So in that case, the board found that the employer
12:30
Speaker 1: committed these extensive, unfairlyure practices during an organizational drive at
12:35
Speaker 1: the Woodford Reserve Distillery. And then once the employer found
12:38
Speaker 1: out about this that there was a majority of employees
12:41
Speaker 1: who signed these cards, management responded with a rapid series
12:45
Speaker 1: of unprecedented targeted benefits a second across the board race.
12:50
Speaker 1: It started at one dollar and went up another four.
12:52
Speaker 1: So think about that. That's five dollars an hour across
12:55
Speaker 1: the board race. That's a ten thousand dollars pay, raise
12:58
Speaker 1: for everyone expanded, and progression pay. I mean, I can
13:01
Speaker 1: go on these benefits which were really like bribes, and you.
13:06
Speaker 2: Left out the free bottles of bourbon.
13:08
Speaker 1: Yeah, I was gonna say, also the bourbon, and you
13:10
Speaker 1: know bourbon costs. I looked it up for bourbon goes
13:14
Speaker 1: for like anything from like I think thirty nine dollars
13:16
Speaker 1: to over sixty dollars a bottle, maybe even more expensive.
13:19
Speaker 1: So these were nice decent bottles of bourbon, you know,
13:22
Speaker 1: from mid range to a little bit higher. And so
13:26
Speaker 1: this obviously interfered with employee free choice. So the region
13:30
Speaker 1: asked for both a GISTLE bargaining order and a Cemex
13:33
Speaker 1: bargaining order, which are two different bargaining orders, but they
13:36
Speaker 1: basically are the same remedy, but they're based on two
13:38
Speaker 1: different theories. And the board just decided to go with
13:41
Speaker 1: the one c Mex.
13:43
Speaker 2: So then tell us about the Cemex bargaining order.
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Speaker 1: What that is. So under Cemex, which is a new
13:50
Speaker 1: Supreme Court precedent, it's only a few years old. Under
13:53
Speaker 1: the Biden Board, once a union presents evidence of majority
13:57
Speaker 1: sport with cards and requests recognition, then the employer has
14:01
Speaker 1: a choice of two things. It has to either voluntarily
14:05
Speaker 1: recognize the union or it has to within two weeks
14:08
Speaker 1: file what's called an r M petition, which is a
14:11
Speaker 1: petition for an election. But it's called an r M
14:13
Speaker 1: petition because management, the employer, has to file the election,
14:17
Speaker 1: not the employees. So they have that choice. They can
14:19
Speaker 1: either say, Okay, I recognize you, or I'm not so sure.
14:23
Speaker 1: I have a doubt. I'm going to ask for an election.
14:26
Speaker 1: So if the employer chooses the election route and commits
14:31
Speaker 1: any unfair labor practices, then the board will see will
14:35
Speaker 1: view the election process as tainted and will issue the
14:40
Speaker 1: bargaining order as a remedy to restore the employee's last
14:44
Speaker 1: uncoerced expression of free choice, which was the cards, because
14:48
Speaker 1: the majority cards expressed that there was a majority that
14:51
Speaker 1: wanted the union. Now, the other remedy, which the Supreme
14:55
Speaker 1: Court adopted in nineteen sixty nine, you know that's almost
14:59
Speaker 1: sixty years now. Well, that remedy said that the employees
15:03
Speaker 1: have to file the election and if there are a
15:07
Speaker 1: lot of unfair layer practices, then they can issue this
15:11
Speaker 1: bargaining order. So both have the bargaining order, but they're
15:14
Speaker 1: kind of based on two different theories. One is based
15:19
Speaker 1: on the sheer number of unfair layer practices and the
15:22
Speaker 1: other is based on unfair labor practices that are tainting
15:26
Speaker 1: the election. Okay, so the two different theories getting to
15:29
Speaker 1: the same thing, and they're both remedial. Now, the Sixth
15:33
Speaker 1: Circuit agreed with the Board and the facts that said, yup,
15:36
Speaker 1: you're right, this was atrocious. I mean, they don't use
15:39
Speaker 1: the word atrocious, but they agreed that the employer committed
15:42
Speaker 1: multiple unfair layer practices and that it was supported by
15:45
Speaker 1: substantial evidence, and that the board properly considered all the behavior.
15:50
Speaker 1: But they said the remedy was wrong. Now, the board
15:55
Speaker 1: only decided even though the alj found both a CMX
16:00
Speaker 1: and a ghissle bargaining order. In other words, either rationale
16:05
Speaker 1: got you there. The board said, we're only going to
16:06
Speaker 1: use c MEX. We don't need to go to ghissel.
16:09
Speaker 1: The court said you can't do that. They had several reasons,
16:13
Speaker 1: and they said, but the most important one, which was
16:15
Speaker 1: really this is what was very shocking about the decision,
16:18
Speaker 1: So the most important one. Because c MEX was an
16:22
Speaker 1: unlawful legislative rule that could not be adopted through adjudication.
16:26
Speaker 1: In other words, the Board engaged into in a policy
16:29
Speaker 1: decision and that CEMEX creates this new substantive rule that
16:34
Speaker 1: imposes new obligations legal obligations on employers and therefore is
16:38
Speaker 1: required under the APA to go through notice and comment
16:42
Speaker 1: rule making. Now this is shocking because the Supreme Court
16:48
Speaker 1: has never said this. In fact, it has always said
16:52
Speaker 1: it's the Board's choice whether to engage in so called
16:56
Speaker 1: rule making or policy making through rule making or through adjudication.
17:01
Speaker 2: So the Board is asking the whole circuit to review
17:05
Speaker 2: this two to one decision.
17:08
Speaker 1: Unsurprisingly, the Board decided that it had to file a
17:12
Speaker 1: petition for a rehearing on Bank. And so there's right
17:16
Speaker 1: now two petitions for rehearing on Bank. There's one by
17:18
Speaker 1: the union that's supporting the board, and of course the
17:21
Speaker 1: Board filed one.
17:23
Speaker 2: So then there's absolutely no Supreme Court precedent for this.
17:29
Speaker 1: The Court has never, never rejected what the Board did
17:35
Speaker 1: because it chose adjudication over rulemaking.
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Speaker 2: Never the Supreme Court.
17:39
Speaker 1: The sixty year precedent was when the Supreme Court said
17:42
Speaker 1: Ghissle was an appropriate remedy and that Ghissle reasoning was
17:46
Speaker 1: appropriate that's a sixty year They never reached the gissle
17:49
Speaker 1: question here because the Board decided we only need CMEX
17:54
Speaker 1: to support the bargaining order.
17:56
Speaker 2: Is this like, Is this then a novel interpretation by
17:59
Speaker 2: the six Circuit.
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Speaker 1: It's not only a novel interpretation, it's an interpretation that
18:04
Speaker 1: flies in the face of administrative law, of Supreme Court precedent,
18:09
Speaker 1: of every single precedent. It's really a shocking decision when
18:13
Speaker 1: you read it. They could have said, we don't think
18:15
Speaker 1: the CMX bargaining order fits here. They could have said
18:18
Speaker 1: a lot of things. We think CMX is ultravirus like
18:21
Speaker 1: in other words, the board really can't do that for
18:23
Speaker 1: other reasons. But they say the board can't do it
18:26
Speaker 1: the way it did it, that it wasn't allowed to
18:28
Speaker 1: adopt a CX bargaining order through adjudication. The CMX bargaining
18:33
Speaker 1: order was adopted through adjudication in another case, CMX, this
18:37
Speaker 1: is brown. So then the board took its precedent CMX,
18:41
Speaker 1: and then it applied it in this case. The board
18:44
Speaker 1: does this all the time. Now, just imagine now that
18:49
Speaker 1: the Board can't create any policies through adjudication. It has
18:52
Speaker 1: to do all rulemaking. This would change the entire landscape
18:56
Speaker 1: of how the board does policymaking. And you can go
19:00
Speaker 1: Supreme Court after Supreme Court precedent that says that the
19:05
Speaker 1: Board is allowed to do this through adjudication. I mean,
19:09
Speaker 1: the Board does almost everything through adjudication. So that's what's
19:13
Speaker 1: so shocking about this case.
19:15
Speaker 2: What about that extended football metaphor so likening the NLRB
19:20
Speaker 2: having a choice between adjudication and rule making to a
19:22
Speaker 2: team electing to run or pass the ball quote, but
19:26
Speaker 2: once the board chooses a run play, it cannot throw
19:28
Speaker 2: the ball downfield after crossing the line of scrimmage. The
19:32
Speaker 2: board cannot exercise its rule making power through the adjudication process.
19:37
Speaker 1: I don't even understand what that means. I mean, it's
19:40
Speaker 1: nice that he knows football. I understand that once you run,
19:44
Speaker 1: you know you're non passing. I get that, But that
19:47
Speaker 1: is irrelevance here. The board always does this. Look, let's
19:52
Speaker 1: say he's right. Let's say the Court's right. The Supreme
19:56
Speaker 1: Court has to say that the Supreme Court has to
19:57
Speaker 1: overrule its precedent. All the court precedent says the opposite.
20:02
Speaker 1: So this is completely activist. How do you litigate. If
20:06
Speaker 1: you can't even depend upon the Courts of Appeals to
20:09
Speaker 1: apply Supreme Court precedent. Fine, we know the Supreme Court
20:14
Speaker 1: can change its rules. And even when the Supreme Court
20:17
Speaker 1: changes its rules, then it shakes up business, it shakes
20:22
Speaker 1: up how we understand the law, it shakes up the
20:25
Speaker 1: rule of law. Right. So, for example, the Supreme Court
20:28
Speaker 1: decided that Revuwade was no longer the law of the land.
20:30
Speaker 1: We knew that could happen.
20:32
Speaker 4: It did.
20:32
Speaker 1: Okay, the Supreme Court has overturned plus E versus Ferguson
20:35
Speaker 1: and Brown versus Board of Education. The Supreme Court's allowed
20:38
Speaker 1: to do this, But imagine if a lower court did that.
20:42
Speaker 1: What the lower court could do is say, we think
20:44
Speaker 1: this is a bad rule. Supreme Court, you should overrule
20:48
Speaker 1: its precedents. But it can't overrule Supreme Court precedent, which
20:51
Speaker 1: is what it's done here.
20:53
Speaker 2: Just logistically, is it wise to ask the whole Sixth
20:57
Speaker 2: Circuit to review this when ken of its sixteen active
21:02
Speaker 2: status judges were appointed by Republicans, including seven by President Trump.
21:08
Speaker 2: So if the Circuit grandson on Bank review and then
21:12
Speaker 2: they lose, there, isn't it worse?
21:16
Speaker 1: No, for a couple of reasons. One is that it's
21:19
Speaker 1: the board's policy, at least it was when I was there,
21:22
Speaker 1: to go for bank review before it goes to the
21:25
Speaker 1: Supreme Court. So to me, the signals that the Board
21:27
Speaker 1: thinks this is so important that we consider going to
21:29
Speaker 1: the Supreme Court. The second reason is this actually doesn't
21:33
Speaker 1: help the conservatives. And this is the reason. The Board
21:36
Speaker 1: currently has a Republican majority, has a Trump appointed Republican majority,
21:41
Speaker 1: and a Trump appointed General Council. If that Trump appointed
21:47
Speaker 1: Republican majority cannot make policy through judication, it's going to
21:52
Speaker 1: slow it down a lot. I mean, this is a
21:57
Speaker 1: procedural question. Really, it's an administry of law question that
22:01
Speaker 1: favors neither side. In the abstract. It happens to favor
22:06
Speaker 1: a very liberal decision here because this is Jennifer Brutso's
22:11
Speaker 1: or part of her theory. This was under the Biden board,
22:14
Speaker 1: but in the next few years it would favor all
22:17
Speaker 1: these conservative decisions. So they don't think so. And I
22:21
Speaker 1: think that what the Board is really doing is fine.
22:24
Speaker 1: If we're going to lose, we might lose CX. In
22:27
Speaker 1: other words, maybe the court will say CMEX is not
22:31
Speaker 1: a good idea. And that was that the Board shouldn't
22:34
Speaker 1: have a remedy in this way. But what it can't
22:37
Speaker 1: do is dictate to the board that it's not allowed
22:41
Speaker 1: to create policy through adjudication. And that's neutral. That's a
22:46
Speaker 1: neutral rule. So it shouldn't It shouldn't matter about conservative
22:49
Speaker 1: versus liberal, unless you want to just slow down all
22:52
Speaker 1: of their policymaking, or you just want to rip apart
22:56
Speaker 1: the new deal completely. That's a possibility.
22:59
Speaker 2: Stay with me, and coming up next on the Bloomberg
23:01
Speaker 2: Law Show, I'll continue this conversation with Professor Ann Lafosso
23:06
Speaker 2: we'll take a look at what the NLRB said in
23:08
Speaker 2: its petition and might the Supreme Court reverse its own precedent.
23:13
Speaker 2: It certainly happened before. A recent ruling by the US
23:19
Speaker 2: Court of Appeals for the Sixth Circuit threatens the National
23:22
Speaker 2: Labor Relations Board's power to establish labor policy through individual
23:28
Speaker 2: case decisions, potentially disrupting the way the agency has operated
23:33
Speaker 2: for more than ninety years. It was a three to
23:36
Speaker 2: two decision, and the National Labor Relations Board is asking
23:39
Speaker 2: the full Circuit to review the decision. On bank I've
23:43
Speaker 2: been talking to Anne Lafasso, an expert in labor law
23:46
Speaker 2: and a professor at the University of Cincinnati Law School.
23:50
Speaker 2: The Supreme Court is skeptical of the administrative state, and
23:54
Speaker 2: that's putting it mildly. Could they say, oh, wait, we
23:57
Speaker 2: like this decision by the Sixth Circuit here they could.
24:01
Speaker 1: They could, but they would have to get rid of
24:04
Speaker 1: let me see, I wrote all this down Channery two.
24:07
Speaker 1: Whyman Gordon Bell Aerospace all for these are foundational administrative
24:13
Speaker 1: law cases that say that the board is allowed to
24:16
Speaker 1: choose between rulemaking and adjudication. They invented this new motivation
24:22
Speaker 1: test that said when the board is motivated by general
24:24
Speaker 1: policy rather than solely by the facts, like that nothing
24:28
Speaker 1: is in the precedent about that mischaracterized se MIX is
24:32
Speaker 1: sort of fitting into its theory, saying that c MIX
24:35
Speaker 1: is somehow this one size fit all rule, when se
24:39
Speaker 1: MIX actually says, you have to have done this, you
24:41
Speaker 1: have to have done this, you have to have done
24:43
Speaker 1: this to get this remedy. It's extremely fact intensive. They
24:47
Speaker 1: ignored at least seven administrative law principles how the board
24:52
Speaker 1: not only can create policy through adjudication, it can change
24:56
Speaker 1: policy through adjudication. So it's actually creating this Circuit split
25:01
Speaker 1: on a foundational late law question. But it's also it's
25:05
Speaker 1: a shocking interpretation because it would mean that any agency
25:10
Speaker 1: that does adjudication, it would change that. Now here's the thing.
25:15
Speaker 1: The Board is pretty much the only the only agency
25:20
Speaker 1: that does this by adjudication. So what I think is
25:24
Speaker 1: that clerks and judges do not understand labor law, so
25:30
Speaker 1: they applaued somehow the more normal administrative rulemaking model to
25:36
Speaker 1: the Board. The Board has done four rules or something
25:41
Speaker 1: in the entire ninety year history. Okay, that means it
25:46
Speaker 1: would be a totally new agency. And the Supreme Court
25:50
Speaker 1: has said this, Congress has never gone against it. So
25:53
Speaker 1: somehow these two judges have decided that we're going to
25:57
Speaker 1: just change the way the whole agency works. It is
26:00
Speaker 1: shocking for its its hootspa. Okay, it's shocking. It's just shocking.
26:07
Speaker 1: So I'm never shocked by what the Supreme Court does.
26:09
Speaker 1: If the Supreme Court has done this, I'd be mildly shocked.
26:12
Speaker 1: But at least it would be the Supreme Court that
26:14
Speaker 1: is allowed to change its mind. This is mandatory authority.
26:20
Speaker 1: If I were in judge, am I allowed to just
26:22
Speaker 1: ignore Dobbs? And say yeah, sorry, you know I allowed
26:25
Speaker 1: to do that to all when she get have an
26:26
Speaker 1: abortion at nine months, you know, I mean, no, it
26:29
Speaker 1: doesn't matter what my views are. I have to follow
26:32
Speaker 1: the Supreme Court.
26:33
Speaker 2: So tell us about the petition the NLRB file to
26:37
Speaker 2: try to get on bank review.
26:40
Speaker 1: Okay, So let's see. I did a little chart, and
26:45
Speaker 1: basically the board in the Union first say that the
26:49
Speaker 1: board has wide latitude, vast latitude to choose adjudication or rulemaking,
26:55
Speaker 1: and almost always chooses adjudication. That's in contrast to what
26:59
Speaker 1: the majority already says, so that the Descent degrees, so
27:02
Speaker 1: that Scent, the Board, and the Union all agree on
27:04
Speaker 1: that interpretation of Chenery two. The majority says that Channery
27:09
Speaker 1: two somehow limits adjudication to resolving the particular problem of
27:13
Speaker 1: a particular case. I've never heard that before. The Descent
27:16
Speaker 1: says that they cherry picked language out of that and
27:20
Speaker 1: instead that Chenery two actually affirms broad discretion, and the
27:24
Speaker 1: Board and the Union say that too. They say that
27:26
Speaker 1: the majority misreads Chenery two. It does not restrict adjudication,
27:31
Speaker 1: and that Chenery two prohibits rigid limits on agencies' ability
27:36
Speaker 1: to choose adjudication. Well, I'm going in another Supreme Court
27:40
Speaker 1: case where the majority says it forbids adjudication to create
27:45
Speaker 1: a new rule, and the Board and the Union along
27:48
Speaker 1: with the Descent, say that the majority misapplies it, and
27:52
Speaker 1: that in fact, in why I'm in Gordon, the Supreme
27:55
Speaker 1: Court itself enforced that rule, which was by adjudication, all right.
27:59
Speaker 1: And then Bell Aerospace is another one where they say
28:03
Speaker 1: that it reads marginal utility is a limit on adjudication.
28:07
Speaker 1: The Board and the Union say that Bell Aerospace categorically
28:10
Speaker 1: affirms the Board's discretion to choose adjudication. These are all
28:15
Speaker 1: standard interpretations. Let me put it this way. If a
28:17
Speaker 1: student wrote that majority opinion, I would give them a D.
28:21
Speaker 1: I wouldn't give them an F because they at least
28:24
Speaker 1: wrote something, But they would not fare well in my class.
28:29
Speaker 1: I mean if they were a Supreme Court judge and
28:31
Speaker 1: they wanted to write this and say we are changing
28:33
Speaker 1: the rule. But they don't even say they're changing the
28:35
Speaker 1: rule because they can't because they know they're not allowed.
28:38
Speaker 1: At least the Supreme Court will tell us they're changing
28:40
Speaker 1: the rule. I would hope anyway. Oh, the role of
28:43
Speaker 1: board experience the majority says the board cannot rely on experience,
28:48
Speaker 1: when there are dozens of cases that say the board
28:51
Speaker 1: can rely on its experience. I don't know where this
28:55
Speaker 1: is coming from. Alternate rationales, because the Alja talked about
29:00
Speaker 1: CMX and Gissle. All of a sudden, administrative agencies can
29:04
Speaker 1: have alternate rationales. Courts have alternate rationales for things. I've
29:09
Speaker 1: never heard of something like this. I mean, I can
29:12
Speaker 1: go on and on with this, but I don't want
29:15
Speaker 1: to bore your arm. I mean, I'm excited about this
29:17
Speaker 1: case because it's so ridiculous. But we'll see what happens
29:20
Speaker 1: because the Supreme Court might you know, shot us. Oh no,
29:23
Speaker 1: it wouldn't be a shock, because the Supreme Court loves
29:26
Speaker 1: to in the last decade has Oh well, it's certainly
29:30
Speaker 1: been good business for law professors.
29:31
Speaker 4: I'll say that.
29:32
Speaker 2: So this only applies in the Sixth Circuit, then.
29:35
Speaker 1: Yeah, it only applies in the sixth Circuit. But it's
29:37
Speaker 1: only a matter of time before the Fifth Circuit decides
29:39
Speaker 1: that sounds like a good idea, And that means the
29:41
Speaker 1: Eleventh Circuit will go where the Fifth Circuit goes. And
29:44
Speaker 1: so I would assume that they will be a deep
29:48
Speaker 1: split before long. I mean, who knows, maybe the other
29:51
Speaker 1: circuits will go whoa. I mean, especially if the Sixth
29:54
Speaker 1: Circuit on Bank says, maybe this wasn't such a good idea.
29:57
Speaker 1: May maybe we made a mistake, and maybe our law
30:01
Speaker 1: clerks didn't take administrative law or labor law, and maybe
30:05
Speaker 1: they didn't understand. I don't know where their law clerks
30:08
Speaker 1: came from, but I hope it wasn't from the University
30:10
Speaker 1: of Cincinnati because I'd have to talk to my colleagues
30:13
Speaker 1: about what they're teaching then.
30:14
Speaker 2: And the NLRB has a policy of non acquiescence, so
30:18
Speaker 2: they won't change because of this decision.
30:20
Speaker 1: Right, Yeah, the b MLRB, as you said, policy of
30:23
Speaker 1: non acquiescence, which means the MLRB has to have a
30:28
Speaker 1: national rule because labor law shouldn't change depending on where
30:31
Speaker 1: you are, so it will just say that, Okay, if
30:35
Speaker 1: we're in the Sixth Circuit, we'll have to follow this rule.
30:38
Speaker 1: That's why they're asking for the en banc review. As
30:40
Speaker 1: I always tell my students, labor law is what the
30:43
Speaker 1: Supreme Court said it is, or the board says it is.
30:47
Speaker 1: It's only what the circuit says it is. If you're
30:50
Speaker 1: in that circuit. Otherwise you follow the board's rule, and
30:54
Speaker 1: then if that's overruled by the Supreme Court, you follow
30:56
Speaker 1: the Supreme Court's rule. Now, the sister circuits, my look
31:01
Speaker 1: at the sixth Circuit and say, wow, that's a good idea,
31:03
Speaker 1: Like I think the Fifth Circuit, I mean, the Fifth
31:04
Speaker 1: Circuit's much more radicalized than the Sixth Circuit. I mean,
31:08
Speaker 1: the Fifth Circuit loses before the Supreme Court relatively often lately.
31:13
Speaker 1: I would have been less shocked if this came out,
31:14
Speaker 1: this is the Fifth Circuit.
31:16
Speaker 2: Yeah, because the Fifth Circuit is seemingly always trying to
31:19
Speaker 2: push the envelope in a lot of different areas.
31:22
Speaker 1: The sixth Circuit doesn't seem to do that as much.
31:24
Speaker 1: They seem to be much more disciplined. And these are
31:26
Speaker 1: George Delvia Bush to come out of the sixth Circuit.
31:28
Speaker 2: And these were both George W. Busha pointee. So they've
31:31
Speaker 2: been on the bench for a long time.
31:33
Speaker 1: That's another thing. I'm pretty sure I've argued against some
31:36
Speaker 1: of these guys when I was at the Board, and
31:38
Speaker 1: so I was like, wait, they know better. I know
31:41
Speaker 1: they know better.
31:42
Speaker 2: So then does this mean there was already a split
31:44
Speaker 2: in the circuits, and the Supreme Court could take this
31:47
Speaker 2: case right away.
31:48
Speaker 1: Well, I would say, yes, it's not even a split
31:52
Speaker 1: in the circuits, it's a split with the Supreme Court.
31:56
Speaker 1: So they are defying the Supreme Court right now. Yes,
32:00
Speaker 1: the Supreme Court could take this right now. Hopefully the
32:03
Speaker 1: Sixth Circuit will realize, wow, we kind of misread this precedent,
32:08
Speaker 1: and maybe we can get rid of c MECHS a
32:11
Speaker 1: different way if they don't like c Mechs. There's ways
32:14
Speaker 1: to get rid of c MECHS if they don't like it.
32:17
Speaker 2: Because this was not the way because Justice Gorsich got
32:21
Speaker 2: annoyed with District Court judges who he said weren't following
32:25
Speaker 2: Supreme Court precedent in the emergency docket.
32:29
Speaker 1: Right even if Gorsuch himself said I agree with this
32:34
Speaker 1: approach and now I want to change the Supreme Court,
32:36
Speaker 1: he should be annoyed. It's a lack of discipline, it's outrageous.
32:42
Speaker 2: So it's going to be very interesting to hear what
32:45
Speaker 2: the full Circuit says if there is an on bank review.
32:51
Speaker 2: This is a really complicated area of the law, and
32:54
Speaker 2: so thanks so much for taking us through it. That's
32:57
Speaker 2: Professor and Lafasso of the University of Since Law School.
33:01
Speaker 2: And that's it for this edition of The Bloomberg Law Show.
33:04
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