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Warner's TNT Sues NBA Over TV Rights · Bloomberg Law

0:03
Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio.
0:10
Speaker 2: Warner Brothers Discovery is suing the NBA for breach of
0:14
Speaker 2: contract after the league didn't accept the company's matching offer
0:18
Speaker 2: for one of its packages in its upcoming eleven year
0:22
Speaker 2: media rights deal. Warner is the parent company of TNT Sports,
0:27
Speaker 2: and the NBA said it wasn't accepting Warner's one point
0:31
Speaker 2: eight billion dollar a year offer and instead signed deals
0:34
Speaker 2: with Amazon, Disney and NBC Universal. The new contracts are
0:39
Speaker 2: expected to triple the league's broadcast income. Charles Barkley, who's
0:43
Speaker 2: been an analyst on TNT for twenty four years, was
0:47
Speaker 2: outspoken about the deal.
0:50
Speaker 1: This was a last ditch cash grab by the NBA
0:54
Speaker 1: and the players. That's why I think they signed an
0:57
Speaker 1: eleven year deal. So they're like, hey, let's get as
1:01
Speaker 1: much money as we possibly can right now. This is
1:03
Speaker 1: going to be our last bite of the apple because TNT, ABCSPN,
1:10
Speaker 1: they're not going to pay more money going forwards.
1:14
Speaker 2: The lawsuit is another chapter in the deteriorating relationship between
1:19
Speaker 2: the NBA and Turner Sports, a relationship that's lasted nearly
1:23
Speaker 2: forty years. Joining me is entertainment and media lawyer Ronald Beanstock,
1:28
Speaker 2: a partner at Scarincy Hollandbeck. What happened here? As far
1:32
Speaker 2: as you can make out, this.
1:34
Speaker 3: Is what appears to have happened, because there's a lot
1:36
Speaker 3: of redactions in the complaints, so it's kind of hard
1:39
Speaker 3: to note from the specifics of the agreements prior. But
1:42
Speaker 3: I will tell you what I think happened. So this
1:44
Speaker 3: is really a fight between tech corporate structure looking to
1:47
Speaker 3: find their way into the larger dollars of entertainment properties.
1:53
Speaker 3: And you can't get any biggers really in sports versus
1:56
Speaker 3: the as the kids would say, old school broadcasting. You've
1:59
Speaker 3: got a company P and T here who has had
2:02
Speaker 3: the right as a licensee for forty years within their agreement,
2:07
Speaker 3: which again a lot of redactions. Hard to know the
2:09
Speaker 3: specifics and the definition of the word match right a
2:12
Speaker 3: commonly used I don't want to say trope, but a
2:15
Speaker 3: commonly used part of entertainment agreement where somebody who has
2:19
Speaker 3: rights to something would like to keep those rights to something,
2:22
Speaker 3: but they allow a third party to come in make
2:24
Speaker 3: the offer and it get the match. That's a discussion
2:26
Speaker 3: we have to have. What is the match right, how
2:29
Speaker 3: is it defined? And then you know you've got a
2:31
Speaker 3: usurper if you will tech company, Amazon, obviously Disney that
2:35
Speaker 3: comes in and says, I want to make a really
2:38
Speaker 3: great offer to you. I'd like to bring this asset,
2:41
Speaker 3: which is called an asset by T and T in
2:43
Speaker 3: their complaints. I want to bring this asset to our camp,
2:46
Speaker 3: and we think we can do a great job with
2:48
Speaker 3: this and the billions of dollars every year, we think
2:50
Speaker 3: we can enhance them, do really well with and enhance
2:53
Speaker 3: the NBA income and enhance ours obviously, bring bigger and
2:57
Speaker 3: better advertising dollars to their format and in subscriptions. And
3:01
Speaker 3: we'd like to take an offer on this somewhere. They
3:04
Speaker 3: made that offer right. The timing was correct. They made
3:07
Speaker 3: the offer, and T and T had two quote match.
3:10
Speaker 3: So T and T says we matched, we matched timely.
3:13
Speaker 3: That's not in dispute. Seems to be all done correctly.
3:15
Speaker 3: But Amazon is saying, and apparently NBA is saying, no,
3:20
Speaker 3: you didn't. You didn't match. According to the agreement, we
3:24
Speaker 3: have other services or other things we can offer. You
3:27
Speaker 3: didn't match that you're only matching the initial offer, and
3:30
Speaker 3: that definition of match is one of the crucial discussions
3:34
Speaker 3: with billions of dollars at stake.
3:36
Speaker 2: I mean, what's the general interpretation of what match means
3:40
Speaker 2: in a contract like this?
3:42
Speaker 3: So in interesting businesses like this, the match would be
3:45
Speaker 3: first right, like a first right refusal. And that's what
3:48
Speaker 3: the definition I'm not clear about. No one's clear about,
3:50
Speaker 3: because it's contractual language is underdacted from the complaint. But
3:53
Speaker 3: there's a real difference here, and that is the difference
3:56
Speaker 3: would be between I get to match and the words
3:59
Speaker 3: that are using complaint as an incumbent, which is not
4:02
Speaker 3: a commonly used word in entertainment property agreement incumbenty, and
4:06
Speaker 3: that it says as an incumbent, TBS has the right
4:08
Speaker 3: to match any quote third party offer end quote for
4:13
Speaker 3: future NBA telecast rights, right to match any third party offer,
4:17
Speaker 3: which would indicate to me that it's an initial match right.
4:21
Speaker 3: If someone says two hundred and I say I'll give
4:23
Speaker 3: you two hundred, I'll match that. Now it stays with me.
4:26
Speaker 3: I am, as they call it, the legacy or incumbent here,
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Speaker 3: I'm the legacy licenseee. I would maintain my rights. And
4:33
Speaker 3: the term length of the next portion of this agreement
4:36
Speaker 3: is eleven years. That would be over fifty years of
4:40
Speaker 3: retaining rights in terms of a licensee to a piece
4:43
Speaker 3: of property like this, And that's probably where everybody is
4:46
Speaker 3: fighting this because the tech companies think, if I do
4:50
Speaker 3: a better job, So the word match looks like initial match.
4:53
Speaker 3: Many times when negotiating entertainment property agreements like this. Music
4:58
Speaker 3: business is a good example, music published record deals or
5:00
Speaker 3: things of this nature. Licensing deals, we have last match.
5:06
Speaker 3: That's a preference of mine because if you say two hundred,
5:09
Speaker 3: but that's not the fully ending negotiated deal, I think
5:12
Speaker 3: I can get you to three. I don't want you
5:14
Speaker 3: to match two. I want you to match the deal
5:17
Speaker 3: I'm willing to execute. That would be what the match
5:20
Speaker 3: right should say. I don't know because it's been redacted,
5:23
Speaker 3: so we'll have to find out as Discovery goes.
5:26
Speaker 2: On with the deal with Amazon. The games would be
5:29
Speaker 2: distributed across Amazon Prime Video, NBC's broadcast network and Peacock
5:34
Speaker 2: streaming service, and Disney ABC and ESPN platforms. So it's
5:39
Speaker 2: not just matching the money, is it. It's also matching
5:42
Speaker 2: the scope.
5:43
Speaker 3: Yes, I think that that's part of the process, and
5:45
Speaker 3: I think the match is the scope what can we
5:47
Speaker 3: offer in terms of SBOD subscription video on demand. I
5:51
Speaker 3: think this is all within the concept of the match, right,
5:55
Speaker 3: because I don't think the match was one sentence match.
5:58
Speaker 3: I don't think it says here's the money match it.
6:00
Speaker 3: I think structurally it's the scope clearly territories worldwide, but
6:04
Speaker 3: it's scope in terms of what is we have to
6:07
Speaker 3: offer and what platforms. I think that's a part of this.
6:10
Speaker 3: I think that they're trying to say you're an old
6:11
Speaker 3: school broadcaster, but TNT has other platforms that they get
6:15
Speaker 3: to put it onto. MAC So I think these are
6:17
Speaker 3: parallel universes colliding. I don't know if they're exactly in
6:20
Speaker 3: the same size universe, but I think that they are
6:23
Speaker 3: structurally similar because MAX allows the similar version of platform
6:28
Speaker 3: structure as Amazon would have as well.
6:32
Speaker 2: Suppose the NBA says, you know, we think we'll get
6:35
Speaker 2: more viewers with the deal with Amazon, and it's in
6:39
Speaker 2: our long term best interests. Can they walk away from
6:43
Speaker 2: the deal if somehow TNT says we can give you
6:46
Speaker 2: the same kind of exposure and money.
6:50
Speaker 3: Someone is looking at this in the long term process, right,
6:53
Speaker 3: Someone's saying this is better for us in terms of
6:55
Speaker 3: the NBA brand and our largest in the future. Clearly,
6:59
Speaker 3: that's what's at stake here. Somewhere in that agreement between
7:03
Speaker 3: P and T and the NBA this forty year. That's
7:06
Speaker 3: a lengthy relationship which apparently, according to whatever I've seen
7:10
Speaker 3: in the press and people that I know, has not
7:12
Speaker 3: been the best in the few years that there's been
7:15
Speaker 3: a lot of discussion about this, you know, and again
7:17
Speaker 3: I'm going to reiterate that point about tech giants versus
7:20
Speaker 3: old school broadcasters. There seems to have been a exclusive
7:25
Speaker 3: negotiation period that was the precursor to this match. So
7:29
Speaker 3: it looked like there was some over the last year. Contractually,
7:33
Speaker 3: they were obligated to have not mediation, but a negotiation
7:37
Speaker 3: where they would sit in that room and they would
7:40
Speaker 3: try to knock out their new agreement. And it didn't work.
7:43
Speaker 3: Somewhere in the NBA to keep the people in the
7:44
Speaker 3: NBA or the owners whoever was involved, said no, it's
7:48
Speaker 3: not structurally sufficient. We think we can do better. We
7:51
Speaker 3: think the NBA brand can do better at this different
7:54
Speaker 3: set of platforms. But they had that moment and it
7:57
Speaker 3: didn't work out well.
7:58
Speaker 2: They've asked for a jury try is it difficult to
8:02
Speaker 2: line up two different offers like this when it's not
8:04
Speaker 2: just money and determine whether it's a real match.
8:08
Speaker 3: I don't think it's that's sophisticated. Look this jury trial demand, yes,
8:13
Speaker 3: but think about what we've got here. We've got in
8:14
Speaker 3: the quest for junct of belief specific performance. I mean,
8:17
Speaker 3: everybody's just looking to try to keep it long before
8:20
Speaker 3: you get to a jury. But if we get to
8:22
Speaker 3: a jury, you know, this to me looks like you
8:25
Speaker 3: can put the two offers up on you know, large
8:27
Speaker 3: boards in front of a jury and go, there's their offer,
8:30
Speaker 3: here's our offer. Look at ours? You see me? Match
8:32
Speaker 3: that there it is. I don't think it's hard to
8:34
Speaker 3: get in front of a jury. It's not difficult areas
8:37
Speaker 3: of law. It's going to be how do you define match?
8:41
Speaker 3: And did we do it? And if we did it,
8:42
Speaker 3: I'm going to show the jury here here, these two
8:44
Speaker 3: pluckers right up here, right here's ours. There's there getting
8:47
Speaker 3: to that though, Oh my goodness, we have a long
8:50
Speaker 3: way to go. We have all this other stuff we're
8:54
Speaker 3: going to have to go through.
8:55
Speaker 2: Also, Warner Brothers said that if this isn't settled before
9:00
Speaker 2: or the contract expires. They want injunction. Yeah, you think
9:04
Speaker 2: a judge would give them that, Well, it.
9:06
Speaker 3: Says a lot, But Judge Grant's an injunction that also says, here,
9:09
Speaker 3: if a likelihood you're going to run on the barracks,
9:11
Speaker 3: that kind of steers things in a different direction. A
9:15
Speaker 3: prognosticator is tough.
9:17
Speaker 2: Interesting that Turner, in its complaint said that we strongly
9:22
Speaker 2: believe that this is not just our contractual right, but
9:26
Speaker 2: also in the best interest of fans who want to
9:29
Speaker 2: keep watching our industry leading NBA content.
9:33
Speaker 3: I want to discuss this T and Keith investment into
9:37
Speaker 3: the property they call their asset, which they shouldn't be
9:39
Speaker 3: calling its assets, but they do in that complaint. That's
9:42
Speaker 3: very telling. They've come to think of it as their own.
9:44
Speaker 3: They have a large investment in the NBA broadcasters and
9:51
Speaker 3: experts and color commentators. That's a lot of money they've
9:55
Speaker 3: got invested, and they've they've been very successful with that.
9:57
Speaker 3: I think they've won their own Emmys separately, whatever those
10:00
Speaker 3: shows are, you know, I know shows now start before
10:02
Speaker 3: the game, during the game, after the game, next week's game, and.
10:05
Speaker 2: I knows absolutely they're not ending.
10:08
Speaker 3: It's just a perpetual series of commentary. But I think
10:11
Speaker 3: that's a huge part of this that they say, look,
10:13
Speaker 3: we pay Charles Barkley X and we have the best
10:16
Speaker 3: people to do this. Now who you're going to bring
10:18
Speaker 3: on to do this? Right? Look at what you've invested
10:19
Speaker 3: into this, And I think that's part of this. And
10:21
Speaker 3: I think that what they're trying to say in the complaint,
10:24
Speaker 3: which leads back to the injunction angle here, is that
10:27
Speaker 3: we've got so much invested and look at the terrible
10:29
Speaker 3: losses will suffer. Well, I have a hard time. I mean,
10:32
Speaker 3: that's forty years. Did you do everything in the forty years?
10:35
Speaker 3: I think that's going to come up, right. They're going
10:37
Speaker 3: to say they got complacent. Sure, they had these great
10:40
Speaker 3: team of experts, these really popular posts, and you know,
10:43
Speaker 3: superstar guys and gals. You know, it's interesting to see
10:47
Speaker 3: that in the complaint. I want to say, it's a
10:49
Speaker 3: woe is me kind of thing, saying how terribly we'll
10:51
Speaker 3: be hurt. Sure, that's what complaints say, but that's not
10:53
Speaker 3: the point here. Did you match it? Did you follow
10:57
Speaker 3: what they had said? I also want to know what
10:59
Speaker 3: went for all in that exclusive negotiation period, What happened there,
11:03
Speaker 3: and ultimately, if I can be the prognosticator for a second,
11:07
Speaker 3: you know, if it doesn't work out, there may be
11:09
Speaker 3: a split. The baby here it is State Court is
11:12
Speaker 3: State Supreme in New York, So this won't be the
11:14
Speaker 3: first time anybody does something like this. They may say,
11:17
Speaker 3: you know what, for the first three years, we may
11:19
Speaker 3: give key games to stay with T and T and
11:22
Speaker 3: their team, and then regular season games X, Y, and
11:24
Speaker 3: Z will go over here, and then eventually we're going
11:26
Speaker 3: to morph this all entirely over to the new licensee.
11:31
Speaker 3: That may be how this gets done. Nobody, particularly the
11:34
Speaker 3: NBA and TNT. Nobody's going to want to have this
11:37
Speaker 3: extend past even the preseason, so I think they're going
11:40
Speaker 3: to have to figure out methodologies to compromise at some point.
11:44
Speaker 3: It's not like they're going to postpone the season, So
11:47
Speaker 3: I think that the issue is going to start to
11:49
Speaker 3: come up pretty fast and furious. This is not just
11:51
Speaker 3: rocket docket as in the federal system. This is going
11:53
Speaker 3: to be oh boy, we got to move this along.
11:56
Speaker 3: There's billions and billions to stake here, and this is
11:59
Speaker 3: one of the most valuable properties and entertainment biz in
12:02
Speaker 3: the world, and we need to get this moving along.
12:05
Speaker 2: Are courts reluctant to force someone into a deal they
12:10
Speaker 2: don't want to be in?
12:12
Speaker 3: Yes, simplest answer I can give. Yeah, that's a common discussion.
12:17
Speaker 3: Like I said back in entertainment properties, if an artist
12:19
Speaker 3: wants off a label, the judge's going to say, how
12:22
Speaker 3: do you guys getting along? Oh? Terribly? Okay, Now I
12:25
Speaker 3: want you guys back together, shake hands, Come on, you
12:27
Speaker 3: can put it back. Never happens. It never happens that way.
12:30
Speaker 3: There's always some override, similar to the theory here of
12:34
Speaker 3: certain games being split up. There may be an override
12:37
Speaker 3: on structure of money. There may be a way to
12:39
Speaker 3: know UO two records to this person, Oh you owe
12:42
Speaker 3: five songs to this publisher. Oh you owe twelve episodes
12:45
Speaker 3: the original production company. Yeah, we do that to get
12:49
Speaker 3: through the process. So we don't kill the golden goose here.
12:53
Speaker 3: Enter Human properties take decades, if not lifetimes to develop
12:56
Speaker 3: like this, and so nobody wants to hurt that just
12:58
Speaker 3: when it's probably coming off an Olympic high right now.
13:01
Speaker 3: So I think that they're going to be ways we
13:03
Speaker 3: get this resolved that may not be in the standard methodology.
13:07
Speaker 3: I think there's gonna be a lot of meetings and chambers.
13:10
Speaker 3: I think there's gonna be a lot of meetings with
13:11
Speaker 3: everybody just discussing how to make this work. But it's
13:15
Speaker 3: can be a fascinating couple of months.
13:17
Speaker 2: So you think that there might be a settlement before
13:20
Speaker 2: this gets more serious, before it goes to a jury
13:24
Speaker 2: or a judge makes a decision.
13:26
Speaker 3: I think there's a possibility there's going to be a
13:29
Speaker 3: series of workaround to try to satisfy some immediacy for
13:34
Speaker 3: T and T. But I think eventually there's going to
13:36
Speaker 3: be a transition unless everything has gone wrong. From the
13:41
Speaker 3: Amazon point of view, in terms of where the match
13:45
Speaker 3: was and how you define match, it sounds like the
13:48
Speaker 3: timeliness was there had an exclusive negotiation process that preceded it,
13:52
Speaker 3: and it sounded like something happened in that definitional process.
13:56
Speaker 3: Somebody says, we did it the other side, NBA, No
14:00
Speaker 3: you didn't do that. No it didn't. Is it based
14:03
Speaker 3: upon as you and I just discussed, the variable platforms
14:06
Speaker 3: and the extensive nature of the other digital platform It's
14:09
Speaker 3: hard to know. The redactions make it hard to know
14:11
Speaker 3: because at the end of the complaint June. There is
14:14
Speaker 3: a series of redactions where it's effectively saying the Amazon
14:20
Speaker 3: offer they figured a way around it. And that's the
14:22
Speaker 3: kind of language you see in the complaint. They found
14:25
Speaker 3: a way around it here. They did something here that
14:29
Speaker 3: wasn't in good faith. It's a bad faith effort to
14:31
Speaker 3: deprive TBS of its contractual right. That's pretty hefty redacted
14:36
Speaker 3: in the complaint. We don't know what the language was,
14:39
Speaker 3: but they're saying they caused the match to be rejected.
14:43
Speaker 3: Has to be proof of that. What did they do?
14:45
Speaker 3: Where is that here? You know where? If that's the enter?
14:47
Speaker 3: What did they do?
14:48
Speaker 2: So?
14:48
Speaker 3: What was so crasty about these guys that they were
14:51
Speaker 3: able to convince them that they can get around the match?
14:53
Speaker 2: Right?
14:53
Speaker 3: That's redacted. We're gonna have to go find out once
14:55
Speaker 3: this proceeding really gets rolling to me. In the last overview,
14:59
Speaker 3: it could have been that if Aready got complacent on
15:01
Speaker 3: the TBST and T side could have been I mean,
15:03
Speaker 3: they had this property for forty years. It could have
15:05
Speaker 3: been I don't know, maybe they got complacent, Maybe they
15:08
Speaker 3: could have done more, Maybe they weren't pushing the brandess
15:11
Speaker 3: as well. Long as they could. I mean, these are
15:13
Speaker 3: growth issues that the NBA has access to that are
15:15
Speaker 3: not a part of the record. But I started out
15:18
Speaker 3: by saying, I'm going to stay with it. This is
15:20
Speaker 3: the invasion of the tech companies, and they're coming for
15:22
Speaker 3: the old school broadcasters, and they think that they could
15:25
Speaker 3: grab up these multi billion dollar properties and do something
15:29
Speaker 3: new with them and gives them a lot of cloud.
15:32
Speaker 3: We're not just delivering pactors anymore. Right, We've got entertainment
15:35
Speaker 3: properties and we're going to have a long term, eleven
15:38
Speaker 3: year deal on one of the most important entertainment sports
15:41
Speaker 3: properties in the world.
15:43
Speaker 2: I may use that line, We're not just delivering packages anymore.
15:47
Speaker 2: Thanks so much for being on the show. That's Ronald Beanstock,
15:51
Speaker 2: a partner at Scarincy Holland Beck. Coming up next. Why
15:55
Speaker 2: federal agencies are losing more court battles since the Supreme
15:58
Speaker 2: Court's term. This is Bloomberg. Last term, the Supreme Court
16:05
Speaker 2: changed the landscape for federal agencies when it threw out
16:09
Speaker 2: a forty year old precedent known as Chevron deference, which
16:13
Speaker 2: required that courts deferred to reasonable agency interpretations of ambiguous laws.
16:19
Speaker 2: The effects can already be seen in federal court rulings
16:23
Speaker 2: since that June decision called loeper Bright. According to a
16:27
Speaker 2: Bloomberg Law review of rulings on agency actions, in the
16:31
Speaker 2: month after that decision, federal judges ruled against agency interpretations
16:36
Speaker 2: in thirteen out of twenty decisions, including orders that blocked
16:40
Speaker 2: rules prohibiting discrimination against transgender people in health care and education,
16:46
Speaker 2: and that blocked rules banning worker non compete agreements. And
16:50
Speaker 2: in all those cases save one, the federal judges reviewing
16:55
Speaker 2: the agency actions had not even used a milder form
16:59
Speaker 2: of defferences to the government an eighty year old president
17:02
Speaker 2: called Skidmore deference, which the Supreme Court said could be used.
17:07
Speaker 2: Joining me is an administrative law expert. Carrie Coliniese, a
17:10
Speaker 2: professor at the University of Pennsylvania Law School. Will you
17:14
Speaker 2: explain what Skidmore deference is?
17:17
Speaker 3: Sure?
17:17
Speaker 2: So?
17:18
Speaker 3: I think the best way to really explained Skidmore difference
17:21
Speaker 3: is by reference to what Chevron difference was, because it's
17:24
Speaker 3: helpful to know what Skidmore difference is not, and it's
17:28
Speaker 3: not Chevron difference. The Chevron difference is where courts in
17:34
Speaker 3: cases where the statute is ambiguous and the agency is
17:38
Speaker 3: a reasonable interpretation of the statute, Courts are obligated to
17:42
Speaker 3: accept the agency's reasonable interpretation. There's actually a duty to
17:49
Speaker 3: follow what the agency says. The idea being that Congress
17:53
Speaker 3: has delegated, even implicitly, the authority to the agency to
17:59
Speaker 3: determine what ambiguous that she means, and courts must follow it.
18:04
Speaker 3: Get more difference now goes back to a decision forty
18:07
Speaker 3: years prior to Chevron. Chevron was decided in nineteen eighty four.
18:12
Speaker 3: It's now just been overturned in twenty twenty four, forty
18:16
Speaker 3: years later. But if you go without sort of forty
18:18
Speaker 3: years before kind of symmetry, here, we can see a
18:22
Speaker 3: Supreme Court's decision called Skidmore that articulated a type of
18:27
Speaker 3: deference that's similar when that she's are ambiguous, but it's
18:33
Speaker 3: not mandatory that courts follow what the agencies have decided.
18:38
Speaker 3: Get more difference is known as difference that follows from
18:43
Speaker 3: agency's power to persuade. If the court reviewing an agency's
18:49
Speaker 3: interpretation finds that, on the basis of the agency's expertise
18:54
Speaker 3: and the thoroughness of its investigations, that well, the agency
19:00
Speaker 3: he's probably right, then it can go ahead and defer
19:04
Speaker 3: to the agency, but it's not obligated to do so.
19:09
Speaker 3: And that's the real difference here. What the Court did
19:14
Speaker 3: this year in Low for Bright was to return us
19:17
Speaker 3: back to a world eighty years ago, which was the
19:22
Speaker 3: world dominated by skidmore difference, where courts could follow what
19:28
Speaker 3: the agency said if they had the power to persuade
19:31
Speaker 3: the court that they were right. I don't know. If
19:34
Speaker 3: your audience is highly technical and filled with a lot
19:38
Speaker 3: of lawyers, I could actually give another analogy that I
19:41
Speaker 3: think claims did more difference well for lawyers. Okay, if
19:46
Speaker 3: we go back to a world back in the common law,
19:49
Speaker 3: where courts were deciding all sorts of questions, courts had
19:53
Speaker 3: to follow precedents of prior court decisions, and the Pennsylvania
19:58
Speaker 3: Supreme Court, let's say, needed to follow prior decisions of
20:03
Speaker 3: the Pennsylvania Supreme Court unless or until they overruled themselves.
20:08
Speaker 3: Binding precedent followed when you were in the same state
20:12
Speaker 3: with the same court. However, it was always the case,
20:16
Speaker 3: and it still is always the case. Say a Pennsylvania
20:19
Speaker 3: Supreme Court could look to the decisions of the Ohio
20:23
Speaker 3: Supreme Court or the Florida Supreme Court in deciding very
20:28
Speaker 3: similar cases, and they weren't obligated to follow what the
20:33
Speaker 3: Ohio or the Florida courts decided, but they might be
20:37
Speaker 3: persuaded by what the courts in Ohio and Florida decided.
20:41
Speaker 3: And that's the way to think about Gidmore deference is
20:46
Speaker 3: not mandatory to follow it, but it is an option
20:50
Speaker 3: if a court is persuaded.
20:53
Speaker 2: In the opinion in Low ur Bright, the Chief Justice
20:57
Speaker 2: John Roberts invoked the skid defense a couple of times.
21:01
Speaker 2: What was his position on it? Was he telling courts
21:05
Speaker 2: use this?
21:06
Speaker 3: He says, it's available. It's still available. Why because it's
21:10
Speaker 3: a doctrine that still puts the court in the driver's seat,
21:14
Speaker 3: because it's the court that gets to decide whether they
21:18
Speaker 3: think it's appropriate to refer to the agency, whether they're
21:21
Speaker 3: persuaded that the agency has the best interpretation of the statute.
21:26
Speaker 3: And Chief Justice Roberts, in the majority opinion in moper Bright,
21:30
Speaker 3: says that's fine in agencies, he says, are still deserving
21:36
Speaker 3: of respectful consideration for their views. So a court should
21:42
Speaker 3: certainly hear agencies out, and if they are persuaded, then
21:49
Speaker 3: sure they follow them. You know, some people would say
21:52
Speaker 3: it's not really a difference at all. It's what's always
21:55
Speaker 3: there for any litigant. If you persuade the josh that
21:58
Speaker 3: you have the best interpret the judge will agree with you.
22:02
Speaker 3: And so it may not really give agencies a whole
22:06
Speaker 3: lot of weight behind what they do. But you know,
22:09
Speaker 3: the reality, of course, is that a lot of these
22:12
Speaker 3: cases arise under statutes and with issues that are very technical,
22:17
Speaker 3: and judges did before Chevron side with agencies, you know,
22:22
Speaker 3: more often than not, and one might might expect the
22:26
Speaker 3: same to happen afterwards, except we have, you know, a
22:29
Speaker 3: different composition to the judiciary today. And I think the
22:33
Speaker 3: Supreme Court's decision to overrule the Chevron is sending a
22:37
Speaker 3: signal throughout the lower courts that you should be skeptical,
22:42
Speaker 3: notwithstanding these passing references to skid More and the possibility
22:47
Speaker 3: that it still might apply. It's very clear. I think
22:51
Speaker 3: the message from the Supreme Court is be very skeptical
22:54
Speaker 3: of agency power. And that's not only in the overruling
22:57
Speaker 3: of Chevron, but it's in the Court's recent invocation of
23:02
Speaker 3: the Major Questions doctrine and in some other cases as well.
23:06
Speaker 2: According to a Bloomberg Law review of decisions issued between
23:10
Speaker 2: June twenty eighth and July twenty six, federal courts didn't
23:14
Speaker 2: refer to Skidmore in nineteen of twenty rulings on agency
23:18
Speaker 2: actions that cited Lower Bright, which is the case that
23:21
Speaker 2: did away with the Chevron doctrine, and federal judges ruled
23:25
Speaker 2: against agency interpretations in thirteen out of those decisions. What
23:30
Speaker 2: does that tell you?
23:31
Speaker 3: It's not surprising for one Gidmore difference. It's not obligatory.
23:36
Speaker 3: So there's no reason that courts need to decide on
23:41
Speaker 3: the basis of Skidmore. There's no reasons for courts to
23:44
Speaker 3: cite Skidmore. The court in Lowperbright was saying to lower courts,
23:50
Speaker 3: you all figure it out and come up with your
23:53
Speaker 3: own best reading of the statutes. And that doesn't leave
23:57
Speaker 3: a whole lot of room for of any kind, even
24:01
Speaker 3: an optional kind of deference like Skidmark.
24:04
Speaker 2: I remember during the oral arguments in the Lower Bright case,
24:08
Speaker 2: the Chief Justice saying something like, we haven't relied on
24:12
Speaker 2: Chevron in more than a decade, But the lower courts
24:17
Speaker 2: relied on Chevron.
24:18
Speaker 3: Didn't They sure they cited the Chevron right absolutely That's
24:23
Speaker 3: why Lower Bright's three key words Chevron is over ruled
24:28
Speaker 3: were so important, as it signaled to the lower courts,
24:32
Speaker 3: don't cite Chevron anymore. You have to figure it out.
24:37
Speaker 3: And you know that's a I mean, I've kind of
24:40
Speaker 3: thought of it as a legal earthquake. I mean, it's
24:43
Speaker 3: really shaken the things up here. After forty years of
24:47
Speaker 3: court citing Chevron, citing Chevron, citing Chevron, it was one
24:51
Speaker 3: of the most widely cited administrative law decisions, really one
24:55
Speaker 3: of the more widely cited of any Supreme Court decisions
24:59
Speaker 3: of all time. Now the Court says away from that,
25:03
Speaker 3: don't cite it. And so it's also I think has
25:07
Speaker 3: around it kind of a penumber that is apparently telling
25:11
Speaker 3: lower court judges be skeptical of deference of any kind,
25:16
Speaker 3: because again, your job as judges is not to defer
25:20
Speaker 3: to anyone, but to make the best reading of the
25:24
Speaker 3: statue yourself. And yes, you can listen to the agency,
25:29
Speaker 3: give the agency respectful consideration, but you know that doesn't
25:32
Speaker 3: leave much room for a notion of deference if it's
25:36
Speaker 3: the courts that are supposed to be decided this difference
25:40
Speaker 3: of any kind, even a voluntary deference even though the
25:43
Speaker 3: lower bright opinion as you can rely on if you're
25:48
Speaker 3: persuaded by the agency. But if you're a lower court
25:51
Speaker 3: judge and you're going to agree with the agency, then
25:54
Speaker 3: just lay out the argument for why the best reading
25:58
Speaker 3: of the statute is the same one that the agency
26:02
Speaker 3: has made no need to cite. Get more. Just lay it.
26:05
Speaker 2: Out, and you sort of referred to this I think
26:07
Speaker 2: Bloomberg law. The review found that district court decisions on
26:12
Speaker 2: requests to freeze Biden administration regulations show a partisan pattern.
26:16
Speaker 2: Seven of the eight rulings that pause the rules were
26:19
Speaker 2: Republican appointed judges. Democratic appointee handed down the one rejecting
26:24
Speaker 2: an injunction bid. So does it seem as if the
26:27
Speaker 2: more conservative judges are the ones that are anti agency
26:32
Speaker 2: and are going to rule against agencies if they can,
26:35
Speaker 2: whereas the more liberal judges will rule four agencies.
26:40
Speaker 3: It's generally been the pattern. It's generally been the pattern
26:44
Speaker 3: in a very subtle way over the past several decades,
26:48
Speaker 3: but certainly in recent years we've seen a greater degree
26:54
Speaker 3: of polarization in the judiciary that kind of mirrors the
26:58
Speaker 3: polarization and society at large, and this is a matter
27:03
Speaker 3: I think of considerable concern generally about our court system.
27:09
Speaker 3: But it also will manifest itself in judges of different
27:15
Speaker 3: you know, political, partisan, ideological persuasions come into different readings
27:23
Speaker 3: of the statutes. There's you know, empirical evidence that indicates that,
27:28
Speaker 3: and we might expect that judges that are skeptical of
27:31
Speaker 3: agency power are hearing this signal that the Supreme Court
27:36
Speaker 3: is sending in lower Bright much more loudly and strongly
27:40
Speaker 3: than our other judges. Perhaps now may be the case,
27:44
Speaker 3: of course, that there will be judges that are willing
27:48
Speaker 3: to side with the agency too, and they're going to
27:51
Speaker 3: say the best reading is the agency's interpretation. In some sense,
27:55
Speaker 3: we're going to have some dueling opinions I suspect in
27:59
Speaker 3: various different courts around the country, ultimately perhaps having more
28:05
Speaker 3: of these conflicts or what we call circuits splits that
28:08
Speaker 3: the Supreme Court will have to resolve, and it's going
28:11
Speaker 3: to go up to a majority of the Supreme Court
28:13
Speaker 3: that I think has demonstrated itself to be extremely skeptical
28:17
Speaker 3: of agency authority.
28:19
Speaker 2: Coming up next on the Bloomberg Lawn Show, I'll continue
28:22
Speaker 2: this conversation with professor Carrie Colinisi of the University of
28:26
Speaker 2: Pennsylvania Law School. Will we reach a point where federal
28:29
Speaker 2: agencies throw up their hands and say no more rulemaking
28:33
Speaker 2: for us? I'm June Grosso and you're listening to Bloomberg.
28:39
Speaker 2: The Supreme Court's decision overturning a forty year old president,
28:43
Speaker 2: known as the Chevron Doctrine, was one of the most
28:46
Speaker 2: watched cases of the last term. The Supreme Court's conservative
28:51
Speaker 2: majority set forth a new standard calling on judges to
28:55
Speaker 2: use their independent judgment to decide whether an agency acts
29:00
Speaker 2: within the authority that Congress granted it, and a little
29:03
Speaker 2: over a month after that decision, the effects can already
29:07
Speaker 2: be seen in federal court rulings. District court decisions on
29:11
Speaker 2: request to freeze Biden administration regulations showed a partisan pattern.
29:17
Speaker 2: According to a Bloomberg Law review of rulings on agency actions,
29:21
Speaker 2: seven of the eight rulings that paused rules were issued
29:25
Speaker 2: by Republican appointed judges, while a Democratic appointee handed down
29:29
Speaker 2: the one rule rejecting an injunction bid. I've been talking
29:33
Speaker 2: to administrative law expert Carrie Coloniesi, a professor at the
29:37
Speaker 2: University of Pennsylvania Law School. This may be a little extreme,
29:41
Speaker 2: but do you think we'll get to the point where
29:43
Speaker 2: agencies will throw up their hands and say, why go
29:46
Speaker 2: through the rule making process when we're just going to
29:49
Speaker 2: be overruled by the courts.
29:51
Speaker 3: It might be certainly something that happens. We'll have to see.
29:56
Speaker 3: I mean, there's actually one recent study done by a
30:00
Speaker 3: legal scholar and political scientists at Texas A and M University,
30:05
Speaker 3: Dan Walters, who looked at the productivity of actually legislatures
30:11
Speaker 3: at the state level because one thought is that, you know,
30:14
Speaker 3: if we have a judges that are not willing to
30:18
Speaker 3: pass the buck to the agencies and to really back
30:21
Speaker 3: up and support what the legislature meant, maybe we'll have
30:25
Speaker 3: more legislation. And he actually found that, you know, there's
30:29
Speaker 3: actually less legislation in states that didn't have something like
30:33
Speaker 3: the Chevron doctrine at the state level. And he surmises that,
30:38
Speaker 3: you know, it might be the same thing that you're
30:41
Speaker 3: suggesting that my bother with legislation if at the end
30:45
Speaker 3: of the day, courts are going to get to decide
30:47
Speaker 3: what it is and it's going to be fixed because
30:50
Speaker 3: when courts decide what a statute means that's in precedent,
30:55
Speaker 3: and there's not a lot of flexibility, so you know,
30:59
Speaker 3: even legislations might well kind of say, well, why bother,
31:03
Speaker 3: and not only agencies.
31:04
Speaker 2: It sounds pretty dismal.
31:05
Speaker 3: But I will say there is one possibility here. Keep
31:09
Speaker 3: in mind that lower Bright was a case that was
31:12
Speaker 3: decided on the basis of a statute, the Administrative Procedure Acts,
31:18
Speaker 3: and the court said that the Chevron doctrine was inconsistent
31:23
Speaker 3: with this overriding statute that governs any time agencies are
31:29
Speaker 3: in court and their actions are being challenged. That statute
31:34
Speaker 3: says that all relevant decisions are to be decided by courts,
31:38
Speaker 3: All relevant legal determinations are supposed to be decided by courts,
31:44
Speaker 3: and Loper Bright really hinged itself in its reasoning on
31:50
Speaker 3: an inconsistency it saw between the Chevron doctrine of deference
31:56
Speaker 3: and the Administrative Procedure Acts that leaves. So maybe this
32:02
Speaker 3: isn't so dismal. If there is a Congress that wants
32:06
Speaker 3: to amend the Administrative Procedure Act, it's possible for them
32:09
Speaker 3: to reverse what the Court has done here in Loper Bright.
32:13
Speaker 3: So we'll have to see I mean, I think what
32:15
Speaker 3: the future holds is going to be dependent upon a
32:18
Speaker 3: very complex set of interactions between judges at a lower
32:22
Speaker 3: court level, different persuasions between what the Supreme Court does
32:27
Speaker 3: in future cases, what agencies do, and what Congress ultimately
32:32
Speaker 3: do in what might be called, you know, the administrative
32:36
Speaker 3: governance game. That's going to be playing out for some
32:40
Speaker 3: years to come, and we'll have to see how it
32:41
Speaker 3: plays out.
32:43
Speaker 2: I wanted to get your take on what the Chief
32:46
Speaker 2: Justice meant when he wrote in lower bright in an
32:49
Speaker 2: agency case in particular, the court will go about its
32:52
Speaker 2: task with the agency's body of experience and informed judgment,
32:57
Speaker 2: among other information, at its disposed.
33:01
Speaker 3: Sure, well, this is a recognition that first, agencies are
33:06
Speaker 3: themselves part of the same government that courts are right,
33:11
Speaker 3: and this is a reality why agencies historically have won
33:17
Speaker 3: more often than not when their actions are challenged in court.
33:22
Speaker 3: It's not easy to prevail against a government litigator because
33:28
Speaker 3: they do bring with them a lot of expertise and knowledge,
33:32
Speaker 3: and courts have at least historically tended to say, well,
33:37
Speaker 3: you know, they're the government. They you know, we're the
33:40
Speaker 3: government too, in some sense, maybe on the same side,
33:46
Speaker 3: and you know, as long as the government's been pretty
33:49
Speaker 3: reasonable and Congress intended the agency to decide we should
33:54
Speaker 3: we should follow that. That was the underlying basis of
33:56
Speaker 3: Chevron and Justice roberts Is, I think recognized the reality
34:01
Speaker 3: that those factors will still be there. The question, though,
34:06
Speaker 3: is the judiciary has changed, and it's not so clear
34:09
Speaker 3: that there are as many judges that are as inclined
34:13
Speaker 3: to say that we're on the same team as the agencies.
34:16
Speaker 3: There are judges, I think out on the federal judiciary
34:19
Speaker 3: today that the administrative agencies is part of a deep state,
34:25
Speaker 3: you know, a conspiracy of working against the public and
34:29
Speaker 3: hamstringing business unduly and so forth, being out of control
34:34
Speaker 3: and needing to be rained in and being very suspicious
34:37
Speaker 3: of them. And when you have judges that take that view,
34:40
Speaker 3: litigants know how to find them, and they will find them,
34:44
Speaker 3: and we will get rulings that have the agency on
34:47
Speaker 3: the losing side in the future.
34:49
Speaker 2: Do you think that at some point this is going
34:52
Speaker 2: to have to go back to the Supreme Court to
34:54
Speaker 2: give more instruction to the lower courts or this is it?
34:58
Speaker 1: Oh?
34:58
Speaker 3: No, there's a lot of unanswered questions in lower right.
35:03
Speaker 3: The Supreme Court is not done with this by any means.
35:07
Speaker 3: And there's two types of questions that will be facing
35:10
Speaker 3: the court. One I might call kind of meta questions,
35:14
Speaker 3: that is, questions about lower Bride and what the overruling
35:19
Speaker 3: of Chevron mean. These are questions about, for example, what
35:24
Speaker 3: did overruling Chevron mean, for example, for past decisions and
35:30
Speaker 3: determinations by courts that had been grounded on Chevron reasoning.
35:37
Speaker 3: The Court tried to address this in one paragraph of
35:41
Speaker 3: its opinion, but it's ambiguous and leaves a lot of questions.
35:44
Speaker 3: So these meta questions about what lower Bright means and
35:47
Speaker 3: how it will apply, and there's several of them, those
35:50
Speaker 3: will be there. The second set of questions that are
35:53
Speaker 3: going to be there is to settle all of these
35:56
Speaker 3: more targeted statute specific questions that are going to arise,
36:02
Speaker 3: and to some extent, they always did arise when different
36:05
Speaker 3: circuits come to different meanings about what the same statute says.
36:12
Speaker 3: And the Court may well have to be even busier
36:15
Speaker 3: than it is today in resolving what we would call
36:19
Speaker 3: circuit splits or where you know, different courts are coming
36:22
Speaker 3: to different best readings of the same statute and we'll
36:27
Speaker 3: have to see how that plays out too. But yes,
36:30
Speaker 3: there's no getting out of the fact that statutory interpretation is,
36:35
Speaker 3: you know, a fundamental part of what judges and lawyers
36:38
Speaker 3: are tasked with doing. It was so under Chevron, and
36:43
Speaker 3: the Supreme Court will continue to have to play a role.
36:47
Speaker 3: There's no getting out of this. You know.
36:50
Speaker 2: I wonder facetiously, but I wonder if at some point
36:53
Speaker 2: the justices who overturn these precedents are going to regret
36:57
Speaker 2: overturning so many in such a short pers of time.
37:00
Speaker 2: Because if you look at, for example, what's happened with
37:02
Speaker 2: the reversal of Roe v. Wade, where Justice Kavanaugh said,
37:06
Speaker 2: now we'll leave it to the States, we can wash
37:08
Speaker 2: our hands of this. Well, look at what's happened.
37:11
Speaker 3: It's a complete mess, right right exactly. And this is
37:14
Speaker 3: why I say this is an earthquake. There's going to
37:17
Speaker 3: be some rubble in place, and this question of you know,
37:20
Speaker 3: which structures will remain standing, as with any earthquake, how
37:25
Speaker 3: badly things will have been damaged. It's not a court
37:30
Speaker 3: that's exercising what had been traditional conservative humility at all,
37:37
Speaker 3: but really been quite an aggressive court here. And you're right,
37:41
Speaker 3: it's unleashed, you know, a mess if you will. You know,
37:45
Speaker 3: at the minimum, on abortion right, it's certainly not alleviated.
37:50
Speaker 3: The Supreme Courts need to decide cases like in the
37:53
Speaker 3: misipristone case or you know, heaven forbid, we're going to
37:57
Speaker 3: have compstack Act case for example, down the road. So
38:03
Speaker 3: abortion has not left the Supreme Court's agenda, and this
38:07
Speaker 3: whole idea of overturning Chevron and having a major questions
38:12
Speaker 3: doctrine all of it. Ultimately, though, there may be a
38:16
Speaker 3: message to the mess. First of all, it's disruptive to government,
38:19
Speaker 3: and maybe that's part of their objective here. Another thing
38:25
Speaker 3: is empowering of the court. It's putting the court front
38:29
Speaker 3: and center in governing on some of the most controversial
38:34
Speaker 3: issues of our time in a way that you know,
38:37
Speaker 3: I don't think it's been occupying that role for at
38:41
Speaker 3: least fifty years, probably even more. When you look across
38:45
Speaker 3: the whole sweep and certainly when you look at administrative
38:48
Speaker 3: law decisions, the courts have not played the kind of
38:52
Speaker 3: central role that now they will be playing. And you know,
38:56
Speaker 3: it raises a host of questions about whether the courts
38:59
Speaker 3: have the capacity to deal with these issues in a
39:02
Speaker 3: smart and effective way. Are we going to have new
39:05
Speaker 3: technologies and new ways of doing business that needs some sound, sensible,
39:12
Speaker 3: good analytic decisions and will the courts be able to
39:16
Speaker 3: deliver that? You know, it's an open question.
39:19
Speaker 2: Unfortunately, it seems like there are a lot more questions
39:22
Speaker 2: than answers. But thanks so much for your answers. Carrie.
39:26
Speaker 2: That's Professor Carrie Coliniesi of the University of Pennsylvania Law School.
39:30
Speaker 2: And that's it for this edition of the Bloomberg Law Podcast.
39:33
Speaker 2: Remember you can always get the latest legal news by
39:36
Speaker 2: subscribing and listening to the show on Apple Podcasts, Spotify,
39:40
Speaker 2: and at Bloomberg dot com, slash podcast, Slash Law. I'm
39:44
Speaker 2: June Grosso and this is Bloomberg