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Transgender Rule Vacated & Special Counsel Report Release · Bloomberg Law

0:02
Speaker 1: This is Bloomberg Law with June Grossel from Bloomberg Radio.
0:08
Speaker 2: Jill and I Kamlin Doug.
0:10
Speaker 3: The entire administration doing everything we can to advance equality
0:14
Speaker 3: for the LGBTQ community in our nation.
0:17
Speaker 4: The entire nation. The Biden administration made LGBTQ rights an
0:23
Speaker 4: important part of its agenda, including a Title nine regulation
0:27
Speaker 4: protecting transgender students that was touted by administration officials as
0:32
Speaker 4: a signature achievement. But President elect Donald Trump has promised
0:37
Speaker 4: to undo protections for transgender students with a.
0:41
Speaker 3: Stroke of my pen on day one. We're going to
0:43
Speaker 3: stop the transgender lunacy, and I will sign executive orders
0:53
Speaker 3: to end child sexual mutilation, get transgender out of the
0:58
Speaker 3: military and out of our elementary schools and middle schools,
1:02
Speaker 3: in high schools well.
1:05
Speaker 4: A federal judge in Kentucky has beaten Trump to the punch,
1:09
Speaker 4: striking down the Biden aministration rule barring discrimination based on
1:15
Speaker 4: sexual orientation and gender identity in federally funded schools. Judge
1:20
Speaker 4: Danny Reeves scrapped the entire fifteen hundred page regulation after
1:26
Speaker 4: deciding it was fatally tainted by legal shortcomings. Joining me
1:30
Speaker 4: is Samantha hunt a lawyer and equal Justice work fellow
1:34
Speaker 4: at a better balance. Samantha tell us about this Title
1:38
Speaker 4: nine regulation that the Biden administration put in place.
1:42
Speaker 2: So I think to understand that question, it's important to
1:45
Speaker 2: know what Title nine is. So Title nine is a
1:49
Speaker 2: federal law that protects students from discrimination on the basis
1:53
Speaker 2: of sex, including discrimination that students face at school because
1:58
Speaker 2: they are pregnant. And since the original passage of Title
2:02
Speaker 2: nine in nineteen seventy two, discrimination on the basis of
2:05
Speaker 2: things like pregnancy, childbirth, rental status have been included in
2:10
Speaker 2: the scope of the statute. So what the twenty twenty
2:13
Speaker 2: four Biden regulations do is that since the Department of
2:17
Speaker 2: Education is a federal administrative agency, this means that the
2:22
Speaker 2: agency often can issue regulations called rules to interpret the
2:27
Speaker 2: meaning of Title nine, and that just means that the
2:30
Speaker 2: agency explains what it believes the scope of Title nine
2:33
Speaker 2: is and the protections that it offers. So these regulations
2:37
Speaker 2: alert recipients of federal funding, in this case, schools, about
2:42
Speaker 2: what their obligations to students are under the law. The
2:45
Speaker 2: Biden regulations clarified protections for students across the country, including
2:51
Speaker 2: for pregnant students, for student survivors of sexual assaults, and
2:55
Speaker 2: for LGBTQIA students by explicitly defining Title nine scope of protections. So,
3:03
Speaker 2: for example, the regulations clarified what kinds of modifications that
3:08
Speaker 2: pregnant students can access so that they can learn while
3:12
Speaker 2: caring for their pregnancies. These regulations are really important. We
3:17
Speaker 2: at a better balance run a free legal helpline and
3:20
Speaker 2: we often hear from student callers we're facing issues getting
3:24
Speaker 2: really modest accommodations that they need so that they can
3:28
Speaker 2: learn while caring for their pregnancies. And what these regulations
3:32
Speaker 2: did was it made it more explicitly known what schools
3:36
Speaker 2: are required to offer them. So, for example, the regulations
3:40
Speaker 2: make it a lot easier for students who give birth
3:42
Speaker 2: to request the scheduled exams if they miss one while
3:45
Speaker 2: they're out recovering from childbirths. And these regulations essentially make
3:50
Speaker 2: it easier for students to get access to protections that
3:55
Speaker 2: Title nine has always been meant to cover.
3:57
Speaker 4: With the controversy over transgender rights that's blown up, what
4:03
Speaker 4: does it do as far as transgender students.
4:06
Speaker 2: That's a great question. So a lot of this case
4:09
Speaker 2: focuses on the concept of gender identity. And what the
4:15
Speaker 2: regulations really do here is it clarifies that the protection
4:19
Speaker 2: against discrimination and harassment on the basis of sex includes
4:25
Speaker 2: on the basis of sex, stereotypes, sexual orientation, and gender identity.
4:31
Speaker 2: So what it really does is it just makes explicit
4:34
Speaker 2: for the first time that students like transgender students have
4:38
Speaker 2: these protections. Now, we have always argued that transgender students
4:44
Speaker 2: are protected under Title nin but what the Biden administration
4:48
Speaker 2: did with these regulations is made it explicit. And so
4:52
Speaker 2: by doing that, making it easier for students to assert
4:55
Speaker 2: their rights and get the protections they deserve.
4:58
Speaker 4: So now a federal judge in Kentucky has vacated the rules.
5:03
Speaker 4: He said that the rules turned Title nine on its head,
5:07
Speaker 4: and he did this on several grounds, so let's take
5:09
Speaker 4: them one at a time. He said, there's nothing in
5:12
Speaker 4: the text or statutory design of Title nine to suggest
5:16
Speaker 4: that discrimination on the basis of sex means anything other
5:21
Speaker 4: than it has since Title line's inception. Tell us about
5:24
Speaker 4: his reasoning there, and whether you think it's wrong or right.
5:28
Speaker 1: So the court.
5:28
Speaker 2: Held that the Department exceeded its authority by interpreting on
5:33
Speaker 2: the basis of sex to include gender identity. The Court
5:37
Speaker 2: believes that on the basis of sex really narrowly means
5:40
Speaker 2: that schools receiving federal funding may not treat a person
5:44
Speaker 2: worse than another similarly situated individual on the basis of
5:48
Speaker 2: a person sex signed at birth, which in the Court's
5:51
Speaker 2: view means strictly sis gender male or female. We think
5:56
Speaker 2: the Court got a lot wrong here. We disagree with
5:58
Speaker 2: the Court that bias stemming from a student's gender identity
6:03
Speaker 2: is not a form of sex discrimination. It very clearly is,
6:07
Speaker 2: because bias based on how a person identifies or expresses
6:11
Speaker 2: their gender, or on the sex or gender of who
6:14
Speaker 2: someone loves is inherently rooted in stereotypes and assumptions about
6:19
Speaker 2: sex based roles.
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Speaker 4: He also shot down arguments that the federal government made
6:25
Speaker 4: that the Supreme Court's decision in the Boss Stoc Case,
6:29
Speaker 4: which protects employees against discrimination because of sexual orientation or
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Speaker 4: gender identity, that that applies to Title nine here right.
6:39
Speaker 2: And we disagree with the Court in holding that Bostov
6:42
Speaker 2: versus Clayton County is not comparable in its application to
6:46
Speaker 2: Title nine. So in Bosstoc. The Supreme Court addressed a
6:50
Speaker 2: nearly identical question as the one in this case, holding
6:54
Speaker 2: that sex discrimination under another federal law, Title seven includes
6:59
Speaker 2: by death definition discrimination because of an employee's sexual orientation
7:04
Speaker 2: or gender identity. We think that this decision is on
7:08
Speaker 2: the wrong side of history in that regard, and we
7:11
Speaker 2: also think it is a break from precedent, because the
7:14
Speaker 2: Supreme Court has held that bostoc has always included gender identity.
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Speaker 4: Another ground is that the Education Department exceeded its authority,
7:24
Speaker 4: and here he cites that decision last term in Low
7:29
Speaker 4: or Bright, which limited the regulatory power of federal agencies.
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Speaker 2: So the Court did hold that this apartment exceeded its
7:38
Speaker 2: authority by interpreting on the basis of sects to include
7:42
Speaker 2: gender identity. Once again, we disagree. Even absence the force
7:47
Speaker 2: of law that Chevron previously gave to rules, we believe
7:52
Speaker 2: that courts have held over time that gender identity is
7:55
Speaker 2: included within the scope of Title nin and that's evidenced
7:59
Speaker 2: by the fact that a very similar question was answered
8:02
Speaker 2: in Bostock. And so the Court is really breaking with
8:05
Speaker 2: precedent here by holding that the government exceeded its statutory
8:09
Speaker 2: authority to interpret its own regulations.
8:12
Speaker 4: And there was even a free speech ground. He rejected
8:16
Speaker 4: the rule on free speech grounds that it violated teachers'
8:19
Speaker 4: rights by requiring them to use students' preferred pronouns.
8:24
Speaker 2: So, yes, the court held that the regulations are violative
8:28
Speaker 2: of the Constitution a couple of ways, And one is
8:31
Speaker 2: that argument that requiring schools to protect students against discrimination
8:38
Speaker 2: based on general identity might in some case lead to
8:42
Speaker 2: a student accusing a teacher who uses their wrong pronouns
8:47
Speaker 2: of sexual harassment. And we think that that's just not
8:50
Speaker 2: true because to investigate sexual harassment, the Biden administration's regulations
8:57
Speaker 2: still requires a conduct be severe or persuasive and to
9:01
Speaker 2: limit the student's access to their education. So we think
9:06
Speaker 2: that that argument doesn't really have any basis here.
9:09
Speaker 4: Changes only took place in twenty four states because the
9:14
Speaker 4: rest of the country judges had put the rules on hold.
9:18
Speaker 4: I mean, it's a short period of time. But did
9:20
Speaker 4: you see any significant difference because of these new rules.
9:26
Speaker 2: The answer to that is yes. And that's another piece
9:30
Speaker 2: that we think the district court got wrong here. They
9:32
Speaker 2: said that this isn't going to disrupt students in their
9:37
Speaker 2: educations because in part half the states had already issued
9:42
Speaker 2: injunctions regarding the regulation, and we see that simply not true.
9:47
Speaker 2: A better balance runs a free legal helpline and we
9:50
Speaker 2: get students to call into the helpline looking for access
9:54
Speaker 2: to modification so that they can care for their pregnancies
9:58
Speaker 2: while also learning and not being excluded from their academic programs.
10:03
Speaker 2: And we have found that absent the clarity that the
10:06
Speaker 2: Biden regulations provide about what kinds of modifications pregnant students
10:11
Speaker 2: can ask for, it becomes a much larger fight for
10:16
Speaker 2: students to get what we believe the law has always
10:19
Speaker 2: afforded them.
10:20
Speaker 1: So the stakes are.
10:21
Speaker 2: Really high for students who need access to clarified protections
10:25
Speaker 2: to make it easier for them to get what they
10:27
Speaker 2: need from the law. And we've been doing this work
10:30
Speaker 2: since before August first, when the Biden regulations went into place,
10:34
Speaker 2: and we've seen time and time again that absent that
10:37
Speaker 2: explicit clarity, students face huge battles before they get what
10:41
Speaker 2: they need.
10:42
Speaker 4: Where does it stand? Because the US Court of Appeals
10:44
Speaker 4: for the Sixth Circuit heard arguments in October on this judge.
10:49
Speaker 4: Judge reeves preliminary injunction, but it has yet to rule,
10:53
Speaker 4: so where does this particular case stand right now?
10:57
Speaker 2: So I think what we would hope to see is
11:00
Speaker 2: an appeal from the federal government challenging this decision and
11:06
Speaker 2: either asking for a reversal or at least asking to
11:11
Speaker 2: narrow the decision in scope. We think that a nationwide
11:15
Speaker 2: vacator is really dangerously overbroad, so we would hope that
11:19
Speaker 2: the federal government would see it has an interest in
11:22
Speaker 2: protecting itself against national vacators, and we hope to see
11:28
Speaker 2: some sort of appeal, either for a reversal or for
11:32
Speaker 2: a limitation in either geographical or subject matterscope.
11:36
Speaker 4: President elect Trump has promised to undo the regulations protecting
11:42
Speaker 4: transgender students, so will that put a stop to this
11:46
Speaker 4: whole effort. I doubt that Trump administration is going to appeal.
11:51
Speaker 4: This judge is ruling, and the Biden administration doesn't have
11:56
Speaker 4: time to appeal it, does it.
11:58
Speaker 2: That's a great question, and I think it's hard to
12:01
Speaker 2: say what exactly will happen. You know, we'd of course
12:04
Speaker 2: like to see the federal government appeal the decision, at
12:07
Speaker 2: least for the scope of the vacator. Like I mentioned,
12:10
Speaker 2: a nationwide vacator is a dangerously overbroad decision and a
12:13
Speaker 2: break from precedent, and I would think that any federal
12:17
Speaker 2: government administration would have an interest in opposing that kind
12:21
Speaker 2: of nationwide vacator from individual federal district court.
12:26
Speaker 4: Let's say the Trump administration unravels the regulations. Is it
12:30
Speaker 4: possible for students who are affected by that to sue? Oh?
12:35
Speaker 2: Right now, it's hard to say what would happen because
12:38
Speaker 2: at this point, since the regulations have been vacated, it's
12:43
Speaker 2: like they did not exist, and so there's not much
12:45
Speaker 2: unraveling to be done at this point by the Trump administration.
12:51
Speaker 2: I think what would happen, or what we would hope
12:54
Speaker 2: to see happen, is that there would be some sort
12:56
Speaker 2: of appeal to reverse this decision first, and then I
12:59
Speaker 2: think it would open the door for other next steps
13:02
Speaker 2: that remain to be seen.
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Speaker 4: There's been a wave of state legislatures passing laws against
13:09
Speaker 4: transgender youth. What's driving more than half the state's opposition
13:14
Speaker 4: to these rules for students? There always seems to be
13:17
Speaker 4: this focus on transgender students using bathrooms that align with
13:23
Speaker 4: their gender identity.
13:24
Speaker 2: You know, I think you would have to ask the
13:26
Speaker 2: states that filed the lawsuits about their motivations, but I
13:31
Speaker 2: find it difficult to understand why a state would want
13:35
Speaker 2: to make it harder for its students to learn. And
13:38
Speaker 2: even though there's been a lot of focus on transgender
13:42
Speaker 2: students and their rights to use the bathroom at school
13:45
Speaker 2: that conforms with their gender identity, these regulations do so
13:49
Speaker 2: much more than that. They protect pregnant students from discrimination
13:54
Speaker 2: at school. They protect student survivors of sexual assault, and
13:58
Speaker 2: I just find it hard to imagine why schools wouldn't
14:02
Speaker 2: want students to feel safe, seen and.
14:04
Speaker 1: Heard at school.
14:06
Speaker 4: Part of is it set new rules for how schools
14:08
Speaker 4: handle complaints of sex harassment and assault right yes.
14:13
Speaker 2: One example of the changes is the sexual harassment portion.
14:18
Speaker 2: So before the Biden Raror regulation, schools were required to
14:22
Speaker 2: investigate sexual harassment if the conduct was both severe and
14:27
Speaker 2: pervasive and if it effectively denied a person equal access
14:31
Speaker 2: to their school program. The Biden regulations lowered the standard
14:36
Speaker 2: to require schools to investigate if the conduct was so
14:39
Speaker 2: severe or pervasive that it denied or limits a person's
14:44
Speaker 2: access to their program. The rule also changed the complainant status,
14:49
Speaker 2: so before a school only had to investigate a complaint
14:53
Speaker 2: if the complaining student was trying to access their education
14:56
Speaker 2: at the time the complaint was filed. The bi and
15:00
Speaker 2: Error Regulations change this to require schools to investigate if
15:03
Speaker 2: the student was trying to access their education at the
15:07
Speaker 2: time of the inctudent.
15:09
Speaker 4: And this had nothing to do with transgender athletes, that's correct.
15:16
Speaker 2: This rule primarily focused on discrimination and harassment standards on
15:22
Speaker 2: pregnant students and on postpartum students, making sure that they
15:26
Speaker 2: have access to education and to modifications they need to learn,
15:31
Speaker 2: and by explicitly addressing that sex discrimination under Title nine
15:37
Speaker 2: includes discrimination on the basis of things like gender.
15:41
Speaker 4: Identity, students still have rights under Title nine. What would
15:46
Speaker 4: you recommend for transgender students who feel they're being discriminated
15:51
Speaker 4: against based on their gender identity? What can they do?
15:55
Speaker 2: So? This decision is devastating for students across the country
15:59
Speaker 2: because without these vital protections, students have to fight so
16:02
Speaker 2: much harder to get access to what they need so
16:05
Speaker 2: that they can learn free from discrimination and harassment. But
16:09
Speaker 2: what is important to keep in mind is that while
16:12
Speaker 2: the decision vacated the twenty twenty four Regulations, Title nine
16:16
Speaker 2: still very much exists. And offer students protection under the law.
16:20
Speaker 2: We are going to be in the fight with students
16:23
Speaker 2: who need access to the things that they need to learn.
16:27
Speaker 2: We encourage them to call our helpline. We encourage them
16:31
Speaker 2: to reach out to us for resources if they're facing
16:33
Speaker 2: difficulties with their school. I think it's just important to
16:36
Speaker 2: note that ideally a student wouldn't need a lawyer's help
16:41
Speaker 2: to get what they need so that they can learn
16:43
Speaker 2: at school. They would just be able to go to
16:46
Speaker 2: their Title nine coordinator. But we've seen that without the
16:51
Speaker 2: explicit clarity that these regulations provide, it makes it much harder.
16:55
Speaker 2: But they still have rights under Title nine and we
16:58
Speaker 2: can still help them get access to what they need.
17:01
Speaker 4: And tell us a little about your organization. A Better
17:04
Speaker 4: Balance or a.
17:06
Speaker 2: Better Balance is a national legal nonprofit organization that helps
17:12
Speaker 2: workers care for themselves and their loved ones without compromising
17:16
Speaker 2: their financial security. We help workers who need assistants getting
17:23
Speaker 2: access to pregnancy modifications, getting access to paid thick time,
17:28
Speaker 2: paid family leave at work. And what my work does
17:32
Speaker 2: is expand some of that practice to be focused on students,
17:37
Speaker 2: so we also help pregnant and postpartum students get access
17:40
Speaker 2: to modifications they need so that they can fully participate
17:44
Speaker 2: in their school programs while caring for their pregnancies. Our
17:48
Speaker 2: helpline is free and confidential, and so when students or
17:54
Speaker 2: workers call us, they know that they have a private resource.
17:58
Speaker 2: And the helpline number is one eight three six three
18:04
Speaker 2: three two two two.
18:06
Speaker 4: That helpline sounds like a valuable resource. Thanks so much
18:09
Speaker 4: for coming on the show, Samantha. That's Samantha Hunt of
18:12
Speaker 4: a better balance. A Florida federal judge ruled today that
18:16
Speaker 4: the Justice Department can publicly release volume one of Special
18:21
Speaker 4: Counsel Jack Smith's final report on the federal criminal investigations
18:25
Speaker 4: into President elect Donald Trump, detailing Trump's alleged efforts to
18:30
Speaker 4: overturn the twenty twenty presidential election. But Judge Eileen Cannon
18:35
Speaker 4: extended an earlier order that bars the government from sharing
18:39
Speaker 4: the second volume of a special Council's report that relates
18:43
Speaker 4: to the investigation into whether Trump mishandled classified documents and
18:48
Speaker 4: obstructed efforts to retrieve them by the government. Joining me
18:52
Speaker 4: is Bloomberg Legal reporter Zoe Tillman. So he tell us
18:55
Speaker 4: exactly what Judge Cannon ruled.
18:58
Speaker 5: So the first part and arguably sort of most significant
19:02
Speaker 5: is Judge Cannon said, I'm not going to stand in
19:05
Speaker 5: the way of Attorney General Merrick Garland releasing the first
19:09
Speaker 5: volume of former Special Counsel Jacksmith's report, and volume one
19:14
Speaker 5: concerns the investigation into Trump's efforts to overturn the twenty
19:18
Speaker 5: twenty election. Of Federal Appeals Court previously had refused to
19:23
Speaker 5: intervene to stop Garlands from making a public Judge Cannon said,
19:27
Speaker 5: this really based on what the government has told me,
19:29
Speaker 5: has nothing to do with the classified documents case before me,
19:33
Speaker 5: so I don't really have any basis to step in here.
19:36
Speaker 5: The second part of her order, though, involves Volume two,
19:39
Speaker 5: which deals with the classified documents case, and what she
19:42
Speaker 5: said is I'm not ready to rule on this yet.
19:45
Speaker 5: The Attorney General doesn't plan to make that part public
19:48
Speaker 5: given that there is still pending proceedings in that criminal case,
19:52
Speaker 5: but he does plan to show it to Some members
19:54
Speaker 5: of Congress and Trump's former co defendants have argued that's
19:58
Speaker 5: enough of a risk to their interest in the case
20:01
Speaker 5: that the judge should stop that from happening as well.
20:04
Speaker 5: So Judge Cannon said, I'm going to block Garland from
20:07
Speaker 5: doing anything with that section. For now, I'm going to
20:10
Speaker 5: hold a hearing on January seventeenth, three days before Trump
20:13
Speaker 5: is inaugurated, and then presumably enter an order on what
20:17
Speaker 5: she thinks should be done with that volume.
20:19
Speaker 4: Is it unlikely that this is going to be the
20:22
Speaker 4: last word on the matter. Might the defense lawyers seek
20:26
Speaker 4: to challenge this all the way up to the Supreme Court?
20:30
Speaker 5: So far their mum on what they plan to do,
20:32
Speaker 5: But it's certainly possible. You know, right now, the ballgame
20:35
Speaker 5: is Volume one, because the Justice Department has already said
20:39
Speaker 5: that Garland doesn't plan to release Volume two. You know,
20:42
Speaker 5: whether members of Congress might you know, end up making
20:45
Speaker 5: parts of Volume two public after they see it. That's
20:47
Speaker 5: sort of several steps down the road where right now,
20:50
Speaker 5: you know, to the extent Trump's former co defendants in
20:53
Speaker 5: the case, who have Trump's support in this, if they
20:56
Speaker 5: want to stop the public from seeing at least some
20:58
Speaker 5: of Smith's work before Trump is inaugurated, at which point
21:02
Speaker 5: he would have the ability to keep it all under wraps,
21:05
Speaker 5: you know, they have to do something. Judge Cannon's earlier
21:09
Speaker 5: injunction expires at midnight, so as of Tuesday, there is
21:12
Speaker 5: nothing legally stopping the Justice Department from making a public
21:16
Speaker 5: So whether it's trying to go back to the Eleventh Circuit,
21:18
Speaker 5: which has already said no, or silence kind of emergency
21:22
Speaker 5: application of the Supreme Court, those are their options at
21:27
Speaker 5: this point. And I should say also, you know, the
21:29
Speaker 5: Justice Department may want to get a ruling sooner on
21:33
Speaker 5: Volume two and not wait several more days to see
21:36
Speaker 5: what Judge Cannon's going to do.
21:38
Speaker 4: Special Counsel Smith, though, transmitted the report and is out
21:42
Speaker 4: of the picture now.
21:43
Speaker 3: That's right.
21:44
Speaker 5: Judge Cannon, in her earlier order robuffed a request to
21:47
Speaker 5: stop Smith from giving a copy even to the Attorney General.
21:51
Speaker 5: So that has happened when the Attorney General formally gave
21:54
Speaker 5: notice to Congress that he had it, and Jack Smith,
21:57
Speaker 5: as of late last week, had, in the Justice Department's
22:01
Speaker 5: words in a footnote quote unquote, separated from the Justice
22:04
Speaker 5: Department sort of a very unceremonial departure for someone who
22:09
Speaker 5: has been such a significant figure in all of this
22:12
Speaker 5: for the past two years. And so he's gone and
22:14
Speaker 5: this is now up to Justice Department lawyers to fight
22:17
Speaker 5: out in these final days of the Biden administration.
22:20
Speaker 4: Does everyone assume that when Trump takes office and there's
22:24
Speaker 4: a new Attorney general, that they're going to drop the
22:26
Speaker 4: classified documents case against these two co defendants.
22:31
Speaker 5: That's right. There is an expectation that, you know, it'll
22:35
Speaker 5: be a direction to drop it. Whether there will also
22:39
Speaker 5: be some kind of clemency action for them that would
22:42
Speaker 5: head off some future investigation or prosecution, that's sort of unclear.
22:49
Speaker 4: That would really mean the end of the case for sure.
22:52
Speaker 4: Thanks so much, Zoe. That's Bloomberg Legal reporters, Zoe Tillman.
22:57
Speaker 4: Coming up next will the Supreme Court keeping in junction
23:00
Speaker 4: in place that blocks the Corporate Transparency Act. This is Bloomberg.
23:06
Speaker 4: The Supreme Court is expected to rule soon on the
23:09
Speaker 4: nationwide injunction issued by the Fifth Circuit Court of Appeals
23:14
Speaker 4: that blocks certain ownership reporting requirements under the Corporate Transparency Act.
23:19
Speaker 4: The CTA requires companies to disclose their true ownership. Finsen
23:24
Speaker 4: estimates that thirty two point six million existing US businesses
23:29
Speaker 4: plus another five million newly incorporated ones each year will
23:33
Speaker 4: need to file reporting information, and that businesses will spend
23:37
Speaker 4: one hundred and fifty million hours and thirty billion dollars
23:41
Speaker 4: coming into compliance. The federal government made an application for
23:45
Speaker 4: a stay of the injunction on New Year's Eve, saying
23:48
Speaker 4: it would be harmed because the injunction cripples the Treasury's
23:52
Speaker 4: efforts to enforce the law while sowing confusion. But a
23:57
Speaker 4: group of twenty five Republican Attorneys general filed to brief
24:00
Speaker 4: supporting the plaintiffs who sued over the CTA reporting requirements,
24:05
Speaker 4: agreeing that the act would create a substantial compliance burden.
24:10
Speaker 4: Joining me is Joseph Liniac, a financial services partner at
24:14
Speaker 4: Dorsey and Whitney. It's a bipartisan effort passed in twenty
24:19
Speaker 4: twenty one. Explain what the Corporate Transparency Act.
24:22
Speaker 1: Is the best way of viewing it is. The Corporate
24:25
Speaker 1: Transparency Act is an expansion of existing law that's been
24:31
Speaker 1: in place for many years, whereby banks and other financial
24:35
Speaker 1: institutions when they make a loan have got to identify
24:39
Speaker 1: who owns the borrower if it's a company, and identify
24:44
Speaker 1: a senior officer. There was a negotiation that took place
24:48
Speaker 1: over several years where the banks were complaining and I
24:52
Speaker 1: think reasonably that the burden of this disclosure scheme fell
24:58
Speaker 1: on them and actively solicited the government to take over
25:05
Speaker 1: summer role of the rules. So in an omnibus bill
25:09
Speaker 1: for the Defense Department, they included the Corporate Transparency Act,
25:14
Speaker 1: which established for the first time the requirement that, besides
25:19
Speaker 1: getting a loan from a bank, if you organize the company,
25:23
Speaker 1: and for the most part it's going to be smaller
25:25
Speaker 1: sized companies, you have to identify who owns twenty five
25:31
Speaker 1: percent or more of the company, as well as who
25:35
Speaker 1: exercises what's known as substantial control over the company. Now,
25:39
Speaker 1: a company is generally going to be an entity that
25:43
Speaker 1: requires registration with a Secretary of State or comparable office,
25:49
Speaker 1: and fincend is the enforcement agency. They issued regulations I
25:56
Speaker 1: believe in twenty twenty two establishing the requirement that several
26:01
Speaker 1: categories that people begin to register. They identified who the
26:05
Speaker 1: exemptions were, and effectively the beginning of this year, meaning
26:10
Speaker 1: January first, twenty twenty five, about thirty million entities were
26:16
Speaker 1: required to register with fince N and several lawsuits were filed.
26:22
Speaker 1: So right now we're in this giant mess waiting for
26:25
Speaker 1: the Supreme Court to take some action.
26:27
Speaker 4: So the first lawsuit was by Texas Top cop Shop
26:32
Speaker 4: explain some of the arguments they raised against the CTA.
26:37
Speaker 1: They were saying their privacy rights were violated, but those
26:41
Speaker 1: constitutional claims were effectively not addressed by the court. What
26:46
Speaker 1: they argued was that this was unconstitutional because it wasn't
26:52
Speaker 1: supported by the Commerce Clause, in which Congress regulates both
26:58
Speaker 1: interstate and foreign commerce. And the Court agreed with them
27:02
Speaker 1: and issued, in a somewhat surprising manner, a nationwide injunction
27:08
Speaker 1: against anyone having to comply with the rule until such
27:11
Speaker 1: time as an appeal could be held.
27:13
Speaker 4: But what were the government's arguments about why this law
27:17
Speaker 4: should go into effect.
27:18
Speaker 1: I believe the government, frankly, has got very very strong arguments.
27:21
Speaker 1: The ability for Congress to pass the law impliedly means
27:26
Speaker 1: that it's constitutional, and there's a very very high burden
27:30
Speaker 1: that has to be met in order to just say,
27:34
Speaker 1: read the law it's facially unconstitutional. That's number one. But
27:38
Speaker 1: more importantly, the Department of Justice pointed out the Commerce
27:42
Speaker 1: Clause and the Necessary and Proper Clause of the Constitution
27:46
Speaker 1: clearly gives Congress the right as well as the executive
27:50
Speaker 1: to be able to legislate and enforce laws. And this
27:54
Speaker 1: was just really an extension of what previously had been
27:58
Speaker 1: in place, and while there may be some conflicting rights here,
28:04
Speaker 1: the ability of government to be able to prevent money wandering,
28:08
Speaker 1: financial crimes, human trafficking, to be able to regulate taxation
28:14
Speaker 1: and avoid tax frauds, and other enumerated powers either held
28:18
Speaker 1: by the Congress or by the executive. I think importantly
28:22
Speaker 1: the focus here is lift the injunctions so we can
28:26
Speaker 1: proceed and we can let litigation and regular course go through,
28:31
Speaker 1: ultimately maybe coming back to the Supreme Court to rule
28:34
Speaker 1: on the constitutionality issue. As a side note, one of
28:39
Speaker 1: the things which has been raised and that this has
28:42
Speaker 1: been a concern by both political parties, depending upon who
28:47
Speaker 1: is in charge of the willingness of some courts to
28:50
Speaker 1: issue nationwide injunctions and doing that really interrupts the flow
28:58
Speaker 1: of litigation around the country, where you can have different
29:01
Speaker 1: circuits with different opinions, but if you have a nationwide injunction,
29:05
Speaker 1: all of a sudden, everything just simply stops. And the
29:09
Speaker 1: Supreme Court itself, through one of its committees, has indicated
29:14
Speaker 1: to the circuits, you really should not be doing it,
29:17
Speaker 1: but they've gotten pushed back, particularly from the Fifth Circuit,
29:21
Speaker 1: saying we've got the right to issue nationwide injunctions, and
29:24
Speaker 1: I think that might close the Supreme Court to weigh
29:27
Speaker 1: in on this and to issue instructions to the lower
29:30
Speaker 1: courts as to when they can or should issue these
29:34
Speaker 1: national injunctions, which can be particularly punitive to the ability
29:38
Speaker 1: of government to be able to regulate.
29:40
Speaker 4: When the Trump administration comes in, I mean, are they
29:44
Speaker 4: likely to have a different viewpoint on this law?
29:47
Speaker 1: Good question, and at least in my experience, the dividing
29:51
Speaker 1: line on these types of issues is between individuals who
29:56
Speaker 1: feel strongly about national security and law enforcem and those
30:00
Speaker 1: that do not. Now, you may have a business component
30:05
Speaker 1: where people just think it is unfair that we have
30:08
Speaker 1: to provide this information to the government, But I think
30:11
Speaker 1: the dividing line is really law enforcement advocates and those
30:16
Speaker 1: that do not feel that that is a priority and
30:20
Speaker 1: law enforcement they believe that this type of information is
30:25
Speaker 1: very very helpful to avoid again money laundering, because if
30:30
Speaker 1: you're able to make an investment in the corporation and
30:32
Speaker 1: you don't have to identify who you are, and you
30:35
Speaker 1: may be a nefarious character that facilitates money wandering. And
30:39
Speaker 1: that's something which the government feels very very strongly.
30:42
Speaker 4: About we'll see what happens of the Supreme Court, Justice
30:45
Speaker 4: Alito has requested a response from the plaintiffs to the
30:50
Speaker 4: government's motion to stay the injunction by four pm Friday.
30:55
Speaker 4: Thanks for joining me. That's Joseph Liniac of Dorsey and Whitney.
31:00
Speaker 4: And that's it for this edition of The Bloomberg Law Show.
31:02
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