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Weekend Law: Court Standoff, Musk Limited & Tennis Suit · Bloomberg Law

0:02
Speaker 1: This is Bloomberg Law with June Grossel from Bloomberg Radio.
0:08
Speaker 2: There's been a remarkable showdown between the Trump administration and
0:12
Speaker 2: the federal judiciary in a Washington, DC courtroom this week.
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Speaker 2: Last Saturday, Judge James Boseburg ordered the government to turn
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Speaker 2: around any planes that were flying alleged Venezuelan gang members
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Speaker 2: to a prison in l Salvador, based on a law
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Speaker 2: used only in wartime. But the planes were not turned around,
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Speaker 2: and since Monday, the judge has been demanding information on
0:37
Speaker 2: the times of the flights to determine whether his order
0:40
Speaker 2: was knowingly violated, but the government has repeatedly refused to
0:45
Speaker 2: give him that information. Here's President Trump's response on Friday.
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Speaker 3: The authority the power to round up people to support them,
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Speaker 3: and then you're under new obligation to a court to
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Speaker 3: show the edits.
1:00
Speaker 4: That's what our country needs because we were unfortunately, they
1:04
Speaker 4: allowed millions of people to come.
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Speaker 1: Into our country.
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Speaker 2: Perhaps even more stunning, the US Attorney General Pam Bondi
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Speaker 2: on Fox this week challenged Judge Boseburg's authority.
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Speaker 3: This judge has no right to ask those questions. You
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Speaker 3: have one unelected federal judge trying to control foreign policies,
1:26
Speaker 3: trying to control the Alien Enemies Act, which they have
1:30
Speaker 3: no business presiding over.
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Speaker 2: The legal issue at the heart of these hearings is
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Speaker 2: Trump's unprecedented use of a law used only three times
1:39
Speaker 2: in our history during wars to deport hundreds of alleged
1:43
Speaker 2: Venezuelan gang members. My guest is constitutional law expert David super,
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Speaker 2: a professor at Georgetown Law. David, I want to put
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Speaker 2: Friday's hearing into context. This has been a week long
1:55
Speaker 2: struggle by the judge to get some basic information from
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Speaker 2: the government about when the flights took off and landed,
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Speaker 2: and he's moved the deadline over and over again to
2:07
Speaker 2: give them an opportunity to comply with his order, and
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Speaker 2: they haven't. What's going on here.
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Speaker 5: The only conclusion that I can draw is that they
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Speaker 5: violated his order deliberately, and they're trying to avoid revealing
2:20
Speaker 5: that the questions being asked are very simple questions, and
2:25
Speaker 5: if the answers are not embarrassing, there's no reason not
2:29
Speaker 5: to disclose them. No terrorists can harm a flight that
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Speaker 5: occurred almost a week ago and is long since returned
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Speaker 5: to ground. There's no national security implications here, it appears
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Speaker 5: that there's security implications for particular officials who may not
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Speaker 5: have acted appropriately.
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Speaker 2: The Attorney General, the top law enforcement official in the country,
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Speaker 2: said that the judge has no right to be asking
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Speaker 2: for specifics in the case in front of him.
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Speaker 5: That's very disturbing. Any lawyer understands that judges have a
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Speaker 5: right to protect their own jurisdiction. That's true of any
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Speaker 5: court worthy of the name. The judge issued an order
3:12
Speaker 5: that was not complied with. If it was an accident,
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Speaker 5: that's certainly something that judges entitled to know about, and
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Speaker 5: if it's deliberate, the judges entitled to know about that.
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Speaker 2: At the hearing on Friday, Judge Boseburg started with a
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Speaker 2: warning to the government lawyers, telling them they need to
3:29
Speaker 2: be careful how they act, cautioning them that their professional
3:33
Speaker 2: reputation is the most valuable thing they have. It seemed
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Speaker 2: like the tone was very different on Friday.
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Speaker 6: Yes it was.
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Speaker 5: Judge Bosburg issued an order that he believed to be
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Speaker 5: correct on Saturday and assumed, as judges do when they
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Speaker 5: issue orders to federal officials, that those officials would follow it.
3:54
Speaker 5: The officials did not follow it, and if it was
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Speaker 5: an accident or a miscommunicy. They've had the better part
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Speaker 5: of a week to show that. The fact that they
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Speaker 5: haven't and apparently can't show that it was an accident
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Speaker 5: suggests that this is contempt of court.
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Speaker 2: You had the age the President an others criticizing Judge Bosberg.
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Speaker 2: Trump called him a radical left lunatic of a judge,
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Speaker 2: a troublemaker and an agitator, and call for his impeachment.
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Speaker 2: And on Friday, the judge seemed to want to set
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Speaker 2: the record straight. He actually got the government attorney to
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Speaker 2: concede that he understood the judge's verbal order on Saturday
4:34
Speaker 2: to turn the planes around. So he specifically got that
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Speaker 2: on the record.
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Speaker 5: Yes, I think he got a number of very important
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Speaker 5: admissions from the Justice Department lawyers on the record that
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Speaker 5: undercut things that have been said in the media. The
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Speaker 5: Justice Department lawyer admitted that the judge had clearly ordered
4:55
Speaker 5: the planes to be turned around well before seven twenty five,
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Speaker 5: that even he admitted that this was a mandatory order
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Speaker 5: he said he passed along to the relevant officials. This
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Speaker 5: makes very clear that the timing that the administration has
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Speaker 5: been raising is not correct and that the administration's notion
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Speaker 5: that this was somehow a temporary order or an order
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Speaker 5: that was superseded is not true.
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Speaker 2: The government's language has been defiant at times, and Bosberg
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Speaker 2: accused the government lawyer of using intemperate and disrespectful language
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Speaker 2: that I can't remember seeing from the United States in
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Speaker 2: court filings. And he said he's going to get to
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Speaker 2: the bottom of it, whether they violated my word and
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Speaker 2: who ordered this. Does it seem like a contempt citation
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Speaker 2: is coming?
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Speaker 5: Certainly? The judge has two questions he asked to ask
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Speaker 5: concerning contempt. First was his order violated? And second by whom?
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Speaker 5: He has apparently established that the government understood what his
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Speaker 5: order was, and is pressing the government for details about
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Speaker 5: exactly what was done that might show that there was
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Speaker 5: indeed a violation. But he's also pressing for information about
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Speaker 5: who did want which would allow him to identify which
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Speaker 5: individuals might be in contempt of court. The lawyer who
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Speaker 5: spoke in court insisted that he passed Judge Boseberg's order
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Speaker 5: along promptly to immigration officials. I take that to mean
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Speaker 5: him saying that he is not the one who is
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Speaker 5: in contempt of court. Judge Bosberg who would like to
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Speaker 5: know who is.
6:37
Speaker 2: The judge has yet to rule on Trump's use of
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Speaker 2: the Alien Enemies Act, but he called the Trump administration's
6:45
Speaker 2: arguments about the extent of the president's powers under the
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Speaker 2: Act a long way from the intent of the law
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Speaker 2: and awfully frightening.
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Speaker 5: Yes, the plaintiffs submitted affidavits from family members of many
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Speaker 5: of the people who were sent to El Salvador, indicating
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Speaker 5: that they were not gang members and never had. In
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Speaker 5: one instance, the family member described the tattoos that his
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Speaker 5: brother had and indicated that these were things that had
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Speaker 5: no gang affiliation but were simply decorative. There's no indication
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Speaker 5: in the record that this is incorrect, and the administration
7:23
Speaker 5: provided no hearing where anyone could correct misunderstandings of these tattoos.
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Speaker 5: I believe Judge Bosberg is noting the absence of any
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Speaker 5: evidence disputing what the plaintiffs has said, and is coming
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Speaker 5: to believe that a lot of innocent people were sent
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Speaker 5: to El Salvador, a country with a history of torture.
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Speaker 2: The Trump administration maintains that Cabinet secretaries are actively considering
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Speaker 2: whether to invoke the state's secrets privilege to prevent turning
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Speaker 2: over the information on the flights. The judge gave them
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Speaker 2: until March twenty fifth to confirm what it is they'll
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Speaker 2: be invoking that, But on what possible basis could they
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Speaker 2: invoke the State Secrets Act?
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Speaker 5: I can't imagine how. If the judge was asking for
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Speaker 5: details of their negotiations with the Salvadoran government or some
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Speaker 5: other national government, that could be plausible, But that doesn't
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Speaker 5: appear to be what Judge Bosburg is to ask at all.
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Speaker 5: He's asked for dates about flights and for communication about
8:28
Speaker 5: that flight and his order within the Justice Department. It's
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Speaker 5: not a state secret just because it is embarrassing some
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Speaker 5: state official.
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Speaker 2: The talk has ramped up this week about whether there's
8:39
Speaker 2: a constitutional crisis, and you have President Trump saying, you know,
8:45
Speaker 2: he's not going to defy a court order, but then
8:48
Speaker 2: he says things like, we can't let a judge do that,
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Speaker 2: We can't let this happen. Have we reached a constitutional crisis?
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Speaker 5: We have because the administration has been violating many court orders,
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Speaker 5: not to just this one. And when one branch of
9:03
Speaker 5: government declares itself free from the checks of the others,
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Speaker 5: that is a constitutional crisis. The president keeps saying that
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Speaker 5: he wouldn't violate court orders, but his officials do so.
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Speaker 5: Either he's completely incapable as an executive or he is
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Speaker 5: allowing his.
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Speaker 6: Officials to disregard court orders.
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Speaker 2: So what can be done?
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Speaker 5: I expect that the officials who violated the order of
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Speaker 5: Judge Bosberg will be asked to appear in court and
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Speaker 5: explain themselves, and if they don't have an adequate explanation,
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Speaker 5: I expect that they will be charged and very possibly
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Speaker 5: convicted of contempt of court. It's very possible that Judge
9:46
Speaker 5: Bosberg one also will issue further orders that make it
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Speaker 5: more difficult for them to violate his orders in the future.
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Speaker 2: We started the week with Chief Justice John Roberts stepping
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Speaker 2: into this battle between the Trump administration and the judiciary.
10:02
Speaker 2: After Trump called for the impeachment of Judge Bosberg, Roberts
10:07
Speaker 2: made a rare public statement saying that impeachment is not
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Speaker 2: the appropriate response to disagreements over a judge's decision, looking
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Speaker 2: at the escalation since then, did it make any difference
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Speaker 2: for the Chief Justice to issue that statement?
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Speaker 5: The Chief Justice is using indirect and delicate language to
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Speaker 5: avoid provoking a further crisis. Wise people would listen to him.
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Speaker 5: So far, we've seen very little evidence of wisdom from
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Speaker 5: this administration.
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Speaker 2: So there was confusion over the flight times. But now
10:44
Speaker 2: there seems to be added confusion because on Friday night,
10:48
Speaker 2: President Trump said he wasn't the one who signed the
10:51
Speaker 2: proclamation invoking the Alien Enemies Act.
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Speaker 7: We want to get criminals out of our country, number one.
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Speaker 7: And I don't know when it was signed because I
10:59
Speaker 7: didn't sign, and other people handle it.
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Speaker 8: But Marco Rubio.
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Speaker 1: Has done a great job and he wanted him out,
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Speaker 1: and we go along with that.
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Speaker 2: So the questions in this case continue, and Judge Bosberg
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Speaker 2: has given government lawyers until Tuesday to explain why he
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Speaker 2: shouldn't find that they violated his order to turn the
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Speaker 2: planes around. And we haven't even gotten to the merits
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Speaker 2: of the case yet. Thanks so much for your analysis, David.
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Speaker 2: That's Professor David super of Georgetown Law coming up next
11:28
Speaker 2: on the Bloomberg Lawn Show. For the first time, a
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Speaker 2: judge limits elon Musk's power, finding his dismantling of USAID
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Speaker 2: likely unconstitutional. Remember you can always get the latest legal
11:41
Speaker 2: news by listening to our Bloomberg Law podcast wherever you
11:45
Speaker 2: get your favorite podcasts. I'm June Grosso, and you're listening
11:48
Speaker 2: to Bloomberg. The Trump administration is facing more than one
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Speaker 2: hundred and fifty cases across the country challenging its actions,
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Speaker 2: and many of the cases involve Elon Musk and DOGE,
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Speaker 2: which has moved swiftly to fire tens of thousands of
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Speaker 2: federal workers, cancel grants and contracts, and generally dismantle the
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Speaker 2: federal government. In court, the administration says that Musk isn't
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Speaker 2: the head of DOGE and doesn't have authority to give
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Speaker 2: orders at agencies. But remember when President Trump gave a
12:21
Speaker 2: shout out to Musk during his joint address to Congress
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Speaker 2: last month.
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Speaker 4: I have created the brand new Department of Government Efficiency Dog.
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Speaker 4: Perhaps you've heard of it, perhaps, which is headed by
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Speaker 4: Elon Musk, who's in the gallery tonight.
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Speaker 2: Well, Federal Judge Theodore Schwang seems to remember, and he
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Speaker 2: cited that in the first major ruling to find that
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Speaker 2: Musk likely exercised unconstitutional powers in this case by orchestrating
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Speaker 2: the shutdown of the US Agency for International Development. Joining
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Speaker 2: me is constitutional law expert Michael Dorf, a professor at
13:03
Speaker 2: Cornell Law School. Mike usaid was the first agency that
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Speaker 2: Musk took his chainsaw to remind us what happened.
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Speaker 1: Musk and the Doze people went into USAID and they
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Speaker 1: canceled a very large percentage of the contracts that USAID
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Speaker 1: had with partner organizations.
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Speaker 6: Throughout the world. They also displaced the existing leadership and
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Speaker 6: Secretary of State Marco Rubio assumed control of USAID, and
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Speaker 6: they gutted the staff.
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Speaker 1: Us also actually tweeted that USAID was effectively dead right,
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Speaker 1: So this was an effort by Doge who essentially kill
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Speaker 1: an agency created by Congress.
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Speaker 2: The judge found that Musk and his team likely violate
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Speaker 2: the Constitution in multiple ways. Let's talk first about the
13:59
Speaker 2: appointment's clause issue.
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Speaker 1: The Constitution sets out how officers of the United States
14:06
Speaker 1: are appointed so called principal officers, who are people who
14:10
Speaker 1: have a whole lot of responsibilities to think about. A
14:13
Speaker 1: cabinet level secretary must be nominated by the President and
14:17
Speaker 1: it's confirmed by the Senate. There are also what the
14:20
Speaker 1: Constitution calls inferior officers who exercise considerable power but under
14:25
Speaker 1: the supervision of a principal officer, and they can also
14:29
Speaker 1: be appointed via that same mechanism of presidential nomination and
14:33
Speaker 1: Senate confirmation.
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Speaker 6: But the Constitution says that.
14:36
Speaker 1: Alternatively, for an inferior officer, Congress confests the authority to
14:41
Speaker 1: make appointments either in the president alone the force.
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Speaker 6: Of law, or in the heads of departments.
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Speaker 1: What the judge said was that Musk is exercising at
14:52
Speaker 1: least the power of inferior officer, probably the power of
14:56
Speaker 1: a principal officer.
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Speaker 6: But it doesn't matter which he.
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Speaker 1: Is because he wasn't appointed in conformity with procedures. He
15:03
Speaker 1: was not nominated by the president and confirmed by the Senate.
15:06
Speaker 1: He was apparently appointed by the president, but the appointment's
15:10
Speaker 1: cause says that can only be a mechanism for inferior
15:13
Speaker 1: officers if Congress authorizes it, and Congress did not authorize this.
15:17
Speaker 1: Congress didn't even create DOZE. DOZE as a creation, Soley
15:21
Speaker 1: of President Trump and.
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Speaker 2: The administration had said that Musk isn't the real head
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Speaker 2: of DOZE and doesn't have the power to make these
15:29
Speaker 2: kinds of decisions. But the judge cited Trump's statements about
15:34
Speaker 2: Musk and Musk's comments and social media posts to demonstrate
15:40
Speaker 2: that quote he has firm control over DOGE.
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Speaker 6: That's right.
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Speaker 1: It's essentially holding that even though at one point or
15:48
Speaker 1: another the administration has tried to claim that Musk is
15:52
Speaker 1: just an advisor, he was in fact exercising the power
15:57
Speaker 1: of the head of Doge must has claim that he
16:00
Speaker 1: is the President in his address to the Joint Session
16:04
Speaker 1: of Congress referred to him that way, He's referred to
16:07
Speaker 1: him that way in other statements. And so you can't
16:10
Speaker 1: just evade the appointment's clause by having somebody the de
16:15
Speaker 1: facto principle or inferior officer without triggering the requirements of
16:20
Speaker 1: the clause.
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Speaker 2: So the judge also found that this push to dismantle USAID,
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Speaker 2: which was created by Congress, likely violated the separation of
16:31
Speaker 2: powers principles.
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Speaker 1: Yeah, so this is the other key point of the
16:35
Speaker 1: constitutional ruling. The Constitution refers to agencies, but leads to
16:41
Speaker 1: Congress the prerogative to create and destroy agencies, and the
16:46
Speaker 1: administration seems to have recognized this. In another context with
16:49
Speaker 1: respect to the Department of Education, even Secretary McMahon acknowledges
16:54
Speaker 1: that she can't dismantle the Department of Education on her own.
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Speaker 1: That would require an Act of Congress. Here, by contrasts
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Speaker 1: Musk and to some extent, Trump have effectively said they
17:05
Speaker 1: are dismantling USAID and they can't do that, right. It's
17:09
Speaker 1: up to Congress to destroy the agencies it creates. They
17:14
Speaker 1: haven't literally wiped out USAID. But if Congress creates an
17:18
Speaker 1: agency and then the executive branch essentially guts it, that's
17:23
Speaker 1: the equivalent. That's how the judge ruled.
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Speaker 6: Any event, what is.
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Speaker 2: The practical effect of the judge's order when you know,
17:32
Speaker 2: as you said, as he said, the USAID has effectively
17:35
Speaker 2: been eliminated.
17:37
Speaker 1: With respect to the appointment's clause. The judge stayed his
17:40
Speaker 1: ruling for a brief period because he acknowledged that if
17:46
Speaker 1: the decisions that were effectively taken by Musk are now
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Speaker 1: ratified by actual USAID officials, then that would render Musk
17:57
Speaker 1: a mere advisor, in which case there would not be
18:01
Speaker 1: an appointment's caused violation, or at least not one that
18:04
Speaker 1: leads to invalidation of the underlying actions.
18:07
Speaker 6: With respect to the separation of powers argument.
18:10
Speaker 1: However, one thing he crucially did do was making an
18:14
Speaker 1: order that it has an impact agency wise. So the
18:18
Speaker 1: short of it is that the administration can't make further
18:22
Speaker 1: cuts to USAID.
18:24
Speaker 6: Some of the personnel.
18:25
Speaker 1: Will be put back in their jobs, but all of this,
18:29
Speaker 1: of course, is going to be subject to an appeal,
18:31
Speaker 1: which the administration has said it.
18:32
Speaker 2: Will take, even if they're put back in their jobs.
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Speaker 2: The judge gave Rubio what fourteen days to decide whether
18:40
Speaker 2: to permanently close the agency's headquarters.
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Speaker 1: Right, so, the President and Secretary of State, where it's
18:48
Speaker 1: agency lodge within the State Department, do have considerable discretion
18:53
Speaker 1: about how to run and even structure an agency where
18:59
Speaker 1: Congress does and say exactly what you have to do.
19:03
Speaker 1: And so that's part of what the judge is doing here.
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Speaker 6: He's saying that you.
19:07
Speaker 1: Can't completely close it, but you do have some considerable discretion,
19:11
Speaker 1: and I'm going to wait until you exercise that discretion
19:14
Speaker 1: and see, you know, whether you've done so in a
19:16
Speaker 1: way that at least preserves the core of what Congress
19:19
Speaker 1: set up the.
19:20
Speaker 6: Agency to do.
19:21
Speaker 2: This decision, obviously is limited to USAID. It's the most
19:25
Speaker 2: direct ruling to date that Musk's roll violates the Constitution.
19:31
Speaker 2: Does this decision have any impact outside of USAID?
19:37
Speaker 9: Yes.
19:38
Speaker 1: The principle that the judge applied would apply to all
19:43
Speaker 1: of the things that Musk is doing with respect to,
19:45
Speaker 1: you know, the entire federal government. Right, So, there's no
19:49
Speaker 1: difference in principle between Musk's unlawful appointment with respect to
19:55
Speaker 1: USAID on the one hand, versus all the other agencies
19:58
Speaker 1: that he's been in going around and making decisions with
20:02
Speaker 1: respect to. But of course other judges might reach a
20:07
Speaker 1: different conclusion on the appointment's claus question. And even if
20:11
Speaker 1: they reach the same conclusion, there is this pretty big
20:14
Speaker 1: loophole that the judge allows for cabinet level officials or
20:20
Speaker 1: other personnel within the agencies who are actually properly appointed
20:25
Speaker 1: to ratify the decisions that Musk has made, so that
20:29
Speaker 1: they can render him advisory in the way that the
20:33
Speaker 1: administration has sometimes claimed he is after the fact, and
20:38
Speaker 1: thereby avoid the judicial and validation of everything that Musk
20:45
Speaker 1: and Doge have done.
20:47
Speaker 2: I want to turn for a minute to this concern
20:49
Speaker 2: in the legal community about the Trump administration not following judges' orders,
20:55
Speaker 2: whether it be with regard to the funding freeze or
20:57
Speaker 2: re hiring probationary work, or the Venezuelan deportations. The administration
21:04
Speaker 2: seems to be either ignoring or delaying or skirting judicial orders.
21:10
Speaker 1: Yeah, and that is a very very serious issue. The administration,
21:16
Speaker 1: I think, is playing a little bit of a game.
21:19
Speaker 1: That is, in social media posts and elsewhere, they are
21:24
Speaker 1: asserting essentially a power to ignore judicial orders. But in
21:29
Speaker 1: actual court filings and statements they have almost invariably claimed
21:34
Speaker 1: that they are complying, but they do so with you know,
21:39
Speaker 1: somewhat flimsy reasons, right, And so to the extent that
21:43
Speaker 1: there's like a sliver of a silver lining, I guess
21:47
Speaker 1: I'm glad that there at least feel the need to
21:51
Speaker 1: pretend to be complying when speaking in open court, because
21:56
Speaker 1: it strikes me that we would be in an even
21:58
Speaker 1: worse constitutional try if a Department of Justice lawyer stood
22:04
Speaker 1: up in open court and said to the judge, make
22:06
Speaker 1: me you know, and then the President basically said, well,
22:10
Speaker 1: you know, the US marshals who are supposed to enforce
22:14
Speaker 1: judicial orders are part of the Justice Department, and I've
22:18
Speaker 1: instructed my Attorney general not to have them enforce the
22:21
Speaker 1: judicial orders.
22:23
Speaker 2: Have other administrations acted like this with court orders, you know,
22:27
Speaker 2: not openly defying them, but not really complying with them either.
22:31
Speaker 1: You can point to situations in which administrations have not
22:36
Speaker 1: exactly bent over backwards to comply with the letter of
22:40
Speaker 1: judicial orders. There are certainly cases in which administrations at
22:46
Speaker 1: least seem to try to comply but were unable to
22:48
Speaker 1: because of resource or time constraints. I can't think of
22:52
Speaker 1: an administration that was so uniformly hostile to judicial orders
23:00
Speaker 1: and at the same time was asserting that it had
23:03
Speaker 1: the power to disregard what the courts told uh to do.
23:07
Speaker 1: You know, the events that we think about in this
23:10
Speaker 1: context are pretty scary moments in American history. So there's
23:15
Speaker 1: the story that's told about President Andrew Jackson, who was
23:19
Speaker 1: unhappy with the ruling of the Supreme Court in one
23:24
Speaker 1: of the Cherokee removal cases and reportedly said John Marshall,
23:29
Speaker 1: meaning the Chief Justice of the United States has made
23:31
Speaker 1: his decision. Now let's see him enforce it. By the way,
23:34
Speaker 1: he probably never actually said that, but it's a good story.
23:37
Speaker 1: Areat But this is a recurring theme in American constitutionalism,
23:44
Speaker 1: and it's because, as Alexander Hamilton wrote in Federalist Number
23:48
Speaker 1: seventy eight, the judiciary is what he called the least
23:53
Speaker 1: dangerous branch, but it's also the least powerful branch, unlike Congress,
23:57
Speaker 1: that lacks the power of the purse, and unlike the presidents,
24:00
Speaker 1: it lacks the power of the sword. And so ultimately
24:04
Speaker 1: compliance with the law depends on good faith efforts by
24:10
Speaker 1: those in government who do control believers of power to
24:14
Speaker 1: actually accept that there is authority in other branches of government.
24:20
Speaker 1: I'm not convinced that President Trump or the people working
24:23
Speaker 1: for him have that kind of a commitment to the
24:26
Speaker 1: rule of law.
24:27
Speaker 2: Future cases will tell the tale. Thanks so much, Mike Best.
24:31
Speaker 2: Professor Michael Dorff of Cornell Law School. Coming up next,
24:34
Speaker 2: tennis players take on their sport. I'm June Grosso and
24:38
Speaker 2: this is Bloomberg.
24:40
Speaker 9: You know, I think things they have to change, sir.
24:41
Speaker 9: It's a big day for tennis, and.
24:43
Speaker 2: Not because of a major tournament, but because of a
24:46
Speaker 2: major lawsuit. Nick Carrios is one of the named plaintiffs
24:50
Speaker 2: suing tennis's governing bodies, accusing them of running a cartel
24:54
Speaker 2: that exploits players by capping their prize money, limiting off
24:58
Speaker 2: court earnings, restricts in competition from rival tournaments, and forcing
25:03
Speaker 2: players to endure a grueling eleven month schedule. Here's how
25:07
Speaker 2: he explained it. To Sky News.
25:09
Speaker 9: I felt like people knew that something was going on
25:11
Speaker 9: behind the scenes for a long time, and I think that,
25:14
Speaker 9: you know myself, Paspasil Djokovic, we all wanted to do
25:18
Speaker 9: something like this, you know, for the future of tennis.
25:21
Speaker 9: You know. I know the players and myself and many
25:24
Speaker 9: other players aren't happy with the structures and everything that's
25:26
Speaker 9: going on in tennis at the moments.
25:27
Speaker 2: And their dissatisfaction is apparent from the one hundred and
25:31
Speaker 2: fifty nine page class action anti trust lawsuit filed by
25:35
Speaker 2: twelve named players and the Professional Tennis Players Association against
25:39
Speaker 2: the ATP and WTA Tours and the International Tennis Federation.
25:45
Speaker 2: But conspicuously absent in the list of named players is
25:49
Speaker 2: twenty four time Grand Slam winner Novak Djokovic, who co
25:53
Speaker 2: founded the PTPA. He's been vocal about higher pay in tennis,
25:57
Speaker 2: where the gap in earnings between the top players who
26:00
Speaker 2: make millions and the lower ranked players who are barely
26:04
Speaker 2: managing to support themselves is the widest in any sport.
26:08
Speaker 8: The media is communicating how much does a Grand Slam
26:12
Speaker 8: champion win constantly rather than you know, also shining a
26:17
Speaker 8: light on the players that are barely make a living,
26:23
Speaker 8: barely making a living from tennis.
26:25
Speaker 2: My guest is anti trust law professor Harry First, a
26:28
Speaker 2: professor at NYU Law School. Harry, can you give us
26:32
Speaker 2: the basics of this very long complaint.
26:36
Speaker 7: Well, the basic idea is sort of similar to other
26:39
Speaker 7: suits that have been brought. Basically players complaining that those
26:44
Speaker 7: owners who are running the sport are getting a lot
26:49
Speaker 7: of the benefits and they're not getting their due, and
26:52
Speaker 7: mainly because the owners are suppressing the market for the
26:58
Speaker 7: player's services in various ways, and one of the ways
27:02
Speaker 7: being trying to exclude competitors that might be willing to
27:08
Speaker 7: hire the talent these players in competing leagues, competing races,
27:13
Speaker 7: competing tournaments, things like that. So there's exclusion, there's price fixing,
27:18
Speaker 7: and the talent, the players, the laborers, if you will,
27:22
Speaker 7: not getting their due.
27:24
Speaker 2: They accuse the sports governing bodies of running a cartel
27:27
Speaker 2: and say professional tennis players are stuck in a rig game,
27:31
Speaker 2: not on the court, but off it, where players are
27:34
Speaker 2: forced to endure grueling schedules, capped earnings, abusive and invasive
27:39
Speaker 2: investigations and discipline, and have limited control over their own
27:43
Speaker 2: careers and brands. Of course, one of the top issues
27:46
Speaker 2: is money. In other professional sports, about half the gross
27:50
Speaker 2: revenue goes to players, but tennis shares less than twenty percent.
27:55
Speaker 2: But is this an anti trust issue?
27:57
Speaker 7: Well, that's a really great question. It's sort of a no, yes.
28:01
Speaker 2: No, let me think about that.
28:03
Speaker 7: Okay, how's that for good wishy washiness. So really low
28:09
Speaker 7: prices for the things you are buying, or what economists
28:13
Speaker 7: would call the inputs, that in itself, I don't think
28:16
Speaker 7: is an any trust violation, just like charging really high
28:20
Speaker 7: prices for what you sell is not really an anti
28:23
Speaker 7: trust violation. You have to have exclusion of competition for
28:27
Speaker 7: there to be an anti trust violation, and an agreement
28:31
Speaker 7: among competitors. So sometimes an agreement among competitors to buy
28:35
Speaker 7: things for a low price that could be an anti
28:38
Speaker 7: trust violation, or an agreement among competitors to sell things
28:42
Speaker 7: at a higher price that could be an anti trust
28:45
Speaker 7: violation technically, because you have competitors who might otherwise either
28:50
Speaker 7: compete the price down if they're sellers, or compete the
28:53
Speaker 7: price up if they're buyers, like buyers of labor. If
28:57
Speaker 7: they were acting independently, you might have different prices, different
29:00
Speaker 7: outcomes better for the party that's selling their goods or
29:05
Speaker 7: services or better for us consumers who are buying them. So,
29:09
Speaker 7: in a technical sense, no, as an individual seller setting
29:12
Speaker 7: your price, that's okay, it's bad if you do it
29:16
Speaker 7: in collusion, or a more graphic way is to call
29:19
Speaker 7: them a cartel, that's bad. And then there's a slight
29:23
Speaker 7: sort of twist on it, although it is not bad
29:27
Speaker 7: in itself. If you're a single seller, to pay too
29:30
Speaker 7: much or pay too little, that's often a sign that
29:33
Speaker 7: you do have monopoly power. And so in a lot
29:36
Speaker 7: of cases that we're seeing, the parties are litigating the
29:40
Speaker 7: idea that prices are either too high or in the
29:42
Speaker 7: case of labor, too low, and it will form the
29:45
Speaker 7: basis for a damage's claim.
29:47
Speaker 2: So Harry, there's a price fixing claim. And according to
29:51
Speaker 2: the lawsuit, a key method used by the tennis governing
29:54
Speaker 2: bodies to keep player pay low is locking them into
29:57
Speaker 2: this closed system of tournaments. And Larry Ellison, the billionaire,
30:01
Speaker 2: wanted to increase the total prize money at his tournament
30:05
Speaker 2: by one point six million dollars, but the ATP and
30:09
Speaker 2: the WTA wouldn't allow that because they didn't want one
30:14
Speaker 2: event to be paying more prize money than the sports
30:17
Speaker 2: for marquee Grand Slam events. That does sound like price fixing.
30:22
Speaker 7: Well, it's sort of a colorful example because it shows
30:26
Speaker 7: what price fixers who agree on what they will pay
30:30
Speaker 7: for labor can affect the price of labor. You know,
30:33
Speaker 7: here's even Larry Ellison can't pay what he thinks is
30:38
Speaker 7: a market price to attract talent to his tournament and
30:41
Speaker 7: compete in other tournaments. So that sounds really bad. A
30:45
Speaker 7: little problem with that is what year was that? Does
30:47
Speaker 7: that occur?
30:48
Speaker 2: Twenty twelve? A while ago?
30:51
Speaker 7: Oh a while ago? Outside the statute of limitations technically,
30:57
Speaker 7: so it's nice to put in a complaint. Whether this
31:01
Speaker 7: is going to be even admissible a trial as another story,
31:05
Speaker 7: but it is an example. I sort of wish they
31:08
Speaker 7: had more recent examples. But presumably their argument is the
31:12
Speaker 7: tournament operators are actually sort of happy with this. You know,
31:15
Speaker 7: they're not Larry Ellison, They're not. Well, actually, some of
31:19
Speaker 7: the tournaments operators are the equivalent. But you know, they
31:22
Speaker 7: would just as soon pay the players less and rake
31:25
Speaker 7: in the money more and not find themselves in the
31:28
Speaker 7: position of other wealthy owners of teams or in this case,
31:33
Speaker 7: tournaments that actually have to compete to put together the best.
31:38
Speaker 7: So the fact that we don't see more recent examples
31:41
Speaker 7: doesn't show that there isn't price fixing. But on the
31:44
Speaker 7: other hand, you don't have a nice example like you
31:47
Speaker 7: have in that case of a tournament operator that was
31:51
Speaker 7: trying to compete this way but couldn't.
31:54
Speaker 2: The players also complain about this eleven month grueling schedule,
31:58
Speaker 2: which they say damages players' bodies and prevents them from
32:02
Speaker 2: competing in other events.
32:04
Speaker 7: Well, I'm not sure this is any trust violation. Sounded
32:08
Speaker 7: more like a labor law complaint to me in a way.
32:11
Speaker 7: You know. I think it goes in there to show
32:13
Speaker 7: that what the public may see as sort of privileged,
32:17
Speaker 7: high class athletes turns out to be a rather grueling job.
32:22
Speaker 7: I mean, they're not coal miners. But there's an aspect
32:25
Speaker 7: to this that the public doesn't see. And I can
32:28
Speaker 7: understand the plaintiffs wanting to get that in front of
32:31
Speaker 7: the judge and eventually in front of a jury if
32:35
Speaker 7: they can. But whether this is actually an anti trust violation,
32:40
Speaker 7: I'm not so sure.
32:41
Speaker 2: So what do you think is the strongest antitrust claim
32:45
Speaker 2: in the lawsuit.
32:46
Speaker 7: Well, I think the strongest claim is the collusion or
32:48
Speaker 7: cartel claim that these are you know, competing parties, various
32:54
Speaker 7: tournaments that have gotten together to divide up markets geographically,
33:00
Speaker 7: to control the sport, to control the mobility of other tournaments,
33:05
Speaker 7: to enter and compete for talents, to control what they
33:08
Speaker 7: have to pay the talent, and you know, to run
33:12
Speaker 7: the sport in their favor. And there are a lot
33:13
Speaker 7: of competing tournament amongst the defendants. You know, usually competitors
33:18
Speaker 7: have a problem when they get together and agree. Now
33:22
Speaker 7: there's a little different maybe for sports where there's an
33:25
Speaker 7: idea of a circuit or a league. You know, that's
33:27
Speaker 7: how you get fan interest. Everything's not a one off.
33:30
Speaker 7: But the basic idea that this is a cartel and
33:33
Speaker 7: a cartel with power in the market because they've excluded
33:36
Speaker 7: other tournaments very hard to become a sanctioned tournament. So,
33:41
Speaker 7: you know, that core of the case I think certainly
33:43
Speaker 7: will survive any effort to dismiss the case outright. But
33:48
Speaker 7: then we'll see what the justifications might be and of
33:51
Speaker 7: course what the defendant's response is, because they have yet
33:54
Speaker 7: to file anything in this litigation, right, so.
33:58
Speaker 2: They've disputed the claims they work to expand compensation for players.
34:03
Speaker 2: I mean, do you see what the defense might be.
34:06
Speaker 7: I think that you know, their basic defense is the
34:09
Speaker 7: defense of all these organized sports. You know, we can't
34:12
Speaker 7: play tennis individually. You know, you need competitors, and that
34:16
Speaker 7: means you have to deal with others. So to put
34:19
Speaker 7: together a league, a circuit, tournaments to appeal to fans
34:24
Speaker 7: requires some joint effort. And remember a lot of this
34:27
Speaker 7: money is broadcasting money. People don't have to watch tennis,
34:31
Speaker 7: they watch golf. They always argue that there are lots
34:34
Speaker 7: of substitutes. Not sure that's a great argument, but they'll
34:36
Speaker 7: argue that. But basically they'll argue there are good justifications
34:40
Speaker 7: for what they do, for how they come together, and
34:43
Speaker 7: that gives them certain ability to manage the sport in
34:48
Speaker 7: a way that attracts capital, that serves the fans consumers.
34:52
Speaker 7: After all's consumer interests, and also is in the interest
34:57
Speaker 7: of the players, except for the two hundred and fifty
35:01
Speaker 7: is claimed players who don't seem to like what's going
35:04
Speaker 7: on or just simply want more money.
35:07
Speaker 2: Does it make a difference that the top players in
35:09
Speaker 2: the sport are not among the plaintiffs.
35:13
Speaker 7: Yeah, that's very interesting. I mean, legally it doesn't make
35:16
Speaker 7: a difference. This is a suit. It's styles as a
35:18
Speaker 7: class action, meaning they're bringing on behalf of all tennis players,
35:22
Speaker 7: which they claim are sort of similarly situated. So in
35:25
Speaker 7: that sense, it really doesn't matter. On the optics of it,
35:29
Speaker 7: it's sort of good and bad. I mean, it does
35:31
Speaker 7: serve to highlight the disparities in this sport between the
35:37
Speaker 7: very top people who are pretty well paid and the
35:40
Speaker 7: majority of people you know, who they claim are living
35:43
Speaker 7: out of their cars. On the other hand, the public
35:46
Speaker 7: loves to see the names they know behind this, so
35:51
Speaker 7: Michael Jordan's name features prominently, and you know all the
35:55
Speaker 7: stories about the NASCAR litigation. So I don't think it's
35:58
Speaker 7: going to matter legally, but I think, you know, in
36:01
Speaker 7: terms of the dynamics of litigation, it may make some difference.
36:05
Speaker 2: They're seeking a jury trial. Do you think that this
36:08
Speaker 2: will get to trial or you know, they'll negotiate, There'll
36:11
Speaker 2: be a settlement.
36:12
Speaker 7: So most cases settle, Most lawsuits, and certainly most lawsuits
36:16
Speaker 7: in federal courts settle. So if you want to predict
36:19
Speaker 7: in an actuarial sense, you would predict settlement. Whether this
36:23
Speaker 7: case will settle, I have no real idea, but certainly
36:26
Speaker 7: it might in the sense that I'm not sure the
36:29
Speaker 7: players want to blow up the system because I'm not
36:34
Speaker 7: sure what would really be in its place. They do
36:37
Speaker 7: benefit from not having every tournament be a one off.
36:42
Speaker 7: I think, you know, if there's some ATP tournament, some
36:46
Speaker 7: sort of circuit that you build up points that you know,
36:49
Speaker 7: everything's not individual. So I'm not sure that they would
36:52
Speaker 7: want to blow this up. So that might indicate that
36:55
Speaker 7: some sort of settlement would be what the plaintiffs might like.
36:59
Speaker 7: But you know, now as a class action, well we're
37:03
Speaker 7: a long way from that. So how we say, if
37:05
Speaker 7: it is certified by the judge as a class then
37:08
Speaker 7: they have to have a settlement that the judge approves
37:12
Speaker 7: as being in the interest of the class. So it
37:13
Speaker 7: becomes a little more.
37:14
Speaker 2: Complicated it always does. Thanks so much, Harry. That's Professor
37:19
Speaker 2: Harry First of NYU Law School, and that's it for
37:22
Speaker 2: this edition of the Bloomberg Law Show. Remember you can
37:25
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37:28
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